Resilience and Strategy Execution in Public Organisations 3658344660, 9783658344665

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Lorenzo Gios

Resilience and Strategy Execution in Public Organisations

Resilience and Strategy Execution in Public Organisations

Lorenzo Gios

Resilience and Strategy Execution in Public Organisations

Lorenzo Gios München, Germany Dissertation, DHPol – Deutsche Hochschule der Polizei, 2021

ISBN 978-3-658-34466-5 ISBN 978-3-658-34467-2 (eBook) https://doi.org/10.1007/978-3-658-34467-2 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Responsible Editor: Marija Kojic This Springer Gabler imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Acknowledgements

If you have ever hiked on a mountain, you know that the you need to put a lot of efforts in the ascent. Until you reach the top you don’t really enjoy the result of your hard work. During the journey you have moments where you need to walk alone and you have moments where you share your experience with other people who help you reaching your goal. This thesis has been for me a process of discover and learning both of who I am and of the topic of the research. The five years I have spent studying and reflecting have intertwined with personal experience and phases of my life. I have met many people who has inspired be, especially the mayors I have interviewed. They have showed me how passion for their own territories and citizens can overcome many obstacles and challenges they face every day. On top of all the mayors who accepted to help me in the research, I want to acknowledge the Province of Trento and the Consortium of Municipalities that provided data and put me in contacts with various institutions. A special recognition is for the professors of the University of Trento who accepted to be part of the Focus Group and gave the guidance in the way of conducting the research. As in every journey of our lives there are persons who walk with us for longer or, in some way, remain impress in our memories and determine our future. In my case there are three extraordinary persons who helped me in the key steps to arrive at end of my voyage. First, Professor Robert who provided me the opportunity to embark in this adventure and has shown me the passion for scientific research. Second, Professor Antonio, together with the entire German Policy University, who gave me guidance, precious suggestions and the support to complete the thesis. Last, my father Geremia who persuaded me to start this project and was an invaluable mentor along the way.

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Now that I’m on top of the mountain, I look back and I want to dedicate all my effort and this research to both my parents. They were with me not only during this hike but in many others of my life. They are the main reason that has given me the possibility to write this thesis. Thank you, Marina and Geremia for everything you have done for me!

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Strategy Execution: A Competitive Advantage . . . . . . . . . . . . . . . . 1.2 Resilience: The New ‘Buzzword’ . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Importance of the Study and Research Questions . . . . . . . . . . . . . . 1.4 Research Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 Structure of the Thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 2 3 4 5 7

2 Theory Regarding Strategy Execution and Resilience . . . . . . . . . . . . . 2.1 Strategy Execution: Literature Review . . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Models for Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . 2.1.2 Traits of the Different Models . . . . . . . . . . . . . . . . . . . . . . . . 2.1.3 Measuring and Steering Execution . . . . . . . . . . . . . . . . . . . . 2.1.4 A Summary Scheme for Measuring and Steering Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.5 Enablers to Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6 Obstacles to Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Resilient Organisations: Literature Review . . . . . . . . . . . . . . . . . . . 2.2.1 Resilience: Context and Definitions . . . . . . . . . . . . . . . . . . . 2.2.2 Models of Resilient Organisations . . . . . . . . . . . . . . . . . . . . 2.2.3 Characteristics of Resilient Organisations . . . . . . . . . . . . . . 2.2.4 Measuring Organisational Resilience . . . . . . . . . . . . . . . . . . 2.3 Execution and Resilience: a Framework for an Effective Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Framework for Executing Strategy Effectively . . . . . . . . . . 2.3.2 Framework for Creating a Resilient Organisation . . . . . . . 2.3.3 Similarities and Differences in the Frameworks . . . . . . . . .

9 9 10 21 22 27 29 33 35 35 36 47 49 54 54 57 60

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2.4 Execution and Resilience in Public Organisations . . . . . . . . . . . . . 2.4.1 Public Value Management (PVM) Approach . . . . . . . . . . . 2.4.2 Execute Strategy in Public Organisation . . . . . . . . . . . . . . . 2.4.3 Build Resilience in Public Organisation . . . . . . . . . . . . . . . 2.4.4 Change Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

65 65 75 81 88

3 Methods and Techniques Used in the Research . . . . . . . . . . . . . . . . . . . 3.1 Research Methods: Paradigm, Data Gathering and Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.1 Philosophical Paradigm and Purpose of the Research . . . . 3.1.2 Data Gathering Methodology . . . . . . . . . . . . . . . . . . . . . . . . 3.1.3 Data Gathering Techniques and Sampling . . . . . . . . . . . . . 3.1.4 Data Analysis Approach: Deductive . . . . . . . . . . . . . . . . . . . 3.2 Data Gathering Methodology: Italian Municipalities Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 An Overview of Municipalities in Italy . . . . . . . . . . . . . . . . 3.2.2 Small Municipalities: Challenges and Opportunities . . . . . 3.2.3 Associated Management: Advantages and Risks . . . . . . . . 3.2.4 Municipalities in the Province of Trento . . . . . . . . . . . . . . . 3.3 Data Gathering Technique: Questionnaire . . . . . . . . . . . . . . . . . . . . 3.3.1 Structure and Type of Questions in the Questionnaire . . . 3.3.2 The Questionnaire Used in the Research . . . . . . . . . . . . . . . 3.3.3 Validation and Administration of the Questionnaire . . . . . 3.3.4 Number of Answers to the Questionnaire . . . . . . . . . . . . . . 3.4 Data Gathering Technique: Focus Group and Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.1 Focus Group to Define Suitable Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2 Indicators to Evaluate the Achievements of the Municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.3 Econometric Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Data Analysis Approaches: Graphical and Analytical Tools . . . . . 3.5.1 Graphical and Analytical Tools . . . . . . . . . . . . . . . . . . . . . . . 3.5.2 Approach Used in Analysis of Questionnaires and Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 Limitations of the Methodology Selected . . . . . . . . . . . . . . . . . . . . .

93 93 93 96 98 100 101 101 104 106 108 110 110 116 117 119 122 122 124 134 136 137 140 141

Contents

4 Discussion of Research Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.1 High Level Analysis of Data Collected . . . . . . . . . . . . . . . . 4.1.2 Insights into Financial Results, Achievements and Changes in Recent Years . . . . . . . . . . . . . . . . . . . . . . . . 4.1.3 Insights into Strategy Execution . . . . . . . . . . . . . . . . . . . . . . 4.1.4 Insights into Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Performance Indicators and Econometric Model Analysis . . . . . . 4.2.1 Grouping Municipalities using the Indicators Analysed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.2 Correlations among Independent Variables of Econometric Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.3 Performance Indicators: Efficiency Model . . . . . . . . . . . . . 4.2.4 Performance Indicators: Resilience Model . . . . . . . . . . . . . 4.2.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Correlation Between Performance Indicators and Questionnaire Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Differences in Resilience and Execution Characteristics Among Groups of Municipalities . . . . . . . 4.3.2 Correlation of Performance Indicators with Resilience and Execution Characteristics . . . . . . . . . . 4.4 Theoretical Implication: Implementation of the Frameworks in Municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.1 Strategy Execution Framework . . . . . . . . . . . . . . . . . . . . . . . 4.4.2 Resilience Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Practical Implications: Proposals for Improving Resilience and Strategy Execution in Municipalities . . . . . . . . . . . . . . . . . . . . . 4.5.1 Relevance of Public Value Management for Italian Municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.2 Proposals for Strengthening Strategy Execution Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.3 Proposals for Strengthening Resilience Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5.4 How to Implement the Approach Proposed . . . . . . . . . . . . 4.6 Extension of the Research to Different Types of Municipality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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143 143 143 158 167 171 173 174 174 179 182 201 206 207 208 211 217 217 219 224 225 226 234 241 244

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4.6.1 Extension to Differently-Sized Municipalities in the Province of Trento . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6.2 Extension to Small Municipalities in Italy . . . . . . . . . . . . .

245 254

5 Conclusions and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Summary of the Approach and Conclusions . . . . . . . . . . . . . . . . . . 5.2 Answers to the Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Limitations of the Research and Future Studies . . . . . . . . . . . . . . .

269 269 272 275

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

279

List of Figures

Figure 1.1 Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Figure 2.6

Figure 2.7 Figure 2.8 Figure 2.9 Figure 2.10 Figure 2.11 Figure 2.12 Figure 2.13

Structure of the thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The COBRA alignment process (Curran, 2009, p. 201) . . . Simplified version of the inverted pyramid (Strategy Execution Ltd, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The 4 disciplines of execution (McChesney, Covey, & Huling, 2012, p. 21) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Six stages of Palladium Execution Premium Model (Pateman, 2008, p. 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview of Making Strategy Work model (Hrebiniak, 2013, p. 67) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The eight components of the strategy execution process (Thompson, Strickland, & Gamble, 2007, p. 362) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary scheme for measuring and steering execution . . . Five categories of strategy execution enablers . . . . . . . . . . . The sustainable leadership pyramid (Avery & Bergsteiner, 2011, p. 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organisational resilience flow diagram (ASIS, 2009, p. 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tool to benchmark resilience (Stephenson, 2010, p. 241) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –Design of an effective measurement system for execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The strategic triangle for public value management (Todorout & Tselentis, 2015, p. 76) . . . . . . . . . . . . . . . . . . . .

7 10 12 13 15 17

20 28 29 45 46 53 56 67

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Figure 2.14 Figure 2.15 Figure 2.16 Figure 2.17 Figure 2.18 Figure 2.19 Figure 3.1 Figure 3.2

Figure 3.3 Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 Figure 4.5 Figure 4.6 Figure 4.7 Figure 4.8

Figure 4.9 Figure 4.10 Figure 4.11

List of Figures

Public value framework for accountability and performance management (Moore, 2003, p. 27) . . . . . . CVP applied to public value (Talbot, 2008, p. 18) . . . . . . . . From data to wisdom model (Cong & Pandya, 2003, p. 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Smart KM model framework for public organisations (Ahmed & Elhag, 2017, p. 180) . . . . . . . . . . . . . . . . . . . . . . . Positive (top) and negative (bottom) responses to change (Marshall & Conner, 1996) . . . . . . . . . . . . . . . . . . Stages of change commitment (Conner Partners, 2007, p. 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research methods map (O’Gorman & MacIntosh, 2015, p. 51) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Types of relationships among municipalities. Translated from Frieri, Gallo, & Mordenti (2012, p. 57) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years of service in the municipality of people answering the questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of all questions . . . . . . . . . Medians and confidence interval of categories (administrative / political) and seniority . . . . . . . . . . . . . . . . Medians and confidence interval of answers by municipality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of double answers by municipality and category . . . . . . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of double answers by resilience vs execution and category . . . . . . . . . . . . . . . . Medians and confidence interval of double answers by seniority and category . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of questions related to financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pareto chart of ways of adapting to changes of containment of expenses and changes in budget management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pareto chart of main types of achievements . . . . . . . . . . . . . Pareto chart of main changes experienced by municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correlation analysis between resilience and strategy execution scores (no outliers) . . . . . . . . . . . . . . . . . . . . . . . . .

72 73 80 80 85 91 94

108 122 144 149 153 154 156 157 158

159 160 161 163

List of Figures

Figure 4.12 Figure 4.13 Figure 4.14 Figure 4.15 Figure 4.16 Figure 4.17 Figure 4.18 Figure 4.19 Figure 4.20 Figure 4.21 Figure 4.22 Figure 4.23 Figure 4.24 Figure 4.25 Figure 4.26 Figure 4.27 Figure 4.28 Figure 4.29 Figure 4.30 Figure 4.31 Figure 4.32

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Correlation analysis between resilience and financial results scores (no outliers) . . . . . . . . . . . . . . . . . . . . . . . . . . . Medians, confidence interval and Mood’s median test of strategy execution characteristics . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of questions about strategy execution characteristics . . . . . . . . . . . . . . . . . Pareto chart of methodologies or tools to execute and track the implementation of the plan (SM3) . . . . . . . . . Medians and confidence interval of strategy execution characteristic and people categories . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of sub-groups of resilience characteristic . . . . . . . . . . . . . . . . . . . . . . . . . . . . Medians and confidence interval of questions about resilience characteristics . . . . . . . . . . . . . . . . . . . . . . . . Pareto chart of the five top and bottom municipalities . . . . Pareto chart of five top and bottom municipalities, averages and trends indicators . . . . . . . . . . . . . . . . . . . . . . . . Regression analysis net spending (all significant variables) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net spending: multiple regression results . . . . . . . . . . . . . . . Standard expenditure requirements: multiple regression results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage net actual vs standard expenditure: multiple regression analysis . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage net actual vs efficient expenditure: multiple regression analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surplus 2016: multiple regression results . . . . . . . . . . . . . . . Paired t test of surplus 2007–2015 and surplus 2016 . . . . . . Medians, confidence intervals and Mood’s median test of different types of municipalities . . . . . . . . . . . . . . . . . . . . Medians and confidence intervals of different types of municipalities for execution and resilience skills . . . . . . . % spending versus resilience and execution characteristics: multiple regression results . . . . . . . . . . . . . . Surplus 2016 versus resilience and execution characteristics: multiple regression results . . . . . . . . . . . . . . Holistic process to improve strategy execution in municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166 168 169 170 171 172 173 178 179 185 188 192 196 199 203 205 209 210 212 215 234

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Figure 4.33 Figure 4.34 Figure 4.35 Figure 4.36 Figure 4.37 Figure 4.38 Figure 4.39 Figure 4.40 Figure 4.41 Figure 4.42 Figure 4.43 Figure 4.44 Figure 4.45

Figure 4.46 Figure 4.47 Figure 4.48 Figure 4.49

Figure 4.50

List of Figures

Core-periphery network for municipalities. Adapted from Bodin and Crona (2009, p. 371) . . . . . . . . . . . . . . . . . . ANOVA test of financial autonomy indicator among categories of municipalities . . . . . . . . . . . . . . . . . . . . ANOVA test of surplus indicator among categories of municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ANOVA test of surplus 2016 indicator among categories of municipalities . . . . . . . . . . . . . . . . . . . . Boxplot of surplus 2016 indicator among categories of municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Province of Trento: medians and confidence interval of questions related to financial results . . . . . . . . . . The Province of Trento: medians and confidence interval of questions related to execution traits . . . . . . . . . . The Province of Trento: medians and confidence interval of questions related to resilience traits . . . . . . . . . . . 2 Sample t-test of financial autonomy indicator between the Province of Trento and the rest of Italy . . . . . . 2 Sample t-test test of personnel expenses indicator between the Province of Trento and the rest of Italy . . . . . . 2 Sample t-test of spending capacity indicator between the Province of Trento and the rest of Italy . . . . . . 2 Sample t-test of collection capacity indicator between the Province of Trento and the rest of Italy . . . . . . 2 Sample t-test of surplus indicator between the Province of Trento and the rest of Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy: medians and confidence interval of questions related to financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy: medians and confidence interval of questions related to execution traits . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy: medians and confidence interval of questions related to resilience traits . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correlation analysis between resilience and strategy execution scores for municipalities in Italy and the Province of Trento . . . . . . . . . . . . . . . . . . . . . . . . . . . Correlation analysis between resilience and financial results scores for municipalities in Italy and the Province of Trento . . . . . . . . . . . . . . . . . . . . . . . . . . .

239 247 248 249 250 250 251 252 255 256 257 258

259 261 262 263

264

266

List of Tables

Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 2.14

Strategic vs operational resilience (Välikangas, 2010, p. 30) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of resilience indicators (McManus, 2008, p. 134) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agility and resilience indicators (McCann, Selsky, & Lee, 2009, p. 48) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Agility and resilience building interventions (McCann, Selsky, & Lee, 2009, p. 50) . . . . . . . . . . . . . . . . . . . . . . . . . . . Some characteristics of resilient organisations . . . . . . . . . . . . Indicators to measure resilience (Stephenson, 2010, p. 245) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Framework for effective strategy execution . . . . . . . . . . . . . . Framework to create a resilient organisation (personal elaboration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Similarities and differences in the frameworks for resilience and strategy execution . . . . . . . . . . . . . . . . . . . . Approaches to public administration and public management (Crawford & Helm, 2009) . . . . . . . . . . . . . . . . . Dimensions of public value (Sami, 2018, pp. 770–771) . . . . Comparison among PVM, resilience and strategy execution frameworks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Differences between public and private organisations. Summary of Wauters (2017, pp. 64–65) . . . . . . . . . . . . . . . . . Comparing traditional governance and collaborative CAN governance ideas (Booher & Innes, 2010) . . . . . . . . . .

37 39 42 43 47 50 55 58 61 66 69 74 76 83

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List of Tables

Table 2.15 Table 2.16 Table 3.1 Table 3.2

Table 3.3

Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 3.9 Table 3.10 Table Table Table Table Table Table Table

3.11 3.12 3.13 3.14 3.15 4.1 4.2

Table 4.3 Table 4.4 Table 4.5 Table 4.6

Factors which promote resilience (Meredith, et al., 2011, pp. 21–22) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Models to manage changes successfully . . . . . . . . . . . . . . . . . Strategy in selecting the sample . . . . . . . . . . . . . . . . . . . . . . . . Number of Italian municipalities and resident population divided by demographic classes in 2018 (Tuttitalia, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comparison among different European countries regarding municipalities. Data from Frieri, Gallo & Mordenti (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistics regarding the Province of Trento in comparison with the situation in Italy . . . . . . . . . . . . . . . . . Structure of the questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . Questionnaire: demographic and financial results section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questionnaire: resilience section (adapted from Stephenson (2010, pp. 176–187) . . . . . . . . . . . . . . . . . . Questionnaire: strategy execution section (based on questions used by Gios (2014, pp. 118–119) . . . . . . . . . . Questionnaire: aggregated questions . . . . . . . . . . . . . . . . . . . . Questionnaire: contact method, answers and performance group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questionnaire: answers statistics per contact method . . . . . . Decision matrix—financial metrics . . . . . . . . . . . . . . . . . . . . . Administrative surplus in 2016 . . . . . . . . . . . . . . . . . . . . . . . . Spending review targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Econometric models’ description . . . . . . . . . . . . . . . . . . . . . . . Coding system used in the questionnaire . . . . . . . . . . . . . . . . Mood’s median test: medians and confidence interval of all questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mood’s median test: medians and confidence interval of categories (administrative / political) and seniority . . . . . . Mood’s median test: medians and confidence interval of answers by municipality . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mood’s median test: medians and confidence interval of double answers by municipality . . . . . . . . . . . . . . . . . . . . . Mood’s median test: medians and confidence interval of double answers by resilience versus strategy execution skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

86 90 99

102

102 109 111 112 113 115 117 120 121 128 132 134 135 144 146 150 152 154

156

List of Tables

Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table Table Table Table Table

4.11 4.12 4.13 4.14 4.15

Table 4.16 Table 4.17 Table 4.18 Table 4.19 Table 4.20 Table 4.21 Table 4.22 Table 4.23 Table 4.24 Table 4.25 Table 4.26 Table 4.27 Table 4.28 Table 4.29

xvii

Mood’s median test: medians and confidence interval of double answers by seniority . . . . . . . . . . . . . . . . . . . . . . . . Average scores per section of the questionnaire . . . . . . . . . . . Best and worst municipalities using financial performance indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The five top and bottom municipalities for each indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Groups of municipalities based on total performance . . . . . . Correlations among independent variables (Xi ) . . . . . . . . . . . Variables in the efficiency models . . . . . . . . . . . . . . . . . . . . . . Net actual expenditure, correlation of single variables . . . . . Net spending model: best subsets of variables for regression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Standard expenditure requirements, correlation of single variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage net actual vs standard expenditure, correlation of single variables . . . . . . . . . . . . . . . . . . . . . . . . . Percentage net actual vs efficient expenditure, correlation single variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variables in the resilience model . . . . . . . . . . . . . . . . . . . . . . . Surplus 2016, correlation of single variables . . . . . . . . . . . . . Improvement in the surplus indicator from 2007–2015 to 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Questionnaire: response statistics per performance group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mood’s median test of worst municipalities versus all others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Variables in the model to correlate performance indicators with resilience and execution characteristics . . . . . Type of municipality versus resilience and execution characteristics: ordinal logistic regression . . . . . . . . . . . . . . . . Evaluation of resilience level of municipalities . . . . . . . . . . . Stratifications of municipalities in the Province of Trento and number of completed questionnaires . . . . . . . . ANOVA test of all performance indicators among categories of municipalities . . . . . . . . . . . . . . . . . . . . . Municipalities in Italy with populations between 1,000 and 2,000 and number of questionnaire responses . . . . . . . . .

157 162 175 177 179 181 183 184 186 190 195 198 201 202 206 208 210 211 216 224 245 246 254

xviii

Table 4.30 Table 4.31 Table 4.32

List of Tables

2 Sample t test of all performance indicators between the Province of Trento and the rest of Italy . . . . . . . Correlation among performance indicators (Xi): all Italian municipalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Results of statistical tests comparing municipalities in Italy and the Province of Trento . . . . . . . . . . . . . . . . . . . . .

255 260 261

List of Equations

Equation 4.1 Equation 4.2

Equation Equation Equation Equation Equation Equation Equation

4.3 4.4 4.5 4.6 4.7 4.8 4.9

Equation 4.10

Equation of linear model between resilience and strategy execution characteristics . . . . . . . . . . . . . . . . Equation of linear model between resilience and crisis management ability measured through financial results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net actual expenditure model . . . . . . . . . . . . . . . . . . . . . . . Standard expenditure requirements model . . . . . . . . . . . . Percentage net actual vs standard expenditure model . . . Percentage net actual vs efficient expenditure model . . . . Surplus 2016 model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net actual expenditure model . . . . . . . . . . . . . . . . . . . . . . . Equation of linear model between resilience and strategy execution characteristics of municipalities in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . Equation of linear model between resilience and crisis management ability measured through financial results for municipalities in Italy . . . . . . . . . . . .

163

165 186 191 194 199 203 212

259

261

xix

1

Introduction

The speed of change in the modern world is continuously increasing. Companies and organisations are requested to develop and implement new strategies to survive and grow. While in business literature a lot of attention has been dedicated to crafting proper strategies, the same focus has not been devoted to implementation or execution. In recent years, however, this tendency has changed. Researchers and managers have realised that execution skills are as important as strategy development abilities: ‘a brilliant strategy, blockbuster product, or breakthrough technology can put you on the competitive map, but only solid execution can keep you there’ (Neilson, Martin, & Powers, 2008, p. 61). Despite the fact that more attention is placed on implementation, many organisations still struggle to understand how to integrate proper methodologies and processes inside their daily activities. Strategy development might be something that only a few executives master, but execution needs to be part of the culture of all people inside an organisation. That is why effective implementation is considered a skill which very few organisations own; execution might be a powerful competitive advantage (Bigler & Norris, 2004). Organisations hit by disruptions show resilience capacity if they are able to preserve an acceptable service level despite challenges and to recover quickly (Arthur & Moody, 2018). This skill might involve an essential talent or an enabling ability to drive quick changes in organisations and when aligning culture, systems and processes with a given strategy. Research that studies resilience and effectiveness in strategy execution could provide ideas and suggestions to managers in order to close the gap that exists between strategy development and execution. An additional value of such research might come from evaluating if resilience is a key component in execution in all types of changes or only in some particular cases. ‘Natural disasters, pandemic disease, terrorist attacks, economic recession, equipment failure and human error can all pose both a potentially unpredictable © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 L. Gios, Resilience and Strategy Execution in Public Organisations, https://doi.org/10.1007/978-3-658-34467-2_1

1

2

1

Introduction

and severe threat to the continuity of an organization’s operation’ (Raj, et al., 2015, p. 377). Organisations might have different abilities to predict and manage these threats depending on their characteristics and on the types of threats. As per many studies on business and management topics, there is a much wider range of research into private companies than public organisations. Whilst both types of entities show common traits, there are substantial differences. The greatest difference is the concept of ownership. While a private company is owned by entrepreneurs or stakeholders and driven by market forces, public organisations are owned by communities and are driven mainly by politics (Boyne, 2002). Due to these differences, it is wise to limit the study to one type of organisation. Research into public organisations offers the possibility of making a greater contribution to increase topic knowledge due to the limited attention which has been given to date to this area by various authors.

1.1

Strategy Execution: A Competitive Advantage

Already in 2005, consistent execution was ranked by CEOs as one of the top ten challenges in their organisations and was mentioned to be of great concern (AMA, 2007). There are some organisations, countries and business sectors where implementation is key to success (Guillén & García-Canal, 2012). For instance, new technological products, such as smart phones, computers or wearable devices, are developed and produced at a fast pace. The life-cycle of such products is very short; in order to be competitive, organisations need to be able to transform a concept into a product effectively in a few months. MacLennan (2011) reports examples of studies and surveys confirming that execution from one side is a competitive advantage, while from the other side it is a very difficult skill to grasp. For example, he mentions that 70 percent of strategies fail due to execution issues or that only 40 percent of executives consider their companies able to succeed in strategy implementation. Other authors (Lepsinger, 2006; Neilson, Martin, & Powers, 2008; Schneider, Shaw, & Beatty, 1991) present similar statistics: about half of managers affirm that there is a gap between strategy development and execution, the majority of employees consider their organisations ineffective at execution and 80 percent of the probability of success is linked to strategy implementation. Organisations adopt various methodologies and measures to improve their ability to master execution. Yet, in most cases, there is a lack of understanding of the topic and of the critical characteristics required for success (McChesney, Covey, & Huling, 2012).

1.2 Resilience: The New ‘Buzzword’

1.2

3

Resilience: The New ‘Buzzword’

Resilience is a term used more and more frequently in scientific and non-scientific circles. ‘Everywhere you turn, the word resilience just keeps cropping up. Like the concept “sustainability”. It seems that resilience is being presented far and wide as shining goal for the future’ (Seville, 2009, S. 9). Is the term resilience only a temporary fad or is the answer in a world which is constantly changing? There isn’t a clear answer to this question. The humanity is living in a period of strong historical acceleration; in a single life-time, a person now experiences more changes than all the older generations put together. These changes affect all spheres of our lives and our relationship with the earth which is hosting us. The capacity to adapt to changes and understand their implications is becoming a key skill that individuals and organisations need to master. Resilience refers to striving for long-term survival and resisting the temptations of short-term benefits (Välikangas, 2010). In recent years, the shortcomings of liberal theories and the tragedy of the commons have become more evident. Some examples are the economic and financial crisis in 2008 (Beer, 2009), climate change and the high number of people suffering from illness related to burn-out. Lee, Vargo and Seville (2013, S. 29) define resilience as ‘a multidimensional, sociotechnical phenomenon that addresses how people, as individuals or groups, manage uncertainty’. This is only one of the accepted definitions of the term since resilience appears in research in many different fields. For example, resilience is used to study the relationships between communities and the natural environment (Moberg, 2011) or the robustness of an IT system (De Florio, 2014). For organisations, resilience is a new concept that is combined with a new way of interpreting the relationship between the external and internal domains. The external domain considers the community, the environment and the relationship with stakeholders to have a significant influence on the organisation and to be a factor which the organisation can influence (Hanson, Austin, & Lee-Bayha, 2003). The internal domain considers new management practices (Avery & Bergsteiner, 2011) and behaviours (Youssef & Luthans, 2007) which allow the company to manage turbulent times (McCann, Selsky, & Lee, 2009). It is apparent that resilience is a new ‘buzzword’ but it is also related to the fact that our world is changing and we need to change with it. We need to find a new way to relate to the environment, a new way to build and manage organisations and a new way to absorb and adapt to changes on a personal level.

4

1.3

1

Introduction

Importance of the Study and Research Questions

This research has the potential to cover two gaps partially in the current literature: 1. Few studies have attempted to research the concepts of resilience and strategy execution in public organisations 2. Few studies have attempted to compare these topics in public with private organisations As mentioned in the previous sections, some traits which characterise resilient organisations and the ability to execute strategy are similar. That is why resilience and execution characteristics can be studied together in this research. For example, the ability to manage a change through the development of a culture where new ideas are accepted and systems are flexible (Pariès, 2013; Hrebiniak, 2013) is mentioned in both fields of study. In one study by the American Management Association (AMA, 2007), organisational resilience is found to be a key enabler in the successful implementation of a strategy. Few studies have attempted to consider the concepts of resilience and strategy execution in public organisations. Some studies have tried to define models or run simulations to assess or strengthen resilience in public organisations (Bryson, 2011; Chandra, 2015; Olofsson, 2015). The results of such studies only partially cover the topic and leave space for deeper investigation. This research, in particular, aims to understand the nature of resilience and execution traits in public organisations and if there are differences with those in private organisations. Resilience in the public sector often is seen as the ability to manage emergencies and crises (Malakis & Kontogiannis, 2013). In that context another question emerges: is resilience as a characteristic useful for execution only in times of crisis? Some organisations face continuously changing paradigms, while others enjoy a more stable environment. For example, public administrations, usually, have the chance to adapt to changes over a longer time period than private companies. While the survival of public services is protected by communities and politicians, private companies risk folding if they are not able to cope with competition and adopt new technologies. In the literature, resilience in public organisations is linked mostly to natural disasters, terrorist attacks and epidemic. This research, instead, will focus mainly on adaptation to long-term changes such as the ones concerning regulatory frameworks and economic conditions. In this context, public organisations have more time to understand fully the change, develop a strategy to adapt and execute it.

1.4 Research Method

5

The definitions used in the research have been selected to support the aim of the study: • Resilience: ‘function of an organization’s situation awareness, management of keystone vulnerabilities and adaptive capacity in a complex, dynamic and interconnected environment’ (McManus, Seville, Brunsdon, & Vargo, 2007, S. ii) • Strategy Execution: ‘the process of indirectly manipulating the pattern of resources and market interactions an organization has with its environment in order to achieve its overall objective’ (MacLennan, 2011, p. 12) The research questions are: • Question 1: in the public sector, are resilient organisations more effective at executing strategy? • Question 2: are the traits of resilient organisations similar in the public and private sectors? • Question 3: how can public organisations improve their resilience and strategy execution capacity? The scope of the research is limited to public organisations and, in particular, to a specific type of organisation in Italy: municipalities. Municipalities, in recent years, have undergone many changes. The economic crisis and new regulations have challenged their structure and their way of operating. On top of that, they have received clear goals from the central government in terms of spending review and governance. The combination of the new strategy and the radical changes they have experienced makes municipalities suitable organisations to study in this research.

1.4

Research Method

From an ontological point of view, this research aims to be as objective as possible. The assumption is that the objects of the study, Italian municipalities, can be investigated mainly through data and facts. However, there is the acknowledgement that analyses, considerations and recommendations are influenced by subjective interpretation. The epistemological approach adopted is pragmatism (Saunders, Lewis, & Thornhill, 2009). Pragmatism allows the scholar to use different philosophies during the research based on the purpose of the study and

6

1

Introduction

questions which need to be answered. Pragmatism guarantees the discipline given by analysis of data and facts but also the flexibility to apply methods and tools that interact with the object of the study. The objects of the research are public organisations and, in particular, Italian municipalities. The methodology selected to collect data is a case study approach. The sample of organisations under study is composed by around 50 municipalities between 1.000 and 2.000 inhabitants in the same area of Italy (Province of Trento). The sample selected consists of homogenous organisations; in this way the effect of resilience and execution traits might be more visible. There are two sampling methods used to select the municipalities in scope: judgment and quota technique. Judgment sampling is used to select municipalities receiving questionnaires. The quota sampling technique is applied to decide how to complete the questionnaires via email or during a face-to-face interview. The research considers two sources of data. The first source of information is the questionnaire sent to a sample of municipalities. The questionnaire will help to show if organisations show resilience and execution traits that might foster achievement of specific results. The second source consists of historical indicators regarding municipalities’ performance. This kind of information is publicly available in Italy and can be retrieved from official reports. A focus group with experts is organised in order to choose the most suitable indicators to use in the research. The data collected through questionnaires and performance indicators are analysed with different tools and techniques to support answering the research questions. Various tools are used to investigate both discrete and continuous data. As general approach, a graphical analysis is performed to show central tendency and variability of various data sets. Analytical tools, such as correlation analysis or hypothesis testing, are applied to verify relationships and differences among groups of data. Data from questionnaires offer insights on resilience and execution characteristics of municipalities mainly from the subjective perspective of respondents. Performance indicators are objective measures of the results of administrative decisions and organisational set-up. The correlation between performance indicators and information from questionnaires provides an understanding of how resilience and effective execution might influence results. Combining insights from analyses and theoretical frameworks, it is possible to compare public and private organisations as well as to advance suggestions for improvement.

1.5 Structure of the Thesis

7

Lastly, to overcome the limitation that the scope is limited to a specific case study, the analysis is extended to different sizes and locations of municipalities. That is meant to extend the validity of the insights to a wider spectrum of organisations and offer the opportunity for further researches on the topic.

1.5

Structure of the Thesis

The thesis starts with a review of the literature (Figure 1.1). Both resilience and strategy executions theories and methodologies are presented in two different chapters. Afterwards, theories are compared in terms of their similarities and differences. That creates the basis to understand characteristics to be investigated in public organisations, with particular attention to municipalities.

Figure 1.1 Structure of the thesis

The second part of the thesis presents the methodology and tools used in the research. The selection of the right indicators to measure the performance of municipalities is critical in order to connect them to specific characteristics of organisations. In the third part, the information collected through public available data, questionnaires and interviews are analysed. The aim is to provide a possible answer to the research questions and also offer suggestions for municipalities to improve their management methods. The conclusion includes limitations and possible next steps to continue the research into resilience and strategy execution in the public sector.

8

1

Introduction

In summary, the research explores the ability of public organisations to use resilience and execution skills to adapt to changes and manage challenges. The scope is limited to Italian municipalities in the Province of Trento. A case study method is used and mainly quantitative data are considered. Data are collected through analysis of official reports, focus groups and questionnaires.

2

Theory Regarding Strategy Execution and Resilience

2.1

Strategy Execution: Literature Review

In the previous chapter, a definition of strategy execution that will be used throughout the thesis was introduced. For a matter of completeness, it is important to explore the various definitions and approaches offered by authors on this topic. Yet, few researchers have crafted a definition for strategy execution and there isn’t a broadly accepted description of the concept of implementation (MacLennan, 2011). There are two ways of seeing strategy execution: one considers it as a process and the other as a system. Both approaches have pros and cons. The process view is easier to understand and, probably, to implement. However, it doesn’t offer all the cause-effect relationships that are provided by the system view (Barrows, 2010). Most of the authors and models described in the following chapters consider strategy execution as a process, while only Kaplan and Norton (2008a) and Lean Management concept insist on the systemic aspect of the subject. Whatever model an organisation decides to adopt, it needs to be aware of the fact that execution is a complex topic. By using a simpler process model, the level of understanding and acceptance might increase. Yet, some of the interactions of the various components might be underestimated. Most probably organisations should find a balance between the two views of execution and adopt the methodology that best fits their environment and culture. In this thesis, the process and systemic views are both considered and various authors are compared. The aim is to produce a synthesis of the various approaches in order to create a general model applicable to the case study of the research.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 L. Gios, Resilience and Strategy Execution in Public Organisations, https://doi.org/10.1007/978-3-658-34467-2_2

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10

2.1.1

2 Theory Regarding Strategy Execution and Resilience

Models for Strategy Execution

Seven different models are described in this chapter. The purpose is to present briefly every single methodology. Then, the characteristics and principles of the models are compared in order to understand commonalities and differences. The comparison will be useful at a later stage of the thesis to assess how the organisations being studied design their execution models. – COBRA methodology (Patrick Curran) Crossing Organization Boundaries Reinforcing Alignments (COBRA) is the methodology developed by Patrick Curran (2009). As the name states, the emphasis is placed on the importance of alignment in the organisation and the ability to cross departments in a smooth way. In order to align the organisation, the author has developed a process comprising of four main steps (Figure 2.1): assessing the environment, aligning the strategy, aligning the organisation and executing strategy. The first three steps contain planning activities, while the last three is where organisations try, learn and adapt.

Figure 2.1 The COBRA alignment process (Curran, 2009, p. 201)

Assessing the environment and aligning the strategy are phases mainly related to strategy development. Where execution really starts is by aligning the organisation. The author defines the company execution capability as ‘a function of the leader’s skill in aligning the structure, the system and the culture’ (Curran, 2009,

2.1 Strategy execution: Literature review

11

p. 16). Most of the time, implementation of a strategy fails because leaders are not able to utilise correctly the ‘three points of pressure’ (Curran, 2009, p. 14) for unleashing the change. The structure of the organisations needs to follow the specific strategy. For example, if the strategy is to try to offer very standardised and low-cost services or products, a hierarchical and standardised structure might work better. Instead, if the organisation wants to foster innovation, a decentralised and autonomous structure might be a mores suitable fit. With system, the author refers mainly to a performance management system. In his view, the system should be simple and disciplined and comprising of five main components: strategy, key indicators, tracking, coaching, review. Curran emphasises the importance of alignment in the five components: first, between strategy and the indicators utilised; then between the status of the indicators (tracking) and the support given to employees to improve (coaching); lastly between the review of the strategy and the indicators. The last point of pressure, which leaders need to activate in an organisation, is culture. ‘When aligned with strategy, culture is a major asset that fosters purpose, passion and excellence. When misaligned it becomes a significant liability, breeding conflict, bureaucracy and a sense of entitlement’ (Curran, 2009, p. 19). Successful execution for the author is a consequence of leaders who are able to manage correctly the three points of pressure and align organisations to be ready to implement the strategy defined. – Translating strategy into action in complex organisations (Andrew MacLennan) MacLennan (2011) offers a framework for executing strategy, called the inverted pyramid (Figure 2.2), and five principles which need to be applied in order to be successful. The pyramid represents the number of people, systems and processes that have to be aligned when implementing a strategy. The bottom of the triangle is the starting point. It is a single decision or a single strategic objective which will be translated. The top of the triangle represents the totality of the organisation that needs to understand and implement the strategy. The pyramid is a good metaphor for the effort that executives and leaders are asked to make in order to create alignment. There are two main phases in the framework presented: translating objectives into activities, and aligning organisational design and systems.

12

2 Theory Regarding Strategy Execution and Resilience

Figure 2.2 Simplified version of the inverted pyramid (Strategy Execution Ltd, 2018)

‘It is often difficult to see how everyday activities, projects and initiatives might plausibly deliver strategic objectives. Bridging the gap between strategy and operations is the core strategy execution challenge, represented by the first phase of the inverted pyramid framework’ (MacLennan, 2011, pp. 70–71). Sometimes managers can complete projects successfully, but the projects might not be useful for the overall strategy of the company. For this reason, it is important to use tools, such as causal chains, and a performance management system to make sure actions are aligned with strategy. The second phase in the framework deals with the alignment of organisational designs and systems, as outputs from the first phase actions and projects are defined. Now organisational leaders are required to create the right conditions in order for actions to be accomplished. That can be done, for example, by allocating resources to the most important initiatives, by having a reliable system to manage changes and by creating the right skills in the organisation. The inverted pyramid model works only if it is supported by five principles inside the organisation: causality, criticality, compatibility, continuity and clarity. Sometimes there is a disconnection between ideas and actions, causes and effects. In organisations good at strategy execution, people master the skills of understanding how actions are related to strategy; in addition, they can judge in a critical manner where to focus their energies. Compatibility and continuity are principles which managers need to use in order to connect all the actions and ensure they point in the same direction. Clarity is what creates meaning in the organisation

2.1 Strategy execution: Literature review

13

and sense of purpose. ‘Strategy execution is not easy: research confirms that the majority of strategies do not achieve intended objectives upon execution. But these 5Cs, applied thoughtfully, offer the scope to avoid the pitfalls and create lasting competitive advantage’ (MacLennan, 2015, p. 30). – The 4 disciplines of execution (McChesney, Covey and Huling) Teams and organisations struggle to balance the effort produced for daily activities and the need to concentrate on projects and initiatives for strategy execution. In their book, McChesney, Covey and Huling (2012) offer a model and some tools to couple with this dichotomy: the 4 disciplines of execution (Figure 2.3).

Figure 2.3 The 4 disciplines of execution (McChesney, Covey, & Huling, 2012, p. 21)

The disciplines, in the figure, ‘point from right to left because great teams execute from right to left—they hold themselves consistently accountable for performance on lead measures, which in turn drives achievement of wildly important goals’ (McChesney, Covey, & Huling, 2012, p. 21). The scorecard is useful for making progress and results visible. It should be in the centre because every single person needs to understand the status and act upon it. The last discipline, accountability, helps to ensure focus and make sure everybody is involved.

14

2 Theory Regarding Strategy Execution and Resilience

The disciplines are applicable both at a team and organisational level. Focus on the wildly important means that a few objectives are selected instead of dispersing energy on many projects or tasks. Act on lead, instead of lag, metrics offers the opportunity to manage indicators that are predictive and that can be influenced. People following lead metrics can understand how their work influences the daily and strategic results. They can take timely and appropriate actions if the indicators are not going in the right direction. Discipline number four (accountability) ‘is where executions really happen…this is the discipline that brings the team members all together and that is why it encompasses the other disciplines’ (McChesney, Covey, & Huling, 2012, pp. 77–78). It consists of the personal commitment of all team and organisational members to achieve the goals defined. It triggers actions, team-spirit and mutual help. In their book, the authors present a step-by-step approach for successfully installing the disciplines in teams and organisations. Managers need to understand and manage change dynamics to introduce the disciplines. Few people will adopt enthusiastically the new way of managing execution; at the same time, during the first stage, the majority will be sceptical or against the new culture. Managers need to guide people through the ‘painful’ process of change so that the four disciplines can start to deliver the results expected from execution. – The Palladium Execution Premium Model (Kaplan and Norton) In their articles, Robert Kaplan and David Norton affirm that the reason why many companies perform worse than others is because they have a disconnection between strategy and operations, between strategy and execution (Kaplan & Norton, 2008b). Starting from this idea, they have developed a model for execution (Figure 2.4) which links the various stages of strategy. In every stage, practical tools and methods are included so that it becomes a guide for managing strategy execution. The model is called Palladium Execution Premium and ‘consists of six major stages, which together function as part of a closed-loop management system….it offers all of the characteristics typical of any management process, including multiple roles and responsibilities, the need to work across organisational boundaries, and an understanding that the process is only as strong as its weakest link’ (Pateman, 2008, p. 11). The model has been developed by the authors based on practical experiences in companies and organisations. Even if it is lacking the rigorous proof offered by the scientific method (Ansari, 2010), it is one of the best known and applied strategies worldwide.

2.1 Strategy execution: Literature review

15

Figure 2.4 Six stages of Palladium Execution Premium Model (Pateman, 2008, p. 12)

In the first step, development of the strategy, an organisation needs to answer to key questions such as: ‘What business are we in and why? What are the key issues we face in our business? How can we best compete?’ (Kaplan & Norton, 2008b, pp. 2–6). The translation of the strategy (step 2) is done through the support of tools such as strategy maps or the definition of a project’s portfolio. Then, managers need to align the organisation (step 3) towards the goals defined. Alignment is a difficult and resource-intense task for managers. Communication, target setting, reward and consequence management are some of the areas that need to be taken into consideration. Plan operations (step 4) ‘is where the strategy becomes fully embedded into the organization’s financial and operational planning and management processes’ (Pateman, 2008, p. 13). As soon as execution starts, the two last steps are initiated. Monitor and learn and test and adapt are crucial to see if the organisation is going in the right direction. They are processes which foster the ability to adjust not only the way in which execution is conducted but also to revise the strategy if required.

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Many organisations adopt one or more steps of the model; what is ‘missing is the integration of the stages, which is necessary to achieve a consistent level of maturity across each stage. Integration is not simple, and organizations that think it is are probably missing the point’ (Pateman, 2008, p. 13). The model developed by Kaplan and Norton might help organisations to create these links. – Making Strategy Work (Lawrence Hrebiniak) The model presented in Figure 2.5 reflects both the studies made by Lawrence Hrebiniak on execution and the feedback he received from various managers and leaders. In the opinion of the author, execution is a process which goes beyond a single decision or single activity. It is the sum of many different decisions and activities made through time. Even if everything starts with the definition or formulation of a strategy, the implementation of it takes much longer and requires more effort. The first step in the model refers to the design of a strategy. It starts first at the organisational level, but then it needs to be translated into every single business or department. ‘Strategy makes “demands” on the business in terms of skills, capabilities, or resources needed to support and execute the strategy. The model also shows that strategy must be translated into short-term objectives or metrics tied to strategic performances’ (Hrebiniak, 2013, p. 65). Once the strategy is defined and objectives fixed, the organisation needs to design the proper structure, processes and define the right responsibilities. The type of strategy selected should lead to the choice regarding the structure to adopt. It is important to notice that some organisations try to replicate the structure implemented at corporate level and also at department level. This type of structure can be a blockage for execution. Despite the fact that the overall strategy is the same, single department strategies can vary. Processes which facilitate communication and alignment are also keys for success. Especially in complex, matrix and global organisations, setting up the right processes that help to go beyond boundaries and support information flow is challenging. One of the factors that can facilitate communication is the clarity around people who are responsible and accountable for tasks, projects and decisions. Effective processes support the alignment of the organisation and change management. ’Effective incentives are at the forefront of this support. They fuel motivation and point managers in the right direction for strategy execution’ (Hrebiniak, 2013, p. 31). However, taking the right direction is not sufficient. It requires a disciplined methodology helping leaders to act. Project management methods offer powerful tools for managing daily activities and focusing on details.

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Figure 2.5 Overview of Making Strategy Work model (Hrebiniak, 2013, p. 67)

Controls and feedback help the organisation to monitor the implementation of the strategy and to act in case the results are not as expected. They help also to manage knowledge, providing valuable information about the ability of departments to execute strategy, possible risks and roadblocks. The author of the model affirms that execution doesn’t happen in isolation. The organisation needs to understand the interaction with its context. The context can influence execution and ultimately the results of the strategy implemented. The author presents four main contexts which need to be considered: the change management context, the culture of the organisation, the organisational power structure and the leadership context. Hrebiniak (2013) offers a process to managers who want to be successful at execution. The model provides a step by step approach which includes the possibility of adapting strategy and implementation thanks to controls and feedback loops. – Lean Six Sigma methodology Lean and Six Sigma are two different approaches to continuous improvement and strategy execution that organisations can apply individually or in combination.

