Paper for the Annual Meeting in the Danish Association for Political Science, October 2013. First draft. Please do not quote.
Author:
Eva Moll Sørensen Post.doc. University of Copenhagen, Department of Political science ems@ifs.ku.dk 1

Performance measures are among the ‘doctrinal components’ of the New Public Management (Hood 1991). As such, they have become an element in how central governments steer local levels of the public sector, at least among the core NPM reformers in the Anglo-Saxon world and the neo Weberian reformers in North-West Europe (Pollitt & Bouckaert 2011, OECD 2008). England has been famous for the extensive use of performance indicators, among others in its ‘Comprehensive Performance Assessment’ (CPA) of local authorities, whereas other reforming countries have used performance indicators in less comprehensive and centralised ways. The differences have been attributed to cultural and institutional differences, but it has also been discussed whether English style centralised PI-based performance regimes may be developed later in more consensual and decentralised countries - such as the Netherlands (Pollitt et al. 2010) or indeed the Nordic countries. Denmark belongs to the more moderate users of performance indicators, but in the latest decade there have been several initiatives from central government actors to intensify the use of performance indicators in the evaluation and steering of local governments. For example, performance evaluation was brought on the agenda in connection with the recent Structural Reform, and a so-called Evaluation Institute for local governments was established. This did, however, not immediately lead to path-breaking change in the direction of indicator-based performance evaluation of local governments. In fact, the new institute found that English-style comprehensive performance assessment was fraught with validity and legitimacy problems and of limited relevance to Denmark (KREVI 2007). However, six years after the Structural Reform there are some signs of change. The small Evaluation Institute has been integrated into a more potent governmental institute for analysis of local governments, and recently the new institute has published comparative measures of the aggregate service levels and productivity of each Danish municipality. In some ways, the method resembles the comprehensive performance assessment which was not deemed relevant as a model for Denmark a few years earlier. In this paper, it is discussed whether (or to which extent) the performance regime for Danish municipalities has indeed changed from disaggregate and decentralised uses of performance indicators to centralised and comprehensive performance evaluation of local governments. It is also discussed why such change was held back in the short term after the implementation of the Structural Reform but became more possible in the medium term. The discussion is approached from the perspective of historical institutionalism; while it is to be expected that the use of 2

performance indicators is subject to a good deal of path dependency, it should also be possible to understand how transformative changes are made possible by a changes to the political and institutional context and new ideas. In the following, the theoretical framework is presented (section 2) followed by the methodology (section 3). The next three paragraphs contain the analysis, consisting of a descriptive account of the case (section 4), an answer to the question whether we have seen a centralised performance regime (section 5) and a discussion of why (section 6). Section seven contains the conclusion.
Performance measurement in the public sector is the subject of a vibrant research community. There are discussions about the advantages of basing public management on quantitative performance indicators (e.g. Kusik & Rist 2004; Ejler et al. 2008), the merits of different measurement methods (e.g. Behn 2003; Andrews et al. 2006), but also about the negative side-effects and constitutive effects of performance indicators (Smith 1995; Thiel and Leeuw 2002; Dahler-Larsen 2008). There are comparative contributions that use institutional and cultural differences to explain models of performance measurement and management (e.g. Bouckaert & Halligan 2007; Pollitt & Bouckaert 2011, Kristiansen 2011), and in recent years there has also been an ambition to address the politics of designing and using performance indicators (van de Walle, van Dooren & Wegrich 2011). The ambition of this paper is, in addition to analysing recent developments in Denmark, to explain how performance regimes are shaped by stable institutional patterns but also how political openings arise for path-breaking change. In order to do this, I will first argue that governments may have more or less centralised and comprehensive performance regimes for local governments. Then I will argue that the degree of comprehensiveness is likely to depend on relatively stable institutional factors such as types of government, state structures and the economic ‘weight’ of local governments. However, even such elements may be subject to change, and windows may open for path-breaking change of the performance regime. Therefore, the explanatory factors consist of both stable institutional factors and of the political occurrences in short- to medium windows for change.
The notion of a performance regime is inspired by the terminology in the literature on performance steering between central and local levels of the public sector (e.g. Murphy et al. 2011; Pollitt et al. 3

2010; Talbot 2010). In this paper, the notion will be understood as referring to how governments calculate comparable indicators of local government performance, how these indicators are used to evaluate local governments, and how the process is institutionally anchored in a government body. At present, there is little in the way of a comparative academic literature on performance regimes for local governments. In a relatively recent OECD report, it was found that indicator systems are used to measure and monitor subnational public services and spending in at least nine different countries (excluding the UK) (OECD 2008). Some of those countries were found to have general indicator systems for subnational governments, including Australia, Denmark, Germany (the Land Berlin), Ireland, the Netherlands and Norway. Judging from this report and the academic literature, it is particularly the ‘core’ NPM reformers in the Anglo-Saxon world and the neo-Weberian reformers in North-West Europe (Pollitt & Bouckaert 2011) that have performance indicator systems for local governments. The systems which are described in the literature do generally not seem to rival the centralism and comprehensiveness of the CPA (e.g. Askim 2007; Johnsen 2007, xx). The UK’s performance management policies under Labour may indeed be seen as an expression of ‘British exceptionalism’ (Hood 2007). Nonetheless, I will use the CPA as a ‘benchmark’ for centralism and comprehensiveness in my analysis of the Danish performance regime for municipalities. The CPA was in some ways a culmination of a development, which began under the Conservative governments in the 1980s . They introduced several schemes which entailed that performance indicators became part of the regulation of local governments (Sanderson 2001), and they established a set of independent regulatory authorities and inspectorates, including t he Audit Commission which regulated the economic performance of local authorities. When Labour came to power in 1997, it rolled back some of the market-based Conservative policies but accelerated the policies based on performance measurements (Martin et al. 2010). In relation to local governments, it established the Best Value program. This program regulated local performance procedures, linked them to a set of national ‘Best Value’ performance indicators and made the regime subject to audit by the Audit Commission (Boyne 2002, Game 2003). After the re-election of Labour in 2001, the government decided to integrate Best Value and a number of service-specific assessments in an assessment regime that would address the performance of the whole local government; Comprehensive Performance Assessment (Martin 2011). The regime existed from 2002 to 2009 when it was superseded with a new regime for local authorities and their key delivery partners; 4

‘Comprehensive Area Assessments’. However, at the change of government in 2010, the system was called an expression of ‘Labour numerology’ and over-centralism, and it was abolished (). CPA had several features which makes it suitable as a benchmark for centralisation and comprehensiveness. First, it was institutionally anchored in a large government organisation 1 . The Audit Commission had the status of an independent government body, but it was regarded as a strong central administrator of the government’s performance management policies (Kelly 2003) (tjek op). Second, CPA was based on a complex aggregation of several elements of performance evaluation. The two main elements were an assessment of current performance and an assessment of authorities’ ability to improve (Haubrich and McLean 2006). The assessment of current performance was based on a complex weighing of performance scores in six service areas and an assessment of use of resources and a corporate assessment (KREVI 2007, Audit Commission xx). Third, and not least, the whole aggregation exercise resulted in the categorisation of each local authority into 5 classes of performance; excellent, good, fair, weak and poor. The performance scores were used to steer local governments through the publication of performance scores and through mechanisms such as rewards for well-performing local governments and interventions into those which were found to have poor performance (e.g. firing of senior staff). It may thus be argued that the regime represents central steering based on summative evaluation (i.e. one that prioritises judgment of final results over learning-oriented identification of organisational processes). In the following, the three characteristics will be used as indicative of a centralised and comprehensive performance regime for local governments: 1) institutional anchoring in a well resourced government body, 2) aggregation of performance indicators across service areas and performance aspects, 3) summative evaluation and steering by central government.
The performance regimes for local governments can be expected to depend on relatively stable cultural and institutional characteristics of each country. Is, however, also to be expected that more contingent political factors will play a role. For example, political election results or increases in resource pressure may create windows for radical changes, especially in the presence of new ideas. In the following, I will discuss the reasons to expect a path of disaggregate and decentralist uses of performance indicators in Denmark, but also why we may expect path-breaking change. 1 In 2009, xxx were working in the Audit Commission. Out of this number, xxx were working with Comprehensive Performance Assessment. 5