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Lean methodology is focused mainly on reducing waste in processes, while Six Sigma recommends reducing variability and strengthening standardisation. Yet, the two approaches have similar goals and are used sometimes in combination. ‘Lean Six Sigma is a business strategy and methodology that increases process performance resulting in enhanced customer satisfaction and improved bottom line results. It is also being widely recognized that Lean Six Sigma is an effective leadership development tool…perhaps the biggest but most unheralded benefit of Six Sigma is its capacity to develop a cadre of great leaders’ (Snee, 2010, p. 10). There is an extensive literature regarding Lean Six Sigma topics. In this chapter, the focus will be on how this methodology can foster strategy execution. One of the possible approaches is provided by McKinsey & Company (2014). The globally known consultancy company has found that organisations, which renew themselves continuously and execute strategy effectively, are able to master four disciplines linked to lean management. The first discipline is related to the ability to deliver value efficiently to customers. Lean thinking tries to understand what value the organisation should provide to customers. ‘It must then configure how it works so that it can deliver exactly that value, no more and no less, with the fewest resources possible, improving coordination, eliminating redundancy, and building quality into every process. The cycle of listening and responding never ends, as the customer’s evolving needs reveal new opportunities to attack waste, create new worth, and build competitive advantage’ (McKinsey & Company, 2014, p. 11). The second discipline relates to the ability of leaders to involve employees and help them to contribute to the maximum in terms of their potentialities. Communication and visual management are some key elements. Managers have daily discussions about performances and people are asked to share ideas and collaborate in teams. Decision making is fast and made at the lowest level of the organisation. Discovering better ways of working is the third discipline. People are trained and empowered to conduct problem-solving sessions on their daily issues. The main task of managers is to coach employees and support them in the problemsolving activities (Rother, 2009). The company becomes a learning organisation where knowledge is shared and everyone is involved in continuous improvement activities. The last discipline relates to the connection of strategy, goals, and meaningful purpose. Organisations that apply lean six sigma principles share a clear vision. ‘At every level, starting with the CEO, leaders articulate the strategy and objectives in ways that their people can understand and support. The final step aligns individual

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goals to the strategy and vision, with the result that people fully understand their role in the organization and why it matters’ (McKinsey & Company, 2014, p. 13). Lean and Six Sigma probably are the most well-known methodologies for strategy execution. They create the link between an organisation’s strategy, customers value and operations. They are based on specific tools to reduce waste and increase reliability; yet, they can work at their best only if people embrace their philosophy and are empowered by their managers to engage in problem solving. – An organisation capable of Strategy Execution (Thompson, Strickland, and Gamble) The three authors of the book Crafting and Executing Strategy (Thompson, Strickland, & Gamble, 2007) provide a comprehensive model that links the creation of strategy with its implementation. ‘Management’s handling of the strategy implementation process can be considered successful if and when a company achieves the targeted strategic and financial performance and shows good progress in making its strategic vision a reality’ (Thompson, Strickland, & Gamble, 2007, p. 361). In order to be successful, organisations can engage themselves in many different activities shaped by the strategy selected and by the environment in which they operate. Yet, there are some basic requirements and managerial components that need to be present to achieve full realisation of the benefits. The authors mention eight components in their model (Figure 2.6). The first two components relate to the resources needed for executing strategy. ‘Proficient strategy execution depends heavily on competent personnel, better-than adequate competitive capabilities, and effective internal organization’ (Thompson, Strickland, & Gamble, 2007, p. 363). Working on people’s capabilities is not enough; organisations should ponder having an adequate number of resources and defining the proper budget required for the implementation of the strategy. Managers have to screen with attention the skills they need and adopt strategies to acquire or create them inside or outside the organisation. The structure and processes of organisations should support execution. That is why some of the eight components refer to the introduction of proper policies, procedures and systems. Information flow and operating systems have to be set in a way that don’t create blocks for communication and actions. Also rewards and recognitions have to be aligned to the overall strategy and to the achievements accomplished. The authors emphasise that execution is a process that runs for a long period of time; therefore, continuous improvement mentality and best practice sharing have to be part of the management framework.

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Figure 2.6 The eight components of the strategy execution process (Thompson, Strickland, & Gamble, 2007, p. 362)

The last two components concern different types of cultures and leadership styles that an organisation displays. Cultures are made of values, beliefs, attitudes and other traits. They can boost strategy execution or can block it. ‘There are four types of unhealthy cultures: those that are highly political and characterized by empire building, those that are change resistant, those that are insular and inwardly focused, and those that are ethically unprincipled and are driven by greed’ (Thompson, Strickland, & Gamble, 2007, p. 447). Managers need to lead organisations in such a way that a high performance and adaptive culture is created and maintained. A proper culture might be the secret ingredient for successful strategy implementation.

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Organisations, excellent at execution, master the eight components suggested by Thompson, Strickland and Gamble. The model proposes only general principles, leaving managers the freedom to shape them in the most suitable form.

2.1.2

Traits of the Different Models

All seven models presented have peculiar characteristics and present some similarities and differences. The majority of the authors consider strategy execution as a process with a clear sequence of steps. Only Kaplan and Norton (2008a) and Lean Six Sigma methodology emphasise the systemic nature. There are some key factors which enable execution. Culture can support strategy implementation or be a strong roadblock (McChesney, Covey, & Huling, 2012; Thompson, Strickland, & Gamble, 2007). Managers should be able to align the organisation towards some specific goals. The alignment needs to take place consistently at the process, system and communication levels (MacLennan, 2011; Curran, 2009). Strategy execution doesn’t happen in isolation. Yet, successful organisations are the ones that understand and manage dependencies and are able to adapt while they go (Kaplan & Norton, 2008a; Hrebiniak, 2013). All authors mention the importance of deploying a measurement system to track and steer execution. There are some models which place more importance on the topic and provide precise tools or a description of how to implement such a system. For example, McChesney, Covey, and Huling (2012) suggest having only a few key objectives and measurable goals. These goals need to be translated in the organisation through the deployment of the right metrics for every level. Kaplan and Norton (2008a) underline the importance of using a tool such as the Balanced Scorecard which takes into consideration objectives that go beyond simple financial results. Every objective requires a metric to be defined and clear measurable goals. Lean Six Sigma suggests starting with the customers’ needs and translating them into specific measurable requirements for internal processes. People in the organisation need to manage the daily activities with a specific set of KPIs that give them direction and are the basis for problem solving to achieve a process improvement. One of the key concepts regarding execution, discussed by all authors, is the need for alignment. Above all, big organisations struggle to produce a consistent message that explains the strategy and the need for actions. In addition, there is the risk that a consistent number of employees wouldn’t understand or accept the direction taken.

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The first alignment happens between strategy planning and strategy execution. The majority of the authors include the link between planning and execution in their models as an integrated part of it. Only McChesney, Covey, and Huling (2012) don’t pay much attention to the topic and Curran (2009) considers it only the starting point for execution. Other types of alignment are related to culture, structure and systems. While culture is discussed extensively in every model, structure and systems are considered as having various degrees of importance by the authors. Hrebiniak (2013) judges it key to adopt the right organisational structure in line with the overall and business strategy. Systems, in general, are seen as a less important factor for execution; managers need to pay attention that systems support the overall objectives, the structure and the culture (Hrebiniak, 2013). The seven models presented have commonalities but also differences. They are mainly based on empirical research and experiences in organisations. In the research, the characteristics of the various models are considered and the concepts that best suit the public sector is adopted.

2.1.3

Measuring and Steering Execution

Measuring strategy execution is important for various reasons: making clear which is the strategy and what are the objectives to be reached; tracking the progress and acting if required; helping people to understand the impact of their actions on a daily basis. All authors presented in the previous chapters discuss the importance of measurement systems and offer some principles and tools. Analysing the topic is useful for the research to understand what organisations good at execution do, to define a strategy to assess organisations under study and also to provide recommendations for improvement. In the chapter, first, the characteristics of an effective measurement system is presented, then an overview of some of the main tools is offered and, finally, a synthesis useful for creating a framework for execution is provided. – Characteristics of an effective measurement system for execution Every organisation is different and requires a specific way of executing strategy and setting-up a proper measurement system. However there are some general guidelines to apply: ‘start on the outside of your business, not inside the company;… responsiveness to customers overshadows all other marketing goals, make sure control measures don’t get in the way;…think of process and product as equals;…don’t

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let overall business goals get lost among the many operating measures’ (Stern & Deimler, 2006, pp. 238–239). This approach resonates with Lean Thinking method where the organisation needs to understand and measure customer needs and then align the measurement system to them (Liker, 2004). One of the first tasks of managers is the definition of key indicators. Based on his empirical experience with companies, Curran (2009) provides five best practices regarding key metrics: they should be aligned, hard and soft, balanced, limited and controllable. Indicators need to be aligned with the strategy and within the organisational layers. ‘To execute a strategy successfully, it must be translated into short-term operational metrics that are related to long-term needs, can be used to assess strategic performances, and help the organization achieve long-term strategic goals’ (Hrebiniak, 2013, p. 104). In the translation process, many managers fail. Organisations create sound and great strategies but they are not able to communicate them in a way that is understandable by their people (Kaplan & Norton, 2008b) Hard metrics are quantifiable dimensions that can be assessed and described with numbers, such as, number of products sold or units produced or cost per hour. ‘Soft indicators include things like: customer satisfaction, quality, and market execution. They are certainly key indicators, capturing critical moments of truth, but to track them generally requires direct observation of behaviour on the job. Both types are important, both needs to be measures and managed. The best companies do both’ (Curran, 2009, p. 121). Another important characteristic of key indicators in execution is that they need to be balanced. Leaders have to understand what are the performance dimensions to be tracked and managed. For example, it would be easy to offer a fast service to customers if costs are not considered. Balanced scorecards are a tool helping organisations to take into consideration four dimensions for their indicators: financial, customer, internal to the organisation, and innovation and learning (Werner & Xu, 2012). Only a limited number of metrics have the biggest impact on the results of the strategy. In addition, ‘if a team focuses on two or even three goals beyond the demands of their whirlwind, they can often accomplish them. However, if they set four to ten goals, our experience has been that they will achieve only one or two’ (McChesney, Covey, & Huling, 2012, p. 25). Leaders are required to find the key measures that represent their vision at best. Then, indicators should be cascaded down in the organisations in a way that helps and doesn’t create dispersion because of too many priorities. The meaning of controllable metrics refers to the fact that individuals or teams have the power to influence them. This type of indicators, sometimes called lead

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indicators, are important because they are the basis for actions and for motivation of people. ‘Organizations should complement ‘lagging’ measures reflecting performances in terms of ultimate objectives (such as financial outcomes in a business) with ‘leading’ measures reflecting performance of indirect drivers of these objectives. Conventionally, many organizations have focused heavily on using lagging indicators, but this approach has been likened to driving a car looking only in the rear-view mirror’ (MacLennan, 2011, pp. 136–137). Lead metrics represent a lever for organisations to lift the heavy rock which strategy and execution place on them (McChesney, Covey, & Huling, 2012). They reduce the mental and physical efforts that employees are required to apply in order to achieve the goals defined. Teams need to be involved in defining their own lead measures. Given certain strategic objectives, employees should be helped to translate them into metrics related to their daily jobs. Through the process of translation, people start to own the strategy and the metrics: that drives engagement. ‘Coming out with the right lead measures is really about helping everyone see themselves as strategic business partners and engaging them in dialogue about what can be done better or differently in order to achieve’ (McChesney, Covey, & Huling, 2012, p. 63) the strategic goals. Curran (2009) offers, on top of the five characteristics for key indicators, a view on the possible types of metrics. The first type refers to functional indicators. They are related closely to processes and operations within an organisation. They measure input, output, efficiency and effectiveness. The second type is related to customer satisfaction. While functional indicators are mainly hard, metrics assessing customer satisfaction are both hard and soft. Customers are both internal and external. ‘In traditional organizations, internal customer satisfaction is rarely on the ‘performance dashboard’. Yet breakdowns in delivering internal customer satisfaction are a major cause of poor strategy execution. Disruptive boundaries crumble when every function is accountable for customer satisfaction as well as functional productivity’ (Curran, 2009, p. 129). The third and last type are execution indicators. They are the ones closely related to shop-floor activities. They are mainly leading indicators and are under the span of control of teams and the team-leader. They are driving behaviours and daily actions. They are influenced by middle managers and supervisors with ‘on the job’ presence and coaching activities. Coaching serves the purpose of training and upskilling people in a fast and structured way (Curran, 2009). The ‘kata’ principle is a key component of Lean principles: managers and supervisors should spend about half of their time coaching employees on the shop-floor. That would guarantee quick problem solving and fast execution (Rother, 2009).

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In all models presented, culture is a key aspect for success of strategy implementation. For this reason, is important to define some metrics guiding daily actions but also related to recognition and rewards. Installing an effective performance management system might serve this purpose. ‘Performance management should involve managers, individuals and teams based on shared understanding, which define performance and contribution expectations, assess performance against those expectations, provide for regular constructive feedback’ (Armstrong, 2006, p. 8), define development opportunities and guarantee rewards in line with the individual and team results (MacLennan, 2011). Performance management can be set to assess and guide individual behaviours and group performances. If employees and teams are empowered, they can work on the execution of strategy without the need for tight controls. Teams, assessed on collective performances, show a higher degree of collaboration and single individuals are pushed by the team dynamics to contribute to the success of the group (Thompson, Strickland, & Gamble, 2007). – Tools for measuring and steering execution Various authors suggest tools and approaches useful for translating strategy into objectives, to support the development of a measurement system for execution and to facilitate the selection of the right metrics. In the next paragraphs, the following tools are presented: balanced scorecard, value-based management, strategy execution maps, causal chains, Hoshin Kanri and the X-matrix. The balanced scorecard ‘provides a framework to translate strategy into operational terms. It helps to develop and communicate short-term objectives in the areas of financials, customer services, internal business processes, and learning and growth, and it attempts to link these objectives to company strategy and long-term goals’ (Hrebiniak, 2013, p. 105). Organisations, which don’t adopt balanced scorecards, tend to rely more on financial indicators; instead, organisations applying this approach affirm they have only 20 percent of their metrics in the financial area (Frigo, 2002a). Having the financial aspects as a sole driver might create issues for the long-term survival of the organisation, since many other critical aspects are underestimated. This concept applies especially to the public sector where the economic aspect is not decisive for the endurance of organisations. In the balanced scorecard, ‘the customer perspective focuses on how the company is perceived by its customers relative to how the company would like to be perceived by its customers. Accordingly, companies must determine how they would like the company to appear to their customers’ (Werner & Xu, 2012, p. 90).

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The internal business process area refers to all activities needed to carry on operations in an efficient and effective way. Finally, the innovation, learning and growth area takes care of the future of the organisation. Managers should think what are the skills, products or services that guarantee survival. Then, specific metrics and objectives are set to steer the organisation in the right direction. Value-based management (VBM) ‘provides a precise and unambiguous metric—value—upon which an entire organization can be built. The thinking behind VBM is simple. The value of a company is determined by its discounted future cash flows. Value is created only when companies invest capital at returns that exceed the cost of that capital. VBM extends these concepts by focusing on how companies use them to make both major strategic and everyday operating decisions’ (Koller, 1994, p. 87). This approach is used to translate strategy. What is looked upon is not only the return of investment at a strategic level but also where value is created in the organisation. VBM breaks down high level objectives and links them to single activities (Frigo, 2002b). Managers are asked to find what are the value drivers and allocate resources accordingly (Koller, 1994). The risk, by adopting VBM, is to be too focused on financial value so that some other aspects are neglected. That is the reason why some authors suggest using it in conjunction with balanced scorecards (Frigo, 2002b). Another tool which can be used in combination with balanced scorecards are strategy maps. They are maps which show how value is created during the execution of a strategy. ‘Companies use strategy maps to bring the elements of the balanced scorecard together in a meaningful way. Strategy maps are useful for implementing the balanced scorecard and for ensuring that the scorecard works to help the company to execute strategy. There is a notion that the learning, innovation and growth should be addressed first, then internal business processes next, which leads into a focus on customer concerns, and finally the result of bringing everything together should be good financial results’ (Werner & Xu, 2012, p. 92). Managers can use strategy maps to explore various options of how strategy can be executed and objectives can be reached. Once one option is chosen, the map is the basis for planning, because it can be broken down into activity levels (MacLennan, 2011). Strategy maps are also useful to explain and communicate to the organisation where value is created, and to align people on core activities (Thompson, Strickland, & Gamble, 2007). The three tools introduced so far have a top-down approach. There are cases where top-down planning doesn’t provide enough clarity to the organisation. Such cases might be, for example: ‘an edict from a senior executive to launch some initiatives (without practical scope for challenges), an unanticipated problem that

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appears and requires a coordinated response or an unanticipated opportunity worthy of consideration and possible action’ (MacLennan, 2011, p. 116). A tool which offers a bottom-up approach, such as causal chains, might help in these situations. Causal chains show, in a graphic manner, logical relationships between events. They are a collaborative method relying on the expertise and input of various experts. They want to investigate how certain activities and initiatives might lead to a certain result (MacLennan, 2011). The Hoshin Kanri approach is linked to Lean methodology. It is a planning method focused on aligning the entire organisation to provide superior services or products to customers (Jackson, 2006). ‘The term roughly embraces four key elements of business management namely: vision, policy development, policy deployment and policy control’ (Hutchins, 2016, p. 2). One important tool within the method is called X-Matrix. The matrix serves the purpose of aligning longterm goals with strategic projects; on the basis of the strategic projects, short-term initiatives are identified and linked through metrics and specific targets. X-matrix is a visual tool which is able to summarise and track strategy and execution in a single chart (Jackson, 2006). All tools presented might support the translation of strategy into actionable objectives at various levels. Strategy translation and steering of execution are processes that require a structured and disciplined management system: the tools presented can serve this purpose. Organisations should implement the approach that best serves their culture and objectives.

2.1.4

A Summary Scheme for Measuring and Steering Execution

The system and the tools to measure and steer execution need to be seen in a holistic way in order to support strategy implementation. The scheme presented in Figure 2.7 tries to provide this holistic view. The definition of strategy starts from the translation of customers’ needs into customer requirements. Understanding the requirements is fundamental in order to develop a plan suitable for the organisation and its environment. Once a strategy is defined, managers set strategic goals. The goals are, then, cascaded down: first at business unit level and afterwards at operational level. The organisation has to make sure that people’s behaviours support operational objectives and the strategy as a whole.

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Figure 2.7 Summary scheme for measuring and steering execution

Leaders have the possibility of adopting various tools to support the crafting, translation and execution of a strategy. Balanced scorecard and Hoshin Kanri are two available methods. The common aspect of these tools is the ability to help managers to have a long-term view of the company. Financial goals need to have the same importance as other types of goals, such as customer satisfaction and innovation. In order to support people to embrace the strategy and the operational goals, leaders might align the performance management system to individuals’ and teams’ rewards. They can also coach their employees in order for them to acquire the right skills for successful execution. Key indicators adopted to steer implementation differ at various levels of the organisation. At strategic level, metrics are lag, hard and with a long-term view. At operational level, they are leading metrics, both hard and soft, and with a short-term view. At every level of the organisation, indicators should be limited in number and balanced. That allows people to concentrate only on main priorities, to take care of performances, internal and external customer satisfaction, and to create the basis for future development of the organisation.

2.1 Strategy execution: Literature review

2.1.5

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Enablers to Execution

In addition to the authors of the models previously presented, other researchers have tried to understand the factors enabling execution and the barriers to it. In this chapter and in the following one, these factors are reviewed by clustering them into five different categories (Figure 2.8): people, systems, structure, strategy and external factors. The categories are used to build the questionnaire sent to the organisations included in the research. Factors related to the category people are the most prominent in the literature. There are various studies that elaborate only on the importance of human factors. For example, Haudan (2007) suggests that employees’ engagement is the key for successful execution; Bigler and Williams (2013) concentrate their study on the role of leadership skills in driving implementation. Human factors might be divided into three different topics: culture, skills and behaviours.

People

Systems

•Culture •Skills •Behaviours

•Informaon •Human Resources Management •Others

External Factors

Structure

Strategy

Figure 2.8 Five categories of strategy execution enablers

Culture is a distinctive trait of an organisation and it has a decisive impact on execution. One study demonstrates that ‘firms with cultures that emphasized all the key managerial constituencies (customer, stockholders, and employees) and leadership from managers at all levels out performed firms that did not have those cultural traits by a huge margin’ (Curran, 2009, p. 20). ‘Organization must develop execution-supportive cultures. Execution demands a culture of achievement, discipline and ownership’ (Hrebiniak, 2013, p. 31). The culture should fit the vision and strategy of the organisation. Yet, there are some general traits of cultures which foster execution: it is clear what are the norms and behaviours expected;

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all people understand and support the vision, targets and the strategy (Thompson, Strickland, & Gamble, 2007); the communication is open and honest, feedback is given and failures are tolerated and seen as a possibility for improvement (AMA, 2007); people are empowered to act; managers spend their effort not on controlling employees but on coaching and motivating them (Neilson, Martin, & Powers, 2008). In order to support execution, people need to have solid competencies, especially leaders. ‘Expanding the leadership capability within an organization may be one plausible option to successfully implement and maintain an effective strategy. Leadership is vital to world-class strategy execution and world-class strategy execution can in turn serve as the “laboratory” for home grown, on the job efforts for leadership development’ (Bigler & Williams, 2013, p. 96). Managers have to master specific competencies. First, they need to help organisations to change (Lepsinger, 2010) by strengthening the resilience characteristics of individuals and teams (AMA, 2007). Leaders are required to create ‘an environment that prizes the formulation of innovative ideas and uses a “disciplined approach” for turning those ideas into action is the kind of culture that improves the chances of strategy success’ (AMA, 2007, p. 8). On the difficult execution journey, people will find roadblocks and need to manage challenges. In order to overcome those challenges, it is important to master the ability to understand cause and effect relationships (MacLennan, 2011) and problem solving (Yukl & Lepsinger, 2007). Senior leaders have a responsibility not only to develop the strategy but also to understand the way in which their vision can influence the organisation (Hrebiniak, 2013). If they are not able to bring middle-managers on board from a rational and emotional point of view (Huy, 2011), they incur the risk of not getting their message across the entire organisation. One of the skills that can help to engage and direct employees is the definition of clear outcomes expected at different levels (Malek & Narayanan, 2008). Organisations, to be effective in execution, need to create high-performing cultures, develop skills in people and ensure individual behaviours are aligned with the vision and strategy. People need to show a clear sense of commitment and trust in the decisions of their leaders (AMA, 2007). ‘Once made, decisions are rarely second-guessed. Whether someone is second guessing depends on your vantage point. A more senior and broader enterprise perspective can add value to a decision, but managers up the line may not be adding incremental value; instead, they may be stalling progress by redoing their subordinates’ jobs while, in effect, shirking their own’ (Neilson, Martin, & Powers, 2008, p. 7). At the same time, senior leaders need to be ready to change their minds based on downstream feedback and involve managers down the line in operating decisions (Martin, 2010). People in

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organisations receive many inputs and have competing priorities. Individuals are able to focus on the most important objectives and actions, which are supported by the definition of appropriate lead metrics (MacLennan, 2011; McChesney, Covey, & Huling, 2012). Communication and alignment are key aspects for understanding the key objectives. Effective managers avoid using difficult and subjective arguments but ‘use a framework that allows everyone to talk about organization’s issues in the same way. They gather data that shows exactly what is happening so that you can move from debating whether you have a problem to discussing what to do about the problem’ (Steffen, Canner, & Neilson, 2012, p. 20). The right culture and people are a starting point; in addition, they require the support of effective systems. The first system described by various authors relates to information flow. Top-down communication ‘clearly should explain what new responsibilities, tasks, and duties need to be achieved for each staff. Fundamentally, it also contains the reasons behind new strategic decisions and actions that need to be taken’ (Alharthy, Abdullah; Rashid, Hamad; Pagliari, Romano; Khan, Faisal, 2017, p. 38). That allows people to understand the strategy, their role within the effort of execution (Yukl & Lepsinger, 2007; Haudan, 2007), and to feel empowered to act (Martin, 2010). If communication flows smoothly ‘fields and line employees usually have the information needed to understand the bottomline impact of their day-to-day choices. Rational decisions are necessarily bounded by the information available to employees’ (Neilson, Martin, & Powers, 2008, p. 8). Leaders need to set-up a system that captures changes in the reference environment and bring them quickly to the organisation. That together with the access to key measures of performance allow managers to define the right strategy (Neilson, Martin, & Powers, 2008). Another system required concerns human resources management (HRM). Strategic and business objectives have to be connected with individual performance goals (Haudan, 2007). Incentives, such as rewards and recognitions, ‘must motivate performance toward desired outcomes. Hoping for one thing but rewarding another is confusing and wrong. So is the neglect of solid performance. The execution process will suffer if the doers aren’t recognized and rewarded’ (Hrebiniak, 2013, p. 226). Objectives and rewards should consider the achievements of concrete goals and they need to take into consideration the skills and behaviours required for execution. Effective organisations implement systems to develop new capabiˇ lities enhancing strategy implementation (Cater & Puˇcko, 2010). Both in rewards and recruitment guidelines, characteristics such as collaboration, optimism and team-work are considered and valued (Lepsinger, 2010; Bigler & Williams, 2013). The models presented in Section 2.1.2 suggest the importance of having additional systems on top of the ones managing information and HRM. For example,

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Thompson, Strickland and Gamble (2007) explain the role of having a structured way to define, store and update procedures and policies. They also encourage companies to adopt systems to manage best practices and continuous improvement. ‘Managers can significantly advance the cause of competent strategy execution by pushing organizations units and company personnel to identify and adopt the best practices for performing value chain activities and, further, insisting on continuous improvement in how internal operations are conducted’ (Thompson, Strickland, & Gamble, 2007, p. 393). Hrebiniak (2013) explains how change management is not only a skill mastered by leaders but it should become a systematic approach. He adds that organisations have advantages in adopting a disciplined project management approach. Kaplan and Norton (2008a) focus their attention on adding the budgeting and controlling systems in the framework of strategy planning and execution. There are different organisations’ structures that might support at best execution. ‘When the structure is undermining the ability of the organization to execute the strategy, it usually involves one or more of the following factors: formal structure…, boundary management…, core processes…, bridging structure’ (Curran, 2009, p. 35). Formal structures should be aligned with the strategy (MacLennan, ˇ 2011; Cater & Puˇcko, 2010; Hrebiniak, 2013) and enough resources should be allocated to them (Jooste & Fourie, 2009). Boundaries management is important to make sure departments provide value to other components of the organisation (Bigler & Williams, 2013). Core processes are the ones which enable companies to provide value to customers and stakeholders. They need to be effective and efficient. Organisations can decide to outsource some processes if that enables strategy execution (Thompson, Strickland, & Gamble, 2007). Bridging structure refers to the fact that sometimes special and unplanned needs emerge. Organisations have to build flexibility so that they can deal with unexpected events (Curran, 2009). External factors can influence the results of execution, above all customers and stakeholders of an organisation. Understanding their needs and translating them into a strategy is vital. Needs vary over time: organisations should master a system to capture changes and adapt execution accordingly (AMA, 2007). ‘Everything that the organization does must in some way contribute to acquiring and serving customers; anything that does not is presumed to be a poor use of the organization’s resources. Moreover, even actions that serve customers can misallocate resources if the result ends up providing more or less than the customer wants’ (McKinsey & Company, 2014, p. 17). Another factor that can be an enabler for execution regards technology and innovation. ‘Today’s organizations increasingly look toward new

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business models rather than just new product lines to challenge the competition’ (AMA, 2007, p. 8). A well formulated strategy helps the process of execution. The strategy should take into consideration the external environment, the goals of the organisation but also the culture, structure and the internal capabilities (Thompson, Strickland, & Gamble, 2007). The plan should not remain static; instead, it needs to change based on the continuous monitoring of the status of implementation. ‘From time to time managers will discover that some of the assumptions underlying their strategy are flawed or obsolete. When that happens, managers need to rigorously re-examine their strategy and adapt it, deciding whether incremental improvements will suffice or whether they need a new, transformational strategy’ (Kaplan & Norton, 2008b, p. 23). Execution is a complex process and requires that leaders and managers understand all the factors driving the success of implementation. Some of the factors are closely interrelated and need to become part of the way of working to master strategy execution.

2.1.6

Obstacles to Execution

Similar to enablers, roadblocks are studied by various researchers. In the following paragraphs, roadblocks are presented using the same categories defined for enablers (Figure 2.8). Cultures which are unhealthy and not adaptive might be a strong barrier to strategy execution (HBR, 2010). ‘One survey found that the biggest impediment to successfully executing a business strategy was not change but simply doing things the way they’ve always been done. Cultural differences may play a role, too. A strategy that worked in one location may require a different approach in another. Within the firm, differences between business units can hinder progress, such as when marketing works in a two-year cycle and operations in a five-year cycle’ (AMA, 2007, p. 17). A culture striving for short-term results might block initiatives that have a ˇ longer-term and strategic view (Cater & Puˇcko, 2010). Execution requires a high level of commitment inside the organisation; lack of sense of ownership and an environment where personnel is involved poorly might hinder the implementation of the strategy (Werner & Xu, 2012; Hrebiniak, 2013). Another obstacle to execution is the lack of proper skills in leaders and staff. Based on the strategy, people need to have specific technical capabilities (MacLennan, 2011; Jooste & Fourie, 2009). If these skills are not present, the organisation have to choose whether to build internally or to acquire them

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externally. Leaders should own additional competences to carry on execution and change management. People who took part in a research mentioned ‘that implementation often involved new methods or approaches…and that mangers often resisted these changes, preferring to operate as they always had’ (Hrebiniak, 2013, p. 22). ‘Even if employees are aware of the strategy and know exactly what to do to execute the strategy, they may not act so that the strategy is successfully executed. In this situation, the employees may be in full favour of helping to execute the strategy, but their commitment to the deluge of work necessary to take care of the daily routine of established procedures and business details, they do not carve out time to do what it takes to execute the strategy’ (Werner & Xu, 2012, pp. 89–90). Sometimes such behaviours are a consequence of poor leadership. Managers might act in a way that is inconsistent with the values and strategy of the organisation (Lepsinger, 2006; HBR, 2010). Yet, they create a sense of uncertainty and low trust that is an ˇ obstacle to cooperation and information sharing (Cater & Puˇcko, 2010). Information systems can have a significant impact on execution. Jooste and Fourie (2009, p. 65), in their research, found that ‘a poor understanding of the strategy by the workforce and ineffective communication of the strategy to the workforce are the most important barriers to effective strategy implementation’. Not enough clarity on roles and responsibilities as a consequence of ineffective communication might be also a strong obstacle (HBR, 2010). Usually managers have to couple with two main types of priorities: daily routines and those usually linked to execution of a strategy. If leaders don’t find a disciplined approach to manage execution priorities, they will soon be lost in the pressure of the daily routine (McChesney, Covey, & Huling, 2012). That happens when there is a lack of a balanced performance management system focusing staff on both urgent tasks to manage the routine and important activities for execution (AMA, 2007; Werner & Xu, 2012). If managers don’t implement a system to monitor progress and achievement, they will lose probably control of execution and miss the opportunity to adapt and improve the strategy (Lepsinger, 2006; Curran, 2009). The structure of the organisation and resource allocation are major issues for strategy execution. According to AMA’s research (2007, p. 15) ‘not having enough resources surfaced as the top factor hindering an organization’s ability to execute its strategic plans today. Too often, it seems, top managers’ strategic ambitions outstrip the resources they’re willing or able to allocate in order to attain their goals. In addition to the problem of having too few resources, the way in which limited resources are allocated can be another factor affecting the ability to execute strategy’. An additional obstacle is the way in which boundaries among departments

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and functions are installed and managed (Curran, 2009). If they are not set in the proper way, they can stop information flow and hinder collaboration. External factors might disrupt strategy execution and create uncertainty on the direction to take. Innovation can have a positive influence on execution but also be the reason for a complete change of strategy if it affects in a negative way the organisation (AMA, 2007). Changing and unclear requirements of customers and stakeholders might cause a waste of resources and create frustration for the staff. The quality of the strategy might be an additional barrier to execution. ‘A poor strategy creates uncertainty about how the organization plans to compete…, what skills or capabilities a company must invest in…, and detracts from managers’ confidence about their ability to compete successfully against foes in the market’ (Hrebiniak, 2013, p. 24).

2.2

Resilient Organisations: Literature Review

2.2.1

Resilience: Context and Definitions

As stated in the introduction, the term resilience is used in various contexts: socio-ecological, psychological, systemic, organisational. In every field of study, the term has different definitions, even if it maintains the same general meaning. Before focusing on organisational resilience, the scope of this research, it is important to understand all possible fields of application in order to gain a broader perspective on the topic. Starting from the study of Charles Darwin on evolution, the scientific world began to focus on determining why some species had survived and others had not (Daly, Becker, Parkes, Johnston, & Paton, 2009). Socio-ecological resilience can be defined as ‘the capacity of a system, be it an individual, a forest, a city or an economy, to deal with change and continue to develop. It is about the capacity to use shocks and disturbances like a financial crisis or climate change to spur renewal and innovative thinking. Resilience thinking embraces learning, diversity and above all the belief that humans and nature are strongly coupled to the point that they should be conceived as one social-ecological system’ (Moberg, 2011, p. 3). While socio-ecological resilience sees people and nature as an interdependent system (Folke, et al., 2010), psychological resilience studies the capacity of a single person. Fletcher (2011) defines it as ‘the ability to adapt to or recover from significant change and remain productive’. The focus is on the capacity of a person to continue to show his normal behaviours despite important changes in

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his life. Hoopes (2015) uses the metaphor of the sponge to explain that a person can absorb only a certain quantity of change before displaying unproductive behaviours. Luckily resilience can be taught and improved so that individuals can learn to absorb more and more changes without suffering of loss of productivity. In general terms, resilience can be associated with the properties of a system. It can be defined as ‘the ability to absorb or tolerate change without losing the peculiar traits or expected behaviors’ (De Florio, 2014, p. 2). Systems, in order to be resilient, need to have two features: evolvability and identity robustness. The first feature refers to the ability to adapt to changes in the environment; the second is the ability to maintain their own characteristics when experiencing disturbances. Another general definition for resilience is ‘the degree of disturbance a system can absorb, the degree to which the system is capable of self-organization and the degree to which the system can build the capacity of learning and adaptation’ (Carpenter, Walker, Anderies, & Abel, 2011, p. 766). In this case, the focus is on the ability to learn and adapt. In the literature, there are many definitions for organisational resilience, too. One example is the following one: resilience is an ‘organization’s ability to achieve high performance levels with minimal dysfunction in an environment of constant change’ (Conner Partner/Resilience Alliance, 2010, p. 1). Bahmra (2011, p. 5379) suggests that ‘resilience refers to the capacity to continuous reconstruction’ or ‘resilience is a fundamental quality to respond productively to significant change that disrupts the expected pattern of events without introducing an extended period of regressive behavior’. Further definitions regarding organisational resilience will be added in the next chapter; however, only one will be selected for the purposes of this research. As discussed, resilience is defined differently in different fields but also within the same field of study. The term is broad and it is used by various authors with differing meanings and boundaries. However, almost all terms agree with the fact that resilience is a capacity or ability that a system, an organisation or a person shows in specific times of change.

2.2.2

Models of Resilient Organisations

There are various authors who have studied resilience in organisations. In the following chapters, some of them are presented. The purpose of the discussion is to understand what model or combination of models most appropriately fit the study of resilience and strategy execution in public organisations.

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– Adaptive cultures (Välikangas) In the literature, resilience is usually seen as the ability to manage and recover from a crisis. Liisa Välikangas (2010, p. 19), instead, introduces a new notion: resilience ‘begins by taking timely action before the misfortune has a chance to wreak havoc’. In this sense a resilient organisation is able to foresee future events and to change before it is strictly necessary. The author studies resilience in organisations from various points of view: strategic vs operational; how to assess resilience in organisations; the three steps approach to building this capability. Strategic and operational resilience works at different conceptual levels. Strategic resilience is linked to the ability to turn threats into opportunities even before threats become real. It is a competitive skill that a company can use to take advantage of accidental events. Where a standard company sees risks, a resilient one can turn the risks into positive surprises. Strategic resilience is present where an organisation owns the characteristics of serendipity and sagacity (Välikangas, 2010, p. 22). Serendipity means the ability to learn and find value in unplanned situations. Operational resilience, instead, concerns the capacity to adapt and recover from accidents or avoid them in the first place. An organisation with this attribute owns particular skills and systems, such as robustness and mindfulness. Strategic and operational resilience are useful for managing different types of threats as shown in Table 2.1: Table 2.1 Strategic vs operational resilience (Välikangas, 2010, p. 30)

Threats

Responses

Disturbance (sudden)

Operational Resilience

Decline (long-lasting)

Strategic Resilience

Opportunity (imminent or long term)

Strategic Resilience

The tests for resilience are also ways to prove the existence of adaptive capacity. Following the theory proposed by the author there are three different tests: competition, legitimacy and sheer toughness. Organisations facing competition develop strategies that lead them to certain consequences. There are particular types of strategies which are linked to resilience. For example, striving for agility or trust in the market have deep connections with resilient characteristics. The second test refers to institutional legitimacy. It differs from competition because the survival logic is based on establishment. There are organisations (private and public) that survive not because they are efficient and profitable, but because

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society guarantee them the right to survive. Examples are banks or public institutions (municipalities, police…). The third test is about toughness. Toughness is the ability an organisation has (or does not have) acquired during many confrontations with other companies. Adversities develop the character and the ability to survive long term. Välikangas suggests a three-step approach in building a more resilient organisation (Välikangas, 2010): 1. Managing the consequences of past performance: sometimes it would be easier to start from scratch instead of inheriting the legacy of the past. For survival it is important to question both success and failure in the past and build resilience for the future. 2. Building resilience in the organisation: there are five dimensions which contribute to making an organisation able to adapt: a. Organisational intelligence: it accommodates multiple voices b. Resourcing: organisations are able to use resources properly for managing changes c. Design: organisations are robustly designed d. Adaptation e. Culture: organisations embody a mind-set not to give up 3. Rehearsing a culture of resilience: the journey is a never-ending one. There are different ways to exercise resilience and to unleash human potential: creating passion for innovation, inventive experimentation, etc. – Organisational resilience (McManus) Sonia McManus and other authors define resilience ‘as a function of an organization’s situation awareness, management of keystone vulnerabilities and adaptive capacity in a complex, dynamic and interconnect environment’ (McManus, Seville, Brunsdon, & Vargo, 2007, p. ii). In the research she defines 15 generic indicators to measure resilience levels. She suggests a five-step approach to manage resilience and three strategies for improving it. The 15 indicators are summarised in Table 2.2. They are divided into three main areas: situation awareness, keystone vulnerabilities and adaptive capacity. Situation awareness is the general capacity of an organisation to be aware of itself and conscious of the environment around it. Keystone vulnerabilities are the elements of an organisation which potentially can cause the greatest negative impact. Adaptive capacity represents the ability to take the most effective decisions and capture the best opportunities in a crisis.

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Table 2.2 Summary of resilience indicators (McManus, 2008, p. 134) Attribute Situation Awareness

Keystone Vulnerabilities

Indicator Description Roles and Responsibilities

Awareness of roles and responsibilities of staff internally in an organisation and the roles and responsibilities of the organisation to its community of stakeholders.

Hazards and Consequences

Awareness of the range of hazard types and their consequences (positive and negative) that the organisation may be exposed to.

Connectivity Awareness

Awareness of the links between the organisation and its entire community of stakeholders, internally (staff) and externally (customers, local authorities, consultants, competitors etc.).

Insurance

Awareness of the obligations and limitations in relation to business interruption insurance and other insurance packages that the organisation may have or not have available.

Recovery Priorities

Awareness of the minimum operations requirements and the priorities involved in meeting those requirements, together with expectations of key stakeholders.

Planning

The extent to which the organisation has participated in planning activities including risk management, business continuity and emergency management planning.

Exercises

The extent to which the organisation has been involved in external emergency exercises or created exercises internally for staff and stakeholders.

Internal Resources

The capability and capacity in terms of the physical, human and process related resources to meet expected minimum operating requirements in a crisis. Includes economic strengths, succession and structural integrity of buildings.

External Resources

The expectations of the organisation in terms of the availability and effectiveness of external resources to assist the organisation in a crisis.

Connectivity

The extent to which the organisation has become involved with other critical organisations to ensure the availability of expertise and resources in the event of a crisis. (continued)

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Table 2.2 (continued) Attribute Adaptive Capacity

Indicator Description Silo Mentality Management

The degree to which the organisation experiences the negative impacts of silo mentality and the occurrence of strategies in place for mitigating them.

Communications and Relationships

The effectiveness of communication pathways and relationships with all stakeholders, both internally and externally in day-to-day and crisis situations.

Strategic Vision

The extent to which the organisation has developed a strategic vision for future operations and the degree to which that is successfully articulated through the organisation

Information and Knowledge

The degree to which information and knowledge are acquired, retained and transferred throughout the organisation and between linked organisations.

Leadership and Management

The degree to which leadership and management encourage flexibility and creativity in the organisation and how successful decision-making is in times of crisis.

The five-step approach is both a way to assess and strengthen resilience (McManus, Seville, Brunsdon, & Vargo, 2007): after having created an awareness of resilience issues (step 1), the organisation is mapped and the key elements are selected both from internal and external perspectives (step 2). Afterwards, the organisation carries out a self-assessment of its main vulnerabilities in terms of the key elements (step 3) and creates plans to prepare for disasters. The vulnerabilities are prioritised selecting the key ones that represent the most dangerous threats in a crisis (step 4). Finally, the organisation works on improving adaptive capacity by working on special case studies developed to strengthen effective management of a crisis (step 5). In the end, the author suggests three strategies for improving resilience (McManus, 2008): communication, business resources, emergency planning. The communication strategy includes the creation and management of a communication plan in order to connect with internal and external stakeholders. For internal stakeholders, it is important to understand the goals and values of the organisation and have clear roles and responsibilities. With external stakeholders, the organisation can engage with clients and suppliers to build trust and long-term

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relationships. Business resources strategy concerns the understanding of how many resources are available and with what skills. Furthermore, it is important to understand what resources are needed to maintain a minimum operational level during a crisis. An emergency planning strategy involves the development of plans to be implemented during a crisis. – An adaptive strategy for organisational crisis planning (Somers) Traditional ways of thinking suggest the definition of a step by step process to be executed during a crisis. Scott Somers (2009), instead, introduces a new paradigm. Organisations should be focused on developing structures and processes that are foundational for the resilience potential. This potential is an asset that organisations can unleash during a crisis and is the basis for the adaptive capacity. Sommer’s approach is similar to the one proposed by Välikangas (2010). Resilience is not only the capacity to bounce back from a crisis, but it is also an active effort to structure the organisation in a way that ensures it thrives in the face of adversity. The author attempts to introduce a tool to measure the latent resilience in order to understand the readiness level in case of a crisis. The tool is called the Organization Resilience Potential Scale (ORPS). It is an operational tool that helps to measure resilience through six different elements (Somers, 2009): • • • • • •

Goal-directed solution seeking Risk avoidance Critical situation understanding Ability to fill multiple roles Reliance on information sources Access to resources

From the study, it emerges that ORPS is an effective tool to measure resilience and it also offers some practical tips for managers to improve it. For example, it is important to focus on crisis planning. Simply facing this topic leads to a decrease in the risk perceived and positively influences risk behaviours. Moreover, leaders need to search for information from multiple sources and analyse the data in order to create useful knowledge. Studies show that people who are willing to spend time on research are more likely to develop emergency plans and mitigation strategies.

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– Building agility, resilience and performance (McCann, Selsky and Lee) The authors suggest (McCann, Selsky, & Lee, 2009) that an organisation, in order to perform well and be profitable needs to be agile and resilient at the same time. This consideration is especially true in turbulent environments. An organisation that is only agile but not resilient is exposed to surprises, and it becomes ‘fragile’. By agility is meant all those practices that make companies lean and quick in terms of decision making, such as reducing managerial layers, using teams and outsourcing non-core activities. The model applied by McCann offers operational measures of agility and resilience, shows how these skills have a significant impact on performance and profitability, and offers suggestions to managers to strengthen the skills of their organisations. The measures used in the model include ten indicators (Table 2.3) divided equally to assess agility and resilience. Other authors describe certain traits as resilient traits that McCann suggests belong to agility. For example, looking actively for sources of information is mentioned both by Somers (2009) and McManus (2008) as a typical resilience indicator. This finding is not surprising given the fact that both capacities (agility and resilience) are necessary to adapt effectively and efficiently to changes. The study shows that, during turbulent times, organisations showing more adaptive capacities and with high performance are more effective in managing the situation. They own, in fact, specific skills: they are simply more capable. McCann (2009) provides suggestions and specific actions that managers can implement in order to build a capable organisation (Table 2.4).