Path-dependency
Within the literature on public management reform, there are many who use cultural or institutional factors to explain how why countries follow distinctive reform ‘trajectories’ or ‘paths’ - also with regard to performance management. For example, it is argued that the Nordic countries (i.e. also Denmark) have egalitarian and consensual cultural traits which favour performance measurement models that are characterised by being stakeholder oriented, having a decentralized and bottom-up approach, and working flexibly and loosely coupled to formal objectives (Johnsen & Vakkuri 2006). It may also be argued that formal institutions, such as the type of government or the degree of centralization of state structures, create biases for certain types of performance regimes (e.g. Pollitt and Bouckaert 2011, Pollitt et al. 2010). For example, it may be argued that Denmark has political institutions which favour coalition- and minority governments, and this is likely to lead to a consensus-seeking style of performance policy making with room for influence from organised interests such as the local government associations (Sørensen 2013). It may also be argued that the Danish public sector has institutional features, such as ministerial government and strong local self-government, which create a bias towards disaggregate and decentralist uses of performance indicators (Sørensen 2013). It may, however, also be argued that Denmark has a feature which leads to a pressure for intensive and centralised performance management; i.e. the high degree of delegation of public tasks to local governments. Danish local governments spend over half of the total public budget, and this makes it highly salient for the central government to ensure a high level of performance in local governments in terms of both service quality and productivity. All in all, there are strong cultural and institutional reasons to expect that the Danish performance regime for local governments will remain on a path characterised by disaggregation of different aspects of performance, a formative rather than summative evaluation approach and decentralist use of the performance indicators. However, it is also to be expected that there will be pressure in central government towards more intensive performance steering of local governments. In the following, it will be discussed when we may expect openings for path-breaking change.
Windows for change
In historical institutionalist explanations of performance regimes, it is expected that countries will remain on their different paths for long periods of time. The notion of development paths is 6

supplemented by that of ‘punctuations’ or ‘critical junctures’ (e.g. Pollitt et al. 2010). This refers to the idea that path-dependent periods are interrupted by short periods of radical change. Critical junctures can be understood as exogenous shocks which lead to a ‘break-down’ of existing institutions, leaving more room than usual for political action and conflict over the shape of new arrangements. It is, however, often criticised that institutionalism appears over-deterministic during the path-dependent periods and explains too little during punctuations (Thelen & Steinmo 1992). It is, however, also possible to understand the punctuations as a ‘window of opportunity’ for strategic actors with a new idea or a problem to be solved (Pollitt & Bouckaert 2009: 19). In Kingdon’s work on agenda-setting, a window of opportunity refers to a short-term opportunity which arises for political actors to bring new policy proposals on the government’s decision-agenda by bringing together three independent ‘streams’; problems, policies and politics (Kingdon 2003). In other words, the window of opportunity is an occasion to propose a policy idea as solution to a problem and find the necessary political support. It may be argued, from an institutionalist perspective, that agenda-setting is not equal to accomplished change. However, the idea of a ‘window of opportunity’ makes it possible to analyse potentially path-breaking policy-making within a relatively stable institutional framework. With a point of departure in Kingdon’s framework, it is to be expected that change opportunities arise because of occurrences in the political or problem streams (Kingdon 2003). It could for example be expected that new election results can open a window for change - particularly if it leads to a new type of government (e.g. a majority rather than minority government) because this also alters the institutional framework for policy-making. Change can also arise because of occurrences in the problem stream; for example indications of performance failure or higher levels of performance pressure may bring performance measurement on the agenda. However, according to Kingdon, problems and politics are not enough to bring an issue on the agenda; it is also necessary to have policy ideas, which can be presented as a solution. In other words, ideas have an independent explanatory value, which is consistent with historical institutionalism (e.g. Hall 1993). All in all, the combination of institutionalist expectations and the notion of a window of opportunity should make it possible to explain both continuity and change in the performance regime for local governments. Windows are likely to arise as a result of changes to the type of government, changes to institutional structures and changes to the level of economic pressure. However, it is also likely 7

that cultural and institutional biases are likely hold back the process of change, and that new policy ideas are a necessary ingredients in the process of change.
The paper is based on a single-case study of the development of the Danish performance regime for municipalities in the period 2001-2013 (cp. Sørensen 2013). The case is relevant from an international perspective because Denmark has given more functions to the municipal level than any other country 2 , and the municipalities also have a high amount of financial and task-solving discretion 3 . The municipalities’ performance is therefore of central importance to the government, but they also have a high level of influence on national policy-formulation and implementation. The case therefore illustrates how performance politics play out when there is both a high level of pressure on improving local performance and a high level of local influence. The focus of analysis in is on the establishment of a governmental Evaluation Institute for local governments and its development of comparative performance indicators for the municipalities. The study is a relatively detailed process-tracing analysis of the development since the Structural Reform, which was decided in 2004 and implemented in 2007. The analysis is based on policy documents, newspaper coverage evaluation reports and 10 different qualitative interviews with participants in the policy process from the initiation in 2004 to the merger in 2012. The participants represent the ministries of Health- and Interior and Finance, LGDK, and the managers of the relevant institute in 2006-2010 and 2010-2012, respectively (for more detail see Sørensen 2013). In this paper, the English CPA regime is used as a ‘benchmark’ to assess the degree to which the disaggregate and decentralist Danish approach to performance measurement and steering of the municipalities has changed tracks during the most recent decade, giving rise to a more comprehensive and centralised performance regime. It is then discussed why the most recent decade has given rise to more change to central-local government relations than the previous decades.
Denmark has a history of minority coalition-governments and consensus-seeking and corporatist policy-making, and it also has a high level of horizontal and vertical decentralisation, leading to a 2 Measured through… 3 Dokumentation 8

negotiating style of implementation. Particularly the municipalities have had a high level of influence on national policy-making and implementation through their association, LGDK (Blom Hansen 2002). Until recently, the government’s economic steering of the municipalities was characterised by high levels of financial discretion under broad framework agreements with LGDK. Its policy-specific steering was characterised by a mixture of relatively broad framework laws and more detailed regulation of local tasks in some policy areas, but generally Danish municipalities have had high levels of discretion, also with regard to their organisation and carrying out of tasks (Andersen 2010). With regard to performance measurement, Denmark has been characterised by a relative absence of governmental regulators and inspectorates of local governments, disaggregate performance measurement and a decentralist uses of performance indicators. However, during the latest 10-15 years, Denmark has experienced a number of potentially path breaking events in central-local government relations. The first event occurred in 2001 when the elections led to the formation of a new type of government; for the first time in several decades, the government had a stable parliamentary majority to the right of the political centre and did not rely on consensual policy-making across the centre of parliament. This event played a major role in opening the window for a second major event; namely when the government in 2004 agreed with its supporting party in Parliament to carry out a large Structural Reform of local governments. The third event occurred in 2008 when the international financial crisis arrived to Denmark. During the next few years significant changes were made to the financial framework of local governments in order to gain better central control of local spending. It may thus be argued that the latest decade or so has presented several windows of opportunity for changes of the performance regime.
Compared to many other states, Denmark does not have strong institutions for inspection or evaluation of local finances or services. Until the Structural Reform, there was no government body, which was responsible for evaluating the performance of local governments. Instead, the evaluation ‘market’ was divided between the local governments’ own research institute, a few sector-specific research and evaluation institutes and a number of private consultancy bureaus. There was in other words no institution, which was similar to the English Audit Commission. 9