Table 2.3 Agility and resilience indicators (McCann, Selsky, & Lee, 2009, p. 48) Agility

Resilience

our organization is open to change

our organization has a strong sense of identity and purpose that can survive anything

our organization actively and widely scans our organization has a strong support network for new information about what is going on of external alliances and partnerships our organization is good at making sense of ambiguous, uncertain situations

our organization is expanding its external alliances and partnerships

our organization takes advantage of opportunities quickly

our organization has "deep pockets"— access to capital and resources to weather anything

our organization is good at quickly deploying and redeploying resources to support execution

our organization has clearly defined and widely held values and beliefs

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Table 2.4 Agility and resilience building interventions (McCann, Selsky, & Lee, 2009, p. 50) Agility-building • Improve “sense-making” skills—better manage uncertainty and ambiguity. How: Use scenarios to scan and build hypotheses and models about what is happening. Get people to read broadly and explore new ideas together. • Create and sustain an openness to change. How: Provide financial rewards and career incentives for innovation and continuous improvement. • Efficiently and quickly acquire, build, share and apply knowledge to critical priorities. How: Create a knowledge management process, but communicate clearly and consistently from the top about the big issues. Form fast-response teams around issues. • Create an action bias throughout the organization. How: Set clear priorities and deadlines and hold people responsible for meeting them. Avoid paralysis in decision making—work on streamlining and clarifying roles/responsibilities in decision-making process. • Develop the ability for quickly deploying and then redeploying resources, talent and skills. How: Learn to hedge bets and avoid over-commitment. Cross-train and frequently move people around to broaden skill/knowledge base. Resiliency-building • Improve contingency planning and crisis response capabilities. How: Take simulations, role-playing and scenario planning seriously and make certain the skills and competencies for surprises and crises are built. • Engage in strategic (enterprise-wide) risk assessment. How: Think about areas of most risk and exposure and develop plans to proactively manage each of them—focus on the higher-risk, under-managed relationships. • Learn to deal with the consequences of failed plans—“take the hit” and react appropriately. How: Minimize losses by avoiding escalation and learning from the process to anticipate it better the next time. • Develop assets and talents both inside and outside the organization that can be drawn upon to mobilize a response. How: Alliances and partnerships are critical and need to be developed and sustained, whether financial or otherwise. • Make certain everyone has a deep, shared belief in your core values and beliefs. How: Communicate often and sincerely about the organization’s vision and values, making certain these are understood and truly hold meaning and value. • Be prepared to rethink and redesign yourself if required. How: Develop your transformation skills—know what to preserve that is part of your core identity and what can be given up.

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The actions are similar to the ones proposed by other authors. They mainly concern organisational culture and skills useful for managing changes, good use of resources, adoption of risk assessments and a smooth flow of information. – Enhancing business resilience and performance through sustainable leadership practices (Avery and Bergsteiner) Avery and Bergsteiner (2011) reflect on resilience starting from the angle of leadership. In the classic Anglo-Saxon view of business, managers are there to maximise shareholders’ value. This view can lead to short-term strategies that can affect the growth and survival of the organisation in the long term. Instead, the authors are inclined to support another view where: ‘the firm should see itself as an interdependent part of a community that consists of multiple stakeholders whose interests are integral to business success’ (Avery & Bergsteiner, 2011, p. 5). In such a context, the organisation is interwoven with all the entities and people around its environment. The context helps to develop resilience skills in order to survive long term and pushes to adopt sustainable leadership practices. The sustainable leadership approach is focused on maintaining a balance between attention to profits, employees and the planet. In order to achieve this balance, leaders need to use management practices that foster resilience in the organisation: decentralised decision-making, seeking cooperation, promoting a shared view of the future, strong innovation, etc. The authors present a model that can be useful for assessing if an organisation is implementing practices that foster resilience. They provide a framework for managers to structure internal processes. The model is called the Sustainable Leadership Pyramid (Figure 2.9) and consists of different layers: • Foundations practices • Higher-level practices: they are based on the foundations. If foundations are not working well, it is very difficult to introduce high-level practices • Key performance drivers: they are the booster to customer experience and therefore they are the drivers of organisational performance • Performance outcomes: the five performance outcomes create sustainable leadership The Pyramid, similar to the ideas discussed by McCann (2009), connect a certain type of practice and set of skills with sustainable long-term performances. Sustainable leadership practices are key to creating a resilient organisation, which is able to adapt to changes and survive multiple crises.

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Figure 2.9 The sustainable leadership pyramid (Avery & Bergsteiner, 2011, p. 8)

– Organisational resilience standard (American National Standard for Security) Given the increasing attention on the topic of disaster recovery in the United States, the American National Standard for Security (ASIS) has defined a standard for organisational resilience. This Standard adopts a process approach for establishing, implementing, operating, monitoring, reviewing, maintaining, and improving an organization’s organizational resilience management system (ASIS, 2009, p. vii). The standard presented in Figure 2.10 supports in setting up a management system that helps to: • • • • •

Understand a current situation and potential risk Define policies and targets to manage risks Implement controls to manage the risks defined Monitor the performance and effectiveness of the operating system Continue to improve the system

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Figure 2.10 Organisational resilience flow diagram (ASIS, 2009, p. 4)

The standard is not only ‘compatible’ with other management standards, like ISO 9001:2000 or ISO 14001:2004, but it suggests an integrated approach. By applying various standards at the same time, the probability of identifying risks and solving problems is higher. The framework provides a high-level guide for managers to implement all the components of the standard. Everything begins with senior managers who need to sponsor the initiative, set objectives and provide all the resources required. It is important also to create a Crisis Management Team. This team is composed

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of cross-departments employees and should lead disaster or event responses. The Crisis Management Team is supported by one or more Response Teams. They are in charge of developing and testing plans to be implemented during a crisis. It is also crucial to define clear roles and responsibilities and document the decisionmaking process in order to support activities and communication with internal and external stakeholders (ASIS, 2009). Characteristics of resilient organisations are not discussed in detail in the standard; however, it can be argued that they are based on the ability to implement the framework provided.

2.2.3

Characteristics of Resilient Organisations

Analysing the models presented in the previous chapter, some general characteristics that belong to resilient organisations can be deduced. They distinguish themselves through a different internal structure, culture and relationship with all stakeholders (Table 2.5). Table 2.5 Some characteristics of resilient organisations McManus (2008)

Somers (2009)

Avery and Bergsteiner (2011)

Awareness of roles and Teams systematically trained Prefer long term over short responsibilities of staff to improvise solutions term internally in an organisation Strategies in place for reducing silos mentality

Employees address problems Organisational change is an with minimal supervisor evolving and considered intervention process

Leadership and management encourage flexibility and creativity

Employees gather information; consider consequences of alternative fixes

Decision making is consensual

The capability to manage crisis: human and process related resources to meet expected minimum operating requirements

Key positions are generalists

Knowledge is spread through the organisation

(continued)

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Table 2.5 (continued) McManus (2008)

Somers (2009)

Awareness of the links between the organisation and its entire community

Employees given knowledge; Teams are extensive and minimal supervisor empowered intervention

Organisation has participated in planning activities including risk management, business continuity and emergency management planning

Work teams have authority to Every stakeholder matter purchase materials as needed

Information and knowledge are acquired, retained and transferred throughout the organisation and between linked organisations McCann (2009)

Avery and Bergsteiner (2011)

High trust through relationships and goodwill

Välikangas (2010)

The organisation has a strong sense of identity Organisations are intelligent about and purpose that can survive anything accommodating different thoughts The organisation has a strong support network Organisations use proper resources to of external alliances and partnerships manage changes and to innovate The organisation is expanding its external alliances and partnerships

Organisations are robustly design

The organisation has "deep pockets"— access to capital and resources to weather anything

Organisations are adaptive

The organisation has clearly defined and widely held values and beliefs

Values don´t allow the organisation to give up

McManus (2008) considers three different attributes of resilience: situation awareness, keystone vulnerabilities and adaptive capacity. Situation awareness is the general ability of an organisation to understand its strengths (resources, ability…), the environment and relations with stakeholders. This capability can be developed through a strong sense of identity and purpose (McCann, Selsky, & Lee, 2009). At the same time, the organisation has to look externally and create a network of stakeholders. The final goal is the transformation of relationships based on rules and mutual respect in strategic partnerships (McCann, Selsky, & Lee, 2009).

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The understanding of internal vulnerability is a positive consequence of high self-awareness. Awareness alone is not enough; the organisation has to create a culture where risk management is central and quality is managed and improved over time (Christopher & Peck, 2004). High resilience is driven by four behaviours: anticipating critical disruptions and their consequences, noticing the disruptions when they occur, planning how to respond and adapting (Lay, 2013). Adaptive capacity is a ‘measure of the culture of the organization that allows it to make decisions in a timely and appropriate manner both in day to day business and also in crises’ (McManus, 2008, p. 129). Most of the authors concentrate their research on this characteristic. Resilience is linked with the concept of empowerment and self-management. Teams are allowed to improvise solutions with limited supervisor intervention (Somers, 2009). Such a structure supports a decision making and democratic process based on consensus (Avery & Bergsteiner, 2011). Leadership plays a key role in creating an adaptive capacity. Välikangas (2010) suggests that managers have to work on five dimensions to develop imaginative organisations: accommodation of different voices, use of scarce resources for innovation, robust design, change management and a ‘not-giving-up’ mentality. Another characteristic to consider relates to information flow among individuals (McManus, 2008). The knowledge is spread and is considered a common asset and not a private source of power. An ‘open’ organisation is possible only in the context of high levels of trust supported by healthy relationships and goodwill (Avery & Bergsteiner, 2011). In addition, the American National Standard Institute provides a management system which helps to introduce processes and policies (ASIS, 2009). This step-by-step approach might be integrated with other models that provide more information in terms of the culture and behaviours required to create a resilient organisation.

2.2.4

Measuring Organisational Resilience

Various researchers and institutions have tried to measure organisational resilience using different tools and techniques. Some of them are quantitative, with data generally collected through questionnaires, and some are qualitative, with information commonly gathered through interviews. In the current chapter some of the tools and indicators are presented in order to facilitate the selection of the most appropriate approach to adopt in this research.

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Starting from the models already presented, McManus (2008) implemented a five-step approach to gather data and information. The five-step approach is mainly a qualitative method: it is based on interactions with organisations through workshops, case studies and interviews. Resilience is measured thanks to the three attributes and 15 indicators described in Table 2.6. ‘In terms of situation awareness, the process was developed to assist the researcher to look at perceptions that influence decision making processes, and which impact on existing and future planning strategies. The process offers value from a vulnerability perspective as it utilises several different types of data (surveys, interviews, scenarios) to identify and validate keystone vulnerabilities and decision making around those vulnerabilities’ (McManus, 2008, p. 52). Stephenson (2010) applied the model developed by McManus as a starting point for measuring resilience in organisations; however, she introduced a different method for collecting data and extended the number of indicators. Stephenson gathered information through on-line questionnaires instead of implementing the five-step process. She developed two surveys: one for ‘normal’ employees and one for senior managers. The one for senior managers is more exhaustive and contains a section exploring impact on performances. In addition, the author conducted semi-structured interviews to foster managerial discussions. On the basis of her research, Stephenson extended the model used by McManus and defined which factors help to predict organisational resilience. Based on this study, the number of indicators is reduced and they are grouped into two categories (Table 2.6): adaptive capacity and planning.

Table 2.6 Indicators to measure resilience (Stephenson, 2010, p. 245)

Adaptive Capacity

Indicator

Definition

Minimization of Silo Mentality

Minimization of divisive social, cultural and behavioral barriers, which are most often manifested as communication barriers creating disjointed, disconnected and detrimental ways of working.

Capability and Capacity of Internal Resources

The management and mobilization of the organization’s resources to ensure its ability to operate during business-as usual, as well as being able to provide the extra capacity required during a crisis.

Staff Engagement and Involvement

The engagement and involvement of staff who understand the link between their own work, the organization’s resilience, and its long-term success. Staff are empowered and use their skills to solve problems. (continued)

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Table 2.6 (continued)

Planning

Indicator

Definition

Information and Knowledge

Critical information is stored in a number of formats and locations and staff have access to expert opinions when needed. Roles are shared and staff are trained so that someone will always be able to fill key roles.

Leadership, Management and Governance Structures

Strong crisis leadership to provide good management and decision-making during times of crisis, as well as continuous evaluation of strategies and work programs against organizational goals.

Innovation and Creativity

Staff are encouraged and rewarded for using their knowledge in novel ways to solve new and existing problems, and for utilizing innovative and creative approaches to developing solutions.

Devolved and Responsive Decision Making

Staff have the appropriate authority to make decisions related to their work and authority is clearly delegated to enable a crisis response. Highly skilled staff are involved, or are able to make, decisions where their specific knowledge adds significant value, or where their involvement will aid implementation.

Internal and External Situation Monitoring and Reporting

Staff are encouraged to be vigilant about the organization, its performance and potential problems. Staff are rewarded for sharing good and bad news about the organization including early warning signals and these are quickly reported to organizational leaders.

Planning Strategies

The development and evaluation of plans and strategies to manage vulnerabilities in relation to the business environment and its stakeholders.

Participation The participation of staff in simulations or scenarios in Exercises designed to practice response arrangements and validate plans. Proactive Posture

A strategic and behavioral readiness to respond to early warning signals of change in the organization’s internal and external environment before they escalate into crisis.

Capability and Capacity of External Resources

An understanding of the relationships and resources the organization might need to access from other organizations during a crisis, and planning and management to ensure this access. (continued)

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Table 2.6 (continued) Indicator

Definition

Recovery Priorities

An organisation wide awareness of what the organisation’s priorities would be following a crisis, clearly defined at the organisation level, as well as an understanding of the organisation’s minimum operating requirements.

In addition, Stephenson proposed a tool to benchmark resilience in different entities. This four-stage methodology is shown in Figure 2.11. Resilience drivers work as input for the model. They take into consideration issues and the unmet needs of the organisation. The four stages of the methodology are plan, measure, analyse and adapt. During the measure phase, a survey containing the indicators presented above is launched. Somers (2009) developed the ORPS (Organization Resilience Potential Scale) tool that uses six different factors to measure resilience potential. The six factors had already been introduced by Mallak (1998) but Somers operationalised them so that they can captured in an online questionnaire. Surveys were sent to the senior managers of more than 100 departments in the public sector. The author decided to collect data only from senior managers because he argued that they are the only ones with a broad view and understanding of the organisation. McCann (2009) decided to adopt an online questionnaire to collect qualitative and quantitative information concerning agility and resilience. The sample was very broad and included companies across North America. The individuals completing the surveys were mainly executives, managers and high-level human resources professionals. McCann included agility and resilience indicators presented in Table 2.6. The questionnaire also contained a measure of the performance and profitability of the companies involved. Sellberg (2015) applied a resilience assessment to understand the level of readiness of organisations in the public sector. The assessment is based on a methodology developed by Resilience Alliance (2010). The approach is qualitative and adopts a case study method. It consists of various tools like surveys, semi-structured interviews, reviews of official documents and a workshop with the main players inside the organisation. While the assessment is performed, participants understand their level of resilience and can create an action plan to improve it. The approach bridges sustainable development with crisis management and offers a holistic view of the resilience level.

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Figure 2.11 Tool to benchmark resilience (Stephenson, 2010, p. 241)

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Ferreira et al. (2013), in their research on rail engineering, built on the studies of Hollnagel et al. (2007) regarding characteristics of resilient engineering systems. The authors developed a set of inquiries to be included in a survey. The questionnaire is composed by three sections: the first one relates to indicators; the other two are dedicated to the assessment of the planning process. The results of the research showed the importance of some specific factors in building resilience. The study is focused only on a specific department; yet, the findings might not be applicable to other divisions and organisations. Taking into considerations the measurement systems developed by various authors, it is evident that questionnaires are the most adopted tools. In some cases, surveys are combined with interviews that offer the possibility of gathering additional qualitative data.

2.3

Execution and Resilience: a Framework for an Effective Organisation

2.3.1

Framework for Executing Strategy Effectively

Effective management of strategy execution is a collective effort that can be compared to an orchestra. Musicians need to have the right skills and extensively prepare for the performance. The place where the show take place have to be carefully selected. The music tracks should fit the audience. The conductor has the task to align all the instruments in order to create a solid and harmonious performance. After the show, the entire orchestra review the results and take corrective action in order to improve over time. Effective execution of strategy requires accurate preparation, collective execution and continuous improvement (Table 2.7). The phase precedent to real execution requires extensive planning and alignment at managerial level. The organisation, first, have to understand who are the most important customers and stakeholders and what their requirements are. Then, it should assess if its products and services fulfil those requirements, compared to the offers of competitors. On the basis of these preliminary analyses, the organisation needs to define a strategy to increase the value provided to current or new customers and stakeholders. A well-designed strategy takes into consideration internal strengths and weaknesses. That increases the probability that the plan is successfully implemented.

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Table 2.7 Framework for effective strategy execution

Pre-Execution •Understand Customers' & Stakeholders’ Needs •Define Strategy •Align the Organisation: People, Structure, Systems •Design a Management System

How: •Various Methods and Tools

Execution

Post-Execution

•Implement Plans and Projects •Monitor Progress and Manage Issues •Learn and Adapt

• •Capture and Share Lessons Learnt •Grant Sustainability

• How: •Program and Portfolio Management •Performance Management System

• How: •Tools and Systems to Monitor Performances and React •Knowledge Management System

Once a strategy is defined, the execution ‘orchestra’ has to be assembled and prepared. The task of leaders is to introduce a suitable management system and to start aligning people, structure and systems. The management system consists of selecting a methodology for execution, of designing a performance management scheme and of installing the system in the organisation. Alignment should start with people and culture. Personnel have to understand the plan, embrace it and develop the skills required for implementation. Thereafter, the structure of the organisation has to be shaped to support execution. In doing so, managers need to pay particular attention to facilitating the alignment between functions and to placing the right resources in the right place. In turn, communication systems are critical to involve people and make sure everybody is going in the same direction. They also facilitate the implementation of tasks and handovers between departments. It is essential that individual and team objectives are part of reward and recognition programs considering the achievement of goals, behaviours and skill development required for execution. Lastly, managers need to find a balance between daily operational tasks and progress on implementation in order to ‘orchestrate’ the strategy. A management system is supported by proper metrics and KPIs. The measurement approach is developed in the pre-execution phase but it is utilised before, during and after strategy implementation (Figure 2.12). Metrics which assess the success of execution are developed during the design of the strategy and are the ultimate method for understanding completion or failure of the plan. They are also called realisation indicators and are lag by definition. Deployment metrics are

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Figure 2.12 – Design of an effective measurement system for execution

valuable to realise if execution is correctly managed. They support the tracking of skills development or resources acquisition, and can be introduced to monitor the level of comprehension and commitment of the staff. Deployment metrics are heavily adopted at the beginning of the implementation effort but are less relevant along the journey. Risk indicators present a similar tendency. They are important for understanding what can go wrong and taking appropriate countermeasures. At the beginning, risks are more strategic and might have a big impact on the results; afterwards, they become more operational and, usually, have limited influence on success. In the preparation phase, a methodology to carry out execution is selected. The appropriate methods and tools vary from organisation to organisation and from strategy to strategy. There are approaches that are more rigorous and structured, such as Lean Six Sigma or project management methodologies. There are others that are ‘lighter’ and don’t require a systematic implementation through the entire structure. Leaders have to be aware of different methods and adopt the one that best fits their situation. It can also happen that various departments adopt different methodologies. For example, operation functions might choose a ‘Lean approach’ and sales and marketing areas the ‘4 Disciplines of Execution’ (McChesney, Covey, & Huling, 2012). During the execution phase, managers must have a rigorous and, at the same time, flexible style. Rigor is required to carry on projects, initiatives and tasks in

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a consistent and timely manner. It is achieved through proper systems and disciplined behaviours. Flexibility is important to drive ‘learning and adapt’. When strategy is implemented, issues and new opportunities emerge especially at operational level. Information needs to flow smoothly and reach leaders and central functions that can adapt the plan accordingly. In the execution phase, realisation metrics are deployed through organisational levels and become process driven. They lead daily activities of individuals and help to align teams and behaviours. If issues related to resources or skills emerge, managers need to take the proper countermeasures. For example, they can support employees with training and coaching. Process indicators work in parallel with program metrics. Program metrics assess the progress of change initiatives required to implement a new plan. They should be linked to process and realisation indicators. There is an expectation that as soon as change initiatives are implemented, performance varies and signs of success are seen. Otherwise, managers have to understand the reasons and consider modifying the strategy. Once execution is completed and hopefully realisation of benefits is reached, the organisation has to ensure sustainability of results. It often happens that companies and other entities move towards new strategies already during the implementation phase. The risk is that change initiatives, not completed and embedded in the culture, will fall apart as soon as attention is moved to different objectives. Managers need to ensure that systems remain in place to monitor closure of activities and consistent performances. One last task is capturing and sharing of lessons and best practices. Reflecting on successes and failures during the journey might help people to continuously improve and avoid the pitfalls of the past. Experiences regarding strategy execution should be part of a structured knowledge management system to develop and transfer learning among departments and to new employees.

2.3.2

Framework for Creating a Resilient Organisation

Välikangas (2010) points out that resilience is not only demonstrated by an organisation during a crisis but it is, above all, an ability to foresee the crisis and to avoid or mitigate it. In order to reach this level of ‘wisdom’, an organisation needs to take specific actions to prepare itself. Analysing the different models previously presented, a framework to create a resilient organisation can be suggested (Table 2.8).

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Table 2.8 Framework to create a resilient organisation (personal elaboration)

Resilient Organisation Culture

Processes & Systems

Stakeholders Relationship

Resources

Situation Awareness

Risk Analysis

Monitor & Adapt

Continuous Improvement

The characteristics of a resilient culture are similar to those presented in many books on leadership. They are based, for example, on empowerment of people, delegation, teamwork, etc. Avery and Bergsteiner (2011) present a comprehensive list of practices required to create sustainable leadership. The model offers a good starting point for leaders to understand in which directions to concentrate their efforts. All practices need to be bounded together with a strong sense of identity and core values (McCann, Selsky, & Lee, 2009) that provide the basis for longterm survival. Specialisation of functions and roles becomes a risk and doesn’t provide the flexibility and the holistic view required for resilience. Key positions have to be generalist and people should own the ability to fill multiple roles (Somers, 2009). Right processes and systems are the necessary infrastructure for organisations to accomplish their objectives. In this respect, ASIS (2009) provides a useful flowchart indicating the steps to follow. Definition of clear goals is the first milestone. Then they need to be translated into high-level policies and operationalised in practices and procedures. Particular attention is given to communication flows which connect stakeholders inside and outside the organisation (McManus, 2008). Another aspect is that extensive use of procedures and standardisation might reduce the ability to adapt to a changing environment (Van de Walle, 2014). Managers need to find a balance between the need for instructions and clear roles and the freedom given to people. A possible solution is provided in the Lean Management methodology where standardisation is key, but people are empowered and motivated to challenge and improve standards (Rother, 2009). Communication with stakeholders is not enough; managers should strive to create strategic relationships. The focus needs to be on a long-term collaboration and on building alliances with employees, customers, suppliers and social entities (McCann, Selsky, & Lee, 2009). Avery and Bergsteiner (2011) explain that the way to achieve such powerful connections is to abandon the approach of maximising shareholder value. Considering the interest of all stakeholders, and not only shareholders, is a prerequisite to be successful.

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Resources are a critical asset for resilience in at least two situations: when organisations need to prepare themselves for the future by implementing internal changes (Välikangas, 2010) and when a mobilisation is required in times of crisis. Means required to run essential operations during crisis (McManus, 2008) have to be properly planned and allocated in advance. Resources can be internal or also external; building partnerships with external stakeholders can create a reservoir of means quickly deployable. The partnership can be formal, for example in the case of outsourcing agreements, or informal and based on trust. Members of other organisations may be willing to help based on the status of the relationship and a common interest for the entire community. Stephenson defines situation awareness as (2010, p. 74): ‘an organization’s understanding of its business landscape, its awareness of what is happening around it, and what that information means for the organization now and in the future’. One action helping to create this ability is continuously scanning for information. Managers should acquire information from multiple sources (McManus, 2008; Somers, 2009) in order to assess internal capabilities and match them with the external environment. Situation awareness is fostered by organisational intelligence (Välikangas, 2010), defined as the ability to accommodate several voices and thoughts. Intelligence refers to a situation where people are humble enough not to take their own answers for granted and seek out different points of view. Situation awareness supports adaptive capacity by foreseeing imminent and future disruptive changes. It also helps to manage internal transformations. In fact, it provides the framework for understanding what needs to be changed and how to change it. Risk analysis is a way of pushing organisations to think forward, to study different scenarios and to prepare countermeasures to mitigate or avoid risks. In order to increase resilience, McCann (2009, p. 50) suggests engaging in an enterprise-wide risk assessment: ‘think about areas of most risk and exposure and develop plans to proactively manage each of them—focus on the higherrisk, under-managed relationships’. McManus proposes a simulation tool called: Readiness Exercises and Disaster Simulation (REDS). ‘REDS encourage organizations to experience their vulnerabilities and strengths in a simulated crisis environment and offer a platform from which to critically assess decision making and communications’ (McManus, 2008, p. 64). Moreover, many other tools and approaches to risk management can be found in the literature concerning disaster prevention, safety and business management. Companies and other entities should periodically assess their risks, prioritise them and act to manage them. ‘The organization shall evaluate resilience management plans, procedures, and capabilities through periodic assessments, testing, post-incident reports, lessons

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learned, performance evaluations, and exercises’ (ASIS, 2009, p. 14). There are multiple ways to monitor the status of readiness. First, the organisation needs to define metrics, both leading and lag, which can assess the compliance with internal procedures, performance and results expected. Lessons learnt are a powerful tool, not only for monitoring resilience level, but also engaging employees and increasing knowledge. Based on the information collected, the system should be prepared to rethink and redesign itself. ‘It needs to develop its transformation skills, to know what to preserve that is part of its core identity and what can be given up’ (McCann, Selsky, & Lee, 2009, p. 50). The last component of the framework is continuous improvement; it is the force that makes resilience building not a one-time effort but a never-ending attempt to strive for perfection. ASIS (2009) suggests establishing and defining a process to seek always new opportunities for being more efficient and effective. It advises also creating a committee to drive and oversee the efforts. Välikangas (2010, p. 153) affirms that ‘building resilience is a start. Once resilience is built into the organization, it needs to be rehearsed’. Sustainable leadership, constant innovation, internal and external benchmarking are some practices which support the development of a culture of continuous improvement.

2.3.3

Similarities and Differences in the Frameworks

Frameworks for creating a resilient organisation and for executing strategy effectively have similarities and differences. In the current chapter some of the most relevant ones are summarised (Table 2.9) – Strategy definition Strategy definition is part of the process of creating a resilient organisation. Välikangas (2010) suggests that companies and public entities need to build serendipity and sagacity characteristics. These skills allow them to foresee the future and prepare to face crises or avoid them. Other researchers underline the importance of the connection with all stakeholders that offers the opportunity to develop a more effective strategy through interactions and exchange of ideas. Looking inwards, the organisation should carry on a detailed analysis of resources, capacity, strengths and weaknesses.

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Table 2.9 Similarities and differences in the frameworks for resilience and strategy execution Aspect

Resilience

Strategy Execution

Strategy Definition

Similarities

• Mentioned in both methodologies

Differences

• Integral part of making of • Not always part of models models. More in terms of defining a strategy suitable for execution

Planning and Preparation

Similarities

• People: empowerment, delegation and training • Systems: management of information flow • Structure: right resources at the right place

Differences

• Build imaginative thinking • Importance of relationship with all stakeholders • Agile, redundant structure • High importance placed on risk analysis

Similarities

• Adopt right hierarchical relationships, roles and responsibilities and resources. • Manage documentation and communication channels

Implementation

Monitoring and Controlling

Lesson Learnt and Continuous Improvement

• Systems to manage projects and portfolios, management of performances

Differences

• Use specific tools and methods (lean, causal chains…)

Similarities

• System to monitor progress, control processes and plan implementation and make suitable adjustments • Monitoring people engagement • Use of leading and lag indicators

Differences

• More focus on risk analysis and indicators

Similarities

• Both suggest capturing lessons learnt and focusing on continuous improvement

Differences

Only a few authors, writing about execution, describe how to define a strategy. For example, Hrebiniak (2013) underlines that, without a proper and effective plan, implementation loses its effectiveness. Managers, therefore, need to master strategy crafting skills in order to build resilient organisations. Yet, these skills are not essential if they want only to strengthen execution capabilities.

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– Planning and preparation Planning and preparation phases are extensively discussed in both the topics under review. Strategy execution and resilience can be compared through the framework used in Section 2.1.6, with the addition of risk analysis as a key component for organisational resilience. Both subjects recommend to pay attention to the role of human resources; it is particularly important to create a clear company identity, with values that should be communicated and embraced by the entire organisation. The management has to adopt empowerment and delegation as standard ways of working. Senior management are asked to provide direction but leave the space to ‘shopfloor’ employees to act independently. In order to support this kind of culture, information needs to flow freely and silos have to be avoided. Roles and responsibilities should be clearly defined in order to allow actions to be quickly and effectively taken. People capability is crucial, too. Skills, such as problem solving and ability to adapt to change, need to be built at all levels. Interestingly, in AMA’s research (2007), personnel resilience is considered a key factor in strengthening abilities to implement plans. The paper confirms the existence of a tight link between ability to adapt to changes and strategy execution characteristics. Research regarding resilience underlines the importance of building imaginative thinking and innovation skills, whereas strategy implementation does not require such transformational abilities to the same extent. Instead, in the literature regarding execution the need for effective systems is described more extensively. For strategy execution, it is not sufficient to set up an efficient and effective way of managing information flows; further systems and metrics have to be in place. Critical systems to consider are the ones linked to individual and team performance. The first step is the selection of the right people; then, personal objectives need to be aligned with organisational ones. Finally, reward and recognition models are essential to motivate and engage employees. Additional systems which could support execution concern decision-making models, portfolio and projects management and resource allocation. Structure refers to the set-up in terms of functions, responsibilities and staffing. From an execution perspective, the structure needs to fit the strategy and the culture (Thompson, Strickland, & Gamble, 2007). Managers should evaluate different models and select which can support both daily operational activities and initiatives related to strategy implementation (McChesney, Covey, & Huling, 2012). One of the main challenges is the communication and alignment

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across boundaries (Curran, 2009); a suitable structure might foster but also hinder execution (Hrebiniak, 2013). The structure requires to be properly staffed with the right resources developed internally or recruited externally (Jooste & Fourie, 2009). Välikangas (2010) describes an adequate structure as the one that is able to mitigate risks. Redundancy, ability to mobilise resources and an arrangement that stimulates innovation will strengthen resilience. An additional characteristic that helps quick adaptation in case of crisis is agility. While for strategy execution the influence of external factors is limited, for resilient organisations, managing external inputs well, is the most significant ability. A particular change in market conditions or a breakthrough in technologies might influence the implementation of a plan. They can create a totally new environment for competition (AMA, 2007). In resilient organisations, the relationship with stakeholders is the main priority (McCann, Selsky, & Lee, 2009). That enhances the ability to understand customer needs and adapt more quickly to emerging situations. All the authors presenting models regarding resilience underline the importance of assessing risks and creating a plan to mitigate them. For example, McCann et al. (2009) suggest that companies should engage in an enterprise-wide risk assessment. In strategy execution, in contrast, risk analysis is foreseen only during specific steps of implementation and is targeted to increase the probability of achieving the expected benefits. The emphasis of risk analysis is lower in strategy execution than in resilience models. – Implementation In the implementation phase, plans, processes and structures defined in the previous stage are executed and tested. In both resilience and strategy execution frameworks this phase is discussed. Yet, in the latter, the methodology is more structured and explained in greater depth. Strategy execution experts provide various tools and practices that permit discipline, alignment and focus in the delivery of expected outcomes. There are many components that are common to the two methodologies and make an organisation effective. Structure is key at this stage and consists, for example, of hierarchical relationships, roles and responsibilities, and resources. Deploying the right means for the key elements helps the expected goals to be reached. In a time of crisis, it is essential to be quick to use the right resources in the right place. An agile structure might be more effective in managing transformational changes or strong crisis.

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Communication channels become a way to capture signals from the environment around the organisation. They help, additionally, to inform and keep employees engaged. Personnel have the potential to escalate issues and support decision making. ASIS (2009) focuses the attention on the need to have proper documentation during the implementation phase. The association affirms that that improves work efficiency by acting as a reminder of goals and measuring progress. – Monitoring and controlling During the implementation phase, and all the other steps, both methodologies suggest having a strong system to monitor progresses, control implementation and making adjustments, if necessary. The starting point is the definition of a measurement system; it has to be aligned with the status of the organisation and its effort to implement a strategy or to build resilience skills. Different types of indicators are commonly used. As previously discussed, there should be a balance between the adoption of leading and lagging indicators. From a strategy execution perspective, risk metrics are utilised to support the achievement of expected benefits. Instead, from a resilience perspective, the focus shifts to the probability that some external (or internal) adverse events will bring to a crisis situation. Another point of contact between organisations able to execute strategy and resilient ones is the attention given to people skills and engagement. In times of change and crisis, having people ready to help and to take the burden of the transformation might be an essential ingredient for success. – Lessons learnt and continuous improvement The environment is continuously changing, competition can become harder and challenges can put survival at risk. That is why the best organisations are the ones that use experience and knowledge as a competitive advantage. Collection and documentation of lessons learnt is a key tool for this kind of approach. It can be applied at the end of the initiative or also during the transformational journey to help the organisation become more efficient and effective. Lessons learnt are not sufficient to create a learning organisation. Only a culture and a system that continuously challenges the status quo provide competitive advantages in comparison with competitors.

2.4 Execution and Resilience in Public Organisations

2.4

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Execution and Resilience in Public Organisations

In previous sections of the thesis, models and frameworks regarding resilience and strategy execution were presented. However, most of the authors concentrate their effort on the private sector; the literature concerning explicitly non-profit organisations is less extensive. Yet, there are specific approaches and tools that researchers have studied in the public sector; in this chapter the most relevant ones are reviewed.

2.4.1

Public Value Management (PVM) Approach

A central concept for the discussion, together with literature regarding resilience and strategy execution, is Public Value Management (PVM). PVM is a new approach to management that underlines, on top of efficiency and effectiveness, the importance of some traits typical of resilient organisations. – Definition, history and characteristics Mark H. Moore, the first author who introduced the term, ‘defines public value as the equivalent of shareholder value in public management, with the public sector acting in the best interests of the collective. The fairness with which public benefits are distributed, and public duties imposed, is as important as the achievement of social outcomes or the satisfaction of individual clients’ (Ernest & Young, 2014, p. 4). PVM is a new approach that describes the mission of public organisations and suggests a specific way of managing. It differs in many ways from the traditional methods of management and it is a step beyond the New Public Management (NPM) concept. In Table 2.10 various methodologies to public administration and public management are summarised. The traditional approach was mainstream from 1980–1990 (Crawford & Helm, 2009). After that, management theories developed in private organisations moved to the non-profit sector under the concept of NPM. Since it was inspired by efficiency and effectiveness principles, managers are required to introduce explicit standards for measuring performances. The model aims to create competition in the public sector in order to foster productivity and innovation. Citizens are considered clients of the organisations; they need to be satisfied with the creation of services and outputs (O’Flynn, 2007).

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Table 2.10 Approaches to public administration and public management (Crawford & Helm, 2009) Traditional Public New Public Management Management (NPM)

Public Value Management (PVM)

Mode of Operation

Planning and policy Management and contracts

Knowledge fields

Theoretical Focus

Policy studies

Management and economics

Governance philosophy

Model of Governance

Procedural

Corporate

Network

Performance Objective

Managing inputs

Managing inputs and outputs

Multiple objectives: service outputs; satisfaction; outcomes; trust and legitimacy

Goal of Managers

Responding to political direction

Meeting agreed performance targets

Responding to citizen preferences, renewing mandate and trust through quality services

Accountability

Upwards through departments to politicians to parliament

Upwards through performance contracts; sometimes outward to customers through market mechanisms

Multiple: citizens as overseers of government; customers as users of services; taxpayers

Role of Community

Little community involvement

Increased consultation

Community enablement and involvement

PVM, instead, ‘represents a way of thinking which is post-bureaucratic and post-competitive allowing us to move beyond the narrow market versus government failure approaches which were so dominant in the NPM era’ (O’Flynn, 2007, p. 353). The community represents the centre of the new way of thinking, not only because citizens are customers, but also because they are involved in the decision making and in shaping government philosophy. The governance model is based on wide networks of entities and individuals, that, together, define and manage public value. The classic theory of managers, seen as executors and controllers of applications of rules and regulations, is no longer valid. They need to respond to preferences and build trust with citizens through the delivery of quality services (Table 2.10). That is why public leaders should take into consideration some key elements (Todorout & Tselentis, 2015; O’Flynn, 2007) regarding their role:

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• The responsibility is not limited to providing services and social security. Managers are protagonist in the creation of value and in helping to shape the economic, social and political environment. • They don’t need to focus exclusively on implementing new guidelines and managing bureaucratic processes. Roles and responsibilities are much broader; they include the creation of a strong network, strengthening relationships based on trust and understanding collective preferences. All the efforts should be directed towards providing quality services to the community. • Public managers, on top of ensuring the daily functioning of processes and services, are required to be able to recognise, manage and communicate changes within and outside their own organisations. Through their strong network, they should understand when something new is coming and react in order to adapt quickly and reduce risks.

Figure 2.13 The strategic triangle for public value management (Todorout & Tselentis, 2015, p. 76)

The authorizing environment

Strategic Triangle Operaonal capacity

Public value outcomes

When political representatives and administrators want to introduce PVM, they have to take into consideration the ‘strategic triangle’ (Figure 2.13) in developing plans and strategies for their organisations (Todorout & Tselentis, 2015). The three components of the triangle represent the relationships existing between the network of entities (authorising environment), the results of the administration (public value outcomes) and the bureaucratic machine (operational capacity). Managers need to collect information about the desires of the citizens by listening to various voices in the network of stakeholders. Once the plan is developed, it has to be communicated, discussed and approved by the network. In the first phase of strategy crafting, this collaborative approach slows down the process

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but ensures the delivery of outcomes that serve and create public value. Another advantage is smoother execution; since various stakeholders are included in the development of the plan, they tend to support its implementation and there are usually fewer roadblocks. Leaders need to assess if the right processes, capabilities and resources are present. If gaps are found, they should introduce changes in order to support execution. Due to the close relationship existing between public organisations and their network, support for the adoption of changes might also be found among stakeholders. This kind of support is extremely useful in an environment where the public sector is challenged every year to become more efficient and fewer resources are given to it. Value creation is multi-dimensional. Going beyond market rules, it takes into consideration various political, social and environmental factors. Sami (2018) studied what various authors consider important value elements. As it is possible to notice from Table 2.11, they include some of the principles already present in the NPM approach. In fact, topics like efficient supply, performance, lean thinking and budget keeping are typical notions of the private sector applied to public organisations. Moving beyond these efficiency and effectiveness dimensions, it is possible to discover further characteristics typical of PVM. First of all, there is a focus on service and other aspects of our daily life: quality of living, social value and sustainability. Second, there are some characteristics related to ethics and behaviours that people in public organisations need to show in order to create the right level of trust with stakeholders: equity, accessibility, accountability, transparency, openness and others. Furthermore, trust is the basis for creating co-governance and a strong network of relationships. Lastly, in order to be able to fully apply the PVM approach, administrators need to master both political and technical skills, on top of owning the right mind-set and values. PVM is characterised by a diffuse democracy, where local communities are involved in the decision-making process. ‘Everyday citizens can add value to both the political and administrative processes of government through focusing decisions on criteria which deliver outcomes that are important to community members and demonstrating that they are prepared to pay to achieve those outcomes. Public managers could benefit from adopting a Public Value framework to guide community engagement in critical local government decisions’ (Thompson & Riedy, 2014, p. 7).

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Table 2.11 Dimensions of public value (Sami, 2018, pp. 770–771) Dimension

Description

User Focus

Satisfy immediate needs of users; good relations with users as motive

Efficient Supply

Business like operations; high productivity

Quality Services

Provide accurate, timely, relevant and precise information and services to customer

Equity

There should be no discrimination on the basis of gender, religion, race and everyone should be treated equally

Performance

Customer satisfaction is the key measure of performance evaluation

Accessibility

User should have access to required information and services

Accountability

Accountability towards society in general; public insight and transparency

Individual Rights

Protect individual rights

Co-Governance

Citizen participation; citizen involvement as co-producer

Openness

All information should be easily assessable and open to general public

Transparency

All official matters should be transparent and available for accountability

Lean Thinking

Flexible response, integration, continuous improvement, knowledge driven activities

Lawfulness

A public official should be efficient and effective, righteous, lawful and ready to take on accountability

Sustainability/ Ecological

Recycle/ reuse, energy efficiency, energy saving, air quality, greener environment

Quality of Life

Impacts on individual and household health, security, satisfaction, and general well-being

Innovative

R&D support, institutional structure and barriers, innovation support

Social Value

Health, education, family, culture, crime

Political Astuteness

Valuable set of capabilities, skills, knowledge, and judgment to officiate public duties

Political

Influence on public bodies, action or policy, role in political affairs, influence in political parties, prospect of future public office (continued)

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Table 2.11 (continued) Dimension

Description

Budget Keeping/ Financial Having economic awareness; staying within budget as motive Rule Abidance

Due process; being loyal to rules

Balancing Interest

Political loyalty; being able to interpret political climate; making networks

Professionalism

Employees should have professional commitment and independent professional standards

Collaboration

Collaborating inside and outside organisation to achieve desired goals

Expertise

A public official should have sufficient expertise in domain knowledge and management skills

– Performance and measures in PVM The focus of NPM approach is on achieving results and agreed performance targets. The most important metrics are related to efficiency and effectiveness. The legislator creates guidelines and performance metrics that public organisations need to respect. In some instances, there is a tendency to reduce costs by reducing the number of employees and outsourcing the delivery of services to companies in a ‘free-market’ (O’Flynn, 2007). Brignall and Modell (2000), in their article on performance management, affirm that there are three different categories of stakeholders: funding bodies, professional groups within the provider staff and purchasers (mainly citizens). All these groups have different interests and priorities. They use different performance indicators to evaluate if a public organisation is successful or not. Power relationships1 among the three categories of stakeholders determine what kind of measures are more important. In the NPM approach, since the pressure and 1 Brignall

and Modell (2000, p. 295; 299) make five propositions to explain the relationships among the three types of stakeholders: 1. ‘The greater the institutional pressures exerted by funding bodies on the focal organization, the greater the managerial emphasis on and integration between measures of financial results and resource utilization throughout the hierarchy of that organization. 2. The greater the institutional pressures exerted by groups of professional service providers within the focal organization, the greater the managerial emphasis on and integration between measures of quality and innovation within that organization.

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the power of the funding bodies (ex: central state) is stronger, the needs of the other two categories of stakeholders (purchasers and professional groups) might be considered less essential. Instead, PVM approach requires a multidimensional and balanced way to measure success and define steering metrics. In the private sector, one tool used to go beyond mere financial results is the Balanced Scorecard. Differences between private and non-profit world make this tool not perfectly suitable to the organisations studied in this thesis. An example of a fundamental difference is that ‘for profit managers need non-financial measures to help them find the means to achieve the end of remaining profitable. Non-profit managers, on the other hand, need nonfinancial measures to tell them whether they have used their financial resources as effective means for creating publicly valuable results’ (Moore, 2003, p. 8). Public Values Scorecard is a new tool and concept that considers the peculiar characteristics of non-profit organisations. At the root of this type of scorecard there is the strategic triangle framework presented in Figure 2.13. The framework is useful for creating the right accountability and it serves as basis for defining a performance management system (Figure 2.14). Authorising stakeholders are a group of diverse individuals and entities that either provide funds or legitimise the non-profit entity. This is why it is important not only to have a strategic approach to stakeholder management, but also to define some metrics to measure the quality of the relationship. On top of financial measures, organisations need to set up indicators to evaluate the level of credibility and trust, the degree of communications and engagement, and all other means required. Another key component is public value. As previously discussed, non-profit entities should understand the requests of the individuals and entities they are serving. Services and products 3. The greater the conflict of interests between groups of professional service providers within the focal organization and funding bodies, the greater the need for management to proactively de-couple the performance measures favored by these groups of stakeholders to balance their interests in the overall control of the focal organization. 4. The greater the institutional pressures associated with contracting between purchasers and the focal provider organization, the greater the managerial emphasis on and integration between measures of resource utilization, quality and competitiveness within the focal organization. 5. The greater the need to compile performance measures favored by funding bodies and groups of professional service providers stemming from Propositions 1 and 2, the greater the need for management to pro-actively de-couple these measures from the ones used to comply with the pressures exerted by purchasers as a result of Proposition 4 to balance the interests of the three groups of stakeholders in the overall control of the focal organization.’

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are created and delivered according to the requests. Operational capability is the machine that allows to deliver value; it is guided by efficiency and effectiveness principles. It relies on the engagement of employees and administrators, and it can grow in an environment where innovation and learning are considered important pillars of the culture (Moore, 2003).

Figure 2.14 Public value framework for accountability and performance management (Moore, 2003, p. 27)

Talbot (2008) offers a different perspective of the way to create a multidimensional set of indicators for measuring public value. His starting point is the

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Competing Value Framework (CVF). ‘CVF asserts that human organizations are shaped by just two fundamental contradictions—the desire for flexibility and autonomy versus the need for control and stability; and the focus on internal concerns and needs versus responsiveness to the external environment’ (Talbot, 2008, p. 10). By the combination of forces produced through the fundamental contradictions, four different types of culture emerge: collaborate, control, compete, create. The author, relying on previous studies, suggests an application for the public sector (Figure 2.15). His framework includes many dimensions of value previously discussed. Trust and Legitimacy is at the centre of the model. They are key to permit organisations to survive and flourish. The other four quadrants refer to the different types of cultures in CVF. Collectivity symbolises the contribution that is provided to citizens, institutions and its network. Autonomy considers values which are fundamentals: transparency, participation, accountability, etc. Security answers to the needs of reliability, consistency and other traditional characteristics of bureaucratic offices. Personal utility, instead, is related to the ability to offer personalised products or services for individuals (Talbot, 2008).