Denmark has relatively many statistics concerning local governments and their services, and many statistics have been produced since the 1970s. They are, however, not collected in a coordinated procedure making it possible to couple economic and results data with much precision. Denmark also has a relatively long tradition of comparative ‘key figures’ for local governments. In the 1980s, the Ministry of Interior began publishing a set of around 50 ‘municipal key figures’ covering structural and financial conditions and expenditure, capacity and staff in a few service areas. The system allows the individual municipality to compare itself with a national or regional averages, and it can also handpick individual other municipalities for comparison, but the system contains little information about the results of local services, and it serves as a benchmark and starting point for local decisions rather than as a central judgment of relative levels of performance (Council of Europe 1998, OECD-PUMA 1997). From 1987, a private consultancy bureau started producing another indicator set, the ECO Key Figures. The system was based on comparisons of each municipality with comparable groups in each area of expenditure. This increased the normative impact of the indicators (KREVI 2009), but this system also contains relatively little information on the service quality, and it is not coupled to governmental objectives or evaluation criteria. To the extent that the government did in fact publish summative indicators of local service results, this was done by sector-specific authorities such as the Labour Market Agency or the Ministry of Education. At the time of the Structural Reform, it seemed utopian to Danish evaluators to try to calculate aggregate measures of the productiveness and effectiveness of local governments in several policy areas in line with Comprehensive Performance Assessment (cp. KREVI 2007). As argued above, the relative absence of centralised performance indicators can be seen as an outcome of the Danish institutional context. However, it is also to be expected that opportunities for change would arise out of the combination of new types of government, institutional reform and economic crisis, which characterised the previous decade. In the following, we shall first consider the change process which was initiated in connection with the Structural Reform. Then we shall consider how the financial crisis put comparative performance indicators back on the agenda.
The Structural Reform was not part of the Conservative-Liberal government’s program when it was elected and formed in 2001, but it soon became a central element in its administrative policy. The 10

reform, which was based on a narrow parliamentary majority 4 , did away with the 14 counties and replaced them with five regions with a much narrower portfolio and without taxing rights. The municipalities were amalgamated, reducing their number from 271 to 98. At the same time their task portfolio was increased, and the level of equalisation was strengthened. The proposal for an Evaluation Institute was part of the government’s proposal for a Structural Reform in April 2004 and the political agreement with the Danish People’s Party in June 2004 (Regeringen 2004, Regeringen og Dansk Folkeparti 2004). The intention was that the new institute, under the Ministry of the Interior and Health, would publish ‘comparable measures for service and quality’ and make it possible to learn from the best (Regeringen 2004). Some participants saw the idea about an Evaluation Institute as a prolongation of a discussion between the ministries of Finance and Interior and LGDK about a governmental institute for comparative efficiency analysis (Sørensen 2013: 202). Until 2004, LGDK had been able to veto the idea, but the Structural Reform presented an occasion to circumvent the institutionalized cooperation with LGDK and gain the public support of the Prime Minister for the idea (Sørensen 2013: 206). The initiative came from the Minister of Health- and the Interior. It can be interpreted as a way to carry through his ideas about comparative performance measurement – but also as an expression of institutional ‘capacity-maximizing’ interests in his ministry. However, in the decision-making phase, the proposal met resistance from several sides. The main points of critique were that the institute could become a ministerial control organ and lead to a standardization of methods. The government made a number of concessions. For example, the independence of the Evaluation Institute was accentuated, and the institute was given the mandate to evaluate the government’s own regulation of local governments. At the same time, the government’s internal support for a new institute under the Ministry of Health and the Interior turned out as somewhat reluctant, and apparently the Ministry of Finance and LGDK were able to find agreement on the point of view that the institute should be small (Sørensen 2013: 236). In the end, several modifications were made that were meant to accommodate LGDK. For example, the Institute was given a modest financing, and LGDK was given promises that the institute was not meant as an auditing institute for individual municipalities, that it should also address the government’s practices, and that some of its analyses should be commissioned from other institutes 4 Bredt flertal for mange elementer men ikke for de væsentligste 11

(including the local governments’ own research institute, AKF). When the law was passed in 2005, the institute was almost of symbolic size, and its role was described in broad and unclear terms. In the implementation phase, the institute was even further removed from the role as the governmental performance evaluator. During the institute’s first years of existence, the task of producing comparative performance indicators was postponed in favor of more complex causal analyses and a role as evaluation expert for the municipalities. This development reflected a strategy to win accept and cooperativeness in local governments, but it was also an expression of a professional skepticism with regard to the organizational effects of summative performance indicators (Sørensen 2013: 251-252). As a reflection of the institute’s reluctance to take on a role as governmental organ for comparative performance assessment, the share of reports published from the institute in 2008 and 2009, which contained quantitative comparative analysis of local governments, fell under 20 % (Sørensen 2013: 257-258).
The end of KREVI
Although the Structural Reform presented an opportunity to overcome LGDK’s resistance, the result was far from the intended governmental institute for indicator-based performance evaluation. However, the original ambition behind the institute was not forgotten. In a ‘status report’ from 2010, the institute’s sponsors criticized its practices in a number of areas, such as the absence of comparative performance indicators, an over-focus on the government’s regulatory practices and to little expertise on the task areas (Deloitte 2010). In 2010, the institute was given a new board and a management with closer links to the government and LGDK, and the institute took on the task of producing comparative indicators and cost effectiveness analyses. Shortly after, it was decided to merge the institute with two other institutes under the Ministry of Interior 5 . While the intention of this decision seems in line with the government’s original ambition to create a potent institute for comparative evaluation, its result was still open when the parliamentary elections in 2011 led to a change of government. At that point in time, the merger could be expected to lead to an effective closure of the institute, which had not been a favorite of the center or left parties. It is, however, also possible that the merger would reinforce the first modest step towards a new kind of performance regime; a Danish version of Comprehensive Performance Assessment. 5 which had now been reconfigured as a Ministry of …. 12

In the following, the development of the new institute will be interpreted in the light of the financial crisis and its role as a second window of opportunity for centralized performance assessment.
The financial crisis hit Denmark from the autumn of 2008. Over the next year, GDP fell with 9% and unemployment rates rose from around 2% to a level of around 6 % (Finansministeriet 2012). The crises also affected the fiscal balance, which changed from a surplus of almost 4% of GDP in 2008 to deficits of an expected xx % in 2010. The government presented a ‘Resurrection Package’ in 2010, which was meant to bring down the deficit under the 3% limit of the Maastricht Treaty. In connection with the Resurrection Package, the state was required to cut back its budgets. One of the strategies was to abolish the so-called VAT foundation, which partly financed the Evaluation Institute and two research institutes for local governments. Instead, all three institutes were to be financed through the Ministry of Health and the Interior, and in the summer of 2011, the Minister announced his intention to merge the three institutes. The decision was not effected until the parliamentary elections in the autumn of 2011, which led to a new centre-left coalition government. However, the idea was taken over by the new government which presented its legislative proposal in March 2012. The proposal described an ‘analysis- and research’ institute with the mission to promote quality development, better resource use and management in the public sector. The institute would be an independent governmental institution with a board consisting of ministerial representatives, representatives of the local government associations, external experts and an employee representative. The new institute would have a total funding of 35,4 mil. DDK – 13 mil. less than the three existing institutions together. It would, however, also be allowed to attract funding from research foundations and other sources. In the policy-formulating phase, the discussions primarily concerned the institute’s independence, its mandate to evaluate the effects of government regulation and its mixed status as an institution for analysis and research. During the parliamentary negotiations, all parties expressed their support for the intentions of the new institute, but the conservatives, liberals and Danish Peoples Party criticised that the institute did not have representatives from private business on its board, and for this they chose to abstain from voting. The new institute, which was established in 2012, was given a well-known and respected economist as board chairman and another high-profiled economist and former member of the independent 13