Figure 2.15 CVP applied to public value (Talbot, 2008, p. 18)

Similar to Moore, Talbot’s framework provides a structure that is the basis for defining multidimensional measures for public organisations. In order to create trust and legitimacy, the four quadrants need to be balanced. The task of managers

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is to implement a measurement system that can give information both on tangible and intangible aspects of the operations. In summary, the modern theory of performance management in public sector is based on the Public Management Approach. This theory takes into account multidimensional aspects which go beyond a simple efficiency and effectiveness approach. – Relevance of PVM for resilience and strategy execution in public organisations Public Value Management is a holistic approach that has, at its centre, the missions and core values of non-profit organisations. In contrast to New Public Management, which is influenced by the corporate management style, PVM underlines the importance of resilience. Survival is linked to trust and values that organisations can demonstrate to stakeholders. There is no advantage in being efficient and effective if trust is lost. PVM offers municipalities a reference model that is in line with their core mission and that can help to strengthen their resilience skills. In addition, operational capacity, one of the three pillars of the strategic triangle, is central in developing a culture of strategy execution. In Table 2.12 the frameworks for public values, for strategy execution (Section 2.3.1) and resilient organisations (Section 2.3.2) are compared. The three frameworks seem to be complementary. Resilient organisations consider the network of stakeholders and build strong alliances. Meanwhile, execution principles are useful for crafting a strategy, defining goals and creating alignment in order to build operational capability and deliver value. There are also overlaps in the fields of strategy and human resources management. Considering this research, it is important to highlight that PVM is, on the one hand, a reference point for non-profit organisations that want to improve resilience and strategy execution skills and, on the other, offers a way to operationalise resilience and execution principles.

Table 2.12 Comparison among PVM, resilience and strategy execution frameworks Public Value Framework

Resilience

Strategy Execution

Expanding Support and Authorisation Funder relations and diversification

X

Volunteer roles and relations

X

Visibility, legitimacy with general public

X (continued)

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Table 2.12 (continued) Public Value Framework

Resilience

Relations with government regulators

X

Reputation with media

X

Credibility with civil society actors

X

Strategy Execution

Creating Public Value Organisational vision, mission

X

Strategic goals

X

Links among goals, activities, outputs and outcomes

X X X

Range of outcomes

X

Activities and outputs that create outcomes

X

Building Operational Capacity Organisational outputs

X

Productivity and efficiency

X

Financial integrity

X

Staff morale, capacity, development

X

X

Partner morale, capacity, development

X

X

Organisational learning and development

X

X

2.4.2

Execute Strategy in Public Organisation

– Strategic Planning Strategic planning is ‘a disciplined effort to produce fundamentals decisions and actions shaping the nature and direction of an organization’s activities within legal boundaries’ (Bryson, 1988, p. 74). Thompson et al. (2007) suggest that there are two main reasons, in for-profit companies, to focus on the crafting and execution of a strategy. The first reason is that it is a way for managers to shape and steer the company in order to gain competitive advantage. The second reason is that studies have revealed that organisations focusing on developing and executing strategies have stronger bottom-line performance. The question is whether the process of strategic planning is also a key element for public and non-profit organisations. Bryson (1988, p. 78) proposes various benefits that can be expected from strategic planning:

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‘think strategically clarify future direction make today’s decisions in light of their future consequences a develop a coherent and defensible basis for decision making exercise maximum discretion in the areas under organizational control solve major organizational problems improve performance deal effectively with rapidly changing circumstances build teamwork and expertise’

Table 2.13 Differences between public and private organisations. Summary of Wauters (2017, pp. 64–65) Type of differences

Differences with private organisations

External Environment

• Larger number of stakeholders • More difficult to ‘ignore’ external groups (politicians, citizens…) • Relation with unstable political environment with frequent changes in policy • Few rivals and expectations of collaboration with others

Goals of the organisation

• Strive for equity and accountability • Multiple and conflicting goals • More vague goals due to political negotiation processes

Internal characteristics

• More bureaucracy with higher degree of risk averseness and lower flexibility • More red tape—adherence to official rules and formalities • Less freedom of managers in selecting, organising and developing their staff

Attitudes and aspirations of staff • Less materialistic and less likely to be motivated by financial rewards • Driven by a stronger desire to serve the public interest • Less likely to experience a sense of personal significance as it is more difficult to observe a link between their contributions and the success of their organisation

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Strategic planning, therefore, can be a significant tool in the hands of governing bodies to increase the value provided to citizens. Before going into details on how to adopt it, it is important to summarise some key differences between private and public sectors. These differences (Table 2.13) influence the way in which strategy planning is implemented. Public organisations have to focus on the needs of multiple stakeholders and involve the development of strategies based on unstable political environments. Policies can change quickly depending on political parties in power. There are not many competitors but more entities to collaborate with. Several public organisations don’t require to have a competitive advantage but they need to work to increase trust and legitimacy. Strategies and change initiatives have to consider internal strengths and characteristics. In the non-profit sector there is more bureaucracy and less flexibility in terms of compromising on rules and formalities. Managers, when introducing changes, should be aware that they have less authority in shaping the organisation and that people have, typically, a risk-averse culture. On the other hand, employees are driven by a desire to serve the public interest and they are usually ready to support initiatives with a positive outcome for the community (Wauters, 2017). – Project management methodology and tools In order to accomplish the goals of the strategic plan, public organisations probably would need to define some initiatives and projects. Some of them will be easy to handle and, therefore, could be managed using the performance management system explained in the previous chapter. Some others, in contrast, are more complex and require a specific approach in order to bring them forward. One way to handle these complex initiatives is to adopt some of the principles and tools of the standard project management (PM) methodology. PM is becoming more popular in the public sector (Crawford & Helm, 2009; Hazel & Jacobson, 2014). Non-profit organisations implementing such a methodology show potential benefits and are synergies with PVM. First, PM offers accountability and transparency, both important characteristics for creating trust internally and externally. Second, it provides tools and approaches for managing multiple stakeholders and their engagement. Additionally, it ensures control and compliance that are key components for the public sector and its bureaucratic way of working. Other benefits are related to the attention given to risk management, consistency in delivery, ensuring value for money and supporting motivation and integration of various groups (Crawford & Helm, 2009). For some small organisations, it is difficult to find employees with experience in PM methodologies. However, even if full deployment of a PM approach is

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difficult to achieve, managers and politicians might implement some basic tools and concepts. There are various PM methodologies defined by different institutions and organisations. For the purpose of simplicity, it is presented only on the one offered by PMI.2 PM approach helps to define and manage four different aspects: scope, time, cost and quality; often there are trade-offs between these aspects. Hazel and Jacobson (2014) suggest some tools for everyday project managers in public organisations: project charter, project schedule and change control management. They are the instruments that each involved person should understand and, if possible, be able to apply. A project charter is ‘a document issued by the project initiator or sponsor that formally authorizes the existence of a project, and provides the project manager with the authority to apply organizational resources to project activities’ (PMI, 2004, p. 368). It helps to achieve clarity among multiple stakeholders regarding the intent, the impact, resources required and timelines. It is also helpful for understanding high level risks and defining mitigation strategies. This ‘formal’ document might be well accepted by public organisations that are used to work with bureaucratic procedures and multiple approvals. The adoption of project charters could reduce the failure rate of projects. In fact, ‘projects fail because of unreported budget overruns, contractors not being held accountable, unmet requirements, uncharted maintenance projects, audit exceptions, risky contract administration, and failure to re-baseline’ (Hazel & Jacobson, 2014, p. 6). In order to understand the duration of projects and of single activities, PM offers different tools that can be implemented in combination. First of all, it is central to define what are the milestones and to sequence them. Milestones are the most important activities that need to be completed in order to achieve the final goal. Once the milestones are clear, a project manager should define all the single activities to be completed. The activities are, then, sequenced based on logical and timely relationships. The durations of activities are calculated based on the resources allocated to them. An iterative process is implemented to define the best schedule; the project duration is optimised taking into consideration resource availability, cost, scope and quality of the deliverables. One of the tools commonly used for scheduling is the GANTT diagram: a visual bar chart that illustrates a plan. The process of creating a schedule might be very useful to non-profit organisations because it helps in understanding interdependencies, timelines and resources required. 2 PMI

(Project Management Institute) is a global non-profit organisation that provides standards and certifications relating to project management.

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A change control process is valuable in the PM methodology to track and manage all the variations a project can encounter during its implementation. Changes might be related to scope, timing, resources or some other aspects. A proper change control process consists of a formal definition of information to collect, of a system to present change proposals and clear responsibilities. It can foster better communication and collaboration among stakeholders. – A knowledge management system Knowledge management (KM) ‘refers to a range of practices and techniques used by organizations to create, share and exploit knowledge to achieve organizational goals’ (Jain & Jeppesen, 2013, p. 348). In an economy where the attention given to services is increasing, proper management of knowledge is becoming a strategic advantage. Private organisations are starting to provide services which are competing with those offered by public institutions. For example, education is becoming more widely accessible through internet and online courses (Cong & Pandya, 2003). Public organisations tend to under-evaluate the risks connected with poor management of knowledge. Both financial and non-financial risks have to be considered when evaluating the benefits and costs of KM. For example, when an employee resigns, there is a cost associated in terms of loss of knowledge, but also a cost associated with the recruitment and training of a new person (Ahmed & Elhag, 2017). Data is the basis for initiating the process of creating knowledge (Figure 2.16). They are facts that can be collected in various forms in the reference environment. When data is organised and processed, information is created. Knowledge is different from information because it contains a certain level of interpretation. People, based on their experiences, reasoning and intuition, interpret various pieces of information and create knowledge. Wisdom is the application of accumulated knowledge (Cong & Pandya, 2003). The more organisations are able to create environments and systems to develop, store and share knowledge and wisdom, the more likely they will create value for their stakeholders.

80 Figure 2.16 From data to wisdom model (Cong & Pandya, 2003, p. 26)

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Wisdom Knowledge Informaon Data

From a more general perspective, a KM system should be connected to the strategic objectives of the organisation. In Figure 2.17, Ahmed and Elhag (2017) present an integrated framework which is useful for linking KM with the strategic plan. For example, lessons learnt sessions can be held during and after specific

Figure 2.17 Smart KM model framework for public organisations (Ahmed & Elhag, 2017, p. 180)

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projects and initiatives to gather information that can be transformed into knowledge and wisdom. Administrators might institutionalise some moments during the year to discuss progress and issues in implementing the annual plan. These meetings represent an opportunity to recognise people who are achieving special results, problem solving on roadblocks and recording best practices. Job rotation and shadowing schemes are key for transferring knowledge and reducing the risk of losing wisdom assets when a person leaves the organisation.

2.4.3

Build Resilience in Public Organisation

– Human resources management (HRM) Systems ‘Efficiency of administration is directly depending on human resources; therefore, we need to develop our public institutions through modernizing and improving human resource management by building up efficiency of individuals and improving their performance’ (Yahiaoui, Anser, & Lahouel, 2015, p. 1). Public organizations have the opportunity to work on HRM not only to improve efficiency but also resilience. Rusaw and Rusaw (2008) affirm that development of human resources is critical in managing crisis in the non-profit sector and make it more resilient. Managers should guarantee the availability of information to multiple stakeholders, create an environment where people can learn and implement new skills, and develop flexibility among employees. Traditionally, HRM in public institutions has been focused on administrative tasks and it is not considered a strategic area. The main functions managed are benefits and compensations, personal data recording, sickness and leave management, recruitment and retention (Yahiaoui, Anser, & Lahouel, 2015). Building a motivated, engaged and high-performing workforce requires additional points of focus for managers and administrators. Rafique et al. (2014) suggest that motivation levels of employees are correlated with rewards (intrinsic and extrinsic) and job satisfaction. Motivation is important because it leads to organisational commitment and knowledge transfer. Some of the points considered are in line with the concept of sustainable leadership. This concept introduced for private organisations fits perfectly into the idea of PVM in the public sector. Avery and Bergsteiner (2011, p. 5) affirms that ‘the firm should see itself as an interdependent part of a community that consists of multiple stakeholders whose interests are integral to business success. In this view, an enterprise can be seen as a system of long-term cooperative relationships

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between affected parties.’ The sustainable leadership view suggests some additional managerial practices which could be adopted by public organisations. The first practice refers to decision making, which is consensual. Staff are empowered and able to self-manage. This practice can be achieved through a good performance management system and a new view of the role of administrators. Taking decisions is no longer considered the purpose of their job, but their tasks are mainly related to facilitating and coaching employees (Rother, 2009). Another characteristic of sustainable leadership is the attention given to innovation and change management. In the public sector, employees are not used to emphasising the positive aspects of changes. Managers might foster innovation through the involvement of employees and letting go. For example, the customs and revenue department of the Dutch Ministry of Finance started transformational change to align the organisation to the needs of their clients. The approach adopted was to create autonomous transformational teams involving employees from different areas. The decision to empower the workforce to shape the future of their organisation brought excellent results and low resistance to change (Bonaretti & Testa, 2003). – Network of stakeholders A strong network of relationships with stakeholders is one fundamental concept in PVM and is one of the methods to create a resilient socio-economic system. There are various studies that attempt to provide an interpretation of how the link between stakeholders should be set to benefit society as a whole (Bodin & Crona, 2009). Above all, it is of interest to understand the way in which cross-scale interactions function (Adger, Brown, & Tompkins, 2005). ‘Cross-scale interactions occur when driver and response variables in cause–effect relationships operate at different characteristic spatial and temporal scales, sometimes producing nonlinear patterns and dynamics’ (Soranno, et al., 2014, p. 65). This type of interactions fits the kind of relationships that public organisations have with different stakeholders in their reference environment. Among various players in the network, linkages with different strengths and characteristics arise. ‘The persistence and stability of governance systems depends on the distribution of benefits from cross-scale linkages, for example, through the mechanism of trust. The key is to identify those linkages that promote the obvious potential for enhanced management and avoid those that have the potential to undermine trust between stakeholder groups’ (Adger, Brown, & Tompkins, 2005, p. 2). There are various ways in which a network can be built. ‘For example, if only few ties exist among actors, joint action is hard to achieve, but too many ties can

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foster actor homogenization and reduce the capacity for effective collective action to deal with changing conditions’ (Bodin & Crona, 2009, p. 372). In addition, a network made by social players have higher stability if connections are made voluntarily on the basis of mutual interests and common vision, and not forced by policies and laws. Bodin and Crona (2009) affirm that the type of social-networks effective in natural resources governance are core-periphery ones. This specific set-up can be considered the most effective for managing public resources. Core-periphery networks are based on the idea that are two types of nodes in a network: core nodes are highly interconnected with one another; in contrast, peripheral nodes are loosely connected to one core (Csermely, London, Wu, & Uzzi, 2013). The structure described shows some characteristics useful for increasing resilience: it fosters knowledge sharing among organisations and makes it easier to mobilise resources when required. Booher and Innes (2010) present a case study of a successful network of public and private institutions in managing common resources. Thanks to tight and weak ties through a complex and adaptive network (CAN), California’s program for water management was able to successfully manage a scarce and critical resource in the region. The approach adopted in California to manage the numerous public and private entities is summarised in the last column of Table 2.14. The management style practiced is very similar to the one suggested by PVM methodology. Managers didn’t take on the role of decision makers, but they helped in the creation of relationships and networks. The structure wasn’t hierarchical, and strict policies and rules weren’t followed; in fact, independent clusters proposed ideas and ways of working. A directional plan was initially created, but it was allowed to vary based on new discoveries and innovation.

Table 2.14 Comparing traditional governance and collaborative CAN governance ideas (Booher & Innes, 2010) Governance dimension

Traditional governance Collaborative CAN governance

Structure

Top-down hierarchy

Interdependent network clusters

Source of direction

Central control

Distributed control

Boundary condition

Closed

Open

Goals

Clear with defined problems

Various and changing

Organisational context

Single authority

Shared authority (continued)

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Table 2.14 (continued) Governance dimension

Traditional governance Collaborative CAN governance

Role of manager

Organisation controller

Mediator, process manager

Managerial tasks

Planning and guiding organisation processes

Guiding interactions, providing opportunity

Managerial activities

Planning, designing, leading

Selecting agents and resources, influencing conditions

Leadership approach

Directive

Generative

Nature of planning

Linear

Nonlinear

Criterion of success

Attainment of goals of formal policy

Realisation of collective action

System behaviour

Determined by component participant roles

Determined by interactions of participants

Democratic legitimacy

Representative democracy

Deliberative democracy

– Personal resilience Many employees in public organisations experience fewer changes than employees in the private sector due to stable job roles and a strict bureaucratic framework. All types of change have an impact on behaviours and individual productivity; people reaction depends on multiple factors: the quantity and intensity, positive or negative perception (Figure 2.18) and the resilience skills a person has developed in his life (Hoopes, 2015). Resilient individuals are the ones who are able to recover from changes in a shorter period of time. They find a new point of equilibrium and quickly display productive behaviour again (Hoopes & Kelly, 2004). There are various reasons why public and private organisations need to build resilience in their workforce and teams. First, there is evidence that people who are less resilient tend to resist change more and show dysfunctional attitudes (Avey, Wernsing, & Luthans, 2008). Second, employees mastering this skill are found to be more innovative and they find solutions using improvisation and flexibility (Coutu, 2002). There are studies proving that resilience has a positive impact on job satisfaction, work happiness and organisational commitment (Youssef & Luthans, 2007). Lastly, some authors argue that resilient individuals show a higher level of performance in organisational and educational settings (Hoopes, 2015; Hanson, Austin, & Lee-Bayha, 2003).

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Figure 2.18 Positive (top) and negative (bottom) responses to change (Marshall & Conner, 1996)

It is interesting to note how resilience skills might have the most positive impact on organisations if they are mastered by their leaders. Resilient managers show a higher level of transformational leadership characteristics. Transformational leadership is a term used to describe ‘the connection, relationship, or influence between leaders and their direct reports. Transformational leaders incorporate inspiration, enthusiasm, and motivational support to encourage their teams to see

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the importance of the higher goal or meaningful work being done to raise up to meet these demands’ (Sylvester, 2015, p. 109). Peterson et al. (2009) have demonstrated how managers who own these positive characteristics are able to deliver better results and performance. Various authors propose different models and traits that could make people mastering resilience. Meredith and al. (2011) offer a review of the literature on this topic. In Table 2.15, factors which are common amongst resilient individuals are summarised. Some of them refer to distinct traits such as a positive attitude or physical fitness. Some others are related to the network of relationships in which people live and interact: both with family and at a community level. Three factors concern the working environment: positive command climate, teamwork and cohesion. Public organisations might benefit by strengthening the resilience muscles of their employees and administrators. They could create a better working environment and a situation where changes have more probably to be successfully completed. Table 2.15 Factors which promote resilience (Meredith, et al., 2011, pp. 21–22)

Individual Level

Resilience Factors

Operational Definition

Positive coping

The process of managing taxing circumstances, expending effort to solve personal and interpersonal problems, and seeking help to reduce or tolerate stress or conflict, including active/pragmatic, problem-focused, and spiritual approaches to coping

Positive affect

Feeling enthusiastic, active, and alert, including having positive emotions, optimism, a sense of humour (ability to have humour under stress or when challenged), hope, and flexibility about change

Positive thinking

Information processing, applying knowledge, and changing preferences through restructuring, positive reframing, making sense out of a situation, flexibility, reappraisal, refocusing, having positive outcome expectations, a positive outlook, and psychological preparation (continued)

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Table 2.15 (continued) Resilience Factors

Operational Definition

Realism

Realistic mastery of the possible/having realistic outcome expectations, self-esteem/self-worth, confidence, self-efficacy, perceived control/acceptance of what is beyond control or cannot be changed

Behavioural control The process of monitoring, evaluating, and modifying reactions to accomplish a goal (i.e., self-regulation, self-management, self-enhancement)

Family Level

Unit Level

Physical fitness

Bodily ability to function efficiently and effectively in life domains

Altruism

Selfless concern for the welfare of others, motivation to help without reward

Emotional ties

Emotional bonding among family members, including shared recreation and leisure time

Communication

The exchange of thoughts, opinions, or information, including problem solving and relationship management

Support

Perceiving that comfort is available from (and can be provided to) others, including emotional, tangible, instrumental, informational, and spiritual support

Closeness

Love, intimacy and attachment

Nurturing

Parenting skills

Adaptability

Ease of adapting to changes associated with military life, including flexible roles within the family

Positive command climate

Facilitating and fostering intra-unit interaction, building pride/support for the mission, leadership, positive role modelling, and implementing institutional policies

Teamwork

Work coordination among team members, including flexibility

Cohesion

Team ability to perform combined actions; bonding together of members to sustain commitment to each other and the mission (continued)

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Table 2.15 (continued) Resilience Factors Community Level Belongingness

2.4.4

Operational Definition Integration, friendships; group membership, including participation in spiritual/faith-based organisations, protocols, ceremonies, social services, schools, and so on; and implementing institutional policies

Cohesion

The bonds that bring people together in the community, including shared values and interpersonal belonging

Connectedness

The quality and number of connections with other people in the community; includes connections with a place or people of that place; aspects include commitment, structure, roles, responsibility, and communication

Collective efficacy

Group members’ perceptions of the ability of the group to work together

Change Management

Introducing changes in public sector is a complex process, especially if it requires alterations to the prevailing culture. Many organisations fail to get the results expected out of their transformational initiatives. Thus, public entities wanting to introduce PVM principles and other approaches described in the previous chapters, need to adopt a rigorous method and be ready to pay the price. ‘Change in the public sector often involves resolving conflicting interests. In one city, a senior citizens initiative was embroiled in conflict for over 15 years. Private sector changes might be just as complex, geographically diverse and impact just as many people. The unique thing about the public sector is that change takes place in a fishbowl and the agents of change are neither the biggest nor most aggressive fish in the bowl. Change is not simply an exercise in convincing the various stakeholders to get on side; it is an exercise in negotiation and compromise’ (Cunningham & Kempling, 2009, p. 330). In public institutions there is a peculiar culture that supports value creation for stakeholders but, in many instances, resists change due to the bureaucratic and rigid set up. A culture can be defined using three components: behaviours, beliefs, and assumptions. If leaders want to start a transformation affecting one or more of these components, they should consider defining the traits of the desired

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culture, and performing an audit to understand the current one (Conner Partners, 2004). Researchers have found different types of key factors that can support or hinder the process of change. For example, the study conducted by the consultancy firm McKinsey and Company (2010) suggests that the most important actions to consider are engagement of employees during the transformation journey, capability building in leadership positions and a focus on achievements. Cunningham and Kempling (2009) underline, instead, the importance of creating a sense of urgency, of fostering collaboration and providing adequate funds. At the same time, they notice how the lack of a strong guiding coalition can cause the process to fail. A case study regarding the reorganisation of a school district (Nitta, Wrobel, Howard, & Jimmerson-Eddings, 2009) is an interesting one; the transformation, which began at the top, faltered because principals in the schools understood the change but they were not able to involve teachers and staff. The root cause of this failure was found to be lack of training for the principals; they didn’t know how to communicate and empower their personnel. McHugh and Brennan (1994, p. 29) argue ‘that, for public sector employees, demands for enhanced quality of service, value for money and accountability have assumed new meanings, creating additional job pressures.’ Consequently, together with resilience, skills building is critical to manage proactively the stress of employees. Otherwise people, with high stress levels, might block the efforts to introduce a new way of thinking and acting. Support for individuals and the entire team, in order to manage change successfully, involves the adoption of the principles of a learning organisation (Strachan, 1996). There are two models (Table 2.16), among others, that present a process and guidelines for managing change in a structured way. ‘Although Smith’s ten principles and Kotter’s eight stages appear similar, the differences between them are stark. Both implicitly focus upon vision and empowerment. Arguably, Kotter’s stages are more cynical, if not Machiavellian (e.g., creating urgency, generating short-term wins, and consolidating gains), while Smith’s principles evoke a kinder, gentler state (e.g., putting people in a position to learn, creating meaningful language, harmonizing initiatives, and basing leadership on courage)’ (Schooner, 1997, p. 476). When carrying out a transformational project, public organisations need to pay attention in the definition of key roles required to manage the process throughout. First of all, the sponsor or sponsors must be clearly appointed and they have to know exactly what their responsibilities are. Sponsors are the people who have the power to legitimise the change and are ready to pay the price required. They need to appoint agents inside their organisations. Agents have a role similar to project

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Table 2.16 Models to manage changes successfully Kotter (2012): 8 stages model

Smith (1997): 10 principles

1. 2. 3. 4. 5.

Establish a sense of urgency 1. Keep performance results the primary Create a guiding coalition objective of behaviour and skill change. 2. Continually increase the number of Develop a vision and strategy individuals taking responsibility for their Communicate the change vision own change. Empower employees for broad-based 3. Ensure each person always knows why action his or her performance and change 6. Create short-term wins matters to the purpose and results of the 7. Consolidate the gains whole organisation. 8. Anchoring the new process in the culture 4. Put people in a position to learn by doing and provide them the information and support needed just in time to perform. 5. Embrace improvisation as the best path to both performance and change. 6. Use team performance to drive change whenever demanded. 7. Concentrate organisation designs on the work people do, not the decision-making authority they have. 8. Create and focus energy and meaningful language because they are the scarcest resources during periods of change. Stimulate and sustain behaviour-driven change by harmonising initiatives throughout the organisation. 9. Practice leadership based on the courage to live the change you wish to bring about.

managers; they are responsible for managing the transformation and interacting with sponsors to ensure support and resources. Creating a network of advocates might be useful, too. Advocates are individuals who do not officially lead the change, but who are willing to help and speak in favour of it (Conner Partners, 2007). The appointment of the roles described, together with a structured approach, help to bring people on-board. Administrators, in municipalities, need to build commitment and support individuals to work through all the stages of the change (Figure 2.19). A significant risk is that employees will block the transformation if they are not accompanied step by step: from the introduction of the new initiative right up to the internalisation in their culture. It is the duty of sponsors and agents

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Figure 2.19 Stages of change commitment (Conner Partners, 2007, p. 3)

to take all the actions necessary in terms of communication, involvement and empowerment leading to success.

3

Methods and Techniques Used in the Research

3.1

Research Methods: Paradigm, Data Gathering and Data Analysis

Researchers might be inclined to choose some methods for data gathering and analysis on the basis of their personal preference or information that is easily available. Yet, scientific research requires a rigorous approach to select methods and tools. O’Gorman and MacIntosh (2015) offer a step-by-step process which helps scholars to understand the most appropriate philosophy and techniques for their research (Figure 3.1).

3.1.1

Philosophical Paradigm and Purpose of the Research

The first philosophical question for a researcher relates to ontology. Ontology is concerned with the essence of the objects, processes or systems under study. ‘The central question is whether social entities can and should be considered objective entities that have a reality external to social actors, or whether they can and should be considered as social constructions built up from the perceptions and actions of social actors’ (Bryman & Bell, 2015, p. 32). In most cases, researchers don’t think of the object of the study as being entirely objective or subjective. There is often a decision to take an approach somewhere in between being objective or subjective (O’Gorman & MacIntosh, 2015). This is the case for this research that studies public organisations in the most objective way; at the same time, it Electronic supplementary material The online version of this chapter (https://doi.org/10.1007/978-3-658-34467-2_3) contains supplementary material, which is available to authorized users. © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 L. Gios, Resilience and Strategy Execution in Public Organisations, https://doi.org/10.1007/978-3-658-34467-2_3

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Figure 3.1 Research methods map (O’Gorman & MacIntosh, 2015, p. 51)

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recognises that analyses, considerations and recommendations are influenced by subjective interpretations. Epistemology concerns the way in which knowledge is created and collected. Epistemology is linked with the ontological view: an objective view accepts only data and fact-driven information; a subjective view takes into consideration personal interpretations and points of view (Saunders, Lewis, & Thornhill, 2009). O’Gorman and MacIntosh (2015) present four different approaches to epistemology: positivism, critical realism, action research and interpretivism. Positivism is typical of natural science research. It is data and fact driven, it relies on quantitative methods of analysis and it doesn’t ‘allow’ the scholar to interact with what is being researched. Interpretivism, instead, believes that there are multiple realities that can coexist at the same time. The only way for the researcher to understand the object of study is to interact with it and give his own interpretation (Bryman & Bell, 2015). Critical realism and action research lie somewhere in between the other two epistemological philosophies. Saunders, Lewis and Thornhill (2009) include an additional approach called pragmatism. Pragmatism allows the scholar to use different philosophies during the research based on the purpose of the study and questions that need to be answered. Pragmatism guarantees the discipline offered by the scientific method but also the flexibility to apply methods and tools which researchers consider more appropriate to single situations. In addition to ontological and epistemological issues, ‘the research assumptions which relate to the philosophical paradigm are: rhetorical issue (language selection in research) and axiological issue (role of values in a study)’ (O’Gorman & MacIntosh, 2015, p. 67). In this thesis, pragmatism is adopted as the main philosophical approach due to the focus it places on the purpose of the research and its flexibility in terms of methods. Krishnaswami and Satyaprasad (2010) affirm that studies can have different purposes. For example, some researchers might extend the knowledge of human beings, test the validity of theories or help solving problems. The first purpose of this thesis is to offer additional insights regarding resilience and strategy execution in public organisations; the second one is to define concrete actions for municipalities to strengthen their characteristics. The aim is to support municipalities in Italy to cope better with the challenging environment they are facing. As a consequence of the Resolution of the European Council on the Stability and Growth Pact (European Commission, 1997), all EU members have had to introduce a measure to guarantee financial stability. In 1998, the Italian parliament enacted a law called the Internal Stability Pact (Patto di stabilità interno) to set goals for all public organisations (Caldarelli, 2016). The law had a significant impact on municipalities which were required to change the way of managing their finances.

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The pact was enhanced after 1998 and the parliament requested municipalities to be more efficient year after year. At the same time, municipalities gained more freedom in the ways they could reach targets with the so-called fiscal federalism (federalismo fiscale). Case studies provide good insight into understanding if more resilient municipalities adapted to the new environment and to the challenging targets. Various authors (Saunders, Lewis, & Thornhill, 2009; Krishnaswami & Satyaprasad, 2010; O’Gorman & MacIntosh, 2015) suggest that researches can be classified based on their goals. This thesis might be seen as a descriptive and explanatory study. It aims to describe how public organisations, such as municipalities, use execution methods and resilience traits to achieve their objectives. In addition, the intent is to illustrate if models, defined by various authors, are applied in total or at least partially. Last, a comparison between private and public organisations is provided. The explanatory side of the research aims to clarify the results of municipalities by finding links with plausible causes. The intent is to understand if resilience and strategy execution traits have a positive impact on the achievements of the organisations. That would allow to suggest specific actions to improve performances by strengthening resilience and execution traits.

3.1.2

Data Gathering Methodology

Case studies are one of the most frequently used methods for collecting information and data in business research (Krishnaswami & Satyaprasad, 2010). Yin, reported in O’Gorman and MacIntosh (2015, p. 80), defines case study as ‘an empirical enquiry that investigates a contemporary phenomenon in-depth and within its real-life context, especially when…the boundaries between phenomenon and context are not clearly evident’. Case studies vary from laboratory research because they don’t aim to separate the phenomenon according to the context in which it appears; in contrast, they want to study the phenomenon in various situations. There are different ways to apply a case study approach to research. The scholar can rely on a single case or multiple cases. The single case strategy allows the researcher to consider the subject of the study in depth. It is often used when there is a specific theory to be tested, a unique context to be explored or when, for practical reasons, there isn’t the chance to study more cases (O’Gorman & MacIntosh, 2015). When feasible, multiple case studies are preferred. Studying the phenomenon in several contexts allows the researchers to understand if the same patterns can be seen in all cases or not. Thus, conclusions are drawn on a more solid basis

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and considering multiple sources of information (Bryman & Bell, 2015). There are no specific rules in defining how many and what cases need to be part of the study. Eisenhardt, cited in O’Gorman and MacIntosh (2015, p. 84), recommends ‘a number between four and ten…with fewer than four cases, it is often difficult to generate theory with much complexity; and its empirical grounding is likely to be unconvincing’. Cases can be chosen in a way that presents contrasting social phenomena; comparing opposite scenarios might facilitate researchers in their studies (Saunders, Lewis, & Thornhill, 2009). The research methodology in this study uses a multiple case-study approach. The thesis includes 42 municipalities with a certain population range (see Section 3.3). The results of the case studies are compared to establish and understand their differences and similarities. The research considers two sources of information. One consists of historical information regarding municipalities’ performance. This level of information is publicly available in Italy and can be retrieved from official reports and various literature. The second source of data is a questionnaire sent to a sample of municipalities either by email or discussed during individual interviews. The questionnaire helps to verify if municipalities show resilience and execution traits that might foster achievement of specific results. The sources of information provide a mixture of both qualitative and quantitative data. Differentiating between the two types is important because that influences the way in which data are collected and analysed. Researchers who decide on a positivist epistemology rely mostly on a quantitative approach, that is useful for inferential experiments or simulations. ‘Inferential approach needs a mass data with uniform characteristics and with set standard variables. These characteristic features are set or established by collecting the information from the mass, either by surveyor by observing the respondents. Once the characteristic features are set to the targeted group. The researcher can draw the inferences easily’ (Krishnaswami & Satyaprasad, 2010, p. 6). Interpretivism, instead, counts on qualitative data to find the meaning of the phenomenon under study. Data consist mainly of information collected through interviews, questionnaires, focus groups or similar methods. In this thesis, the approach is mostly quantitative, with the addition of some qualitative elements in line with the research philosophy. The two types of data and analysis can support each other (Bryman & Bell, 2015). For example, a first exploration of a topic can be conducted through experts’ opinions. Subjective opinions help the researcher to set up a focused and structured quantitative data collection plan.

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Data Gathering Techniques and Sampling

Two different techniques to collect data are applied in this research: historical data regarding financial performances and questionnaires. Financial performance data are quantitative and are available in Italy on public websites. Questionnaires are one of the most used techniques in business research. They have the advantage that both qualitative and quantitative data can be collected. In addition, questionnaires are commonly used and understood by people; thus, it is easier to adopt them in field studies (Saunders, Lewis, & Thornhill, 2009). ‘Interviewing is an extremely flexible research tool. It can be used at any stage of the research process: during initial phases to identify areas for more detailed exploration and/or to generate hypotheses; as part of the piloting or validation of other instruments; as the main mechanism for data collection; and as a ‘sanity check’ by referring back to original members of a sample to ensure that interpretations made from the data are representative and accurate’ (Brewerton & Millward, 2001, p. 77). In most cases, researchers don’t have the chance to collect information from the entire population of cases in scope. Studying a sub-set of specific cases might facilitate the research. ‘Well-selected sampling may reflect fairly accurately the characteristics of the population. For example, with a survey of a sample of voters, one can predict the voting intentions of millions of voters. A specified value of the population, such as average of variance is named a parameter; the corresponding value in the sample is termed a statistic. The chief aim of sampling is to make an inference about an unknown parameter from a measurable sample statistic. A second aim of sampling is to test a statistical hypothesis relating to population.’ (Krishnaswami & Satyaprasad, 2010, p. 51). Sampling methods can be classified in multiple ways. One generic distinction is between random sampling and non-random sampling (Fink, 2003). Random sampling is based on probability theory: every instance of the population has the same chance of being selected. Instead, non-random sampling uses other criteria to select the cases in the scope, such as the researcher’s experience or ease of data collection. Non-random samples, even if they might add some bias, are adopted often in business research. This choice happens for a few reasons: it is impossible to pursue probability sampling, it is a faster and less costly approach, etc. (Saunders, Lewis, & Thornhill, 2009). Two non-random methods of sampling are applied in the thesis: judgement and quota. Judgment ‘method means deliberate selection of sample units that conform to some pre-determined criteria. This is also known as Judgement sampling. This involves selection of cases which we judge as the most appropriate ones for the given study’ (Krishnaswami & Satyaprasad, 2010, p. 77). Quota method is defined as

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‘a type of stratified sample in which selection of cases within strata is entirely nonrandom’ (Saunders, Lewis, & Thornhill, 2009, p. 235). Judgment sampling is used to select the municipalities that will receive a questionnaire. A quota sampling technique is applied to decide how to complete the questionnaires via email or during a face-to-face interview. The purpose is to maintain representation of the groups selected but, at the same time, to give enough freedom to the researcher to include the municipalities willing to support. The sample of municipalities is selected in order to test the hypotheses and to answer the research questions (Table 3.1). In the literature, most of the characteristics distinguishing resilient organisations are related to internal factors. Consequently, in the sample selection, the focus was to minimise the contribution of external factors. Furthermore, selecting municipalities of similar size allows an easier comparison among them. The sample should contain both organisations that are most likely resilient and not resilient. Extreme cases are considered, too. For example, the aim was for the sample to include the best and the worst municipalities in terms of achieving financial targets over a period of multiple years. This procedure allows magnifying the factors that influence resilience and execution traits. The sample size is composed by around 30 municipalities; that allows adopting parametric statistics. With a smaller sample size, it would be necessary to use non-parametric distribution that is less powerful. Table 3.1 Strategy in selecting the sample

Factor

Value/Description

Sample Size

Around 30

# of citizen

Minimise variation

External environment

Minimise variation

Ability to achieve saving goals

Maximise variation

Ability to answer effectively to crisis

Maximise variation

The municipalities included in the sample were selected through the following procedure: 1. Select an area with homogenous regulation and socio-economic situation: the province of Trento in Italy. 2. Define a sub-group of municipalities of similar size: 51 municipalities with a population between 1000 and 2000 citizens in the Province of Trento. The factor size has to be considered because the goals set by the Stability Pact

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and other targets given to municipalities differ depending on the number of inhabitants. For example, municipalities with less than 5000 citizens were not affected by the new norms in the first years (Caldarelli, 2016). 3. Analyse the data related to the achievements of the 51 municipalities in scope. 4. Define some extremes (the best and the worst) in the group of municipalities through data and information analysis. 5. Make sure that municipalities answering the questionnaire belong to all three groups considered (the best, the worst and those in the middle) This procedure maximises the chances of observing differences between the municipalities with strong and weak resilience and strategy execution skills.

3.1.4

Data Analysis Approach: Deductive

‘A deductive approach begins by locking at theory, produces hypotheses from that theory, which relate to the focus of research, and then proceeds to test that theory. But that is not the only way to use theory in research. An inductive approach starts by looking at the focus of research (the organisation, a business problem, an economic issues etc) and through investigation by various research methods, aims to generate theory from the research’ (Greener, 2008, p. 16). A deductive approach is related to quantitate methods, while an inductive approach relies mostly on qualitative tools. However, this rule is not fixed and a quantitative research might have an inductive orientation. The approach taken in this study is mainly deductive. The reason is that some hypotheses (ex: resilience organisations are better at strategy execution) are the starting point of the research and the aim is to test them based on an existing theoretical framework. The thesis, therefore, is relying mainly on quantitative analyses. Quantitative analyses offer many deductive tools to explore relationships among variables, compare different groups and create models to explain a phenomenon. Relationships among variables can be explored through tools such as correlation or multiple regression analysis. ‘The purpose of testing and comparing a set of two or more groups is to identify statistically significant differences in the means of the analysed groups. Using these kinds of techniques helps to make statistical inference about any population from a randomly chosen sample’ (O’Gorman & MacIntosh, 2015, p. 185). Models are used to create a simplified version of the phenomenon. They are valuable to explain behaviours; they often rely on the analyses performed to explore relationships.

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In this research, a mix of quantitative tools and approaches are adopted with the intent to gain insights and test research hypotheses. The analyses performed vary from single calculations of central tendency to the creation of linear models. In many cases graphical representations are shown to facilitate the understanding of information and to draw proper conclusions. Both continuous and discrete data were gathered through questionnaires and performance indicators; particular attention has been paid to select the right tools to analyse specific data types in order to apply a rigorous scientific method

3.2

Data Gathering Methodology: Italian Municipalities Case Study

Data gathering in the research is based on a multiple case-study approach. It is an empirical study of Italian Municipalities in the province of Trento. In this section an overview of municipalities in Italy is provided. In addition, the chapter includes the explanation of how the sample under study is selected and contextual information helpful in defining the data to be collected.

3.2.1

An Overview of Municipalities in Italy

Italy became a state in its current form in 1861. From that year onwards, the number of municipalities remained approximately constant. Despite some attempts to reduce the number, the total has always been around 8,000 (Frieri, Gallo, & Mordenti, 2012). 70% of the total are considered to be small municipalities with a population of less than 5,000 inhabitants. In particular, the demographic class with the highest number of organisations (19%) is the one with a population between 1,000 and 1,999 inhabitants (Table 3.2). Thus, the decision taken in the research is to study a sample of municipalities in that specific class. In comparing the number of municipalities with other European countries, it is evident that Italy is in line with Germany (which has around 12,000), but that it has far fewer local organisations than France (which has around 36,000). In some other nations, the number is significantly lower, as for example in Sweden (290) and the UK (230). It is interesting to note that Italy has a fairly low percentage of public employees working in municipalities (13.6%) (Table 3.3). That implies a strong centralised state with rules and controls that are mainly managed by central authorities.

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Table 3.2 Number of Italian municipalities and resident population divided by demographic classes in 2018 (Tuttitalia, 2018) Demographic classes

Municipality

from 500,000 ab.

6

from 250,000 to 499,999 inh.

6

0.08%

1,923,795

3.18%

from 100,000 to 249,999 inh.

33

0.41%

4,913,191

8.12%

from 60,000 to 99,999 inh.

60

0.75%

4,614,583

7.63%

from 20,000 to 59,999 inh.

419

5.27%

13,709,350

22.67%

from 10,000 to 19,999 inh.

703

8.84%

9,685,536

16.01%

from 5,000 to 9,999 inh.

1,184

14.89%

8,364,157

13.83%

from 3,000 to 4,999 inh.

1,106

13.90%

4,306,943

7.12%

from 2,000 to 2,999 inh.

952

11.97%

2,339,670

3.87%

from 1,000 to 1,999 inh.

1,529

19.22%

2,227,620

3.68%

from 500 to 999 inh.

1,104

13.88%

814,181

1.35%

less than 500 inh.

852

10.71%

248,798

Total

7,954

Number

Population %

Residents 0.08%

100.00%

7,336,149

60,483,973

% 12.13%

0.41% 100.00%

Table 3.3 Comparison among different European countries regarding municipalities. Data from Frieri, Gallo & Mordenti (2012) Country

Approximate number of Municipalities

Percentage of public employees working in local entities

Germany

12,000

35.0%

France

36,000

30.0%

Italy

8,000

13.6%

Sweden

290

83.0%

UK

230

56.0%

Spain

8,000

23.6%

Hungary

3,000

65.0%

Italian municipalities have a high degree of freedom in adopting the organisational structure they consider most suitable for reaching their objectives. There are some basic services that they have to guarantee. They are the services relate to six different sectors (Camarda, 1999): secretary and general affairs, accounting and

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finance, services to the population, public works, urban construction, municipal police. There are key roles that can affect the strategy and the good operation of local organisations (Brugnola, 2018): • the Mayor is elected directly by the residents in the municipalities every five years. The burgomaster is in charge of the administration and, as such, he has the role of executive body in municipalities. The Mayor should base his daily actions on the principles of social solidarity, equality and pluralism. • the Municipal Board is a collegiate body presided over by the mayor; it appoints the assessors and the deputy mayor as one of his first acts. The members of the board play a political-administrative role. They act as a connection between the council and the administrative apparatus. Often, they are asked to use their technical skills to contribute to the management of the municipalities. • the Municipal Council is composed of councillors elected together with the mayor. They represent the political parties competing in the elections. Their role is to provide political-administrative direction and control the work performed by the mayor and the board. • the Town Clerk is similar to the city manager role, which is a term used in the United States of America and in other European countries. The role has regulatory, advisory and legal assistance functions at the meetings of the council and of the board. In some cases, and above all in small municipalities, the Town Clerk covers management functions and is considered the employer from a legal, safety and management prospective. The administration in municipalities and in other public organisations needs to be based on three principles: subsidiarity, differentiation and appropriateness. The principle of subsidiarity is understood in two different ways: horizontal and vertical (Frieri, Gallo, & Mordenti, 2012). Horizontally means that municipalities are entitled to perform functions that the private sector is not able to provide. Vertically means that local organisations should take care of all public sector services except the ones that require a unified management at a higher level. The other two principles help to balance the application of subsidiarity with the aim of an efficient and effective administration. Not all the municipalities are equal; there are significant differences in the characteristics of municipalities (demographics, geography, economy). The principle of differentiation helps to adapt the structure to the specific needs of each organisation. The last principle, appropriateness, refers to the fact that municipalities should have the ‘right’ dimension in order to assure the optimal use of resources and the ability to deliver services. The principles of

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differentiation and appropriateness provide some adjustments to the principle of subsidiarity. First, not all municipalities can manage all the administrative functions. Second, the state should consider the possibility of aggregating or dividing local entities in order to guarantee optimum services (Frieri, Gallo, & Mordenti, 2012).

3.2.2

Small Municipalities: Challenges and Opportunities

Small municipalities represent the majority of the municipalities in Italy. The legislation divides them into different categories to which it applies specific rules. One initial differentiation relates to whether municipalities are located in a mountainous, hilly or plain territory. Municipalities located in a mountainous territory are grouped as mountain communities (comunità montane). The reason for the association is that, in their areas, there are large amounts of natural resources that require shared management and common policies. Administrators and employees working in small municipalities usually have an operational culture, service-oriented behaviours and generalist competencies (Ruffini, 2001). The number of people working in these organisations is very small. They need to cover a broad range of tasks in their roles and often they don’t have colleagues who are able to perform the same job. Personnel usually have a strong sense of service due to the direct contact with citizens and political representatives. Employees tend to be self-learners; Their entrepreneurship is stronger in comparison with public employees working in large and complex municipalities. One drawback is the fact that they don’t have the time and the focus to become specialists in their fields. The lack some specific competencies that, instead, can be found in larger organisations. Small municipalities, in most cases, present a basic organisational structure. They are arranged to cover the basic functions and services with the available resources. Their performances are heavily influenced by the skills and the engagement of single individuals. In one sense, that allows capable and innovative employees and administrators to implement their agenda and improve the organisation. On the other hand, improvements can quickly be lost if people leave or some less capable individuals are hired or elected. Small municipalities have an additional issue regarding talent retention. Young and smart employees don’t have many career opportunities in such organisations. The structure is flat and job rotation possibilities are rare. Consequently, the best talents will often search development opportunities in different organisations after a certain amount of time.