Economic Council as director. The new institute profiles itself as possessing a combination of economic overview, independence, high-quality research, task-specific and methodological expertise, data and usability. Apart from its task-specific areas of expertise, it also has two main cross-cutting themes; productivity and welfare technology. Furthermore, the institute administers several sets of performance indicators, including the above-mentioned ECO Key Indicators and a set of indicators for the municipalities’ financial management, which were developed by the Evaluation Institute. All in all, the new institute seems more tailored to producing the knowledge its sponsors in government finds relevant, including comparative indicators of local performance. The new profile also seems to have translated into the institute’s practice. The best example so far has been a benchmarking analysis of the municipalities’ productivity and service levels, which was commissioned by the so-called Productivity Commission for the public sector (Wittrup et al. 2013a, 2013b). The analysis uses information from different statistical sources to calculate an index figure of the total service level in each municipality relative to other municipalities. The analysis was first published in June 2013 in the form a report, which presented an aggregate potential for productivity improvements in all municipalities. The analysis generated a good deal of public interest and discussion, and a few months later, it was decided that the index figures for each municipality should be published. In other words, the institute chose to publish comparative indicators of the aggregate service levels and productivity of 94 municipalities.
The pattern of change
As argued above, the results of the decision to establish an Evaluation Institute were rather modest when judging from the perspective of 2009 or 2010. Although the government’s proposal to erect a permanent performance-evaluating institute was radical, the size and role of the institute were so modified that it did not add much to the existing field of consultancy bureaus and key figures. However, the initiative was not rolled back to zero, and in 2010 the chance arose to take one more step towards its ambition of letting a governmental institute expose the municipalities to comparative analysis of their service performance and productivity. In other words, what might have ended up as a small aberration from the path actually seems to have turned out as first and second steps in a gradual transformation of the performance regime. In the following, it will be discussed to which extent the new institute and its practices do indeed look like a move towards Comprehensive Performance Assessment of Danish municipalities. 14

When the Structural Reform was used as an occasion to put performance evaluation on the agenda in Denmark, there were no official references to the Audit Commission or CPA. There are, however, many indications that the English performance regime served as an inspiration for Danish policy makers, for example with regards to the publication of comparative performance rankings. When the Evaluation Institute had been established in 2007, one of its first publications concerned the lessons which could be drawn from CPA for the performance measurement of local governments in Denmark. The report was, however, rather negative in its conclusions, and in its summary of main conclusions it was argued that 1) comparative indicators in Denmark should take better account of differences in the economic conditions experienced by local governments, 2) it does not seem fruitful to summarise the quality of different services with one aggregated score for each municipality and 3) the municipalities are likely to behave strategically in relation to comparative performance indicators which are used for steering purposes (KREVI 2007). In the following, it will be discussed whether this rejection of CPA as a model for Denmark has been modified, and how this reflects changes in the political and institutional context of performance evaluation and/or in the technology of performance evaluation itself. In the following, the discussion will focus on the following characteristics of CPA: 1) its institutional anchoring in a well-resourced government body, 2) aggregation of performance indicators, 3) summative and steering-relevant evaluation by central government.
Above, it was argued that a main characteristic of CPA in England was its institutional anchoring in a well-resourced and high-profiled government body, the Audit Commission. In the Danish case, the institutional anchoring of governmental performance evaluation was one of the controversial issues in connection with the establishment of the Evaluation Institute. To LGDK, the establishment of a government evaluator under the Ministry of Interior represented a threat to local autonomy – and to its own position as mediator between the ‘Castle’ of central government and the ‘Machine Room’ of local governments, and in the phase of policy-formulation it tried to find support for its own ‘brick-less’ model of evaluation. At first, it almost succeeded in avoiding having governmental performance evaluation put into bricks. However, after the institute had been established at a rather long arm’s length from the ministry, LGDK volunteered to commit some of 15