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In terms of provision of services for the community, small municipalities have both advantages and disadvantages. Administrators often are in direct contact with citizens and can understand their needs. They can personalise services and answer quickly to needs. At the same time, they need to find ways to implement principles of scope and scale economy to make the best use of the budget available. A possible strategy to increase efficiency and effectiveness is to build alliances and agreements with other organisations, above all neighbouring municipalities. In recent years, there have been three main obstacles to the development of small municipalities (Ruffini, 2001): new regulations, separation between political and administrative powers and the reallocation of the tasks of regions and local organisations. New regulations introduced by the central state are adding higher bureaucratic burden to municipalities. They require, in order to be correctly followed, specialised skills that are difficult to find in a small workforce. In addition, most of the regulations are developed based on the needs of populous towns and cities. That doesn’t always guarantee that they are easily applicable in different types of organisations. The scarce attention of the legislator to the needs of small municipalities is adding complexity and management costs for mayors and employees. Another obstacle is the separation of political and administrative powers. The intent is to divide the body that is issuing strategies and local regulations (municipal board) from the administrative team led by the town clerk or city manager. In theory, the separation should guarantee the independence of the two functions and mutual surveillance. This principle makes sense in complex organisations and can bring advantages in terms of legal compliance, but it is a disadvantage for small municipalities. In most instances, political representatives are involved in technical aspects: they support administrative processes due to lack of resources. Power separation is discouraging the collaboration between political and administrative bodies. The last significant obstacle for the development of small municipalities is the decentralisation carried forward by the central state. More powers and services have been allocated to local organisations following the principle of subsidiarity. There are several reasons why this strategy is more a threat than an opportunity for small organisations. First, as previously mentioned, they are organised in a simple and not very structured way; that limits their ability in terms of planning, managing and delivering additional services. Then, there is a lack of specialised workforce needed to manage greater complexity. It is difficult for municipalities to take advantage of economies of scale and scope, especially in cases where they have issues working together with other organisations in an integrated way. The

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last problem for small municipalities refers to the limited ability to foster innovation (Ruffini, 2001). For example, the introduction of digitalisation principles and tools require specific competencies and adequate resources. Small municipalities seem not to be able to exploit these opportunities due to their structure and dimension.

3.2.3

Associated Management: Advantages and Risks

Creating networks and implementing associated management might be a way for small municipalities to overcome their structural weaknesses. The experience in this direction is still limited in Italy, while in other countries it is something that has already been established for decades (Frieri, Gallo, & Mordenti, 2012). France has only 10 percent more inhabitants than Italy but has four times more municipalities. This arrangement is possible only thanks to well-developed networks and collegial management of services and resources. Associated management allows proximity with citizens due to the limited dimension of local organisations, but it also fosters efficiency and effectiveness due to economies of scale. The introduction of forms of collaboration might be a way to improve resilience and the ability to implement strategies. For this reason, it is relevant to gain an understanding of the advantages and possible risks in the implementation of collegial models. There are multiple advantages for small municipalities starting some forms of associated management (Ruffini, 2001; Frieri, Gallo, & Mordenti, 2012): • Increase in the number of services provided. By sharing resources, municipalities can increase the number and types of helps provided. For a small organisation it is difficult, for example, to offer all school levels due to low numbers of children in the territory. When more municipalities collaborate together, they can reach the critical number needed to offer such a service. • Sharing of tangible and intangible resources. Municipalities can share technologies, tools and knowledge. In this way, they can overcome the issue of not having enough specialised resources. Organisations might decide to share employees. Consequently, they increase flexibility and foster sharing of best practices. • Possibility of a stronger political influence. A larger organisation formed by numerous municipalities might have higher political force to impact policy in the regions and provinces.

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• Opportunity for more effective management of human resources. Employees of associated municipalities might benefit from better career opportunities, greater flexibility for peak work and more effective coordination of activities. • Common supply strategies. By negotiating together with suppliers, municipalities can benefit from discounts and better conditions. • Economies of scope and scale. More efficient use of financial resources and increased volumes can help municipalities reach the optimal size for provision of services. Associated management among municipalities does not only offer advantages. There are risks and drawbacks which need to be considered before starting any affiliations (Ruffini, 2001; Frieri, Gallo, & Mordenti, 2012): • Parochialism. Institutions are afraid of losing autonomy and control over activities that are managed in association with others. Sometimes, they have a poor culture of collaboration, reducing the benefits of associations. • A weak political agreement. Political parties in various municipalities might have divergent interests and face some challenges in collaborating with factions with opposing views. This is why agreements need to be based on a strong common vision and values that can survive changes in mayors and councils. • Resistance to change. Employees who are not accustomed to changes might have difficulty adapting to a new organisational structure. • High social, economic and territorial differentiation. If associations are made among municipalities with substantial differences, they might fail. Citizens and administrators could have different needs and objectives leading to continuous tensions and divergent priorities. • The presence of political and technical leadership. Associations are more complex organisations than single municipalities. The type of management which can be effective in single institutions might not be suitable for such new entities. Without leaders with the right skills, the project might be unsuccessful. There are different ways in which municipalities can build and maintain relationships (Figure 3.2). One main difference is between stable forms of cooperation and simple collaborations on specific projects and initiatives. Municipalities need to consider their internal weaknesses and strengths and balance the threats and opportunities of every type of relationship. Analyses might be crucial in order to select the most effective set-up. Associated management has a long-term view and considers both the formulation of policies and the provision of services.

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Figure 3.2 Types of relationships among municipalities. Translated from Frieri, Gallo, & Mordenti (2012, p. 57)

3.2.4

Municipalities in the Province of Trento

The Province of Trento together with the Province of Bolzano are special territories which have peculiar economic, legal and geographical status. Understanding such specific context supports the correct interpretation of the data and information collected in the research. The Province of Trento enjoys a special autonomy dating back to the ItalianAustrian agreement signed in Paris in 1946; the autonomy was extended in 1972. Due to this special status, the province manages some of the tasks and duties of the central state. The autonomy relies on a secular history, made up of traditions, rights of common and self-regulations that existed already before the 20th century. Among other characteristics, the autonomy allows the province to retain part of the tax revenue that, otherwise, should go to the central state. The institution of Trento has the right to legislate on many aspects within the boundaries of the Italian Constitution. Vice versa many other regions need to follow decisions taken in Rome. The number of municipalities in the Province of Trento was 176 in 2018. In recent years, the number has been significantly reduced. In fact, in 2009 there

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were 223 local institutions. When comparing the municipalities with the rest of Italy (Table 3.4), it is evident that they are smaller in terms of numbers of inhabitants but larger in terms of administered territory. A peculiarity is that all local institutions in the Province of Trento are considered mountain municipalities. Consequently, they are obliged to be organised into a community (Figure 3.2) and cooperate to collectively manage natural resources. This is not something new; for centuries the population has formed associations and cooperated in the best interests of the community. The presence of institutions, such as rural banks or cooperatives of consumers, is still strong. The population density is lower (87 inhabitants per km2 ) than the average in Italy (200). That is due to the geographical characteristics of the territory that is mainly mountainous: the average altitude is 700 metres above sea level. The economy in Province of Trento is flourishing in comparison with the rest of the country. The average income per capita is 26% higher than in Italy as a whole and the unemployment rate is less than half. The local economy has a lower level of tax evasion and is based on service industry (73% of people are employed in this sector). Following its historical inclination, the province has strong links with central European countries, especially German-speaking ones.

Table 3.4 Statistics regarding the Province of Trento in comparison with the situation in Italy1 Province of Trento

Italy

Number of municipalities (2018)

176

7,954

Average number of inhabitants per municipality (2016)

3,058

7,618

Average territory (km2) x municipality

77.4

37.9

Percentage of mountain municipalities (2018)

100%

43.3%

Population density (2018)

87

200

Per capita yearly income (2016)

35,500 e

27,700 e

Unemployment rate (2018)

5.0%

10.7%

Percentage of tax evasion (2018)

13.5%

16.3%

1 Source

of the data in the table and the rest of the chapter: ISTAT—National Institute for Statistics (http://dati.istat.it/), UrbiStat (https://ugeo.urbistat.com/AdminStat), OpenPolis (https://www.openpolis.it/), Comuni Italiani website (http://www.comuni-italiani.it). Websites accessed on 15th October 2018.

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In summary, the Province of Trento and its municipalities present some peculiarities in comparison with the rest of Italy. Their financial independence, strong economy, vast territory and culture of collaboration might influence the way in which they are managed and their performance. It might be a valuable exercise to compare the data and findings related to this area with other regions in Italy. In the next two chapters the techniques used to gather data are discussed. First the questionnaire for field research is introduced; afterwards the performance indicators, which were defined through a focus group, are described.

3.3

Data Gathering Technique: Questionnaire

3.3.1

Structure and Type of Questions in the Questionnaire

Questionnaires are powerful and flexible tools. Through questionnaires, a variety of data can be collected: demographic information, attitudinal data, behavioural data and others (Brewerton & Millward, 2001). For every type of data, different techniques can be applied to interact with respondents. ‘Among the most commonly used are 5- or 7-point attitude scales, but others include open-ended questions, semantic differential scales, diagrammatic rating, or forced-choice questions’ (Brewerton & Millward, 2001, p. 108). Three types of techniques are implemented in the questionnaire: open-ended questions, force-choice questions and 5-point attitude scales. Open questions are useful when researchers want to collect the subjective opinion of the respondents. They provide the space to elaborate, prioritise and share ideas (Saunders, Lewis, & Thornhill, 2009). Force-choice questions guide the respondent to select from a predetermined list of options. ‘Five or 7-point Likert-type scales typically involve the respondent being presented with a statement to which s/he is asked to report how s/he feels about the accuracy or otherwise of the statement, ranging between the extremes of ‘Strongly agree’ through ‘Neither agree nor disagree’ to ‘Strongly disagree” (Brewerton & Millward, 2001, p. 108). In this research, the questionnaire consists of various types of questions and sections. The purpose of the tool is to understand if municipalities show characteristics typical of organisations that are resilient and well-equipped for strategy execution. Force-choice and attitude scale questions are used to understand if municipalities have adopted the principles explained in the literature review chapter. In contrast, open questions are asked in order to assess people’s perception of achievement, to describe the organisation and to explain of what has been done in previous years. The information collected are combined to study

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possible correlations with financial results. The enquiries are based on the models studied in the literature but are partially customised to be relevant to the specific organisations under study. The inquiries have been arranged into five main sections (Table 3.5). The first section aims to collect demographic information regarding the respondent and the organisation. The second section contains questions regarding the results obtained by municipalities in recent years. The following two parts want to assess if organisations own resilience and execution characteristics. The last section allows respondents to add additional comments and information regarding changes happened in the last years.

Table 3.5 Structure of the questionnaire What are the main results of the municipality in the last years? How well did it manage the changes in regulations?

1. Demographic 2. Financial results assessment 3. Resilience characteristics

Is it a resilient organisation and able to execute strategy?

4. Strategy execution characteristics

Did it manage other big chances or crises?

5. Other changes / crises

– Demographic and financial results section The purpose of this section (Table 3.6) is to understand what roles are played by people answering the questionnaire and their experience in the organisation. Furthermore, information regarding the perception about the performance of municipalities is collected. The information is matched with the financial indicators previously presented.

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Table 3.6 Questionnaire: demographic and financial results section Topic

Question

Question Type

Code

Demographic

What municipality are you working for?

List

D1

Demographic

What is your role in the municipality?

List

D2

Demographic

How long have you been working or leading the municipality?

List

D3

Financial Results

In the last ten years the municipality has improved its budget and financial resource management

Rating (Likert’s Scale)

F1

Financial Results

The municipality was able to adapt successfully to the new fiscal policies

Rating (Likert’s Scale)

F2

Financial Results

In the last ten years the municipality has improved its budget and financial resource management

Rating (Likert’s Scale)

F3

Financial Results

In the last ten years the municipality has improved the services it provides

Rating (Likert’s Scale)

F4

Financial Results

The municipality has successfully Rating (Likert’s Scale) adapted to changes in the management of the budget (harmonised budget and blocking of the administrative surplus)

F5

Financial Results

How has the municipality been able to adapt to cost containment requirements and changes in budget management? What actions have been taken?

Open

F6

Achievements

In the last ten years, what have the Open municipality’s main achievements been?

A1

Crisis/Changes

What crisis or important changes Open has your municipality faced in the last 10 years?

C1

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– Resilience section This section of the questionnaire is based on the method developed by Stephenson (2010). The benchmarking methodology introduced by the author has been tested on organisations in different sectors. Yet, it can also be adopted to compare municipalities. The tool was developed to test organisational resilience when natural disasters and severe, unexpected crises take place. This is one of the reasons why the questions are modified to adapt them for long-term changes, such as the ones under study. The other reason for modifying the questions is to make the enquiries as relevant as possible for municipalities. The set of questions proposed by Stephenson are numerous. Only the most relevant were included in order to increase the probability of people answering the questionnaire. The logic followed to select the enquiries has been to leave at least one question related to each factor proposed by the author. The most pertinent questions for municipalities within each factor have been chosen (Table 3.7).

Table 3.7 Questionnaire: resilience section (adapted from Stephenson (2010, pp. 176–187) Topic

Question

Adaptive Capacity

People are encouraged to Rating (Likert’s Scale) move between different departments or try different roles within our organisation to gain experience

Question Type

Code RA1

Adaptive Capacity

There is an excellent sense of teamwork and camaraderie in our organisation

Rating (Likert’s Scale)

RA2

Adaptive Capacity

When a problem occurs in our organisation, internal resources become more easily available at short notice and there is less red tape to deal with

Rating (Likert’s Scale)

RA3

Adaptive Capacity

People in our organisation typically ‘own’ a problem until it is resolved

Rating (Likert’s Scale)

RA4

(continued)

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Table 3.7 (continued) Topic

Question

Question Type

Code

Adaptive Capacity

In our organisation, it is a priority that people have the information and knowledge they need to respond to unexpected problems that arise

Rating (Likert’s Scale)

RA5

Adaptive Capacity

I am confident that Rating (Likert’s Scale) management and political representatives would provide good leadership if our organisation was struck by a real crisis*

RA6

Adaptive Capacity

Our organisation actively encourages people to challenge and develop themselves through their work

Rating (Likert’s Scale)

RA7

Adaptive Capacity

When we need to, our organisation can make tough decisions quickly

Rating (Likert’s Scale)

RA8

Adaptive Capacity

Our organisation proactively monitors what is happening in its environment to have an early warning of emerging issues

Rating (Likert’s Scale)

RA9

Adaptive Capacity

Our organisation is successful at learning lessons from past projects and making sure these lessons are carried through to future projects

Rating (Likert’s Scale)

RA10

Planning

Our organisation is able to collaborate with other municipalities and organisations to manage unexpected challenges*

Rating (Likert’s Scale)

RP1

(continued)

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Table 3.7 (continued) Topic

Question

Question Type

Code

Planning

Our organisation has clearly defined priorities for what is important during and after a crisis

Rating (Likert’s Scale)

RP2

* modified from original question

– Strategy execution section The literature, the factors and the framework for strategy execution are the basis for the questions presented in Table 3.8. The focus is on the use of a proper methodology to define long- and short-term goals and to deploy them in actionable plans. Moreover, the questionnaire has been designed to test if municipalities show some of the characteristics presented in the literature and that ensure an organisation is able to execute strategy effectively. Another important tool is the use of metrics to track progress and success; hence why a few questions regarding different types of indicators have been added to the list. Table 3.8 Questionnaire: strategy execution section (based on questions used by Gios (2014, pp. 118–119) Topic

Question

Question Type

Code

Methodology used

Strategies and long-term Rating (Likert’s Scale) plans to meet financial targets are regularly drawn up

SM1

Methodology used

A yearly plan to meet financial goals is made and shared regularly

Rating (Likert’s Scale)

SM2

Methodology used

Do you usually use any methodologies or tools to implement and track the implementation of plans?

Open

SM3

Factors: People

Employees and managers involved have the right skills to support the implementation

Rating (Likert’s Scale)

SF1

(continued)

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Table 3.8 (continued) Topic

Question

Question Type

Code

Factors: People

Everyone understands the strategy and his/her role and responsibilities

Rating (Likert’s Scale)

SF2

Factors: People

Employees are motivated and Rating (Likert’s Scale) committed to the plan

SF3

Factors Systems

Information flows freely in the organisation across boundaries

Rating (Likert’s Scale)

SF4

Factors Systems

Priorities are clearly communicated and managed

Rating (Likert’s Scale)

SF5

Factors Systems

An effective performance management system to reward employees with best performance is in place

Rating (Likert’s Scale)

SF6

Factors Systems

An effective system to manage risks is in place

Rating (Likert’s Scale)

SF7

Factors Systems

An effective system to Rating (Likert’s Scale) capture lesson learnt and share with the organisation is in place

SF8

Factors Structure

The budget (people, money…) allocated to the annual or long-term plan is appropriate

Rating (Likert’s Scale)

SF9

Factors

Additional Comments

Open

SF10

Measurement System

There is an effective use of Rating (Likert’s Scale) lag and lead metrics to measure progress and success

3.3.2

SA1

The Questionnaire Used in the Research

The final questionnaire is composed of the three sections presented above. Some of the questions regarding resilience and strategy execution are similar; therefore, they are aggregated in single sentences (Table 3.9). People completing the questionnaire, in this way, will not have to answer the same question twice.

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Table 3.9 Questionnaire: aggregated questions Topic

Question

Code

Resilience

In our organisation, it is a priority that people have the information and knowledge they need to respond to unexpected problems that arise

RA5

Strategy Execution Information flows freely in the organisation across boundaries SF4 Question chosen

Information flows freely in the organisation across boundaries

RS1

Resilience

Our organisation is successful at learning lessons from past projects and making sure these lessons are carried through to future projects

RA10

Strategy Execution An effective system to capture lessons learnt and share them with the organisation is in place

SF8

Question chosen

Our organisation is successful at learning lessons from the RS2 past and making sure these lessons are carried through to future projects

Resilience

Our organisation has clearly defined priorities for what is important during and after a crisis

RP2

Strategy Execution Priorities are clearly communicated and managed

SF5

Question chosen

RS3

Priorities are clearly communicated and managed

The complete questionnaire is presented in its original form in Italian and translated in English in the electronic supplementary material (Appendix 7). The total number of questions is 33, divided as follows: • • • • • •

Demographic: 3 questions Financial Results: 6 questions Crisis/Changes: 1 question Resilience: 9 questions Strategy Execution: 11 questions Common questions relating to Resilience and Strategy Execution: 3 questions

3.3.3

Validation and Administration of the Questionnaire

Reliability and internal validity are two important characteristics of a welldesigned questionnaire (Saunders, Lewis, & Thornhill, 2009), which explains why it was assessed and improved before its utilisation.

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The reliability was ensured involving the staff of a municipality selected as a test case. People from both political and administrative units were invited to participate in a meeting. The questionnaire was shared and discussed together. The aim of the meeting was to ensure that questions were clear enough and understood in the same way across all the participants. In addition to feedback received during the meeting, some university professors were included to ensure internal validity. Questions are considered ‘valid’ if they are able to assess exactly what they were developed for. The professors work at the Department of Economics and Management at Trento University. They were selected because they have extensive knowledge of using questionnaires, they know the territory in which the municipalities operate and they have experience in public administration. After the validation and the adjustment of the questionnaire, it was sent to the respondents. In order to increase the probability of answers, the questionnaire was presented to the head of the Consortium of Municipalities in Province of Trento (Consorzio dei Comuni Trentini). The manager has sponsored the initiative and provided a list of contacts in the municipalities. Some questionnaires were sent by email and some others were presented during a face-to-face interview. The decision to utilise two different channels was made for a couple of reasons. First, emails allow a consistent number of people to be quickly reached and avoid the bias introduced by the discussion with the interviewer. Second, face-to-face interviews offer the chance to discuss topics in depth and to clarify questions. Using two different channels has helped, on the one hand, to increase the number of answers, and, on the other hand, to collect additional information through in-person meetings. Respondents contacted via email received a link to a Google Form (https:// www.google.com/forms/about/) containing the questionnaire. The adoption of a tool, such as Google Form, has facilitated the collection of answers and the performance of preliminary analyses. The email contains a brief summary of the purpose of the research and it explains potential outcomes. Particular attention has been given to the text included in the email and to the introduction in the questionnaire (Appendix 8 in the electronic supplementary material), since they can affect the answer rate (Saunders, Lewis, & Thornhill, 2009). Face-to-face meetings were conducted using the same questionnaire sent via email. Meetings were preferred over emails when two conditions were present: contact details of the people were easily available and municipalities were willing to support the research. The appointments were an opportunity to better explain the questionnaire and to understand in depth the logic that had led some municipalities to obtain certain results. They also aimed to offer an understanding of

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whether organisations have worked to build resilience and in what ways they have used some of the recommendations of strategy execution authors. In summary, meetings helped to collect additional insights into the ways in which municipalities operate and to structure suggestions for organisations to improve their skills and performance. If feasible, questionnaires were used both with political and administrative staff in the municipalities. Citizen representatives and employees can have different points of view. Thus, this was important for understanding similarities and differences.

3.3.4

Number of Answers to the Questionnaire

The method explained in Section 3.1.3 was followed to review what organisations fall into the space of this study. In Province of Trento there are 51 municipalities with a population between 1,000 and 2,000 inhabitants each (see Appendix 1 in the electronic supplementary material). However, seven out of the 51 are new entities formed from the merging of multiple organisations between 2015 and 2016. The new entities are excluded from the research because there are not enough historical data to evaluate their performance. In addition, most of financial information are missing for two further municipalities that, therefore, were also excluded from the analysis since there is limited possibility for comparing them with the others. That leaves 42 municipalities with the right characteristics to be studied in this research. Table 3.10 summarises the ways in which the 42 municipalities were contacted and the answers received: 14 organisations were contacted for face-to-face meetings, while 27 were contacted through emails (Table 3.11). One organisation had recently merged with some neighbouring municipalities and, therefore, was not contacted. One representative of the political body and one representative of the administrative workforce were asked to answer the survey. In some cases, replies were received from both categories, sometimes only one survey was completed and in 13 instances, there were no replies. Counting on two questionnaires per municipality, theoretically 82 answers could have been obtained. In reality only 51% (42 questionnaires) of the respondents replied; the percentage is higher when attempting contacting municipalities via telephone and requesting a face-to-face meeting (response rate = 82%) and is lower when sending emails (response rate = 35%).

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Table 3.10 Questionnaire: contact method, answers and performance group Municipality

Contact via Web or Face-to-Face

Politics

Administrative Personnel

Performance Group

Munic. 1

Web

Munic. 2

Web

X

x

Top

Munic. 3

Web

X

x

Medium

Munic. 4

Web

X

Munic. 5

Face-to-Face

X

x

Medium

Munic. 6

Face-to-Face

X

x

Medium

Munic. 7

Face-to-Face

Munic. 8

Face-to-Face

X

x

Medium

Munic. 9

Web

x

Top

Munic. 10

Web

Munic. 11

Face-to-Face

x

Top

Munic. 12

Web

Munic. 13

Web

Munic. 14

Web

Munic. 15

Web

Munic. 16

Web

Munic. 17

Web

Munic. 18

Face-to-Face

Munic. 19

Web

Munic. 20

Face-to-Face

Munic. 21

Face-to-Face

Munic. 22

Web

Munic. 23

Web

Munic. 24

Face-to-Face

Munic. 25

Web

Munic. 26

Face-to-Face

Munic. 27

Web

Munic. 28

Web

Munic. 29 Munic. 30

Top

Medium

Medium

Top X

Medium Medium X

Worst Worst

X

x

Medium

x

Worst

X

Worst x

Medium

X

x

Top

X

x

Medium

x

Medium Medium

X

Medium Medium

X

x

Medium

x

Medium

Web

x

Top

Web

x

Medium

Worst

(continued)

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Table 3.10 (continued) Municipality

Contact via Web or Face-to-Face

Politics

Administrative Personnel

Performance Group

Munic. 31

Face-to-Face

X

Munic. 32

Face-to-Face

X

x

Medium

Munic. 33

Web

Munic. 34

Web

Munic. 35

Web

Munic. 36

Web

Munic. 37

Face-to-Face

X

x

Medium

Munic. 38

Web

X

x

Medium

Munic. 39

Web

X

Munic. 40

No longer existing

Medium

Munic. 41

Web

Medium

Munic. 42

Face-to-Face

Medium Medium Medium

X

Medium Medium

X

Medium

x

Medium

Table 3.11 Questionnaire: answers statistics per contact method Contact Method

# # # Answers Municipalities Answers—Politics Answers—Administrative vs Contacted Contacted (%)

Web

27

8

11

Face-to-Face 14

13

10

82%

Total

21

21

51%

41

35%

The answer rates are higher than the expected results based on recent studies (Lindermann, 2018). The average expected overall response rate is 33%: it is 57% for in-person survey methods and it is 30% for email survey methods. Most of the administrative employees (76%), who answered the survey, have been working in the municipalities for more than ten years (Figure 3.3). One can assume that this experienced workforce is a precious asset for the organisations in terms of knowledge and skills. On the other hand, they might be less open to changes and new approaches. Political representatives, instead, had, on average, fewer years of service in municipalities. Many (43%) are on their first mandate and they have been in their current role for only few years. Nevertheless, there is

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a significant number (33%) with a seniority of more than ten years. That means that they have been elected at least three times in their municipalities.

Years of service in the Municipality 2-5 years

Administrative

18

5-10 years

> 10 years

Political 16

16 14

Count

12 10

9

8

7

6

5

4 2 0

3 2

2-5 years

5-10 years

> 10 years

D3

Figure 3.3 Years of service in the municipality of people answering the questionnaire

3.4

Data Gathering Technique: Focus Group and Performance Indicators

3.4.1

Focus Group to Define Suitable Performance Indicators

Indicators are an important tool to evaluate the performances of municipalities and help to advance hypotheses on resilience level and ability to execute strategy. Various types of performance metrics are available in Italy at national level and in the Province of Trento. In order to understand what are the most significant indicators and models for the thesis, a focus group with experts was organised and facilitated. ‘A focus group can be defined as a group discussion or interview between one researcher and several participants at once. Normally, they consist of small groups

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123

of individuals who convene to communicate their opinions concerning a specific area of interest defined by the researcher’ (O’Gorman & MacIntosh, 2015, p. 123). It is a technique which can have various applications in scientific research. For example, a focus group can be used for exploring topics where knowledge is limited, for explaining particular behaviours or also for designing an experiment (Hennink & Leavy, 2013). There are no standard ways of planning and conducting a focus group; one of the advantages of this technique is its flexibility to be adapted to the situation and type of research (Hennink & Leavy, 2013). In the process of implementing the method there are two steps happening before the actual focus group: planning and recruiting. Planning consists of deciding the purpose, preparing a guide, finding a location and deciding how to capture the output of the discussion. Recruiting, instead, concerns the method of selecting and inviting participants (O’Gorman & MacIntosh, 2015). One of differentiators among types of focus group is the number of participants. ‘Full groups contain eight to ten people, whereas minigroups are limited to four or six. Some researchers prefer to use minigroups instead of full groups because they feel they can gain more in-depth information from a smaller group. Other researchers use minigroups because they find that is not feasible to recruit more than six persons for a particular group’ (Greenbaum, 1998, p. 3). During the focus group the role of the moderator is critical because the person needs to conduct the meeting through five different phases: introduction, icebreaker, initial questions, important questions and closing questions (O’Gorman & MacIntosh, 2015). Introduction and ice-breaker help the participants to understand the topic, the objective and to know each-other. ‘The first question on the discussion guide is the opening question. It is usually a simple question that all participants can respond to and begins to make participants feel comfortable to contribute to the discussion. The opening question is not intended to promote discussion, therefore it is often short and factual’ (Hennink & Leavy, 2013, p. 56). The important questions, instead, are related to the objective of the focus group and are intended to facilitate discussions and share knowledge and ideas. The closing questions support an effective conclusion of the focus group: they should allow participants to add additional ideas and to recap the output of the discussion (O’Gorman & MacIntosh, 2015). In this research, a focus group was conducted to understand how performance of municipalities can be evaluated and if there is a way to obtain indications regarding the level of resilience and the ability to execute strategy. In the planning phase various types of available indicators were collected. Municipalities in Italy follow a standardised way of budgeting and accounting. The standard is defined by the national administration and it is common to all municipalities. The

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National Institute of Research (ISTAT) analyses data provided by all municipalities and calculates financial metrics year after year. On ISTAT website indicators from the year 2007 to 2015 are visible, at the time of the research. A list of some available indicators is presented in the electronic supplementary material (Appendix 2) (ISTAT, 2018). The second part of the preparation concerned the recruiting of experts to participate to the focus group. Participants were carefully chosen based on knowledge regarding small municipalities in the Province of Trento, public administration and econometric models. Due to the peculiarity of the topic, four professors from the Department of Economics and Management at Trento University were selected. The four participants have the knowledge required: one professor in environmental economics, who had been mayor of a small municipality for ten years, one professor in statistics, one professor in public management and one professor in marketing specialized in tourism of mountain areas. Some of the professors are the same who helped to validate the questionnaire. The focus group took place at the University of Trento and lasted around two hours. The purpose of the session was to define the most significant performance indicators for municipalities and create econometric models to measure resilience and ability to execute strategy. The agenda included an introduction of the research and the purpose of the focus group, some initial questions to start knowing better the participants, the important questions regarding indicators and econometrics and a conclusion summarizing the findings. Since the four experts are used to working together, no formal ice-breaker or introductions were included in the agenda. A list of available performance indicators was provided during the focus group to facilitate and narrow the discussion. The outputs of the focus group have been a list of the most significant performance indicators useful to evaluate small municipalities and proposals for econometric models. The subsequent chapters include the indicators and proposals as well as the rational of the selection. The focus group required follow-up with individual participants to refine the models.

3.4.2

Indicators to Evaluate the Achievements of the Municipalities

The indicators defined in the focus group to evaluate achievements of municipalities are related to financial results. These kinds of metrics offer hints regarding the ability of organisations to adapt to a challenging environment. Three set of indicators were proposed:

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• The official financial metrics for the municipalities in the year 2007–2015 • Budget surplus for the year 2016 • Spending review targets given to municipalities by the Province of Trento – Financial performance metrics 2007–2015 The pool of experts selected six metrics which are more significant than others in demonstrating organisational performance: 1. Degree of financial autonomy (grado di autonomia finanziaria). The metric measures the percentage of revenue collected or earned by a municipality versus the total revenue; it excludes, therefore, revenue coming from external contributions (e.g. from provinces or regions, from the European Union…). It helps to understand how much of the budget is dependent on transfers from other public organisations. A high degree of financial autonomy means less vulnerability to external shocks and, therefore, a higher level of resilience. degr eeo f f inancialautonomy =

taxr evenue + extrataxr evenue totalr evenue

2. Budget rigidity (rigidità della spesa). The metric measures the percentage of expenses deployed to pay employees and to reimburse loans versus total revenue. It helps to understand how much money is used to run current operations. If the value of the indicator is high, it means that municipalities spend less of their budget on investments. Accordingly, there is a rigidity in the expenditure because the municipality doesn’t have much flexibility to invest in new projects or ideas.

Budgetrigidit y =

curr entex penses f or salariesandwages+ curr entex penses f orr einbur semento f loans totalr evenue

3. Personnel expenses vs current expenditure (incidenza spese personale su spese correnti). The metric measures the percentage of current expenditure used to pay employees versus the total current expenditure. If the value of the indicator is high, it means that municipalities spend more on paying wages than on running other current operations (schools, maintenance…). As a consequence, there might be less money available for services to support citizens.

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Per sonnelex pensesvstotalcurr entex penditur e =

curr entex penses f or per sonnel totalcurr entex penditur e

4. Collection capacity (capacità di riscossione). This metric measures the ability of municipalities to collect the forecasted amount of money. If the value of the indicator is high, it means that municipalities are able to collect a consistent amount of money. The result helps the organisation to have more resources available to spend and helps to be more adherent to the budget. Collectioncapacit y =

totalr evenue(moneycollected) totalr evenue( f or ecasted)

5. Spending capacity (capacità di spesa). This metric measures the ability of municipalities to spend the resources allocated in the budget. If the value of the indicator is high, it means that municipalities are able to spend the money as it was budgeted. Having a high spending capacity helps the organisation to implement its plan and to achieve the expected results. Spendingcapacit y =

totalex penses( payments) totalex penses( f or ecasted)

6. Administrative surplus (deficit) in relation to current revenue (avanzo / disavanzo di amministrazione in relazione alle entrate correnti). This metric measures the surplus (deficit) in comparison with the revenue of the municipality. It helps to understand if the organisation has created a realistic budget, where all allocated expenses have been made. If the value of the indicator is low, it means that the municipality has correctly estimated its budget. administrativesur plus(de f icit)inrelationtocurrentrevenue =

administration f inalresult totalrevenue

These six metrics are considered from two perspectives: • Average values between 2007–2015 per municipality. • Trend values between 2007–2015 per municipality. Both averages and trends were compared through a decision matrix to verify performance for each municipality. A decision matrix is built by establishing a list of options, evaluated through different criteria. Every option is scored versus every criterion. The scores are summed to gain a total that helps in ranking the

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options. The options are the municipalities under study and the criteria are the indicators selected: • The average values for all organisations were compared and ranked. The data are divided into four quartiles, each containing 25% of the numbers. At each quartile a score is assigned (Top 25% = 4 points; Second 25% = 3 points; Third 25% = 2 points: Last 25% = 1 point); a special score is awarded to the best municipality (5 points) and to the worst (0 point) for that specific indicator. • Additionally, the trends of the metrics were analysed. The trend is derived by the regression line connecting the values of different years. The coefficient of the regression equation is used to evaluate the trend. Based on the coefficients, scores are awarded using the same system explained for the averages. The decision matrix presented in Table 3.12 shows the results of the analysis of financial metrics. There are some municipalities that perform better than others in almost all indicators. At the same time, organisations at the bottom of the table have low values in almost all considered dimensions. One can argue that such analysis might be helpful for dividing municipalities into categories. Raw data and calculations used in the decision matrix are presented in the electronic supplementary material (Appendix 3). – Budget surplus and harmonised budget in 2016 After the economic crisis in Italy, the central government issued laws and guidelines to reduce expenses at national and local level. In particular, some of them have had an effect on the way budgets in municipalities are managed. In legislative decree number 267 issued in 2000, the principle of budget balance is introduced. In law number 208 issued in 2015, the principle is expanded (Camera dei Deputati, 2016). The principle of budget balance is not valid for a single organisation but it is seen from a broader perspective. Regions, provinces and municipalities are not allowed to have a deficit in their aggregated financial plans; the budget is considered to be the sum of the plans of all organisations in the same territory. As a consequence, municipalities are prohibited to spend their surplus; it should be available in case some other organisations in the same territory have deficits. The budget surplus can be used only in some special cases or if authorised by the central state or by their own region.

0

2

3

3

3

4

4

4

3

2

3

1

1

3

4

3

Munic. 4

Munic. 5

Munic. 6

Munic. 7

Munic. 8

Munic. 9

Munic. 10

Munic. 11

Munic. 12

Munic. 13

Munic. 14

Munic. 15

Munic. 16

Munic. 17

Munic. 18

Munic. 19

3

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1

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1

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1

1

4

1

3

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2

4

2

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4

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1

1

4

3

3

4

4

2

2

1

0

2

1

2

3

3

4

2

4

4

3

1

2

4

4

Trend Average

Spending capacity

2

4

1

5

1

2

1

3

4

3

2

4

3

3

1

2

4

2

4

4

1

1

1

2

2

2

2

4

3

3

0

4

4

4

1

1

4

4

Trend Average

Collection capacity

2

4

1

4

0

1

1

3

4

1

3

4

2

3

1

3

4

4

4

3

1

3

3

1

2

2

1

2

1

4

1

4

4

4

1

2

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1

2

0

2

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1

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2

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3

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2

4

1

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4

(continued)

33

28

23

27

13

25

24

24

41

32

42

31

37

30

30

23

27

40

40

Trend Average Trend Total

Surplus (Deficit)

3

4

3

1

2

2

4

5

4

1

1

2

Munic. 3

4

4

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Munic. 2

1

1

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Munic. 1

Personnel expenses

Trend Average Trend Average

Budget rigidity

Municipality Average

Financial Autonomy

Table 3.12 Decision matrix—financial metrics

128 Methods and Techniques Used in the Research

1

2

1

1

1

1

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1

Munic. 23

Munic. 24

Munic. 25

Munic. 26

Munic. 27

Munic. 28

Munic. 29

Munic. 30

Munic. 31

Munic. 32

Munic. 33

Munic. 34

Munic. 35

Munic. 36

Munic. 37

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Munic. 22

3

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Munic. 21

4

5

4

Munic. 20

Personnel expenses

Trend Average Trend Average

Budget rigidity

Municipality Average

Financial Autonomy

Table 3.12 (continued)

1

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Trend Average

Spending capacity

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Trend Average

Collection capacity

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(continued)

26

29

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33

18

31

33

32

30

20

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25

26

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33

36

42

Trend Average Trend Total

Surplus (Deficit)

3.4 Data Gathering Technique: Focus Group and Performance Indicators 129

2

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Munic. 41

Munic. 42

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Munic. 40

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Munic. 39

1

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Munic. 38

Personnel expenses

Trend Average Trend Average

Budget rigidity

Municipality Average

Financial Autonomy

Table 3.12 (continued)

5

1

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1

Trend Average

Spending capacity

2

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Trend Average

Collection capacity

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35

33

37

29

26

Trend Average Trend Total

Surplus (Deficit)

130 3 Methods and Techniques Used in the Research

3.4 Data Gathering Technique: Focus Group and Performance Indicators

131

The change had an impact on the way expenses were managed. Municipalities have an incentive to spend their resources in the current year, since they can’t consume money in the following periods. Some organisations were already effective in their expenditure and they were not heavily affected by the new regulation. Some others, instead, showed a consistent surplus of money not spent. In both cases the new principle can be used as a way to test the ability of municipalities to adapt to changes. An indication of the surplus is given by one of the indicators presented in the previous chapter: administrative surplus (deficit) in relation to current revenue. From 2016 onwards, municipalities had to start using a new accounting system, called the ‘harmonised budget’ (bilancio armonizzato). The harmonised budget refers to the process of reforming public accounting that has been in place since 2009 in law n. 42/2009 for local authorities and in law n. 196/2009 for the state budget and other public administrations. The aim of the reform is the creation of a homogeneous accounting system for all Italian public administrations. The standardisation supports the consolidation of public accounts. Other advantages are a faster answer to the requests of the European Union, a more comprehensive tracking of public spending and an effective support in determining standard needs and costs. In Table 3.13, municipalities are ranked based on administration surplus index in 2016: the first year in which the rule on the restricted use of surplus was applied. Organisations show different values. Some were able to spend almost all the available money. Some others, instead, had a very high surplus at the end of year. Three municipalities show an indicator greater than one. They have more money not spent than the amount collected in the year; most probably they carried over part of their surplus from previous years.

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Table 3.13 Administrative surplus in 2016 Municipality Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic. Munic.

10 31 20 28 34 42 38 2 22 30 5 23 16 7 26 41 40 24 32 6 17 9 27 29 3 11 36 19 15 13 37 39 21 1 25 33 35 14 4 12 8 18

Tax Revenue 909,305 307,457 2,024,720 308,013 1,049,990 876,636 784,574 1,978,829 1,185,631 517,499 467,690 212,114 337,380 361,010 1,628,273 215,471 1,341,593 242,225 894,247 270,993 934,600 3,149,671 497,001 609,734 391,420 794,328 632,781 362,289 369,217 664,792 515,710 1,388,344 642,619 493,778 463,881 435,264 289,815 807,337 401,742 507,037 979,695 529,211

Revenue from external contribuons 194,111 326,383 741,332 680,795 645,783 162,756 850,738 455,569 411,284 287,547 264,567 405,853 196,841 576,771 843,782 650,617 296,393 603,728 487,706 392,130 794,284 346,635 858,184 672,066 715,072 520,269 293,993 368,610 511,698 433,122 503,504 470,291 245,655 542,021 298,142 399,054 243,183 300,802 501,349 216,597 482,455 125,151

Extra-tax Revenue 505,830 453,861 963,968 224,585 481,819 1,145,601 446,379 5,196,133 2,685,514 597,003 694,581 138,469 390,323 366,522 7,637,692 561,818 935,944 750,762 940,073 376,308 1,476,691 1,966,995 750,876 199,927 433,388 1,516,933 429,739 499,019 381,066 204,590 356,612 2,055,776 854,077 2,588,180 178,649 530,652 427,791 1,484,698 191,918 318,325 1,415,602 843,665

Administraon Final Result

Administrave Surplus

23,699 119,239 461,708 157,410 316,541 321,326 315,680 1,272,519 794,116 275,181 291,272 158,723 232,284 331,046 2,589,673 368,572 721,397 529,874 770,780 348,629 1,120,498 1,921,645 755,088 602,582 675,754 1,379,240 675,122 612,236 628,702 657,526 709,050 2,088,341 1,026,117 2,387,118 740,651 1,085,743 820,154 2,248,330 1,009,329 1,140,971 3,511,162 3,299,989

0.015 0.110 0.124 0.130 0.145 0.147 0.152 0.167 0.185 0.196 0.204 0.210 0.251 0.254 0.256 0.258 0.280 0.332 0.332 0.335 0.350 0.352 0.359 0.407 0.439 0.487 0.498 0.498 0.498 0.505 0.515 0.534 0.589 0.659 0.787 0.795 0.854 0.867 0.922 1.095 1.220 2.203

– Spending reduction targets 2016–2019 In 2015, the Province of Trento defined spending review targets for all municipalities with less than 5,000 inhabitants (Autonomous Province of Trento, 2015).

3.4 Data Gathering Technique: Focus Group and Performance Indicators

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The targets are set based on an econometric model and they consider a standard expenditure requirement (fabbisogno di spesa standard). Municipalities have three years (2016–2019) to achieve the defined targets. If they do not achieve the expected results, the Province of Trento will intervene and force local entities to find ways to reduce expenses. Spending-review targets are calculated starting from the efficient standard expenditure requirements. This standard provides an indication of the amount of expenses an efficient municipality should have. Targets are customised using other factors, such as population and socio-economic indicators (tourism, workers, elderly people…). In this way, actual expenses of municipalities are compared with an ideal efficient organisation; based on the comparison, reduction targets are fixed. For the purpose of this research, it is of interest to investigate the ability of organisations to achieve the goals. Unfortunately, at the time of writing, the timeframe allowed for the savings (2016–2019) is not yet arrived to an end. What can be considered is not the targets ‘per se’, but the comparison of expenses with the defined standard. If a municipality is already efficient, it is likely to have expenses lower than the standard; and vice versa, if a municipality is not well managed, it is likely to have poor performance. In Table 3.14, values of actual and standard expenditures for various municipalities are summarised. The majority of organisations have expenses higher than their targets. Only few are performing better than the requirement set by the efficiency standard.

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Methods and Techniques Used in the Research

Table 3.14 Spending review targets M unicipalities Munic. 1 Munic. 2 Munic. 3 Munic. 4 Munic. 5 Munic. 6 Munic. 7 Munic. 8 Munic. 9 Munic. 10 Munic. 11 Munic. 12 Munic. 13 Munic. 14 Munic. 15 Munic. 16 Munic. 17 Munic. 18 Munic. 19 Munic. 20 Munic. 21 Munic. 22 Munic. 23 Munic. 24 Munic. 25 Munic. 26 Munic. 27 Munic. 28 Munic. 29 Munic. 30 Munic. 31 Munic. 32 Munic. 33 Munic. 34 Munic. 35 Munic. 36 Munic. 37 Munic. 38 Munic. 39 Munic. 40 Munic. 41 Munic. 42

3.4.3

Net actual expenditure 1,624,280 1,721,167 1,012,768 819,867 967,258 746,323 1,063,087 1,464,859 2,224,428 912,653 1,091,878 634,876 796,869 851,607 745,691 724,250 1,623,896 981,119 863,820 1,742,057 1,111,214 1,344,468 613,962 681,474 584,414 1,679,880 1,174,955 798,431 875,721 863,047 817,605 1,045,259 812,807 1,406,184 710,623 849,945 907,737 1,145,383 2,056,912 1,455,047 964,959 1,149,342

Standard expenditure requirements 1,162,808 1,647,296 1,127,599 1,022,535 902,704 708,171 1,036,918 1,584,595 2,562,840 1,092,151 1,233,402 609,323 984,330 887,710 722,020 690,394 1,152,075 921,355 894,134 1,580,887 1,086,456 1,196,069 633,195 672,701 697,884 1,930,130 1,228,558 916,791 1,109,040 873,752 778,706 884,847 889,196 1,379,258 709,838 837,022 798,191 1,259,522 1,884,779 1,299,925 937,443 1,185,494

Efficient standard % net expenditure expenditure vs standard requirements 1,090,533 1,559,561 1,054,428 952,195 824,945 622,136 971,691 1,513,338 2,502,611 1,006,221 1,152,950 521,762 896,106 798,645 642,371 605,256 1,076,935 843,662 811,015 1,495,509 1,018,276 1,111,481 557,371 596,975 610,114 1,868,986 1,152,343 835,633 1,032,202 803,852 692,706 810,323 816,985 1,300,606 629,520 753,153 722,074 1,182,126 1,824,461 1,219,171 870,839 1,118,552

140% 104% 90% 80% 107% 105% 103% 92% 87% 84% 89% 104% 81% 96% 103% 105% 141% 106% 97% 110% 102% 112% 97% 101% 84% 87% 96% 87% 79% 99% 105% 118% 91% 102% 100% 102% 114% 91% 109% 112% 103% 97%

% net expenditure vs efficient requirements 149% 110% 96% 86% 117% 120% 109% 97% 89% 91% 95% 122% 89% 107% 116% 120% 151% 116% 107% 116% 109% 121% 110% 114% 96% 90% 102% 96% 85% 107% 118% 129% 99% 108% 113% 113% 126% 97% 113% 119% 111% 103%

Econometric Models

Two econometrics models to verify possible relationships among indicators were proposed during the focus group. Finding correlations among metrics and building econometric models might explain which variables make a municipality perform better than others.

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Econometrics is an interdisciplinary science in which relationships are studied using quantitative values defined by economic theory. Different techniques, procedures and results support hypotheses testing and the forecasting of future trends (Carlucci, 2003). Econometric models are useful in this research because they don’t require controlled experiments, as per many statistical models, but they help to interpret data collected in the ‘real’ environment. One model concerns the efficiency level and the other the resilience level of municipalities (Table 3.15).

Table 3.15 Econometric models’ description Type of model

Dependent variables (yi )

Independent Variables (xi )

Efficiency

Net spending vs standard

Resilience

Budget surplus in 2016

1.Financial autonomy average 2.Budget rigidity average 3. Personnel expenses 4.Spending capacity average 5.Collection capacity average 6.Surplus (deficit) average 7.Population 8.Surface area (km2 )

The efficiency model is based on the indicators developed by the Province of Trento to define spending reduction targets. Instead, the resilience model considers the budget surplus indicator in 2016. As previously explained, due to the introduction of new regulations, municipalities are no longer allowed to spend the money budgeted in one year in the following one. It can be hypothesised that organisations, that have been able to adapt better to this change, show a higher level of resilience. The participants in the focus group stated that financial performance indicators might be the independent variables in the model. They suggested using the averages of the indicators for the various years. Averages smooth special situations that can influence the values in specific years. The experts also recommended introducing two additional variables on top of financial indicators: number of inhabitants and surface area of the municipality (Appendix 1 in the electronic supplementary material). These two characteristics might have a significant effect on expenses and complexity to manage.

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Methods and Techniques Used in the Research

Data Analysis Approaches: Graphical and Analytical Tools

One of the goals of this research is to find relationships among different types of information (questionnaires, performance indicators…) and to draw conclusions regarding resilience and strategy execution. Researchers have many tools available to conduct deductive data analysis. In this thesis the method applied is the PGA process. PGA means practical, graphical and analytical. It suggests that if a conclusion is evident with practical considerations or graphical visualisations, complex statistical analyses are not necessary. Two main types of data were collected: continuous and discrete or categorical data. For example, the values of the performance indicators are considered continuous data, while the values measured on a Likert scale in the questionnaires are discrete data. Understanding which type of data needs to be analysed is important since difference tools and descriptive statistics apply. In general, the data collected are described through two measures: central tendency and variability. Mean and median are used to describe central tendency. ‘The mean is the sum of individual scores in a data set divided by the number of scores. The median is a value in the set of which 50 percent of cases fall below and 50 percent above’ (Bridgmon & Martin, 2012, p. 7). Variance, standard deviation and range measure, instead, central tendency. ‘The variance of the sample is the total sum of squares divided by the number of scores. The symbol of the variance of the population is sigma squared. The standard deviation of the sample is the square root of the variance. The symbol for the standard deviation of the population is σ . The range of scores in a data set is simply the difference between the highest and lowest scores’ (Bridgmon & Martin, 2012, pp. 8–9). Mean, variance and standard deviation are more suitable to describe continuous data, while median and range for discrete data (O’Gorman & MacIntosh, 2015). All analyses have been performed using Microsoft Excel or Minitab2 . Minitab is a widely used statistical software, that helps to automate calculations, analyses and the creation of graphs. In the next chapters, the graphical and analytical tools and the approach taken to analyse the data collected are presented. Analytical tools are divided in two types of techniques: the ones to explore relationships and the ones to compare groups.

2 https://www.minitab.com/

3.5 Data Analysis Approaches: Graphical and Analytical Tools

3.5.1

137

Graphical and Analytical Tools

– Graphical tools The main graphical tools used in this research are Pareto charts and Boxplots. Pareto charts are showing the most frequent categories in a data set. They are created, for example, ‘to identify the most frequent defects, the most common causes of defects, or the most frequent causes of customer complaints. Pareto charts can help to focus improvement efforts on areas where the largest gains can be made’ (Minitab, 2019). This graph supports the analysis of some answers of the questionnaires and the grouping of municipalities based on performance. A Boxplot is useful to visualize and ‘compare the shape, central tendency, and variability of sample distributions, and to look for outliers. A boxplot works best when the sample size is at least 20’ (Minitab, 2019). A boxplot is usually created to visualize medians, ranges and outliers; however, it is a flexible tool and can help to display also means, confidence intervals3 and other data characteristics. In this thesis, in the first instance a graphical analysis was performed, but if inconclusive, then an additional analytical tool was applied. – Analytical tools to explore relationships Tools to explore relationships are ‘based on the analysis of independent and dependent variables and address multiple purposes, such as testing theories and models, predicting future outcomes and trends, and assessing the reliability and validity of primary and secondary data scales’ (O’Gorman & MacIntosh, 2015, p. 180). Two main techniques were applied: simple linear regression and multiple regression. The regression techniques are the basis to create linear models that help to explain data behaviours and answer the research questions. A correlation analysis assesses relationship between pairs of variables and it is the basis for the simple linear (one independent variable) and multiple (two or more independent variables) regression techniques. The method adopted is the ordinary least squares (OLS) estimation, that derives the equation by minimising

3 ‘A

confidence interval is a range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter. Because of their random nature, it is unlikely that two samples from a particular population will yield identical confidence intervals. But if you repeated your sample many times, a certain percentage of the resulting confidence intervals would contain the unknown population parameter CITATION Min19 \l 1033 (Minitab, 2019).

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the sum of the squared residuals. Three parameters are relevant for assessing the correlations among variables: o P-value. If the value is lower than a significant level defined a priori (α value), there is no have enough evidence to dismiss the hypothesis that a correlation between two variables exists. Consequently, one can assume that there is a relationship between them. Usually α value is set at 0.05 level, that means a 5% of probability of drawing an incorrect conclusion. In this research the standard level of α is selected. o R-sq expresses the percentage of variation in the data that can be explained by the regression model. In some instances, the adjusted R-sq is presented since it takes in consideration the number of predictors in the model. o r (Pearson coefficient) represents the type of correlations between two variables. It varies from -1 to + 1. A value of 1 implies that a linear equation describes a perfect relationship with both variables increasing simultaneously. A value of 0 implies that there is no linear correlation between the variables. It is important to underline that a correlation between two variables doesn’t imply a relation of causation. Two variables can be correlated and varying simultaneously but not be linked by a direct cause. That usually happens when there is another variable ‘in-between’ connected with both of them. A typical example is the statistic affirming that where more ice-creams are sold, more shark attacks take place. The sale of ice-creams is not caused by shark attacks. There is an inbetween variable that might be described as warm weather or beach location: more people buy ice-creams and more people decide to go swimming at the seaside. In the analyses performed, therefore, when a correlation is present, a hypothesis is made on possible causal relationships but it might be difficult to prove it. In one case, before running a multiple regression, a best subset analysis has been performed. This type of analysis offers a recommendation of the best variables to include in the model for multiple regression. The researcher needs to decide which variables to consider fixed, and which will enter a pool to choose from. Among the subsets of variables, the researcher might select the one with the highest adjusted R-sq and the lowest value for Mallows cp.4

4 ‘Mallows’

Cp helps to choose between multiple regression models. Mallows’ Cp compares the precision and bias of the full model to models with a subset of the predictors. Usually, you should look for models where Mallows’ Cp is small and close to the number of predictors in the model plus the constant (p)’ (Minitab, 2018).

3.5 Data Analysis Approaches: Graphical and Analytical Tools

139

– Analytical tools to compare groups ‘The purpose of testing and comparing a set of two or more groups is to identify statistically significant differences in the means of the analysed groups. Using these kinds of techniques helps to make statistical inference about any population from a randomly chosen sample’ (O’Gorman & MacIntosh, 2015, p. 185). In this thesis three different techniques are applied: t-test analysis, one-way ANOVA and Mood’s median test. ‘T-test is used to test if two sample means are significantly different from each other from two independent samples. This is a between group analysis. We are testing whether the two means from independent samples are from different populations. The sample means as estimators of the population parameters based upon the sampling distribution of differences between means’ (Bridgmon & Martin, 2012, p. 25). The output of the t-test, and other statistical tests, is a p-value measuring the ‘probability’ that the samples are coming from the same populations. If the pvalue is lower than 5%, conventionally, one can affirm that the samples are coming from two different populations and, therefore, they are different. ‘Comparing the means of two different groups or conditions is not always sufficient and needs to be extended in order to compare the means of three or more sample groups. The use of analysis of variance (ANOVA) is suitable for this, as it compares the variance between different groups with the variability within each of the groups. As a measurement unit, the F statistic is the ratio that expresses the differences in the variances of different groups’ (O’Gorman & MacIntosh, 2015, p. 187). The p-value obtained as output of the statistical analysis helps to state if at least of the sample groups is different from the others. Both one-way analysis and ANOVA test are performed when the samples taken in consideration are made out of continuous data and are based on means. In case the data are discrete, other tools based on medians are used to compare samples. In order to compare medians of groups of data, there are two different tests which are normally run: Mood’s median and Kruskal-Wallis. These two techniques are relevant since the majority of data included in the questionnaires are discrete in nature. The questions, with the exception of open inquiries, are based on a fivepoint Likert scale. ‘Likert questionnaires are widely used in survey research, but it is unclear whether the item data should be investigated by means of parametric or nonparametric procedures’ (de Winter & Dodou, 2010, p. 1). There are different opinions, among the researchers, about the best way of proceeding. De Winter & Dodou (2010) have demonstrated the equivalence of using a parametric test of the means (t-test for continuous data) or a non-parametric test of the medians (MannWhitney-Wilcoxon test for discrete data). The choice made in this research is to

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Methods and Techniques Used in the Research

maintain the coherence between type of data and analyses. Likert scale data are discrete in nature; therefore, medians and non-parametric tests are run to describe and analyse the results. However, the central limit theorem5 allows using means and parametric statistics in case data are aggregated. In order to compare medians, two different tests are available: Mood’s median and Kruskal-Wallis. The first is more robust in the presence of outliers, but is less powerful if outliers are not present. Taking a conservative approach, Mood’s median test, which guarantees robustness with extreme values, was selected.

3.5.2

Approach Used in Analysis of Questionnaires and Performance Indicators

The approach adopted consider all sources of data collected and aim to support answering the research questions. In particular the goal is to assess the existence of correlations between resiliency and effectiveness in strategy execution, and to define possible areas of improvements. First, the results of the questionnaires are analysed. Answers referring to execution and resilience characteristics are investigated to determine strengths and weaknesses of municipalities. The investigation is performed through boxplots and Mood’s medians tests that help to show differences and commonalities. In order to obtain additional insights, Pareto charts are created to summarize the most frequent achievements, changes and ways of adapting to changes. Data are also aggregated to verify the existence of a correlation among execution traits, resilience characteristics and results perceived. Information collected through questionnaires are subjective in nature due to the fact that numerous questions require to state an opinion. The analysis of performance indicators is useful to introduce more objectivity and to classify municipalities based on their real results. The correlation analysis comparing various indicators allows the researcher to obtain insights on the dynamics of the organisations and to advance hypotheses regarding resilience and strategy

5 ‘The

central limit theorem is a fundamental theorem of probability and statistics. The theorem describes the distribution of the mean of a random sample from a population with finite variance. When the sample size is sufficiently large, the distribution of the means is approximately normally distributed. The theorem applies regardless of the shape of the population’s distribution. Many common statistical procedures require data to be approximately normal’ (Minitab, 2019).

3.6 Limitations of the Methodology Selected

141

execution. The two econometric models, defined in the focus, group are examined through multiple regression studies. The models help to identify what levers municipalities might pull to increase efficiency and resilience. The next step in the approach is to combine data collected through questionnaires and performance indicators. A correlation analysis between the two sources of data is run to verify if resilience and execution traits have a significant impact on financial and administrative results of municipalities. The insights obtained support the crafting of recommendations to strengthen performance, ability to execute strategy and resilience characteristics. One of the limitations of the sample taken in consideration is that the size and geographical location of the municipalities are homogenous. Therefore, in the next chapter an attempt to extend the research to different types of municipality is made.

3.6

Limitations of the Methodology Selected

Any choice regarding the methodology adopted in a study brings some advantages but also limitations. It is important to underline the most important limitations because they can affect the quality of the results. The first limitation is that the sample size refers to only one category of organisations: municipalities. It might not be representative of public sector in general. For this reason, conclusions have to be considered only as a starting point for a wider discussion on public sector dynamics. In addition, only a specific category of municipalities in a specific region is examined. Not all lessons might apply to other territories, however that can only be proven with a study extended to the whole of Italy. The second limitation concerns data collection and in particular the use of questionnaires. This tool has many advantages but also some shortcomings. First, respondents are often not asked to add their names and contact details. Thus, there is no way of checking and correcting information in case of doubt. Second, questionnaires rely on the correct interpretation of the inquires and on the effort dedicated to answer. In addition, the body of knowledge regarding strategy execution and resilience in public organisations is limited. Thus, the model used for the questionnaire and interviews may have been weak and not complete. Another point to consider is the way in which municipalities have been divided into groups. The split was done based on some financial indicators that might or might not represent the overall performance of the organisations. Unfortunately, ‘official’ indicators to measure performance of municipalities don’t exist; any choice made would have represented an approximation and led to mistakes. Lastly,

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Methods and Techniques Used in the Research

due to the innovative character of the topic, the research is expected to offer only a basis for further studies. The answers to the research questions may be directionally correct but not exhaustive. An additional limitation regards the approach to explore relationships among variables. The two main techniques adopted (simple linear regression and multiple regression) present three main disadvantages (Rickards, 2003): first, it is assumed that the effect of independent variables is similar for all instances under study; second, regression methods consider only averages values that are an approximation of the reality; and lastly, these techniques can consider only one dependent variable at the time. Rickards (2003) suggests that the use of a data envelopment analysis (DEA) might overcome all three limitations. In the thesis, the application of DEA would have allowed to study together the dependent variables of the efficiency and resilience models and helped to define the optimum values of the independent variables. Additional discussions regarding shortcomings of the methodology and of the overall research are included in the last chapter of this thesis. That supports the provision of a framework to better interpret the results and the recommendations for future researchers to overcome some of these limitations.

4

Discussion of Research Results

4.1

Questionnaire Analysis: Insights on Resilience and Strategy Execution

4.1.1

High Level Analysis of Data Collected

The purpose of this chapter is to start looking at the data collected through the questionnaires and to understand the differences and similarities between municipalities. The insights provided by the data help to identify the factors influencing resilience and the ways in which the organisations execute strategy. The questions included in the questionnaires were coded using the approach presented in section 3.3.2; the coding system is shown in Table 4.1 to support the interpretation of the analyses. The medians and their confidence intervals for all questions (Figure 4.1) reveal some significant differences. Confidence interval represents the range of values within which, most probably, the median of a population lies. The Mood’s median test (Table 4.2) confirms that at least one of the groups is different from the others (p-value = 0.000). It is important to underline that non-parametric are less powerful than parametric tests; future researches might explore collection of continuous data to confirm the findings of this and following analyses.

Electronic supplementary material The online version of this chapter (https://doi.org/10.1007/978-3-658-34467-2_4) contains supplementary material, which is available to authorized users.

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 L. Gios, Resilience and Strategy Execution in Public Organisations, https://doi.org/10.1007/978-3-658-34467-2_4

143

144

4

Discussion of Research Results

All questions: medians and their confidence intervals 5

Answers

4

3

2

1

F1 F 2 F3 F 4 F5 A1 A2 A3 A4 A6 A7 A8 A9 RP1 RS1 S2 S3 SA1 SF1 SF 2 SF 3 SF6 SF7 SF9 M1 M 2 R R R R R R R R R R S S

Questions

Figure 4.1 Medians and confidence interval of all questions

Table 4.1 Coding system used in the questionnaire Code

Question

F1

In the last ten years the municipality has improved its budget and Financial financial resource management Results

Topic

F2

The municipality was able to adapt successfully to the new fiscal policies

F3

In the last ten years the municipality has improved its budget and financial resource management

F4

In the last ten years the municipality has improved the services it provides

F5

The municipality has successfully adapted to changes in the management of the budget (harmonised budget and blocking of the administrative surplus) (continued)

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

145

Table 4.1 (continued) Code

Question

RA1

People are encouraged to move between different departments or Resilience: try different roles within our organisation to gain experience Adaptive Capacity There is an excellent sense of teamwork and camaraderie in our

RA2

Topic

organisation RA3

When a problem occurs in our organisation, internal resources become more easily available at short notice and there is less red tape to deal with

RA4

People in our organisation typically ‘own’ a problem until it is resolved

RA5

In our organisation, it is a priority that people have the information and knowledge they need to respond to unexpected problems that arise

RA6

I am confident that management and political representatives would provide good leadership if our organisation was struck by a real crisis*

RA7

Our organisation actively encourages people to challenge and develop themselves through their work

RA8

When we need to, our organisation can make tough decisions quickly

RA9

Our organisation proactively monitors what is happening in its environment to have an early warning of emerging issues

RP1

Our organisation is able to collaborate with other municipalities and organisations to manage unexpected challenges

Resilience: Planning

RS1

Information flows freely in the organisation across boundaries

RS2

Our organisation is successful at learning lessons from the past and making sure these lessons are carried through to future projects

Resilience & Execution

RS3

Priorities are clearly communicated and managed

SA1

There is an effective use of lag and lead metrics to measure progress and success

SF1

Employees and managers involved have the right skills to support Execution: the implementation People

SF2

Everyone understands the strategy and his/her role and responsibilities

SF3

Employees are motivated and committed to the plan

Execution: Measurement System

(continued)

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4

Discussion of Research Results

Table 4.1 (continued) Code

Question

Topic

SF6

An effective performance management system to reward employees with best performance is in place

Execution: Systems

SF7

An effective system to manage risks is in place

SF9

The budget (people, money…) allocated to the annual or long-term plan is appropriate

SM1

A strategy and long-term plan to meet financial goals was established

SM2

Execution: Structure

Execution: Methodology A yearly plan to meet financial goals is made and shared regularly Used

Table 4.2 Mood’s median test: medians and confidence interval of all questions Mood’s Median Test: All Questions Descriptive Statistics Q3 − Q1

95% Median CI

39

1.0

(4, 5)

25

1.0

(3, 4)

26

1.0

(3.41082, 4)

25

17

2.0

(3, 4)

13

28

1.0

(4, 4)

3

29

12

2.0

(2, 3)

RA2

3

22

20

1.0

(3, 4)

RA3

4

20

21

2.0

(2, 4)

RA4

4

9

33

0.0

(4, 4)

RA6

4

11

30

1.0

(4, 4)

RA7

3

24

17

2.0

(3, 4)

RA8

4

14

27

1.0

(3.81887, 4)

RA9

3

26

15

2.0

(3, 4)

RP1

4

14

27

1.0

(3.81887, 4)

RS1

4

13

28

1.0

(4, 4)

Questions

Median

N < Overall Median

F1

5

2

F2

4

17

F3

4

14

F4

3

F5

4

RA1

N>= Overall Median

(continued)

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

147

Table 4.2 (continued) RS2

4

18

22

1.0

(3, 4)

RS3

3

25

17

1.0

(3, 4)

SA1

3

31

10

1.5

(2, 3)

SF1

4

13

28

1.0

(4, 4)

SF2

3

24

18

1.0

(3, 4)

SF3

3

23

19

2.0

(3, 4)

SF6

3

28

13

2.0

(2, 3)

SF7

4

16

25

1.0

(3, 4)

SF9

4

13

29

1.0

(4, 4)

SM1

4

14

27

1.0

(3.81887, 4)

SM2

4

17

24

1.0

(3, 4)

Overall

4

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

25

119.03

0.000

Analysing the graph and the table with the descriptive statistics in more detail, some outlying values become evident. Question F1 (in the last ten years the municipality has been heavily affected by more stringent fiscal and administrative policies) is the only one with a median equal to five. This result bodes well for the research, because it means that municipalities perceive themselves to be in a period of change. They need, therefore, to use their resilience in order to adapt successfully. One question has a wider confidence interval (CI = 2−4): RA3 (when a problem occurs in our organisation, internal resources become more easily available at short notice and there is less red tape to deal with). This question is meant to assess the ability of the team to work together on aligned priorities in order to solve emerging issues. The wide confidence interval may be related to varying municipal capacities for team work and the prioritization of collective interests over personal goals.

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4

Discussion of Research Results

Three questions have the lowest median (˜x = 3) and confidence interval (CI = 2–3) scores: RA1 (people are encouraged to move between different departments or try different roles within our organisation to gain experience), SA1 (there is an effective use of lag and lead metrics to measure progress and success), SF6 (an effective performance management system to reward the highest performing employees is in place). All three questions relate to the way in which municipalities and employees are managed. Employees do not appear to be encouraged to try out different roles and do not have many opportunities for job rotation and not all organisations have a good performance system in place for rewarding achievement and correct behaviours. Progress measurement metrics do not appear to be widely used by the public entities. It is interesting to note that the question with the lowest answer variation (˜x = 4, Q3 − Q1 = 0, CI = 4–4) is RA4 (people in our organisation typically ‘own’ a problem until it is resolved). It appears that most people in all the municipalities are attentive to their tasks and have a clear sense of ownership of their work. When the impact of two other factors, seniority of service and whether someone is in administration or a political figure, is analysed, some additional insights are obtained. First of all, the categories seem to have a significant impact (p-value = 0.031) on the results (Table 4.3 and Figure 4.2). The answers given by administrative employees have the same median (˜x = 4) as those given by political representatives but they have a higher variability with a tendency towards low scores. Seniority alone, on the other hand, it seems, has no significant effect on the scores. However, the groups produced by combining the two factors show a significant difference (p-value = 0.004). The administrative and political staff with more than ten years of service score, on average, higher than administrative employees with low seniority.

Answers

Answers

Category of People

Political

Administrative Political

D3

2-5 years

5-10 years

>10 years

D2bis

D3

1 Administrative Political

3

4

5

1

1

2

Administrative Political

Answers by Seniority and Category

Administrative

2

3

4

5

2

3

4

5

D2bis

1

2

3

4

Answers by Category

Answers Answers

5

2-5 years

Seniority

5-10 years

5-10 years

>10 years

2-5 years

Political

>10 years

>10 years

5-10 years

Answers by Category and Seniority

Administrative

2-5 years

Answers by Seniority

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution 149

Figure 4.2 Medians and confidence interval of categories (administrative / political) and seniority

150

4

Discussion of Research Results

Table 4.3 Mood’s median test: medians and confidence interval of categories (administrative / political) and seniority Mood’s Median Test: Categories of People Descriptive Statistics D2bis

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Administrative

4

251

276

1

(3, 4)

Political

4

224

321

1

(4, 4)

Overall

4

95.0% CI for median (Administrative)—median (Political): (−1,0) Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

1

4.63

0.031

Seniority: Descriptive Statistics D3

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

2–5 years

4

141

144

1

(3, 4)

5–10 years

4

92

116

1

(3, 4)

>10 years

4

242

337

1

(4, 4)

Overall

4

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

2

4.56

0.102

Categories and Seniority: Descriptive Statistics (continued)

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

151

Table 4.3 (continued) D3 / D2bis

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Administrative > 10 years

4.0

178

219

1

(4, 4)

Administrative2–5 years

3.0

34

18

2

(3, 3)

Administrative5–10 years

3.5

39

39

1

(3, 4)

Political >10 years

4.0

64

118

1

(4, 4)

Political2–5 years

4.0

107

126

1

(3, 4)

Political5–10 years

4.0

53

77

1

(4, 4)

Overall

4.0

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

5

17.50

0.004

Municipal scores also seem to differ significantly (p-value = 0.000), see Table 4.4 and Figure 4.3. Municipality 22 has the lowest median (˜x = 2), while Municipality 30 and 24 have the lowest variation (Q3 − Q1 = 0.25) and a high median (˜x = 4). Only one questionnaire from each of the three municipalities, however, was answered; this outcome may have affected both the absolute value and the variations. – Municipality with both political and administrative questionnaire responses Since the administrative categorisation significantly affects the scores, it is important that only the municipalities where both questionnaires were answered be analysed. The reason is to reduce both the bias introduced in municipality scores where only one person has responded and since there are equal numbers of answers per category, makes it is easier to perform additional analysis. In Figure 4.4, the municipalities which answered both questionnaires are compared. At least one of the organisations presents scores that differ significantly from the others

152

4

Discussion of Research Results

Table 4.4 Mood’s median test: medians and confidence interval of answers by municipality Mood’s Median Test: Municipalities Descriptive Statistics D1bis

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Munic. 11

4

20

32

1.00

(3, 4)

Munic. 14

3

17

9

2.00

(2.64976, 4)

Munic. 16

3

29

22

1.00

(3, 4)

Munic. 17

3

15

11

1.00

(3, 4)

Munic. 18

4

11

15

1.00

(3, 4)

Munic. 19

4

11

15

1.00

(3, 4)

Munic. 2

3

28

24

1.00

(3, 4)

Munic. 20

4

25

27

1.00

(3, 4)

Munic. 21

4

18

34

1.00

(4, 4)

Munic. 22

2

19

7

2.25

(2, 2.35024)

Munic. 24

4

6

20

0.25

(4, 4)

Munic. 26

3

32

19

2.00

(2, 3.99804)

Munic. 27

3

10

6

1.75

(2.76272, 4)

Munic. 29

4

11

15

1.25

(3, 4)

Munic. 3

3

30

22

2.00

(2.50305, 4)

Munic. 30

4

6

20

0.25

(4, 4)

Munic. 31

4

8

18

1.00

(3.64976, 4)

Munic. 32

4

14

33

1.00

(4, 4)

Munic. 35

4

11

15

2.00

(3, 4)

Munic. 37

3

38

14

2.00

(2, 3)

Munic. 38

3

34

17

2.00

(2, 3)

Munic. 39

3

17

9

1.00

(3, 4)

Munic. 4

4

7

19

2.00

(4, 4)

Munic. 42

4

4

47

0.00

(4, 4)

Munic. 5

4

18

34

1.00

(4, 4)

Munic. 6

4

16

35

1.00

(4, 4)

Munic. 8

4

9

43

0.00

(4, 4)

Munic. 9

4

11

15

1.00

(3, 4) (continued)

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

153

Table 4.4 (continued) Overall

4

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

27

135.99

0.000

Answers by municipality 5

Answers

4

3

2

1

11 14 16 17 18 19 . 2 20 21 22 24 26 27 29 . 3 30 31 32 35 37 38 39 . 4 4 2 . 5 . 6 . 8 . 9 ic. ic. ic. ic. ic. ic. nic ic. ic. ic. ic. ic. ic. ic. n ic ic. ic. ic. ic. ic. ic. ic. nic ic. nic nic nic nic un un un un un un M u un un un un un un un Mu un un un u n un un un u un Mu Mu M u Mu M M M M M M M M M M M M M M M M M M M M M M

Municipality

Figure 4.3 Medians and confidence interval of answers by municipality

(Table 4.5). Municipalities 42 and 8 have the highest average and least variable scores; meanwhile, Municipalities 37 and 38 are the only ones that have a median of confidence interval between 2 and 3. Note that Municipality 26 has the widest confidence interval, due to the variation in the answers given by both the administrative and political staff members. Municipality 11 is the only one where the scores given by the political representative are clearly lower than those given by the administrative employee.

154

4

Discussion of Research Results

Figure 4.4 Medians and confidence interval of double answers by municipality and category Table 4.5 Mood’s median test: medians and confidence interval of double answers by municipality Mood’s Median Test: Municipality Descriptive Statistics D1bis

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Munic. 11

4

20

32

1

(3, 4)

Munic. 16

3

29

22

1

(3, 4)

Munic. 2

3

28

24

1

(3, 4)

Munic. 20

4

25

27

1

(3, 4)

Munic. 21

4

18

34

1

(4, 4)

Munic. 26

3

32

19

2

(2, 3.99804)

Munic. 3

3

30

22

2

(2.50305, 4)

Munic. 32

4

14

33

1

(4, 4) (continued)

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

155

Table 4.5 (continued) Munic. 37

3

38

14

2

(2, 3)

Munic. 38

3

34

17

2

(2, 3)

Munic. 42

4

4

47

0

(4, 4)

Munic. 5

4

18

34

1

(4, 4)

Munic. 6

4

16

35

1

(4, 4)

Munic. 8

4

9

43

0

(4, 4)

Overall

4

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

13

99.20

0.000

In order to have a more aggregated view of all the questions, they have been grouped by both resilient characteristics and strategy execution capability. The scores have been duplicated for the three questions that refer to both abilities. There is insufficient evidence (Table 4.6) to claim a significant difference (pvalue = 0.984) between the scores assigned to the two abilities displayed in the top part of Figure 4.5. On the other hand, the bottom part of the figure suggests a potential difference between the scores given by the two categories of people. This outcome might confirm the findings revealed earlier in this chapter. Seniority has an effect (p-value = 0.001) on the scores collected (Table 4.7 and Figure 4.6). However, considering all the organisations, the effect of seniority is not significant. People with fewer years of service tend to give lower scores in the questionnaire. Administrative employees who have been working between two and five years seem to be more critical of their municipalities’ skills and management. Of the six groups (grouped according to seniority and category), they are the only one that has a median equal to two: that of the other five groups is equal to four.

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Discussion of Research Results

Figure 4.5 Medians and confidence interval of double answers by resilience vs execution and category

Table 4.6 Mood’s median test: medians and confidence interval of double answers by resilience versus strategy execution skills Mood’s Median Test: Resilience vs Strategy Execution Descriptive Statistics Res Ex

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Execution

4

149

181

1

(3, 4)

Resilience

4

151

184

1

(3, 4)

Overall

4

95.0% CI for median (Execution)—median (Resilience): (0,0) Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

1

0.00

0.984

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

157

Table 4.7 Mood’s median test: medians and confidence interval of double answers by seniority Mood’s Median Test: Answers versus Seniority Descriptive Statistics Q3 − Q1

95% Median CI

107

1

(3, 4)

48

1

(3, 4)

294

1

(4, 4)

D3

Median

N < Overall Median

N >= Overall Median

2–5 years

3

124

5–10 years

4

39

> 10 years

4

189

Overall

4

Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

2

13.46

0.001

Figure 4.6 Medians and confidence interval of double answers by seniority and category

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4.1.2

Discussion of Research Results

Insights into Financial Results, Achievements and Changes in Recent Years

– Municipalities: achievements, changes and adaptation strategies Almost everyone who answered the questionnaire emphasized the extent to which the municipalities have been affected by more stringent fiscal and administrative policies. The question (F1) on this topic is, in fact, the only one with a median equal to five. The other four Likert-scale questions, which refer to financial results (Table 3.6), show lower scores. People gave the statement relating to the improvement of services provided to citizens (F4) the lowest rating (˜x = 3). This question is also the only one to which the median of answers given by political representatives is lower than those given by administrative employees (Figure 4.7). It seems that municipalities have worked more successfully on new fiscal policies (F2) and budget management (F3; F5) than on the improvement of services delivered.

Financial Results: questions and category 5.0 4.5

Answers

4.0 3.5 3.0 2.5 2.0 D2bis

Questions

l l l l l e e e e e ca ca ca ca ca t iv t iv t iv tiv tiv iti iti iti iti iti ra ra ra ra ra ol ol ol ol ol si t si t si t si t si t P P P P P in in in in in m m m m m Ad Ad Ad Ad Ad F1

F2

F3

F4

F5

Figure 4.7 Medians and confidence interval of questions related to financial results

The answers to the three open questions (F6, A1, C1) in the first section of the questionnaire, have been summarised in a synoptic table and a Pareto chart was created categories to help to classify the answers. Recurrences of similar answers have

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

159

been counted and assigned to the appropriate category. Municipalities have adopted different methods to adapt to expenditure constraints and changes in budget management (F6). The most common measures implemented are related to the optimisation of expenditure, hiring freezes, rationalisation and better project planning (Figure 4.8). These three categories together account for 58% of all the methods used for adapting to cost containment and changes in budget management. The most common reaction to budget cuts is to rationalise current expenses. In certain instances, current expenses have been affected by the hiring freeze introduced by the Province of Trento. Better project management, on the other hand, has proved to be a consequence of not only reduced resources, but also new budgeting methods which require better planning and greater oversight of municipal activities.

Pareto chart of ways of adapting (F6) 60

80

30

60

20

40

10

20

0

0

l f s n th les ion ent e nt de ta ff he r re t af io w t itu r s izat ro g ru izat em em mo e s O d o g l l v g t g f n ri e etin na ro na ona ga pe ses rio o m p n a i x g i p e n co ud ra t im m zat o e t In i d b nt xpe ject re g w sin wa ia te gan ons o rre f e r e u t r c i a p n f o t c o o h c o A of tion and on ur c g s Ass e w n P t in t c N es tio du en n ye a e u o z r i o em pl cc im nd ov m a pt Ac pr re O ze o m i f e fre ing ng ni g n ai r ri in la n T P H Frequency 15 8 8 5 5 3 2 2 2 1 2 Percent 28.3 15.1 15.1 9.4 9.4 5.7 3.8 3.8 3.8 1.9 3.8

Ways of adapting

100

Percent

50 40

Figure 4.8 Pareto chart of ways of adapting to changes of containment of expenses and changes in budget management

Public building is mentioned 17 times in the questionnaires as one of the municipalities’ main achievements (Figure 4.9). Together with service improvements, this category accounts for 58% of the total results. Responses reveal that organisations focus on investment in public real estate and services for their citizens. Intangible assets such as trust and network building or increased collaboration are not mentioned.

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4

Discussion of Research Results

Successes

100

40

80

30

60

20

40

10

20

0

t n g n et th es io en io in al dg nu at at ild he em iz ve liz bu f g bu e a m a o r w n ti ic d w an ne bl tio op m an ne g ra Pu y d e in nd r d e t a d t n to u ia ea n cl ta r ri cr oc tio in te en ss to s, uc e A m s e d h l t e t re ru ov en of es m pr y t ic st ns lit ra im e e a c v s p In au qu ice Ex e re rv th bu Se f w to ne en to m e n io ov pt pr da Im A Frequency__ 17 12 8 4 3 3 2 Percent 34.0 24.0 16.0 8.0 6.0 6.0 4.0

e th O

r

Percent

Frequency__

Pareto chart of achievements (A1) 50

0

1 2.0

Figure 4.9 Pareto chart of main types of achievements

It is interesting to note that associated management is only indicated four times as an achievement, but is the most frequent topic on the crisis chart (Figure 4.10). It could be argued that the Province of Trento’s policy to create associated management structures with neighbouring organisations has been only partially successful. In most cases, this policy has not only failed to deliver the expected savings, but has actually created new conflicts among the municipalities involved. That said, associated management as currently structured only began about two years ago: people are still adapting to it and it is as yet too early to assess its impact. In contrast, the next three categories of crisis represented in the Pareto chart (new budget, bureaucratic rules and workforce reduction) have been in place for the last ten years and are likely to have had an impact on the municipal performance indicators. – Correlation of perceived results with resilience and strategy execution characteristics One of the research questions aims to verify whether, in the public sector, more resilient municipalities can execute strategy and manage crises more effectively

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

161

Pareto chart of crisis and changes (C1)

Frequency_

60 50

100 80

40

60

30

40

Percent

70

20 10 Relevant crisis and changes

0

t t s s n er th es le m en en w tio th ye ru te O ro lo uc e m gem t ic ys g d g p s e a a a m re d ic cr an an at fe es ch au m ns hi ro tm re d em e l p e e u e e p b t b ra at dg ex ci og um ex ew bu d so pl N fn em an m o As ew D s N n co nd d tio Fu an uc d ew Re N Frequency_ 21 12 11 10 8 2 2 3 Percent 30.4 17.4 15.9 14.5 11.6 2.9 2.9 4.3 Cum % 30.4 47.8 63.8 78.3 89.9 92.8 95.7 100.0

20 0

Figure 4.10 Pareto chart of main changes experienced by municipalities

than their less adaptable counterparts (Question 1). This chapter begins the process of hypothesis testing. In particular, it is ascertained whether or not there is a correlation between resilience and strategy execution characteristics, and if traits linked to resilience help organisations to adapt and obtain results. To perform the correlation analysis, the same approach and tools used in Section 3.4.2 to evaluate the relationships among performance indicators are adopted. In theory, linear regressions cannot be adopted, because the data collected in the questionnaire are ordinal and not continuous. However, using aggregated data means that the Central Limit Theorem and parametric statistics can be applied. Table 4.8 summarises the averages, calculated as means, of the scores of the three different sections of the questionnaire: financial results, resilience characteristics, strategy execution characteristics. Question F1 is excluded from the financial results averages since it measures the perceived impact of the changes and not the success of adaptation. The three questions which measure both resilience and strategy execution traits are duplicated. In order to prove the hypothesis described above, the first step is to verify whether or not there is a correlation between resilience and strategy execution traits. The model shows a significant correlation—both when outliers are taken

162

4

Discussion of Research Results

Table 4.8 Average scores per section of the questionnaire Municipalities

Average of Finance Results

Average of Resilience Scores

Average of Strategy Execution Scores

Munic. 32

3.38

3.54

3.29

Munic. 5

3.25

3.88

3.50

Munic. 38

2.50

2.92

2.88

Munic. 16

3.50

3.21

3.29

Munic. 8

4.00

3.92

4.17

Munic. 2

3.25

3.29

3.54

Munic. 37

3.00

2.54

2.75

Munic. 20

3.00

3.29

3.33

Munic. 42

4.00

4.08

4.00

Munic. 21

4.13

3.71

3.54

Munic. 6

4.00

3.71

3.58

Munic. 26

3.38

2.67

2.69

Munic. 3

3.25

3.04

3.21

Munic. 11

3.38

3.42

3.50

Munic. 39

3.50

3.17

3.25

Munic. 27

3.00

2.67

3.11

Munic. 24

3.75

4.17

3.58

Munic. 30

4.00

3.75

3.75

Munic. 14

3.50

2.42

3.25

Munic. 31

3.50

3.67

3.33

Munic. 4

4.75

3.75

3.75

Munic. 17

3.50

3.58

2.92

Munic. 19

4.25

3.50

3.50

Munic. 35

4.25

3.92

3.50

Munic. 9

4.25

3.58

3.33

Munic. 18

2.75

3.33

3.67

Munic. 22

1.50

2.58

2.50

Munic. 29

4.00

3.58

4.08

Grand Total

3.49

3.38

3.38

4.1 Questionnaire Analysis: Insights on Resilience and Strategy Execution

163

into consideration (Appendix 8.2 in the electronic supplementary material), and when they are not (Figure 4.11). In the analysis without the five outliers, the model is able to explain 72.3% of the variation seen in the data—a very high percentage for such a model, and one which confirms that municipalities which show resilience traits also have characteristics that allow them to execute strategy effectively. This assessment is based on people’s opinions, as captured by the questionnaire: the answers are very likely to be heavily coloured by the individuals’ perceptions. Moreover, three of the questions used for both variables may also have influenced the results. Nevertheless, the model provides good indicators with which to begin to answer the research question. The following equation correlates resilience (Xres) with strategy execution (Yex): Yex = 1.022 + 0.6996 Xres Equation 4.1—Equation of linear model between resilience and strategy execution characteristics

The equation contains a constant term, usually called an intercept. The intercept represents the mean of the independent variable (Yex) when the dependent variable (Xres) is set at zero. In Equation 4.1, the constant has no practical meaning since the value of resilience index cannot be zero. It does, however, have a significant correlation (p-value = 0) with the dependent variable, and must therefore be taken into consideration. The intercept captures all the variability that cannot be explained by the independent variable and ensures that the sum of the residuals in the model is zero.

Check Amount of Data

Status Description

i

Regression for Execution Average vs Resilience Average Report Card

Your sample size (n = 37) is not large enough to provide a very precise estimate of the strength of the relationship. Measures of the strength of the relationship, such as R-Squared and R-Squared (adjusted), can vary a great deal. To obtain a more precise estimate, larger samples (typically 40 or more) should be used.

Unusual Data

There are no unusual data points. Unusual data points can have a strong influence on the results.

Normality

Because you have at least 15 data points, normality is not an issue. If the number of data points is small and the residuals are not normally distributed, the p-value used to determine whether there is a significant relationship between X and Y may not be accurate.

Model Fit

i

You should evaluate the data and model fit in terms of your goals. Look at the fitted line plot to be sure that: • The sample adequately covers the range of X values. • The model properly fits any curvature in the data (avoid over-fitting). • The line fits well in areas of special interest.

Figure 4.11 Correlation analysis between resilience and strategy execution scores (no outliers)

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4

Discussion of Research Results

Regression for Execution Average vs Resilience Average Model Selection Report

Y: Execution Average X: Resilience Average

Fitted Line Plot for Linear Model Y = 1.022 + 0.6996 X 4.5

Execution Average

4.0

3.5

3.0

2.5 2.50

2.75

3.00

3.25

3.50

3.75

4.00

Resilience Average

Statistics R-squared (adjusted) P-value, model P-value, linear term P-value, quadratic term Residual standard deviation

* Statistically significant (p < 0.05)

Figure 4.11 (continued)

Selected Model Linear

Alternative Model Quadratic

71.50% = Overall Median

Q3 – Q1

3 4 4 4

43 337 95

35 449 1113

1 1 1

95% Median CI

(3, 4) (4, 4) (3, 4)

Test Null hypothesis H₀: The population medians are all equal Alternative hypothesis H₁: The population medians are not all equal DF Chi-Square P-Value 2 4.51 0.105

Figure 4.28 Medians, confidence intervals and Mood’s median test of different types of municipalities

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4

Discussion of Research Results

Table 4.23 Mood’s median test of worst municipalities versus all others Mood’s Median Test: Worst versus Others Descriptive Statistics Type Worst

Median

N < Overall Median

N >= Overall Median

Q3 − Q1

95% Median CI

Others

4

432

562

1

(4, 4)

Worst

3

43

35

1

(3, 4)

Overall

4

95.0% CI for median (Other)—median (Worst): (0,1) Test Null hypothesis

H0 : The population medians are all equal

Alternative hypothesis

H1 : The population medians are not all equal

DF

Chi-Square

P-Value

1

3.99

0.046

Boxplot of Answers vs Types of Municipalities and Resilience/Execution 5

Answers

4

3

2

1 Type Res Ex

Worst

Medium Execution

Top

Worst

Medium Resilience

Top

Figure 4.29 Medians and confidence intervals of different types of municipalities for execution and resilience skills

4.3 Correlation Between Performance Indicators and Questionnaire Results

4.3.2

211

Correlation of Performance Indicators with Resilience and Execution Characteristics

Two main models—one for efficiency, the other for resilience—were considered in the analysis of performance indicators. The first had four different dependent variables; for the purpose of this study, only the percentage of net actual versus standard requirement expenditure is included. This metric best represents the level of efficiency of the organisations. For the resilience model, the 2016 budget surplus is analysed. The three categories of municipality (worst, medium, top) as a dependent variable are also taken into account in the study. I want to verify if the dependent variables presented in Section 4.2 are correlated to the municipal characteristics that emerge from the questionnaires and interviews. The new model is presented in Table 4.24. The independent variables are the scores related to resilience and strategy execution in the questionnaires. The means are used as the parameter for representing the central tendency of the scores. Table 4.24 Variables in the model to correlate performance indicators with resilience and execution characteristics Type of model

Dependent variables (yi )

Independent variables (xi )

Relationship between performance and resilience/execution characteristics

y1 = % net expenditure vs standard y2 = Budget surplus 2016 y3 = Type of municipality (categorial variable)

Xres = Resilience characteristics Xex = Strategy execution characteristics

The multiple regression of percentage of net spending versus standard shows a significant relationship (p-value = 0.012) both with the resilience and the strategy execution characteristics (Figure 4.30). Although the model presents two outliers in the analysis of residuals, these do not influence the results (if the two outliers are eliminated, the model changes very little). The characteristics of the municipalities are able to explain about 30% of the variation seen in the percentage of spending. As stated for previous models, the low R-sq suggests that a large part of the observed behaviour remains unexplained and that the model is incomplete. It excludes important (unidentified) variables and, therefore, it could be only adopted as a starting point for future research. The equation which explains the relationship is presented below.

212

4

Discussion of Research Results

Y 1 = 1.366 + 0.1526 Xres − 0.2586 Xex Equation 4.8—Net actual expenditure model

Check

Status Description

Multiple Regression for % net expend Report Card

Amount of Data

i

The sample size (n = 28) is not large enough to provide a very precise estimate of the strength of the relationship. Measures of the strength of the relationship, such as R-Squared and R-Squared (adjusted), can vary a great deal. To obtain a precise estimate, larger samples (typically 40 or more) should be used for a model of this size.

Unusual Data

!

2 data points have large residuals and are not well fit by the equation. These points are marked in red on the Diagnostic Report. You can hover over a point or use Minitab’s brushing feature to identify the worksheet rows. Because unusual data can have a strong influence on the results, try to identify the cause for their unusual nature. Correct any data entry or measurement errors. Consider removing data that are associated with special causes and redoing the analysis.

Normality

Because you have at least 15 data points, normality is not an issue. If the number of data points is small and the residuals are not normally distributed, the p-values used to determine whether there is a significant relationship between the Xs and Y may not be accurate.

Figure 4.30 % spending versus resilience and execution characteristics: multiple regression results

4.3 Correlation Between Performance Indicators and Questionnaire Results

Multiple Regression for % net expend Diagnostic Report Look for these patterns:

Residuals vs Fitted Values

Large Residuals

0.3

0.2

Unusual X Values 0.1

0.0

Clusters -0.1

-0.2 0.85

0.90

0.95

1.00

1.05

1.10

1.15

Unequal Variation

1.20

Look for patterns, such as strong curvature or clusters, that may indicate problems with the regression model. Ideally, the points should fall randomly on both sides of zero. Identify any large residuals that could have a strong influence on the model.

Multiple Regression for % net expend Summary Report Comments

Is there a relationship between Y and the X variables? 0

0.1

> 0.5

Yes

The following terms are in the fitted equation that models the relationship between Y and the X variables: X1: Average of Resilience Average X2: Average of Execution Average

No

P = 0.012

The relationship between Y and the X variables in the model is statistically significant (p < 0.10).

If the model fits the data well, this equation can be used to predict % net expend for specific values of the X variables, or find the settings for the X variables that correspond to a desired value or range of values for % net expend.

% of variation explained by the model 0%

100%

Low

High R-sq = 29.66%

29.66% of the variation in Y can be explained by the regression model.

% net expend vs X Variables

Average of R

1.5

Average of E

1.2 A gray background represents an X variable not in the model.

0.9

2.

4

Figure 4.30 (continued)

2 3.

0 4.

4 2.

2 3.

4.

0

213

214

4

Discussion of Research Results

Collinearity analysis shows quite a significant correlation between the two predictors (Pearson coefficient = 0.746), as discussed in Section 4.1. At the same time, the VIF indexes are reasonably low (VIF = 2.25). This result indicates that, while the model may have a collinearity issue, it is at an acceptable level. The intercept is significant (p-value = 0.000), which is within the range of the data used as input in the model. The constant thus needs to be kept and has a real meaning within the equation. In the equation, execution characteristics have a negative effect on spending percentages. This outcome means that the municipalities with higher scores on the execution questions are more efficient. In fact, a lower spending percentage suggests the capacity to spend less than a reference standard. Resilience scores have the opposite effect on the equation: the higher the resilience skills, the higher the spending. An explanation might be the fact that resilient organisations need to have redundant capacities and systems in order to be ready to cope with external shocks; buffer capacity is likely to raise the running costs of organisations, while increasing flexibility and ability to adapt to changes. The model, which includes 2016 budget surplus as the dependent variable, shows no significant relationship with municipal characteristics (Figure 4.31). Moreover, using the category ‘type of municipality’ reveals no additional correlations with resilience or strategy execution (Table 4.25). An ordinal logistic regression was used in the last analysis, chosen as the most appropriate statistical tool for predicting the behaviour of an ordinal dependent variable (type of municipality) with one or more independent variables (resilience and execution characteristics). In the previous analyses, the results revealed a correlation between resilience and execution characteristics. The assessment of the results was based on the questionnaire responses. This section of the research includes additional objective estimations of the achievements, obtained by taking certain performance indicators into account. The regressions model presented confirms a correlation between certain municipal characteristics and spending efficiency. There is not enough statistical evidence, however, to confirm a correlation with the other metrics, such as budget surplus in 2016, or municipality type. This conclusion may be the result of a real lack of relationships among the variables, but how they are selected is probably also a factor. 2016 budget surplus was chosen as an indicator of the organisations’ ability to adapt to new regulation. It seems, however, that the municipalities have not significantly changed their behaviours as a result of the new regulation, which means that this variable cannot serve as an indicator of resilience. The identification of municipal types helped to categorise them on the basis of performance indicators. Not all of the selected indicators, however, have

4.3 Correlation Between Performance Indicators and Questionnaire Results

Check

Multiple Regression for Surplus 2016 Report Card

Status Description

Normality

215

Because you have at least 15 data points, normality is not an issue. If the number of data points is small and the residuals are not normally distributed, the p-values used to determine whether there is a significant relationship between the Xs and Y may not be accurate.

Multiple Regression for Surplus 2016 Summary Report Comments

Is there a relationship between Y and the X variables? 0

0.1

> 0.5

Yes

There is not enough evidence to conclude that any of the X variables have a statistically significant relationship with Surplus 2016. Use the plots of Surplus 2016 versus the X variables to examine the relationships and look for patterns that may have practical implications.

No

There is no relationship between Y and the X variables. No terms were entered into the model.

% of variation explained by the model 0%

100%

Low

High

R-sq = 0.00%

0.00% of the variation in Y can be explained by the regression model.

Surplus 2016 vs X Variables

Average of R

Average of E

2

1

A gray background represents an X variable not in the model.

0

4 2.

3.

2

0 4.

4 2.

2 3.

4.

0

Figure 4.31 Surplus 2016 versus resilience and execution characteristics: multiple regression results

a relationship with resilience or execution traits, which may be influenced by other (external) variables. In sum, there is a relationship between certain municipal characteristics and spending efficiency but, while other relationships may also exist, the data available and the selection of indicators do not provide enough information to detect further connections. In the next two chapters, both the theoretical frameworks and the findings of the case study are explored to understand the implications of these results and to develop proposals that might be offered to the municipalities concerned.

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4

Discussion of Research Results

Table 4.25 Type of municipality versus resilience and execution characteristics: ordinal logistic regression Ordinal Logistic Regression: Type of municipality versus Resilience and Execution Link Function: Logit Response Information Variable

Value

Count

Type

Medium

20

Top

5

Worst

3

Total

28

Logistic Regression Table 95% CI Predictor

Coef

SE Coef

Z

P

Odds Ratio

Lower

Upper

Const(1)

1.64529

3.65110

0.45

0.652

Const(2)

2.99896

3.69171

0.81

0.417

Average of Resilience

2.43767

1.45737

1.67

0.094

11.45

0.66

199.15

Average of Execution

−2.62043

1.71879

−1.52

0.127

0.07

0.00

2.11

Log-Likelihood = −20.610 Test of All Slopes Equal to Zero DF

G

P-Value

2

2.869

0.238

Goodness-of-Fit Tests Method

Chi-Square

DF

Pearson

94.0127

50

P 0.000

Deviance

41.2192

50

0.807

Measures of Association: (Between the Response Variable and Predicted Probabilities) Pairs

Number

Percent

Summary Measures

Concordant

120

68.6

Somers’ D

0.38

Discordant

54

30.9

Goodman-Kruskal Gamma

0.38

Ties

1

0.6

Kendall’s Tau-a

0.17

Total

175

100.0

4.4 Theoretical Implication: Implementation of the …

4.4

217

Theoretical Implication: Implementation of the Frameworks in Municipalities

In Section 2.3 the frameworks for resilient organisations and effectiveness in strategy execution were presented. The application of the two frameworks to the findings of the case study, allows an understanding of the strengths and points of improvements for municipalities in scope.

4.4.1

Strategy Execution Framework

For the discussion of this topic, the model defined in Section 2.3.1 is used; it takes into consideration the three phases in strategy execution: pre-implementation, implementation and post-implementation. Based on the interviews, municipalities usually prepare three-year and oneyear strategic plans. The first one, in reality, only represents an exercise in its own right. The government body develops based on the current regulations but it is not used as a way to align the organisations towards the same goals. During the interviews, an exception to this rule was found. One mayor, who has been in power for about eight years, stated that he spent the first year of his mandate creating a list of actions and projects together with his team. Then, they prioritised the actions and created a robust strategic blueprint. Even now, many years later, the list of priorities still guides their work. This is a positive exception but, unfortunately, not the standard way of defining strategy in the municipalities. There is more attention given to the annual scheme that drives the budget. The importance of it increased due to the effect of the new regulations, in particular with regard to the block of administrative surplus. Previously, in a considerable number of municipalities, the annual plan was simply a guideline: projects and expenses were decided based on priorities that were continuously changing. The new stricter rules on budget and spending have increased the focus on developing a reliable strategic blueprint. Guidelines and regulations issued by the Italian state offer tools to facilitate the creation and implementation of a strategy, above all tailored for the annual plan (Camarda, 1999). In particular, the Executive Management Plan (PEG—Piano Esecutivo di Gestione) is a scheduling and authorisation tool for the purpose of ordering and rationalising the activity of local authorities. It supports the definition of objectives, resources and management responsibilities, which are inspired by criteria of efficiency, effectiveness and transparency of administrative action (Falcone, 2005). The PEG functions as a link between the political body and the

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administrative management, integrating the principle of distinction between politics and administration. The use of this planning and executing tool is optional for municipalities below 5,000 inhabitants. None of the municipalities interviewed mentioned adopting such a tool for crafting the annual strategy. This behaviour may represent a lost opportunity to align the organisation and give clarity to priorities, resources and measures of success. Lack of communication and effective management, further complicate the process of creating an annual strategy in small municipalities. From interviews, with administrative personnel, it emerged that priorities included in the budget are not transferred effectively throughout the organisation in the majority of the cases. Management systems, which can be useful in guiding and steering the execution of the plan, are not properly structured. First of all, a lack of such systems means there is no easy way to translate projects and initiatives into single tasks, allocate resources and come up with timelines. Second, there is no use of lead indicators to monitor progress and raise potential issues. Lastly, there are no alignment meetings to track delays, risks and other roadblocks. Only two cases were found where mayors mentioned the use of tools that demonstrate proactive management of projects. In one instance, the manager adopted a diagram similar to a Gantt to create a schedule of milestones for yearly projects. In the second example, the mayor had created a card, similar to a project chart, for every single initiative. Tracking of the progress of annual plans is done mainly during city council meetings. In this way, the political body, together with the town clerk, functions as a steering committee for execution. Administrative employees, in general, are not included in the updates nor do they help to steer the projects. Most of the initiatives which are tracked and controlled by the city councils, are investments in public works. The realisation of these investments is, in most cases, externalised to companies and other institutions. There is no specific functionary who assumes the role of a program manager nor is there a project management office (PMO). Milestones and timelines, if defined, are not tracked and there is no structured way of tackling issues and delays. Information flow is on an ad-hoc basis and, many times, the communication is informal and based on personal knowledge. Due to the low number of resources involved in the management of municipalities, it is difficult to track many of the projects. Execution is easier when the organisation is focused on a few prioritised initiatives, than on many parallel ones. One of the positive cultural aspects is that people in municipalities have a strong ownership of their work and they collaborate well in teams. Despite the use of unstructured processes, they have the ability to carry out tasks and solve problems with the help of others.

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In the post-implementation phase, one of the key tasks is the verification of the realisation of expected benefits. The verification might assume greater or lower importance based on the type of project or strategy. For example, if the project was concerned with the construction of a new building, once it has been verified that the building respects the norms and it is suitable for its intended purpose, there is no need for further monitoring. In contrast, if the municipality introduced a new regulation for managing separate collection of rubbish, it would be relevant to define a way to check the level of adherence to the new guideline. Based on the interviews, there is no evidence that municipalities have an organised way of defining metrics to measure the sustainability of the changes introduced. Lessons learnt and knowledge management systems are fundamental components of the post-implementation phase. As discussed previously, municipalities do not manage this topic proactively. However, the size and the culture of the organisation support the management of knowledge even without the adoption of an explicit system. In summary, the municipalities considered in this study do not display levels of excellence in terms of project execution. They are lacking the formality afforded by the use of tools and systems to manage the implementation. In particular, there is not much attention given to creating a long-term strategy and or an annual plan. Metrics and routines to measure progress are only partially apparent. Projects and initiatives are carried out without specific tools and methodologies. Nevertheless, municipalities rely on their flexibility and ability to collaborate.

4.4.2

Resilience Framework

In Section 2.3.2, a framework for creating a resilient organisation was developed based on the literature reviewed. In this chapter, the characteristics of the municipalities are compared with the framework to gain an understanding of the similarities and differences. Culture is one of the main pillars of organisational resilience. Municipalities show some of the traits described in the literature, however, they do not focus sufficiently on other traits. From the interviews, it emerges that there is a strong sense of purpose and belonging; mayors and employees feel a strong sense of duty towards the community and show values that indicate a clear mission in their daily tasks. The size of the municipalities studied strengthens this type of culture: employees in small organisations are in contact every day, inside and outside work, with citizens.

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Taking into consideration the principles by which sustainable leadership can be created (Avery & Bergsteiner, 2011), it can be discovered that some practices are often missing. First, employees often seem to work in silos. They do not have many formal opportunities to share information and work towards common goals. Practices, such as alignment meetings, shared goal definition or status reports are not implemented. The discussions and decisions are made at political level in the presence of the town clerk (segretario comunale). Information seems to flow from decision makers to single relevant employees, but there is no sharing among teams. Things get worse when there is poor relationship between mayors and town clerks. Town clerks, in smaller municipalities, assume the function of general managers. They are in charge of managing all employees. If a town clerk is absent or does not communicate the decisions taken by the political body properly, the effectiveness of the bureaucratic body diminishes. Employees in municipalities have a clear sense of their roles and responsibilities. They are often specialised in their functions (registry office, tax office…) and they are able to handle issues and tasks in their fields of competence. They feel ownership over their fields of responsibility and tackle challenges until a solution is found. In general, there is also a good sense of teamwork and employees are able to work together in a crisis. One area of fragility is the extreme specialisation of the workforce. An organisation, to have a high degree of resilience, needs to have flexible and redundant resources. In municipalities, due to inflexible rules and a bureaucratic management system, it is often difficult to create that flexibility which is helpful in times of crisis. For example, one of the organisation’s interviewed had a severe issue because the only accountant they had resigned. The replacement of the accountant was not permitted due to spending review rules and there was none available to assume the responsibilities. Only a few municipalities have tried to train personnel, especially at the lower level, to perform different tasks in different offices and have attempted job rotation in special cases. An additional point of interest relates to resource development and objectives management. More than 10 years ago, the Italian government issued guidelines offering principles and tools to municipalities for state-of-the-art management of human resources (Falcone, 2005). These practices have not received the proper attention in the organisations studied. In most cases, active management of human resources is missing. Yearly goals and objectives are very often not defined and not discussed with individual persons. Dialogues and proper feedback to improve performance and strive for continuous growth of the workforce are often missing. There are some tools and a budget to incentivise the best performers, but sometimes awards are split equally among employees in order to avoid differences and ‘discontent’. There is no clear strategy for the training and development of

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employees. Training is linked mostly to technical areas, for example, the introduction of new software or a new regulation. Career aspects (both horizontal and vertical development) are treated on an ad hoc and as-the-opportunity-arises basis without proactive management. This lack of focus on human resources management practice, probably, is likely a result of culture, as well as the training and skills of town clerks and political leaders. Town clerks, mayors and city councilmen (in small entities) are people managers but often they do not have the right competencies to perform those tasks. In terms of knowledge management, municipalities appear to be able to learn from their experiences and to apply lessons from the past. This is achieved without a formal way of managing lessons learnt. The dimensions of the organisations studied and the low turn-over in the workforce support the creation and storing of knowledge. Nevertheless, a more structured and collective way of reflecting on past experiences, results and failures could bring value leading to the improvement of efficiency and effectiveness. In addition to culture, processes and systems both play an important role in terms of organisation resilience. Municipalities seem to have two opposite behaviours regarding this aspect. On the one hand they have rigid and structured procedures to manage the administration; on the other hand, they are weak in other systems in terms of communication, priority definition and project management. Administration procedures and practices give clarity to employees and citizens how to handle certain issues and requests. However, the increasing number of regulations and administrative requirements introduced in the Italian legislation in recent years, often mean that institutions are slow to implement changes and provide services. The municipalities in this study seem to have a positive tendency to create strategic partnerships with their closest stakeholders. Political representatives have daily direct contacts with their citizens. Due to the limited number of inhabitants in their communities (between 1,000 and 2,000), proximity becomes easier, which in turn allows representatives to better understand and prevent potential. Usually there is a strong network and link with all organisations and companies in the same territory. Volunteer fire fighters, first aid volunteers and other types of associations deliver services which the public sector cannot afford to manage. Municipalities support these groups by providing grants, public spaces and services. Small businesses and companies, have a direct link to the public institutions and engage in frequent communications; they are an integral part of the wealth and prosperity of the community. Among all these various entities there is a significant level of interdependency and collaboration that fosters resilience and allows

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the system to answer to changes in the economic-social environment. Municipalities also demonstrate the ability to collaborate with each other to manage crisis or to start common projects and initiatives. Many of them have been forced to implement associated management (gestioni associate) by the Province of Trento. In several cases the ‘forced’ joint management of offices and services has not yet delivered the benefits expected (primarily cost saving). In contrast, it has created conflicts and a clash of cultures. Despite this unsuccessful change, municipalities retain their willingness to collaborate and work with their neighbours. The relationship with the Province of Trento and its offices seems to be more negative. Often conflicts regarding resources and responsibilities emerge. The province, attempting to control expenses and optimise budgets, has set up rules and regulations without listening carefully to the voices of local entities. Municipalities are able to create strategic partnerships with other adjacent organisations (associations, companies, neighbouring institutions…). This ability would result in the entire network being resilient and ready to provide mutual help. It seems that municipalities should concentrate on improving their ability to connect with other types of institutions, and more effectively, with bodies such as the Province of Trento. In addition, the questionnaires show that organisations might improve the proactive monitoring of their environment to ensure early warning of emerging issues. More effective monitoring might also throw up the possibility of strengthened alliances or new strategic partnerships. Municipalities, despite the fact that they have been facing a general reduction in resources in recent years, have confirmed that they have enough money and people to manage their objectives and activities. However, the amount of money available from the Province of Trento has continually decreased and become less predictable. In addition, there was a hiring freeze on personnel that has affected the organisations. In spite of this environment, municipalities seem not to have fared quite well. Based on the questionnaire results, they feel they have enough resources to carry out their plans. It is positive to note that the competencies and skills of employees are considered adequate for managing the organisations. Municipalities have skilled and committed resources; this characteristic theoretically create a positive environment for developing resilience skills. Nevertheless, during interviews, many people stated that they feel challenged by the changing environment and feel they are ‘suffering’ as a result. For long-term success, administrators might consider strengthening the resilience skills of single individuals in order to make the entire organisation more capable of adapting to new changes. As mentioned in the paragraph about stakeholders’ relationships, municipalities struggle to own the competency for situation awareness, especially with regard to events or information outside their spheres of influence. They don’t have a method or

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a systematic way of scanning the environment in search of information about what is happening around. They are mostly internally focused. However, it seems that they are able to collect multiple voices and accommodate different points of view. They identify their own weaknesses and strengths but they are currently missing external awareness about whether a storm is approaching. It seems probable that, faced with a challenge arising from an external source, municipalities would be hit hard and taken by surprise. Yet, the organisation should have enough self-awareness to understand how to react to such a situation. Risk analysis is a technique known and used for certain specific areas such as environmental risks and disaster recovery. Often, the analysis is performed together with other entities and organisations in the province. It is possible to confirm that all the institutions interviewed handle risk analysis, mitigation and prevention, at least partially. What is missing is a systematic approach that could be applied organisationwide to other spheres, such as financial risks, project-related risks, etc. One of the weakest areas, in comparison with the framework for resilient organisations, is the application of monitoring and control. In municipalities, there are some controls relating to the correct application of norms and regulations and the use of some financial indicators to understand expenses, budget adherence, etc. However, financial metrics are mostly lag indicators which measure results a-posteriori. In the same way, just as there is not much attention on planning and defining measurable yearly goals, there is also not much attention paid to adopting lead indicators or other tools that could help to develop an ongoing understanding of performance. If the organisations lack the culture and tools to monitor progress and accomplishments, then they need to be able to count on their workforce to be effective enough to implement new changes. The concept of continuous improvement is not well-known within municipalities. Many changes are forced on them by the external environment rather than an internal willingness to strive for excellence. These institutions do seem able to take advantage of lessons learnt, however, there is not much appetite for self, or organisational improvement. If such a culture for excellence exists, it is linked to individuals rather than to the organisation. In summary, it can be stated that municipalities, at least the ones considered in this research, show some of the traits typical of resilient organisations. There are, however, opportunities for exploring the adoption of practices and tools that might increase their ability to adapt to changes. In Table 4.26, an attempt has been made to evaluate the level of resilience of the institutions studied. The assessment takes into account the dimensions presented in the framework for resilient organisations (Table 2.8).

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Table 4.26 Evaluation of resilience level of municipalities Dimensions of org. resilience

Sub-dimensions

High Level of Resilience

Culture

Values and Belonging

X

Medium Level of Resilience

To HR management practices

X

Processes and Systems Stakeholder Relationships

X ‘Internal’ Stakeholders

X

‘External’ Stakeholders Resources

X

Risk Analysis

Continuous Improvement

4.5

X X

Situation Awareness Monitor and Adapt

Low Level of Resilience

X Monitoring Adaptation

X X X

Practical Implications: Proposals for Improving Resilience and Strategy Execution in Municipalities

From the data collected and the analyses performed in the previous chapters, it is possible to affirm that municipalities have strengths, but also weaknesses in terms of resilience and strategy execution. In the current chapter, some recommendations for improving these characteristics and manage the change are described. When organisations transform the way of operating, unfortunately the rate of failure is high; one of the reasons is the unstructured process adopted to manage changes. Presenting basic concepts and tools for change management might be useful for public sector and ‘small’ institutions. The sample selected is made up of municipalities with a small number of inhabitants and employees. Not all the suggestions proposed may be relevant for other types of organisations; therefore, in the next chapter, the analysis is extended to institutions of different sizes and located in different regions.

4.5 Practical Implications: Proposals for Improving Resilience

4.5.1

225

Relevance of Public Value Management for Italian Municipalities

In recent years, there has been increased pressure from funding bodies (central state and regional institutions) on Italian municipalities to deliver better results in terms of financial outcomes and use of resources. The Italian public sector is operating in an environment similar to the one described in the NPM approach, where priority is given to efficiency and effectiveness. Yet, small organisations, due to their dimensions and links with their specific local areas, are more capable of creating a network with their stakeholders and building the connections and credibility essential to flourish. In one opinion poll, conducted by SWG, one of the biggest companies in Italy for market research, it emerged that mayors are the public officials with the highest level of trust and municipalities are considered the public organisation which manages resources best (SWG, 2018). The PVM framework would offer local institutions guidelines and new directions for understanding how to fulfil their role in society most effectively. Even if they are forced by principal funding to improve efficiency and reduce spending, they can still increase the value they provide. They have the opportunity to leverage all components of the strategic triangle and create a new mechanism of mutual support among the network of stakeholders. There are additional elements suggesting that citizens consider municipalities and their governing bodies to be value providers. First of all, local organisations are viewed as strengthening the culture of civic duty, typical of the control and collaboration quadrant of Talbot’s model. Second, citizens think that mayors play a key role in environmental protection, quality of life, security and cultural richness. Lastly, citizens would like mayors to have more powers and resources. It can be concluded that municipalities, more than other public institutions in Italy, already are structured in a way that is favourable to the implementation of the PVM approach. Although, they are challenged by the surrounding environment and economic situation, they might consider implementing practices that can foster excellence in terms of resilience and strategy execution.

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Proposals for Strengthening Strategy Execution Capability

– An effective strategic plan Most of the municipalities interviewed develop a medium-long term and an annual plan. They concentrate their efforts on the definition of a budget with expected income and expenses. None of them create a proper strategic plan, for example using the PEG (Executive Management Plan) tool, which is not mandatory for small institutions (Camarda, 1999). By focusing only on budget definition, organisations miss the link with resources management. Important information is not included in budgets: names of people responsible, departments, resources used and services provided by various offices, and management objectives. One of the advantages of adopting a strategic planning approach, and a tool like the PEG, is that it firms up responsibilities by authorising spending in a more functional and binding way. In addition, a plan establishes links between objectives, endowments and managers. Small municipalities are not able to introduce a very formal and in-depth process, due to the limited staff and competencies available. However, it is important that some key aspects are considered. They need, for example, to define a clear vision; they should analyse the environment around them and their internal capabilities and define clear objectives for all offices. Municipalities can introduce models for strategy planning already used in companies and for-profit organisations, adapting them to the peculiarities of the public sector. Wauters (2017) reports an example of the application of Kaplan and Norton’s model to the Ministry of Works in Bahrain. Using a step-by-step approach, the Ministry was able to define a medium-long-term plan and a series of actions to align the staff. Considering the differences between public and private organisations and the PVM approach there are a few key points that municipalities need to consider when applying strategic planning: • The variety of stakeholders and the purpose of creating values for them require to include multiple actors in the process. While private companies can run their exercise ‘alone’ by studying their competitors, public organisations incur big risks in not including their network. Stakeholders collaborate with local institutions by providing funding, requests for services but also other types of resources: human resources (e.g. volunteers), knowledge and political support. During strategy planning, municipalities should include at least some representatives of their network: citizens, other non-profit organisations, companies,

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•

•

•

•

•

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representatives of other political bodies (e.g. Province of Trento). Administrators, sometimes, take into careful consideration the needs of their inhabitants but have a conflictual relationship with other political bodies. All stakeholders play a part in the level of trust and legitimacy: public leaders need to make an effort to build positive connections with multiple entities. The planning process, including a diverse team, might be long and difficult. Managers may be tempted to take shortcuts. Yet, the time invested in the planning phase, in understanding needs and defining value propositions, might facilitate the future implementation of the plan. Strategic plans need to be flexible and frequently reviewed. Municipalities operate in unstable political environments and have multidimensional requirements; objectives in the plan have to be stated finding the right balance between using a detailed definition or only a high-level description, which can be altered more easily. While vision and mission will stay stable for a longer period of time, projects, priorities and objectives should be regularly revised (e.g. quarterly). For local public institutions, focusing mainly on financial measures might be simple and effective; however, they should make an effort to find out what really creates value for stakeholders and implement an effective measurement system to align the organisation. Municipalities have two different management bodies: political and administrative. It is critical that both roles work pursuing the same objectives. Sometimes political bodies might be tempted to propose certain goals and initiatives without understanding the implications from an administrative point of view. Politicians have to collect facts and understand the perspective of administrative managers in order to make decisions in an informed and holistic way (George, 2017). The manner in which strategic plans are created becomes essential for success. Organisations need to consider bureaucratic risks. Good ideas and plans may fail due to roadblocks in the bureaucratic machine linked to practical and cultural aspects. Administrators, especially if inexpert, can under-evaluate the impact of rules, which increase in complexity year after year in Italy. Collaboration with town clerks and administrative employees is key in defining the most effective way to implement plans. Involvement needs to start already from the beginning of the strategy development process. That allows to take in consideration multiple perspectives regarding the complexity of the execution and to work collaboratively on problem solving. Public managers have lower ability to influence human resources management. In private companies, it is easier to reshape the organisation, acquire new

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staff or lay people off to support a new strategy. In the public sector, this is very complex. Administrators, therefore, have to make sure that the resources available are committed to the strategy, flexible enough to support changes and own the right capabilities to drive execution. In addition, starting from the strategy definition phase, managers should communicate with employees and to understand potential risks and gaps. Implementation and facilitation of a strategy planning process requires specific capabilities and acumen. With few exceptions, municipalities don’t master these competencies and it would be too costly to build them internally. Organisations might require external support from a consultant company; an additional solution could be to share the cost of one or more experts among a group of institutions. In the Province of Trento, municipalities have been collaborating for a long time and have created a consortium (Consorzio dei Comuni Trentini). The consortium protects the interest of local organisations and provide shared services. It could own strategy planning capability and support municipalities in developing their plans. In addition, the consortium can guarantee that lesson learnt are captured and shared among the associates. – A multidimensional performance management system A performance management system based on a value approach is the best way to take into consideration different interests and to align organisations. Yet, public institutions should master multiple abilities to implement such system: capturing the requirements of different stakeholders, understanding priorities, introducing metrics and deploying them internally. PVM framework doesn’t offer specific methods to support organisations in building these competencies. It needs to be integrated with other tools and methodologies as Balanced Scorecards (Frigo, 2002b) or Lean Management (Jackson, 2006). In this dissertation, for the sake of simplicity, CPV model presented by Talbot (2008) is adopted. The same line of argumentation can be applied to the public management framework introduce by Moore (2003). The starting point for building an effective performance management system is a strategic plan. The plan should consider all three components of the strategic triangle: the authorising environment, operational capacity and public value outcomes. In addition, it needs to integrate lag indicators useful for verifying if the expected results have been reached in a medium-long-term scenario. Talbot presents five areas of interest for public institutions (Figure 2.15) in terms of performance management. Considering the Collectivity quadrant of the

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model, municipalities need to define metrics to monitor social outcomes of the services they provide. For example, they might consider measuring accessibility and the quality of kindergartens or facilities for senior citizens. The strength of partnerships with other non-profit organisations (sports associations, red-cross volunteers, etc.) could be another area to work on. For every key topic in the strategic plan, there should be specific metrics providing information regarding status and progress. Some indicators might be difficult to define; however, municipalities have to make an effort to find the most suitable ones in line with their goals. For example, a possible metric for assessing kindergarten services might be the level of satisfaction of parents. For strategic partnerships, municipalities can introduce other measures as number of partnerships or quantity of funds given to non-profit organisations. The exercise of defining possible metrics should be performed for every quadrant of Talbot’s model and be in line with the strategic plan. Such an exercise might require significant time and multiple discussions between political and administrative elements of municipalities. External stakeholders need to be included, at least partially, in the discussion. They can provide precious information regarding their requirements and the level of service expected. At this stage, the number of metrics proposed might be high. Municipalities need to have a process to prioritise them in accordance with their goals. It can be argued that, on a long-term basis, the most importance indicators are the ones linked to Trust and Legitimacy, essential for survival of non-profit organisation. All defined and prioritised metrics require to have some basic characteristics in order to serve their role of helping management in value creation. First of all, they need to be balanced and multidimensional, taking into consideration the various stakeholders and the complexity of a public organisation. Second, they should be S.M.A.R.T. (Specific, Measurable, Achievable, Realistic, and Timely). Every metric involves an operational definition helping people to understand its meaning and how it is calculated. The definition has to be aligned with a specific strategic objective and provide a simple of way of measuring the dimension considered. The baseline of the indicator, the level expected and when it should be reached should be clearly defined. Going back to the example of the quality of kindergarten services, the indicator could be the level of satisfaction of parents on a scale of one to ten. If it is assumed that a strategic goal is improving the services because many citizens complain about them. The municipal council might ask administrative personnel to create a survey and interview a sample of parents. In this way, it would be possible to define a baseline, to identify some improvement opportunities and to create a plan to increase satisfaction to a certain level in a certain time. However, not all metrics

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require improvement actions. For some of them, it may be enough to maintain a stable value or even decrease their performance. In fact, some municipalities, based on their objectives, may decide to redeploy resources from one area to another. Once key metrics are well defined and specific goals are set, they need to be deployed through the internal organisation and with the external stakeholders. Indicators at strategic level are mainly lag and long-term. Vice versa, measures deployed at an operational level are leading, short-term and more concrete. Assuming that satisfaction level is the lag indicator for kindergarten services, lead indicators might be school bus punctuality or food variety in the canteen. These metrics are important because they are directly linked to everyday operations and to the tasks of individual workers. They influence behaviours and, in the long term, drive the success or failure of the strategic plan. Hoshin Kanri process and X matrix are tools that can facilitate the deployment process of effective indicators. This process is powerful in aligning the organisation and in creating connections with value creation. Lean management offers practices to foster accountability of single individuals toward the metrics and the plan. Visual management is a way to show the status and trend of performance indicators under the control of a certain area or team. Teams, given their metrics and goals, design and create a visual board. The group meets in front of the board with a certain frequency (daily, weekly…), discusses progress and issues, and defines actions and priorities. The structure of the board is based on the PDCA (Plan, Do, Check, Act) cycle defined by W. E. Deming (1952) in his study on quality management and process improvement. Introducing visual boards helps to increase the sense of ownership in the team, makes performance gaps visible and supports problem solving. While the application of such tools and routines is quite wide-spread in private organisations, it is still limited in the public sector. Monteiro et al. (2015) presents an example of a successful deployment of visual management in non-profit institutions. Thanks to the adaption of a Lean approach, lead times and resources required for various financial and HR processes showed significant reductions. Municipalities, in order to improve their execution capability, on top of creating a strategic plan, need to install a multidimensional performance management system. Lag metrics should be defined taking into consideration PVM approach and stakeholder requirements. They are deployed in the organisation through the adoption of operational lead indicators. Lean management offers some tools and approaches to translate objectives into personal and team goals. Through visual management and routine meetings, it is possible to develop that sense of transparency and ownership essential for driving successful execution.

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– Project management methodology and tools The rigorous structure offered by project management methodologies in terms of processes (initiating, planning, executing, monitoring and controlling and closing (PMI, 2004)), tools and mind-set might be useful in executing complex initiatives in an effective way. In Italy there is a tendency for public projects to go over budget and to be delivered with delay. During interviews with mayors and administrative personnel, it was noticed that basic concepts of PM are not well understood or taken into consideration. The introduction of some foundational principles might immediately have a positive impact on execution of projects. For example, the adoption of a change control process, in combination with a charter and a proper schedule, might support effectiveness and trust building. From interviews, it also emerged that small municipalities tend to outsource project management activities, especially for construction activities. Managers usually consider budget implications but don’t have a clear overview of timelines and resources. The creation and periodic reviews of a GANTT diagram together with external providers could foster problem solving, fast decision-making and effective communication. Similar to the discussion regarding strategy planning, small municipalities can acquire project management skills externally or rely on the consortium. A third valuable option is to invest in developing internal capabilities. Public organisations have multiple projects to manage, therefore, investing on training of internal personnel might be a smart and cost-effective choice. – Learning from the past: a knowledge management system Municipalities considered in this thesis seem to manage knowledge mainly in two ways: explicitly, if it relates to norms, laws and procedures; implicitly, if it concerns the way of performing certain tasks or processes in different departments. None of the organisations interviewed have a structured method for knowledge management (KM); they rely on frequent informal contacts and information sharing between employees and political representatives. The majority of employees have been working in the same institution for many years and they represent an asset in terms of experience and wisdom. Municipalities face some challenges in relation to KM. First, there are often only one or two persons working in a specific department. If, for any reason, they are not present (sickness, maternity leave or resignation), the risk is that most of

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the processes may be blocked or delayed. Unfortunately, only a few municipalities have started to create conditions for job rotation or cross-department training in order to mitigate this risk. Second, all the changes happened in recent years have created additional issues There are cases where employees have resigned, partially due to workload and increased job complexity, and it has not been possible to replace them because of hiring freeze. Associated management imposed by the Province of Trento, has forced some municipalities to concentrate specific departments into one single town-hall of the community. People need to move to another town or village to access certain services and, therefore, knowledge has become less accessible. From interviews it emerges that, when a change is triggered by external source, municipalities struggles to adapt due to limited support and scarcity of resources. For example, when local institutions had to adopt the new accounting system, called the ‘harmonised budget’, they received only an introductory training and there was no single expert to whom they could refer. Administrative employees either found their own way to implement the new system or tried to reach out to colleagues in other organisations to share issues and experiences. Since municipalities have limited human resources, it is unlikely that they will be able to implement a state-of-the-art KM system. Yet, they can still introduce some basic concepts that could make a difference in their way of managing knowledge and wisdom. Cong and Pandya (2003) suggest that public organisations need to work on three factors: people, process and technology. The most relevant factor, based on the authors’ point of view, is people. Managers and political representatives should foster a culture suitable for creating and sharing knowledge. There are five key actions to complete: raising awareness of the benefits of KM among employees, creating an environment of trust, choosing and developing managers who support information sharing, introducing a program of reward and recognition for people supporting KM, forming communities of practices. Three of the actions proposed are related to culture and communication. Municipalities might start by organising training or meetings explaining the concept of KM. These events are also valuable opportunities for collecting feedback regarding the current status and potential risk related to knowledge management. In order to foster the new culture, administrators should act as role models and provide real examples of collaboration and information sharing. The communication can be done informally or formally through case studies and articles in newsletters or emails. That contributes to a climate of trust helping employees to feel safe to share information, experiences and issues. Certain behaviours are also reinforced through rewards and recognition; for example, annual

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personal objectives could include goals regarding creation of manuals, mentoring of new employees or the acquisition of new skills. To foster sharing among municipalities, communities of practice might be installed. Working groups with employees from different organisations but working in the same department would increase mutual help and sharing of best practice. In summary, municipalities need to manage KM more proactively along with the risks associated with it. Strengthening some processes, behaviours and culture traits would not only increase knowledge assets but also improve the level of trust, collaboration and value delivered to stakeholders. – A holistic process to improve strategy execution Suggestions to improve strategy execution may work better if applied in a holistic way. Municipalities need to create a continuum between strategy planning and execution and foster the development of a learning organisation. A possible process to help in implementing all the recommendations made is presented in Figure 4.32. Everything starts with an in-depth discussion with multiple stakeholders to understand needs and the possibilities for value creation. On the basis of priorities requirements, a strategic plan is created. The plan should include the changes required and how resources are allocated in order to achieve the goals. In parallel with the development of the plan and the discussion with stakeholders, municipalities can design a multidimensional performance management system. The system needs to consider strategic objectives and other important aspects: operational efficiency, behaviours and values, network creation, etc. The first indicators, which are developed, are the ones measuring results and value creation (lag); then, these indicators are translated into operational metrics that guide day-to-day activities (lead). Information collected through monitoring and control are used to continuously review the strategic plan, especially because changes in the external environment are more frequent for public than for private organisations. The execution of the plan is achieved through specific initiatives and the effective accomplishment of routine activities. For complex programs, the adoption of basic principles and tools of project management methodology is recommended. For day-to-day activities, it is important to put in place some routines and metrics that increase the sense of ownership and ability to solve problems. In addition, a carefully designed knowledge management system supports municipalities to continuously improve and adapt. On the one hand, it helps people to learn new skills, and on the other hand, it reduces the risks of competency loss.

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Figure 4.32 Holistic process to improve strategy execution in municipalities

All the recommendations, in sync with continuous nurturing and communication with stakeholders, might allow municipalities to increase trust and legitimacy inside and outside the organisation. Deploying an effective strategy execution system would represent an essential milestone for improving resilience skills and for long-term survival of local institutions.

4.5.3

Proposals for Strengthening Resilience Characteristics

– Introduce state-of-the-art human resources management (HRM) practices Public organisations in Italy show some peculiar characteristics with regard to HRM (Bonaretti & Testa, 2003). Trade unions have always focused their attention on negotiating salaries and haven’t paid much attention to other forms of

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development and health. Among public employees, there is a weak sense of organisational justice: rewards, promotion and development opportunities are not felt to be given based on meritocracy. This feeling creates a feeble sense of belonging that leads to a fear of new ideas and limited ability to adapt to changes. Personnel selection, promotion and rewards are based mainly on technical skills with partial attention placed on soft skills. Such an approach guarantees more objectivity in terms of acquiring people with the highest technical characteristics. Yet, it doesn’t consider sufficient skills as communication, team-work and problem solving that are important for building a resilient and effective organisation. The Italian state has tried to promote a different culture by enacting different laws. One, in particular (regulation n. 80 published on 5th April 2014), concerns measures aimed at improving organisational well-being in public administrations (Lozzi, 2007). Unfortunately, the majority of the guidelines and principles haven’t been applied in practice. Based on the interviews performed, management of rewards and recognition is one of the main areas for improvement in municipalities. Current regulations allow to assign yearly bonus to employees who have performed well. However, in only half the questionnaires, people confirmed that meritocratic principles were applied to assign rewards. In the other cases, the amount is split equally among the staff. In one single instance, the mayor affirmed that employees were asked to agree how to assign the rewards suggesting a high level of empowerment in the team. Finding objective criteria for assessing performance could foster resilience and increase a sense of belonging within the workforce. Structured approaches to recognition didn’t emerge during the interviews. Intrinsic rewards, or recognitions, are better motivators once a person has reached a certain salary level. They are, for example, ‘appreciation, education, working environment title, authority, attaining new targets, good behaviour from boss and moving from one job to another after completing certain targets’ (Rafique, Tayyab, Kamran, & Ahmed, 2014, p. 20). It is probably easier for municipalities to adopt recognition systems than rewards. By connecting recognition with strategic objectives, local organisations could foster value creation through the development and involvement of individuals. The role of political bodies and town clerks needs to evolve in order to support a new and more effective way of managing rewards and recognition. On top of technical competencies, managers should develop strong managerial abilities. Administrators have to strengthen their HRM skills, by, for example, discussing development plans, offering feedback and understanding how to drive changes. The evolution of roles in the public administration might require to be supported by external experts, able to create the required competencies in organisations.

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Individual performance management schemes should be linked to the new role of managers, the reward and recognition system and the ability to execute the strategic plan. Only a few municipalities, in the interviews, mentioned the definition of individual goals and their review at least on an annual basis. In order to make this process part of the culture, administrators need to make employees aware of priorities, of their contribution to the goals and of how their performance is measured. That is the reason why individual performance management systems work better in conjunction with strategy plans and with the willingness and capability of managers to provide feedback and fair evaluations. A team is not the simple sum of individuals coming together: it is something that needs to be built over time, selecting the right individuals for the right positions. People interviewed affirmed that municipalities own most of the skills needed for the implementation of plans. Yet, they were referring especially to technical skills; few referred to skills like team-work, the ability to change and collaborate. Paying more attention to soft skills might help municipalities to select personnel fitting better the organisation. In the public sector, the turnover rate is low and getting rid of people is almost impossible. Once a bad hiring is made, the municipality can suffer the consequences for a long period of time. Job rotation and opportunities to extend competencies are practices that are only implemented in few institutions. They cannot easily be adopted due to the rigidity of the organisational model and the small number of opportunities available for jobs. Yet, these practices can have multiple benefits: reducing the risk of knowledge loss, increasing team-work, decreasing the impact of silo mentality, supporting people with development and engagement. While extensive job rotations would be complex to organise and difficult to plan, administrators could concentrate on extending the competencies of employees. They might introduce programs to permit employees, working in a specific office, to learn some of the tasks of other departments. That would allow flexibility in case a person is missing or there is extreme workload in a specific area for a certain period of time. One of the simple tools that could be used to develop a program to upskill competencies is the skills matrix. A skills matrix is a graphic tool displaying the current competencies of a person in comparison with the skills desired or needed to fulfil tasks or roles. Employees in small municipalities have a strong sense of belonging. Administrators may consider relying on the already existing organisational identity to improve health and align the employees (Lozzi, 2007). Managers should create and communicate a mission statement including the values expected for personnel working in the institution. The exercise of developing the mission and values have to be a collegial one. It needs to start from the requirements of the stakeholders

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that define the reason for the organisation’s existence. Managers should include as many employees as possible in order to come up with something that is accepted and supported by the majority. The introduction of inclusive practices, such as team decision making and problem-solving sessions, might support the growth of a sense of identity. These practices could also lead to better collaboration and to a reduction of non-constructive conflicts. Mayors and town clerk play a key role in introducing state-of-the-art HRM practices. Embracing sustainable leadership principles supports the introduction of these new ways of management that will foster innovation and continuous improvements within their municipalities. – Increase value through innovation and self-financing opportunities In recent years, municipalities have seen a reduction in the funds transferred by the Province of Trento and other organisations. Some of them have struggled to adapt to the change, especially institutions relying on these transfers to cover current expenses and salaries. The decrease puts at risk the quality of services provided to citizens. Some municipalities have found solutions to the problem by increasing own income or reducing costs. The ability to find innovative solutions can offset the impact of budget cuts and can increase value provided to the network of stakeholders. Moore (2005, p. 43) suggests that innovation can increase value in the public sector in three different ways: • ‘The first generated better methods for performing their core, basic function. • The second would be to exploit the performance advantages that could be gained by abandoning their one-size-fits-all approach in favor of one that encourages adaptation and customization. • The third is to explore new uses of their organizational capabilities by introducing new products and services.’ The first type of innovation is related to a continuous improvement of current services and operations. Municipalities tend to focus on efficiency. They try to provide the same level of services by reducing the amount of resources allocated in terms of workforce or money. This approach, even if it is useful for coping with a smaller budget, leaves other types of improvements unexploited. From the interviews, it emerged that there is a lack of a systematic method to review processes. Decision on how to carry out daily operations is left to the judgement of individual employees, who are not asked to find more effective ways to perform

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their tasks. Municipalities, in this way, miss an opportunity to install a culture of continuous improvement whereby the workforce is involved in the innovation process. Increasing the attention and rewards linked to continuous improvement might have a significant impact on the value perceived by citizens and, at the same time, guarantee a more efficient use of resources. The second way in which innovation can help municipalities is through customisation of services and relationships with stakeholders. In today’s world, citizens are becoming more demanding and they expect customised services. In most instances, the public sector is still linked to an old one-size-fits-all approach. Yet, there are examples of innovation and improvements in small municipalities. One of the organisations contacted decided to become more family friendly and opens its offices in the evenings twice a week. That allows families and full-day workers to easily access the municipality’s facilities. Others offer special services to the elderly, such as the option of being accompanied to hospitals or home delivery. Local entities may have fewer resources but also have more knowledge regarding the needs of their citizens. In addition, they can usually rely on volunteers and non-profit organisations to carry on initiatives for the community. The third type of innovation suggested by Moore is related to the exploration of new possibilities to deploy organisations’ capabilities. From an income perspective, the ability to increase the revenue from collection and own activities can reduce the risk and uncertainty of budget transfer from external sources. In recent years, several municipalities have begun to explore new sources of income. A significant number of organisations, which have natural resources in their territory, such as rivers, streams, quarries or wood, have started to exploit them. They have built hydroelectric power plants, sold woods or increased taxation on the material extracted from quarries. Sometimes, it is difficult for municipalities to build new infrastructure to exploit natural resources: they don’t have the budget or they are not allowed to invest in this kind of projects. Thus, they are required to explore opportunities to create partnerships with other public or private organisations. By forging strategic alliances, they may be able to collect the required funds and share risks. Municipalities have to acquire an entrepreneur mentality and think about the ways in which they can secure funds and services. Other organisations, which don’t own natural resources, might invest in tourist activities or create an environment friendly to businesses that can attract private investments. One municipality consulted, for example, decided to renovate abandoned huts that are now rented out to tourists who want to spend their holidays in the middle of the nature. In order to carry out investments, municipalities can rely on local and European contributions. Italy is one the countries with the lowest level of use of European

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funds. Public organisations need to improve their ability to explore the network of connections and to capture opportunities in the environment around them. For municipalities, it is important to create synergies, design innovative projects, and request and obtain funds. For example, the European Union has made special resources available for sustainable energy. Tapping into those funds could permit local communities to reduce their emissions, improve their financial situation and maybe also create new jobs. Municipalities have many opportunities to increase their resilience, value creation, and trust through innovation. They can work on continuous improvement of their core services, customise the offers to the needs of their stakeholders and act as entrepreneurs by carrying out new projects to secure finances and provide additional value. – Create a strong and resilient network of stakeholders In Section 2.4.3, core-periphery networks have been presented due to the fact that are effective ways for managing public resources and have characteristics useful to strengthen resilience. In Figure 4.33, there is a representation of a possible core-periphery network applied to municipalities.

Figure 4.33 Core-periphery network for municipalities. Adapted from Bodin and Crona (2009, p. 371)

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Discussion of Research Results

Political representatives and managers (yellow nodes) should spend the greatest amount of their time on creating strong relationships with other municipalities, public organisations and private companies. That would allow them to capture best practices, build alliances and create synergies. Instead, employees (blue nodes) should be empowered to carry out independently routine operations and projects. The weak links between administrators and employees guarantee the information flow required to align and manage the organisation. The example presented of the California’s program for water management (CAN) represent a good illustration of a core-periphery network. The program was able to successfully manage a scarce and critical resource in the region through a complex and adaptive network (Booher & Innes, 2010). Small municipalities might adopt a similar approach that supports the strengthening of stakeholder networks, the definition of common goals and a democratic decision-making process. Local organisations could rely on the network to obtain information, expertise and resources. Mutual help would increase the resilience of single institutions but also of the entire network. – Increase personal resilience to build resilient organisations As discussed in Section 2.4.3, strengthening personal resilience has various benefits for organisations: easier change management, higher level of innovation and job satisfaction, and better performance. In order to build resilience capabilities, administrators can take various actions. If they are successful, municipalities might become nimble organisations. ‘Nimbleness is the ability of an organization to consistently succeed in unpredictable, contested environment by implementing changes…efficiently and effectively’ (Hoopes & Kelly, 2004, p. 116). Training and exercises, with the purpose of developing positive psychological resources, have already been demonstrated to offer good results (Youssef & Luthans, 2007). Another key aspect is the ability of administrators to promote resilience and act as role models. The political body and managers need to be the first persons to be trained in resilience. In addition, they should create an action plan to improve their skills and be supported, if possible, by a coach during their journey. Having individual employees with resilient characteristics is not sufficient to create resilient teams. Leaders have to promote synergies among people, sharing common goals and forming an empowered organisation (Hoopes & Kelly, 2004). Deliver training and improving skills might sound like a difficult task for small municipalities. However, resilience building could be a common effort with the aim to increase organisational nimbleness and personal capabilities with benefits for employees, administrators and stakeholders.

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Leaders in small municipalities might have advantages in building resilience in the workforce in comparison with leaders in bigger organisations. In fact, transformational managers are more effective if they are working in a start-up environment, rather than in a structured company or institution. Applying this consideration to the public sector, it can be hypothesised that transformational mayors and administrators are more effective in small municipalities rather than in big cities.

4.5.4

How to Implement the Approach Proposed

The path to strengthen resilience and execution capabilities is not easy for small municipalities. It requires, for example, visionary leaders, persistency and a clear way to manage changes. Two different models for change management were presented (Table 2.16): 8 stages (Kotter, 2012) and 10 principles (Smith, 1997) models. Administrators might choose to select one of the two methodologies or a different approach. Once they have decided upon the direction they want to take, leaders need to have a disciplined and proactive way to apply the method in order to increase the probability of success of their efforts. Otherwise, the desired outcome will, most probably, not be achieved and people will feel frustrated, disappointed and less open to new initiatives. Methods for change management are not easy to follow because they require a lot of energy, resources and time. However, administrators might create a coalition with their stakeholders (internal and external) which could help to spread the workload and a create a winning team able to deliver high-level performance. Primary sponsors for the transformation can be found at municipality level (mayor and town clerk) or at a higher level. If, for example the Province of Trento, embrace the cultural change, local institutions have more leverage in adopting the new way of working. In any case, administrators need to appoint and train change agents, find the support of advocates and set-up an effective communication through all the stages of the transformation. The changes required to make municipalities resilient and effective at executing strategy are substantial. The transformation needs to be conducted by strong sponsors and leaders who have proper technical and soft skills. The two roles who have the power to design and introduce new cultural and management practices are mayors and town clerks. The mayor is the political representative of the community and, for small municipalities, he supports the management of the administrative workforce. The town clerk, in contrast, has three main functions:

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• Provide assistance to political representatives • Coordinate the directional body • Manage employees (especially in small municipalities) A study conducted on town clerks in cities and towns in Italy assessed their leadership styles (Fosti & Turrini, 2010). The model used for the assessment considers five different leadership styles: task-oriented, relation-oriented, change-oriented, diversity-oriented and integrity-oriented. It appears that town clerks mainly adopt two types of leadership: change-oriented and integrity-oriented. They are able, therefore, to behave and work with integrity, a characteristic that is important in the public sector to demonstrate fairness and honesty, and to create trust. In addition, they are capable to implement changes by striving for more efficient and effective practices. Thus, town clerks master capabilities helpful to lead municipalities in the future, however, in order to adopt successfully the new PVM approach. they need to develop further in four areas (Fosti & Turrini, 2010): • Growing awareness of their role. Sometimes town-clerks have the tendency to see themselves more as the gate-keepers of laws, than managers and leaders. • Developing the ability to create relationships with stakeholders (relationoriented leadership). One of the main tasks of administrators is the creation of a strong network to foster resilience. Town clerks might lack the awareness and the competence to play this role and to help the municipality to develop relationships. • Acquiring new management skills. The background and competencies of town clerks is mainly focused on law and economics. It is necessary for them to extend their skills to other areas, such as strategy development, and management of performance, projects and change initiatives. • Developing tools for continuous learning. Town clerks should stay continually up to date about new tools and approaches for public sector management. They need, therefore, to develop a knowledge management system and support municipalities to become learning organisations. Mayors are the persons primarily in charge of driving the change. They are, by law, responsible for various tasks and accountable (Brugnola, 2018): • to the community for the correct use of resources, the production of results and their coherence with the institutional mission • to the city council and to the control bodies for the results of the administration • to the other stakeholders in the public system for the contribution offered to achievement of the overall goals

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As discussed for the role of the town clerk, mayors need to master specific skills to be able to create an effective and resilient organisation within their municipalities. Above all, they can adopt techniques and acquire capabilities to help them to successfully manage changes (Brugnola, 2018): • Management and facilitation skills. In small municipalities, mayors support the management of employees and, therefore, they need to develop the right competencies. That is more important in the situations where town clerks are not always present since they are working part-time in other organisations. • Communication and networking skills. Mayors are the primary persons in charge of communication with external stakeholders and the community. Their ability to understand needs and convey the value offered by the organisation are important in maintaining a high level of trust and legitimacy. • Learn and implement best practices. The only fact of being able to build a network of stakeholders is not enough. Mayors need to understand what they can learn from other organisations. By studying the best performers, they can help their own municipalities to progress and support value creation. • A 100-days plan. From the moment of their elections, mayors have a five-year term. If they have been nominated for the first time and are new to management, they might encounter the risk of waiting too long before taking their first actions and communicating their vision. One of the techniques for reducing such risk is the creation of a plan for the first 100 days of their term. It would help the mayor, the town council and the employees to immediately start the process of change and increase trust in the new administrators. • Prevent the crisis. Municipalities interact and depend on a multitude of stakeholders. That makes changes affecting the organisations much more difficult to forecast and manage. Mayors need to develop business acumen and perform risk analyses in order to prevent and mitigate crises. The roles of mayors and town clerks are fundamental in small municipalities for creating resilient and effective organisations. The people who are in those positions need to acquire skills and competencies beyond their traditional roles and responsibilities. They need to be leaders with strong competencies in employees and stakeholder management. In addition, it is important that mayors and town clerks find synergy and alignment between them to pull the municipality in the same direction. In fact, trust and legitimacy are linked to the value municipalities can offer to stakeholder through the political and administrative bodies, lead respectively by mayors and town clerks.

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4.6

4

Discussion of Research Results

Extension of the Research to Different Types of Municipality

This research is focused on municipalities of a particular size (1,000–2,000 inhabitants) in a specific area of Italy (Province of Trento). This focus was chosen in order to obtain a somewhat homogeneous sample (in terms of size and geography). In this chapter, there is an attempt to verify if the analyses, results and recommendations might be valid for municipalities of other sizes in the Province of Trento and municipalities of the same size in the rest of Italy. The approach chosen is to vary one factor at a time (size or geography) in order to increase the probability of observing differences and commonalities in different samples. The performance indicators described in Section 3.4.2 are available for all municipalities in Italy. The targets and regulations relating to the reduction of expenses and blocks on budget surplus in 2016 are applicable only to the Province of Trento. The budget surplus regulation applies to all the Trentino organisations but the expenditure reduction targets are specific to organisations with fewer than 5,000 inhabitants. The comparison between the municipalities in the study and the other two types is based on the available data. The questionnaire described in Section 4.1 was also used to collect information for this extended analysis. The information was collected in two different ways from the public entities in the Province of Trento: some municipal employees were interviewed face-to-face; others were contacted by email. The (small) municipalities in other areas of Italy were all contacted by email. The questionnaires were sent through Asmel,1 an association for the subsidiarity and modernisation of local institutions. The association supported the research and sent the questionnaire; for privacy reasons, it did not provide the names of the municipalities contacted. As there is no possibility to know how many organisations received the request, the response rate cannot be calculated. Analyses and observations in this chapter aim to provide insights into how different types of municipalities operate. While no attempt is made to deal exhaustively with the topic, the hope is that these hypotheses will be valid for organisations across Italy.

1 Website:

https://www.asmel.eu/

4.6 Extension of the Research to Different Types of Municipality

4.6.1

245

Extension to Differently-Sized Municipalities in the Province of Trento

In 2018, there were 176 municipalities in the Province of Trento (Table 3.4); some of these are relatively new entities, created by merging two or more local entities. Data from the period 2007–2015 are therefore not available for all of today’s municipalities. In Table 4.27, the stratification is based on population. For the purposes of the research, local entities with the biggest populations represent the most interesting category, however the group of municipalities with fewer than 1,000 inhabitants is the largest. The organisations with populations over 5,000 are obliged to follow some specific regulations, such as adopting the PEG (Executive Management Plan -Piano Esecutivo di Gestione). Therefore, there was an attempt to obtain as many responses as possible from the more populous entities. Table 4.27 Stratifications of municipalities in the Province of Trento and number of completed questionnaires Size (inhabitants)

# of Municipalities

# of Questionnaires Answered

5,000

15

3

Performance indicators are available for all of the size-differentiated groups and it is therefore possible to perform analyses and compare the different groups. However, because so few questionnaires were completed, the insights provided into execution and resilience characteristics are correspondingly limited. Although all the categories are included in the graphical analysis (boxplots), municipalities with fewer than 1,000 inhabitants (two answers) have been excluded from the statistical analysis, and all organisations with more than 2,000 inhabitants have been grouped in a single category. This aggregation risks losing any eventual differences between municipalities with populations above or below 5,000. To mitigate the risk, significant variances will be reported in the discussion. – Performance indicators Analysis of the boxplots (Appendix 10 in the electronic supplementary material) which compare the various performance indicators shows differences among the

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categories. There is only enough information to see statistically significant differences for two indicators (Table 4.28); financial autonomy (Figure 4.34) and budget surplus (Figure 4.35). For both of these indicators, the categories with extreme values are municipalities with populations below 1,000, and those with between 2,001 and 5,000. The smallest entities show the worst performance: on average, they are more dependent on external sources of financing, and also have bigger budget surpluses at the end of the year. The municipalities with between 2,001 and 5,000 citizens have the most favourable values for the indicators. Table 4.28 ANOVA test of all performance indicators among categories of municipalities

Financial Autonomy

p-value Anova Test

Category/ies with significant differences

0.018

0.5

Yes

No P = 0.044

Differences among the means are significant (p < 0.05).

#

Sample

1 2 3 4

2,001-5,000 >5,000 5,000

0.5

Yes

No

P < 0.001

Differences among the means are significant (p < 0.05).

#

Sample

Differs from

1 2 3 4

2,001-5,000 >5,000 5,000

F1

00

00 ,0 -2 0 0 1 ,0

>

0 00 2,

F2

-2 00 1,0

00 ,0

0 00 2, > F3

,0 -2 00 ,1 0

00 >

0 00 2,

F4

00 1,0

0 00 2,

2, >

0 00

F5

Figure 4.38 The Province of Trento: medians and confidence interval of questions related to financial results

4.6 Extension of the Research to Different Types of Municipality

251

The different groups exhibit similar values in relation to the organisations’ execution skills (Figure 4.39). The existence of a measurement system also offers the more structured municipalities greater opportunities for improvement. The more populous entities, their more sophisticated structures notwithstanding, do not mention using any systematic method for measuring performance. They usually use PEG to set objectives at an organisational and managerial level, but have no metrics or systems for monitoring and adapting.

Boxplot of Execution 4.0 3.5

Answers

3.0 2.5 2.0 1.5 1.0 Size

1,0

00

-

Execution

e M

0 00 2,

>

0 2,

t en m re u as

00 00 1 ,0

-

e M

0 2,

00 >

0 00 2, 1,0

gy lo do o th

00

-

2,

0 00 >

0 2,

le op Pe

00 00 1 ,0

-

0 00 2,

>

2,

e ur ct ru t S

0 00 00 1 ,0

-

0 00 2,

>

em st Sy

0 00 2,

s

Figure 4.39 The Province of Trento: medians and confidence interval of questions related to execution traits

With regard to resilience traits (Figure 4.40), the main differences relate to adaptive capacities. The biggest organisations show a lower result than those with a population between 1,000 and 2,000 inhabitants. The scores of the most populous municipalities are most obviously lower for three questions: people are encouraged to move between different departments or try out different roles within our organisation to gain experience (RA1); there is an excellent sense of teamwork and camaraderie in our organisation (RA2); and our organisation proactively monitors what is happening in its environment to give early warning of emerging issues (RA9).

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Discussion of Research Results

Boxplot of Resilience 4.0

Answers

3.5

3.0

2.5

2.0 Size Resilience

1,000 - 2,000 > 2,000 Adaptive

1,000 - 2,000 > 2,000 Planning

Figure 4.40 The Province of Trento: medians and confidence interval of questions related to resilience traits

– Conclusions and insights The analyses conducted on the performance indicators and completed questionnaires help to advance some hypotheses regarding the similarities and differences between municipalities in the Province of Trento: • The municipalities with fewer than 1,000 inhabitants have, in general, the worst performance indicators (especially for financial autonomy and budget surplus). They depend on funding from other public organisations and find administrative procedures challenging. Their mayors do not feel that they have adequate resources to implement their plans. • Consideration of the selected performance indicators suggests that the optimal population size for municipalities is between 2,001 and 5,001. These organisations, however, could benefit from both the flexibility offered by lean structures and the efficiency offered by economies of scale and scope. Associated management, in the long-term, is likely to help smaller local entities to improve their performance.

4.6 Extension of the Research to Different Types of Municipality

253

• Municipal size influenced the 2016 levels of surplus and, therefore, the municipalities’ ability to adapt to the new regulation. The organisations with populations between 2,001 and 5,000 again performed best for this indicator, apparent confirmation of the previous point regarding optimal municipal size. • The questionnaire results suggest that the better organisational structures of the populous municipalities provide greater support for more effective execution. In contrast, however, these organisations exhibit a lower capacity and thus lower levels of resilience. The bigger municipalities (pop. > 5,000) seem to partially lack team spirit due to a more hierarchical structure and fewer contacts between departments. Although it would be possible for them to create opportunities for job rotation and fostering mutual understanding, they do not seem to see this aspect as a priority. The suggestions made in Section 4.5 to improve the resilience and execution skills of the municipalities in the original research might also be valid for smaller or more populous organisations in the Province of Trento. The performance indicators and questionnaire responses indicate some differences but also many similarities. The more populous organisations seem to have certain characteristics that allow them to better execute their strategies: they can rely on economies of scope and scale to drive efficiency and effectiveness. The optimal population seems to remain between 2,001 and 5,000, a size which allows both for close contact with the needs of citizens and stakeholders and adherence to structured processes and systems. More populous municipalities lose resilience with regard to the management of both people and the environment. The smallest organisations, on the other hand, seem to lack the critical mass which would enable them to deliver certain services and execute more ambitious plans. The recommendations made previously to improve resilience and execution abilities still hold. It might be helpful for smaller entities to concentrate more on strengthening their competences and building relationships with other organisations; they could, for example, endeavour to acquire the skills and resources that would allow them to benefit from associated management. The populous municipalities, on the other hand, could focus primarily on strengthening resilience by increasing teamwork and flexibility in the workforce and paying more attention to the opinions/needs of external stakeholders.

254

4.6.2

4

Discussion of Research Results

Extension to Small Municipalities in Italy

In 2018, 1,529 municipalities in Italy (Tuttitalia, 2018) had between 1,000 and 2,000 inhabitants. The number of this type of organisations has decreased in the last 10 years. Data on financial indicators between 2007 and 2015 are available for 1,499 municipalities outside the Province of Trento (Figure 4.27); these data are compared with those from the 42 municipalities investigated in the main part of this research. The data set contains the names of local entities which have disappeared in recent years. However, because it is difficult to identify which these are, they have not been excluded from the analysis (Table 4.29).

Table 4.29 Municipalities in Italy with populations between 1,000 and 2,000 and number of questionnaire responses Size (inhabitants)

# of Municipalities

# of Questionnaires Answered

Province of Trento

42

42

Rest of Italy

1,499

17

– Performance indicators A comparison of the six financial indicators for the municipalities in the Province of Trento and those in the rest of Italy reveals significant differences. Both graphical (Appendix 11 in the electronic supplementary material) and analytical analyses (Table 4.30 and from Figure 4.41, 4.42, 4.43, 4.44 and 4.45) confirm that the two groups behave differently: there are statistically significant differences between them for five out of six indicators. Organisations in the Province of Trento have less financial autonomy, spending capacity and collection capacity. Conversely, their indicators for personnel and budget surplus are higher. The financial autonomy level may be affected by the money transferred by the Province of Trento, which, as a special area, is able to disburse greater sums to its municipalities than is possible in other regions of Italy. Spending capacity and collection capacity indicators may be related to lower management skills and less familiarity with bureaucratic procedure. Budget surplus is more difficult to explain, while some local entities in Italy show budget deficits, in the Province of Trento, there is no recorded deficit. Before the introduction of the new regulation, a budget surplus might have been seen as a sign of healthy finances. It appears probable that the municipal budgets in the Province of Trento are healthier.

4.6 Extension of the Research to Different Types of Municipality Table 4.30 2 Sample t test of all performance indicators between the Province of Trento and the rest of Italy

255

2 Sample t Test: p-value Financial Autonomy

0.5

Yes

No

P < 0.001

Statistics Sample size Mean 95% CI Standard deviation

Italy

Trentino

1499 0.67042 (0.6654, 0.6754) 0.098955

42 0.56983 (0.54075, 0.59892) 0.093342

The mean of Italy is significantly different from the mean of Trentino (p < 0.05).

Difference Between Samples Statistics Difference 95% CI

95% CI for the Difference Is the entire interval above or below zero?

*Difference 0.10059 (0.071090, 0.13009)

*Difference = Italy - Trentino

Comments 0.00

0.03

0.06

0.09

• Test: You can conclude that the means differ at the 0.05 level of significance. • CI: Quantifies the uncertainty associated with estimating the difference in means from sample data. You can be 95% confident that the true difference is between 0.071090 and 0.13009. • Distribution of Data: Compare the location and means of samples. Look for unusual data before interpreting the results of the test.

0.12

Distribution of Data Compare the data and means of the samples. Italy

Trentino

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Figure 4.44 2 Sample t-test of collection capacity indicator between the Province of Trento and the rest of Italy

There is insufficient evidence to ascertain any difference in resilience traits, (Figure 4.48). The responses from the whole country group that do reveal a lower level of performance are those related to the possibility of employees moving into different departments (RA1), the confidence that managers and political representatives can manage a crisis well and take tough decisions (RA6 and RA8) and the ability to collaborate with other municipalities (RP1). As before, there is an attempt to verify whether or not there is a correlation between resilience and strategy execution traits, and whether the organisations’ geography has an impact. The model takes into account the means of all the scores in the two sections of the questionnaire. The data for both the municipalities in the Province of Trento and those across Italy are included. The model (Figure 4.49) shows a significant correlation between the resilience and execution traits. The equation that correlates resilience (Xres_Italy) with strategy execution (Yex_Italy) is as follows:

4.6 Extension of the Research to Different Types of Municipality

259

2-Sample t Test for Surplus (Deficit) by Area Summary Report Do the means differ? 0

0.05

Individual Samples

0.1

> 0.5

Yes

No

P < 0.001

Statistics Sample size Mean 95% CI Standard deviation

Italy

Trentino

1499 0.18367 (0.1733, 0.1940) 0.20466

42 0.44647 (0.32763, 0.56532) 0.38138

The mean of Italy is significantly different from the mean of Trentino (p < 0.05).

Difference Between Samples Statistics Difference 95% CI

95% CI for the Difference Is the entire interval above or below zero?

*Difference -0.26280 (-0.38213, -0.14348)

*Difference = Italy - Trentino

Comments -0.4

-0.3

-0.2

-0.1

0.0

Distribution of Data Compare the data and means of the samples.

• Test: You can conclude that the means differ at the 0.05 level of significance. • CI: Quantifies the uncertainty associated with estimating the difference in means from sample data. You can be 95% confident that the true difference is between -0.38213 and -0.14348. • Distribution of Data: Compare the location and means of samples. Look for unusual data before interpreting the results of the test.

Italy

Trentino

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Figure 4.45 2 Sample t-test of surplus indicator between the Province of Trento and the rest of Italy

Yex_Italy = 1.039 + 0.6840 Xres_Italy Equation 4.9—Equation of linear model between resilience and strategy execution characteristics of municipalities in Italy

Equation 4.9 is similar to Equation 4.1 (obtained only in relation to municipalities with populations between 1,000 and 2,000 in the Province of Trento). It is thus possible to affirm the existence of a correlation between resilience and execution traits across Italy. The second question considers the correlation between resilience traits and an ability to manage crisis, which is assessed through the financial results section of the questionnaire (Figure 4.50). The model shows a significant correlation between the two sets of data, but no correlation in terms of municipal geography. As stated for previous models, the low R-sq (25.4%) suggests that a large part of the observed behaviour remains unexplained and that the model is incomplete. It

0.000

0.000

0.808

4. Spending capacity Average

5. Collection capacity Average

6. Surplus (Deficit) Average

na

23.29% 0.483

23.78% 0.488

22.46% −0.474

0.000

0.000

0.855

0.000

7.10%* −0.266

1.58%* −0.126

na

26.23% 0.512

R-sq / r

0.234

0.000

0.000

p value

na

6.93%* −0.263

0.84%* −0.092

R-sq / r

3. Personnel expenses

0.000

0.000

p value

1.41%* −0.119

62.79% 0.792

R-sq / r

4. Spending capacity Average

0.010

p value

0.43%* −0.066

R-sq / r

5. Collection capacity Average

4

* The influence of outliers is high

0.000

3. Personnel expenses

19.63% −0.443

R-sq / r

p value

0.000

p value

2. Budget rigidity Average

2. Budget rigidity Average

1. Financial Autonomy Average

Table 4.31 Correlation among performance indicators (Xi): all Italian municipalities

260 Discussion of Research Results

4.6 Extension of the Research to Different Types of Municipality

261

Boxplot of Financial Results 5

Data

4

3

2

1 Region

Italy Trentino F1

Italy Trentino F2

Italy Trentino F3

Italy Trentino F4

Italy Trentino F5

Figure 4.46 Italy: medians and confidence interval of questions related to financial results

Table 4.32 Results of statistical tests comparing municipalities in Italy and the Province of Trento Financial Results

Mean (t Test): p-value

Standard Deviation Test: p-value

0.990

0.136

Execution Traits

0.085

0.250

Resilience Traits

0.171

0.254

excludes important (unidentified) variables and, therefore, it could be only adopted as a starting point for future research. The equation that correlates resilience (Xres_Italy) with crisis management and financial results (Yfr_Italy) is: Yfr_Italy = 1.1614 + 0.567 Xres_Italy Equation 4.10—Equation of linear model between resilience and crisis management ability measured through financial results for municipalities in Italy

262

4

Discussion of Research Results

Boxplot of Execution 5

Answers

4

3

2

1 Area Execution

Italy Trentino Measurement

Italy Trentino Methodology

Italy Trentino People

Italy Trentino Structure

Italy Trentino Systems

Figure 4.47 Italy: medians and confidence interval of questions related to execution traits

Equation 4.10 is similar to Equation 4.2 (obtained only in relation to municipalities with populations between 1,000 and 2,000 in the Province of Trento). It is thus possible to affirm the existence of a correlation between resilience and crisis management ability across Italy. The intercepts of both formulas have significant p-values and need to be included in the model. The constants, however, do not have a real meaning since the predictor Xres_Italy cannot assume the value zero. – Conclusions and insights The above analyses of performance indicators and questionnaires allow to advance some hypotheses regarding the similarities and differences between municipalities in the Province of Trento and across Italy: • The performance indicators of the municipalities in the Province of Trento and those in the rest of the country reveal similar relationships. For example, an organisation with a good collection capacity also scores highly on the spending capacity indicator.

4.6 Extension of the Research to Different Types of Municipality

263

Boxplot of Resilience 5

Answers

4

3

2

Area Resilience

1

Italy

Trentino Adaptive

Italy

Trentino Planning

Figure 4.48 Italy: medians and confidence interval of questions related to resilience traits

• The results from the municipalities in the Province of Trento are statistically different from those in other areas of Italy. Comparatively high levels of Provincial funding mean lower levels of financial autonomy: local entities in Trentino are more dependent on external sources of finance. They also spend a larger proportion of their current budgets on staff pay. This behaviour may be influenced by various factors (higher salaries, bigger workforces, the provision of more services …), but it restricts budgetary flexibility. On average, municipalities in the Province of Trento show worse performances in terms of collection and spending capacity. The indicator level may be due to healthier finances (budget surplus) which mean that administrations are not compelled to increase the efficiency of their procedures. They may also use slightly different accounting systems. Generally speaking, organisations in the Province of Trento manage their budgets more effectively and prudently. • Municipalities in the rest of Italy seem to have suffered heavily from budget cuts in recent years. Moreover, only in the Province of Trento have local entities been required to associate with their neighbours. • The questionnaire responses show similar characteristics and behaviours in terms of financial results, resilience traits and execution characteristics. The

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Multiple Regression for Execution Av Report Card

Status Description

Amount of Data Unusual Data

Discussion of Research Results

i

Your sample is large enough (n = 59) to obtain a precise estimate of the strength of the relationship.

!

• Large residuals: 2 data points have large residuals and are not well fit by the equation. These points are marked in red on the Diagnostic Report. • Unusual X values: 2 data points have unusual X values, which can strongly influence the model equation. These points are marked in blue on the Diagnostic Report. You can hover over a point or use Minitab’s brushing feature to identify the worksheet rows. Because unusual data can have a strong influence on the results, try to identify the cause for their unusual nature. Correct any data entry or measurement errors. Consider removing data that are associated with special causes and redoing the analysis.

Normality

Because you have at least 15 data points, normality is not an issue. If the number of data points is small and the residuals are not normally distributed, the p-values used to determine whether there is a significant relationship between the Xs and Y may not be accurate.

Multiple Regression for Execution Av Model Building Report X1: Resilience A X2: Area

Final Model Equation Execution Average = 1.039 + 0.6840 X1

Model Building Sequence

Incremental Impact of X Variables

Displays the order in which terms were added or removed.

Step Change Step P

Long bars represent Xs that contribute the most new information to the model.

Final P

Resilience A 1

Add X1

0.000

0.000 Area

0

25

50

75

0

100

20

40

60

Increase in R-Squared %

R-Squared(adjusted) %

Fitted Line Plot for Resilience A

Each X Regressed on All Other Terms

Shows the relationship between Execution Av and Resilience A.

Gray bars represent Xs that do not help explain additional variation in Y.

Execution Av

4

Resilience A

3

2 2

3

Resilience A

4

0

50

100

R-Squared % A gray bar represents an X variable not in the model.

Figure 4.49 Correlation analysis between resilience and strategy execution scores for municipalities in Italy and the Province of Trento

4.6 Extension of the Research to Different Types of Municipality

265

Multiple Regression for Execution Av Summary Report Comments

Is there a relationship between Y and the X variables? 0

0.1

> 0.5

Yes

The following terms are in the fitted equation that models the relationship between Y and the X variables: X1: Resilience Average

No

P < 0.001

The relationship between Y and the X variables in the model is statistically significant (p < 0.10).

If the model fits the data well, this equation can be used to predict Execution Av for specific values of the X variables, or find the settings for the X variables that correspond to a desired value or range of values for Execution Av.

% of variation explained by the model 0%

100%

Low

High R-sq = 65.03%

65.03% of the variation in Y can be explained by the regression model.

Execution Av vs X Variables

Resilience A

Area

4

3 A gray background represents an X variable not in the model.

2

2

3

4

It

y al

t en Tr

o in

Figure 4.49 (continued)

main differences relate to regular annual and long-term planning, to human resources management and to certain systems, such as information flow and knowledge management. • Geography does not influence correlations between resilience and execution or financial results. Municipalities in both the Province of Trento and the rest of Italy with higher scores in the resilience section of the questionnaire also score more highly in the execution and financial results sections. The municipalities with between 1,000 and 2,000 inhabitants demonstrate similar characteristics. This result means that the recommendation made in Section 4.4 and 4.5 should apply to organisations in both the Province of Trento and the rest of Italy. The local entities could concentrate on different areas for improvement, depending on their own particular situations. For example, if a municipality’s administrative processes are already efficient and effective, it might choose to focus on finding new ways of boosting income or increasing collaboration with other organisations

266

4

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Discussion of Research Results

Multiple Regression for Finance Aver Report Card

Status Description

Amount of Data

i

Your sample is large enough (n = 59) to obtain a precise estimate of the strength of the relationship.

Unusual Data

!

• Large residuals: 3 data points have large residuals and are not well fit by the equation. These points are marked in red on the Diagnostic Report. • Unusual X values: 2 data points have unusual X values, which can strongly influence the model equation. These points are marked in blue on the Diagnostic Report. You can hover over a point or use Minitab’s brushing feature to identify the worksheet rows. Because unusual data can have a strong influence on the results, try to identify the cause for their unusual nature. Correct any data entry or measurement errors. Consider removing data that are associated with special causes and redoing the analysis.

Normality

Because you have at least 15 data points, normality is not an issue. If the number of data points is small and the residuals are not normally distributed, the p-values used to determine whether there is a significant relationship between the Xs and Y may not be accurate.

Multiple Regression for Finance Aver Model Building Report X1: Resilience A X2: Area

Final Model Equation Finance Average = 1.614 + 0.567 X1

Model Building Sequence

Incremental Impact of X Variables

Displays the order in which terms were added or removed.

Step Change Step P

Long bars represent Xs that contribute the most new information to the model.

Final P

Resilience A 1

Add X1

0.000

0.000 Area

0

25

50

75

0

100

Finance Aver

10

20

30

Increase in R-Squared %

R-Squared(adjusted) %

Fitted Line Plot for Resilience A

Each X Regressed on All Other Terms

Shows the relationship between Finance Aver and Resilience A.

Gray bars represent Xs that do not help explain additional variation in Y.

4 Resilience A

3

2 2

3

Resilience A

4

0

50

100

R-Squared % A gray bar represents an X variable not in the model.

Figure 4.50 Correlation analysis between resilience and financial results scores for municipalities in Italy and the Province of Trento

4.6 Extension of the Research to Different Types of Municipality

267

Multiple Regression for Finance Aver Summary Report Comments

Is there a relationship between Y and the X variables? 0

0.1

> 0.5

Yes

The following terms are in the fitted equation that models the relationship between Y and the X variables: X1: Resilience Average

No

P < 0.001

The relationship between Y and the X variables in the model is statistically significant (p < 0.10).

If the model fits the data well, this equation can be used to predict Finance Aver for specific values of the X variables, or find the settings for the X variables that correspond to a desired value or range of values for Finance Aver.

% of variation explained by the model 0%

100%

Low

High R-sq = 25.40%

25.40% of the variation in Y can be explained by the regression model.

Finance Aver vs X Variables

Resilience A

Area

4 3 A gray background represents an X variable not in the model.

2

2

Figure 4.50 (continued)

3

4

It

y al

t en Tr

o in

5

Conclusions and Outlook

The purpose of this research was to investigate resilience and strategy execution in the public sector. An empirical study was conducted on Italian municipalities. The scope was mainly limited to small municipalities in a homogeneous territory (Province of Trento). The choice was driven by the need to study organisations operating in a similar environment. In the final section of the research the findings were extended to other types of municipalities in the same territory and across Italy. The contribution of this study can be seen from various angles. First, few researchers have attempted to study organisational resilience in the public sector with a long-term view. Many have considered the ability of organisations to adapt to intensive, unexpected and fast-moving situations, such as natural disasters, but few have investigated the capacity to become accustomed to new regulations and changes in the economic environment. Second, any studies, which try to understand the link between resilience traits and strategy execution ability, have not been found in the course of this research. Another contribution are the recommendations made to municipalities which could improve their organisational characteristics, allowing them to become more efficient and effective. In this last chapter, the focus is on three topics: a summary of the findings which have contributed answering the research questions, the limitations of the approach and possible recommendations for future studies.

5.1

Summary of the Approach and Conclusions

The initial part of the research was dedicated to the literature review. First, different definitions of strategy execution and resilience in organisations were presented in order to select the ones most suitable to the thesis. The second part © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2021 L. Gios, Resilience and Strategy Execution in Public Organisations, https://doi.org/10.1007/978-3-658-34467-2_5

269

270

5

Conclusions and Outlook

of the review concerned the most important models to implement strategy and to strengthen resilience skills. The focus was not only on the models but also on the way to ascertain the characteristics of organisations and measure success. Thanks to all the information collected it was possible to define two specific frameworks that might help organisations to strengthen their effectiveness and ability to change. The two frameworks have many similarities and some differences. For example, both resilience and strategy execution require empowerment of people and the use of lead and lag indicators. However, in the resilience framework there is a stronger emphasis placed on building a network of stakeholders, while, for implementing strategy successfully, it is important to adopt proper tools and systems. The literature explicitly concerning execution and resilience in public organisations is less extensive than for private sector. Yet, there are specific approaches and tools which researchers have studied in the public sector. An important concept presented in this thesis is Public Value Management (PVM). PVM is a new approach to management that includes many traits useful to build resilience and strategy execution skills. One of the main differences between private and public organisations is their purpose and what they need to do to survive long term. While companies have the main goal to be profitable, public organisations have to build trust with a variety of stakeholders. In summary, the chapter regarding the literature review has offered the foundations for the research providing frameworks for execution and resilience, with a particular focus on public organisations. The methodology was based on a multi-case study approach. The case study was focused on Italian municipalities in a specific geographical area (Province of Trento) and with a population between 1000 and 2000 citizen. The choice was done in order to have comparable types of organisations and to gain insights of impact of resilience and execution characteristics. Italian municipalities in the last years underwent many changes, especially from the administrative and budget perspectives. In particular, they had challenges due to the reduction of resources and stricter control from the central state. In addition, organisations in scope had to go through a reform imposed from the Province of Trento which pursued an ‘associated management’ system among small municipalities. All the changes introduced in the last years make Italian municipalities a good case study for investigating resilience and execution traits. Data and information for the case study were collected in two ways: a questionnaire aiming to investigate mainly execution and resilience characteristics, and performance indicators to measure the level of ‘success’. The questionnaire

5.1 Summary of the Approach and Conclusions

271

was sent both to the political and administrative representatives of municipalities. The answers were given either via email or through a face-to-face meeting. In total 41 answers to the questionnaires were collected, that means that 51% of the people contacted completed and sent it back. The second source of data was represented by performance indicators publicly available either at the Italian national level or at the level of the Province of Trento. A focus group was organised in order to define what the most suitable indicators to measure resilience and strategy execution in municipalities are. Four experts from the university of Trento participated in the focus group and suggested to use three set of indicators: six different financial metrics in the years 2007–2015, the budget surplus for the year 2016 and the spending review targets given to municipalities by the Province of Trento. The experts, in addition, helped to build two econometric models to explore relationships among the indicators. The approach adopted to analyse data is mainly deductive. A series of graphical and analytical tools were used to explore relationships and compare groups. The approach consisted of three main steps: analysis of the results of the questionnaires, study of performance indicators and econometric models, and investigation of the correlation between information from the questionnaires and performance indicators. Reviewing the information collected on the field trough questionnaires, it was observed that that there was a significant correlation between resilience characteristics and both execution traits and results achieved. The implementation of a performance management system is the area with more improvement opportunities in strategy execution. Concerning resilience characteristics, municipalities might concentrate more on the development of employees’ skills. There are limited opportunities for job rotation and people are not challenged to improve their competencies. Performance indicators show that none of the municipalities is clearly the best or the worst considering all the metrics taken into consideration. However, some interesting insights are discovered. For example, three indicators were correlated with each other (collection capacity, spending capacity and surplus) and they might be used to evaluate the effectiveness of administrative processes. In addition, the new law regarding budget surplus in the Province of Trento should have encouraged municipalities to change their management methods. In reality behaviours haven’t transformed much: municipalities with more efficient administrative processes and with good collection and spending capacity continue to perform better in the budget surplus indicator. The last part of the analysis attempted to correlate the information of the questionnaires with the performance indicators of the municipalities in scope. One

272

5

Conclusions and Outlook

main finding from the investigation is a correlation between an efficiency indicator (the percentage of net actual versus standard requirement expenditure) and execution and resilience characteristics assessed through questionnaires. Municipalities with higher scores in the execution skills are more efficient. Instead, resilience scores have an opposite effect on the equation: the higher resilience skills are, the higher the spending is. That might be explained by the fact that resilient organisations need to have redundant capacities and systems in order to be ready to cope with external shocks. This buffer capacity might increase the running costs to guarantee flexibility and ability to adapt to changes. The last part of this research was dedicated to providing suggestions to municipalities to strengthen execution and resilience skills. The recommendations are based on the literature review and on the insights collected through the case study. First, the theoretical frameworks are reviewed and adapted to suit the needs of public organisations, especially municipalities. Then practical tips are given in order to tackle some the weaknesses of the organisations in scope.

5.2

Answers to the Research Questions

The research aimed to answer three main questions: • Question 1: in the public sector, are resilient organisations more effective at executing strategy? • Question 2: are the traits of resilient organisations similar in the public and private sectors? • Question 3: how can public organisations improve their resilience and strategy execution capacity? – Question 1: resilience and strategy execution The questionnaires used in the research confirm that municipalities showing a higher level of resilient traits present stronger strategy execution characteristics and have a perception of having obtained better financial results. From this perspective, a positive correlation between resilience, strategy execution and adaptation to change exists. Resilience and strategy execution characteristics have an opposite influence on one of the performance indicators of efficiency: net spending versus standard. Execution abilities have a positive correlation with efficiency, while an increase in the level of resilience leads to a higher spending in organisations. There are no

5.2 Answers to the Research Questions

273

other significant correlations between data collected through the questionnaires and the financial indicators studied. Municipalities considered in this research (Province of Trento and between 1,000 and 2,000 inhabitants) have similar behaviours to other municipalities of different sizes and in different locations. Thus, the recommendations made can be extended, with some limitations, to all municipalities in Italy. – Question 2: resilience in public and private organisations Resilience is the ability to adapt to changes or, according to a more extended meaning, the capacity to foresee changes and take appropriate actions. Public and private organisations need to master various skills to develop these characteristics. The actions to consider to strengthen resilience are, in most cases, similar. However, there is a fundamental difference between private and public sectors. In the private sector, companies need primarily to take into consideration the interests of shareholders, while public organisations have to understand and deliver value to multiple, and often differing stakeholders. In order to survive long term, forprofit organisations need to make sure they deliver financial value. In contrast, non-profit organisations need stakeholders to guarantee their legitimacy in order to continue to exist. Legitimacy is built through trust and value creation. Following Public Value Management approach, public organisations, such as municipalities, have to work in three directions: expanding support and authorisation, creating public value and building operational capability. They have to focus more than private companies on developing relationships with stakeholders, on demonstrating values and ethical behaviours, and on being a credible partner. Public entities, in contrast to private ones, can also survive without being financially efficient. There are many similarities between the characteristics of resilient organisations in the public and private sectors. For example, both types have a culture of empowerment and involvement of employees. They adopt a system to evaluate and manage risks by implementing the right organisational approach and by developing situation awareness capacity. Both make efforts to continuously improve and have a process by which to manage knowledge and lessons learnt. – Question 3: areas of improvement Public organisations could improve their resilience and strategy execution traits by strengthening some specific characteristics. Every organisation is different and

274

5

Conclusions and Outlook

should focus on its own priorities. This research has found some areas of improvement for municipalities. These areas could be also considered by other entities in the public and private sectors. To improve execution ability, municipalities might expand their ways of developing strategic and tactical plans. They should start from the desires of their stakeholders and translate them into objectives. Objectives need to be communicated and cascaded down within the organisation. An effective performance management system is required to monitor progress and to align everyone. Sometimes initiatives, developed to reach objectives and create value, present a high level of complexity. In such cases, it is important to have a structured way of managing the initiatives, for example by adopting simple tools from the project management methodology. Becoming a ‘learning organisation’ might offer a strategic advantage to municipalities and other public entities: the first step could be to introduce a knowledge management system. Municipalities, to become more resilient, could improve their human resource management system, foster innovation, create a strong network of stakeholders and strengthen personal resilience of employees. Human resources, sometimes don’t receive the right level of attention in public organisations. Resilience relies upon empowerment and the involvement of people. Employees need to own the right technical and soft skills to support execution. Managers have to adapt their role from being order givers to coaches and facilitators. The structure of organisations has to be lean and flexible to adapt quickly to changes. Innovation should not be seen as a threat, but as a vital factor in future operational capacity. All stakeholders in the public and private spheres have to be involved as far as possible in decision making and in win-win collaborations. People in the organisation are required to develop the right mind-set and competencies to understand and to support cultural transformational change. Strengthening individual resilience skills might be the key to boosting the transformation of public organisations. Senior managers need to develop change management skills in order to help public organisations to become more resilient and able to implement strategy effectively. In municipalities, the two most critical roles are the mayor and the town clerk. They lead, respectively, the political and administrative bodies. Mayors are required to manage stakeholder relationships, while town clerks need to create an efficient and effective administrative apparatus. Municipalities can perform most effectively only if the two bodies are aligned and are able to cooperate.

5.3 Limitations of the Research and Future Studies

5.3

275

Limitations of the Research and Future Studies

It is important to discuss the limitations of this thesis for two reasons. The first is to provide a framework to better interpret the results presented. The second reason is to help future researchers to overcome some of these limitations. The main types of limitations are the following: • • • • •

The sample consists of a particular type of public organisations Performance indicators considered are only financial Limited number of answers to questionnaires No interactive methods and tools were used to assess resilience capacity Political elections and changes in people managing municipalities might influence results • No empirical assessment of the effectiveness of the recommendations • Lack of prior research studies on the topic First of all, a sub-group of municipalities in Italy is chosen as being representative of public organisations. Starting from the analysis of this sub-group, the study sought to generalise some of the conclusions drawn. Choosing a homogenous sample of organisations helps with comparisons, but it increases the risk that conclusions are not generally valid. To partially overcome this limitation, the analysis was extended to other municipalities. It would be interesting to understand if the suggestions made for municipalities in the Province of Trento apply to other public organisations (schools, police, etc.) and to other countries. Performance indicators were chosen in an attempt to identify an objective measure of resilience and strategy execution. That limited the study only to financial results of municipalities. Public Value Management suggests using a multidimensional system to understand performance of public organisations. The system should consider the main goals of the public sector which are related to increase legitimacy and trust. From this perspective, the choice of financial indicators helps to measure only partially the achievements of municipalities. It is therefore recommended, for future research, to select a balanced set of indicators that provide information on both financial and non-financial results. Questionnaires are a good tool for interacting with people operating in organisations and collecting useful information. However, they are influenced by the subjectivity of individuals and by the interaction with interviewers, in the case of face-to-face discussion. As demonstrated in the analysis, people in political and administrative roles have significantly different opinions. Due to the limited number of questionnaires per municipality, a single person might have a substantial

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5

Conclusions and Outlook

effect on the results. To minimise this impact, future researchers might consider interviewing more people from each organisation and developing additional questions which leave limited space for subjectivity. Previous researches have used workshops and scenario exercises to assess the level of readiness of organisations to manage crises. These tools fulfilled the dual purpose of assessing resilience and training people. This thesis has focused only on performance indicators and questionnaires to collect information. Adding interactive methods, such as workshops, might help the research to better identify organisational dynamics relating to such complex topics. The ways in which small organisations, such as municipalities with a population between 1,000 and 2,000 inhabitants, operate is influenced by single individuals. Elections occur every five years and town clerks sometimes move to different municipalities. Thus, the strategy, culture and goals of municipalities might vary in the medium-long term due to turnover in personnel. This thesis considered a period of ten years, which could incorporate changes in political bodies and administrative managers. Researchers, to overcome this limitation, could select a shorter period of time or select different organisations, since bigger municipalities or other public organisations, which are not subject to political elections, may have greater continuity in the operating model. The frameworks and recommendations to strengthen the ability of municipalities to execute strategy and adapt to changes are based on theoretical considerations. It would be interesting to carry on further studies applying some of the ideas discussed in a real case scenario. Assessing the impact of the changes on one or more municipalities would make the theory more robust and might lead to adjust some of the considerations. Another limitation is the lack of extensive literature on the topic: both regarding specific findings on execution and resilience for public organisations and on management and characteristics of Italian municipalities. On the one hand, this research might help to create new knowledge, yet on the other hand it doesn’t support comparison with previous literature. Future papers might help to challenge the approach taken and help to underline weaknesses and strengths of this thesis. In summary, future studies could help to overcome some of the limitations and enlarge the focus in various ways. Researchers might study other types of public organisations to see if the hypotheses and results from this work are still applicable. Alternatively, they could expand the current research by analysing results using additional indicators on top of financial measures. They might also review single municipalities in depth, by interacting with people through workshops, scenario exercises and case studies. Scholars could help some organisations to

5.3 Limitations of the Research and Future Studies

277

implement the suggestions presented to strengthen resilience and execution traits. If the recommendations support the public sector to provide additional value to stakeholders, that would be a positive contribution to society arising from this research.

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