its own ‘VAT foundation’ means for the institute which grew in size from the original xx mil. per annum to xx mil. before it was merged in 2012. In the status report from 2010, one of the main criticisms of the institute concerned its lack of sector-specific expertise and econometric capability; something which may to some degree be attributed to its small volume. It was also was criticized for having too little focus on its task of producing comparative performance indicators, for directing the spotlight of evaluation too often on central government, and not least for lacking political sensibility and identification with its ‘sponsors’ in the government and in LGDK. These points were too some degree addressed with the change of management in 2010, but the institute remained relatively small. The merger in 2012 could therefore both be interpreted both as a step towards or as a step away from institutionally anchored governmental evaluation. On the one hand the new institute has a relatively broad mission of analysis and research into issues of relevance to local governments, and it is not specifically charged with comparative evaluation of local governments. On the other hand, the new institute is relatively large and has many of the capacities which were lacking in the Evaluation Institute, it is led by high-profiled people in the Danish economic profession, and its organisational structure and communication seems relatively closely coupled to its official mission. In other words, it does seem like the modest first step, which was taken with the establishment of the Evaluation Institute, has been followed by another step in the direction of more solid institutional anchoring of governmental evaluation of local governments.
Another distinguishing feature of CPA concerns its complex aggregation of a high number of different performance indicators into simple performance scores. As argued above, the idea of summarising service quality into one score for each municipality was characterised as not very fruitful by the Evaluation Institute in 2007, and it was noted that there were no plans about doing something similar in Denmark. It can, however, be argued that this is exactly what has been done in 2013 with the publication of the calculated service levels and productivity of 94 (out of 98) Danish municipalities. The report contains indicators of the overall service levels in each municipality relative to the best performing municipalities. It also contains indicators of the service levels in eight different policy areas relative to the best performing municipality in each area. The indicators are then coupled with expenditure figures to produce 16

indicators of the overall productivity of the municipalities and of their policy-specific productivity in three areas. The scores are based on a benchmarking analysis using the so-called DEA method. This means that the indicators, which are used in the analysis, are weighted in a way which is designed to give each municipality the best possible score relative to others. The method is described as a conservative method, which gives each municipality the benefit of the doubt, when it comes to attributing differences between the municipalities to either differences in productivity or to different prioritisations of services and service aspects. The analysis also uses statistical corrections of the service indicators, and the municipalities are only compared to others which resemble them with respect to socio-economic differences (Wittrup et al. 2013). In other words, the analysis is designed to take account of a number of potential criticisms of comparative performance scores and rankings. It thus takes account of some of the specific criticism of CPA such as measuring local constraints rather than performance, minimal room for local priorities and arbitrary weighting of scores (KREVI 2007: 15-20). It does, however, not take account of all potential criticisms, and the report contains a list of disclaimers from its authors (Wittrup et al 2013: 5-6). For example, it is argued that there is a lack of good service indicators especially when it comes to outcomes, which entails that the analysis may represent differences in measurable aspects of performance at the expense of unmeasured aspects. However, the authors do not draw the conclusion that some aspects of quality are less measurable than others, but rather that the existing data sources and measurement techniques should be improved (ibid: 6). The analysis does also not address the many criticisms of CPA and performance measurement more broadly for having negative behavioural effects in the municipalities. It may, however, be argued that such effects mainly arise when performance indicators are used for summative evaluation and/or steering by central government. In the following, it will be discussed to which extent this is the case.
Probably one of the main features which distinguishes the English and Danish paths of performance measurement of local governments is that Denmark has not attached its comparative figures for local governments to official evaluation standards. According to Johnsen, the ‘decoupling’ of comparative figures from governmental performance objectives is one of defining characteristics of 17

the ‘Nordic’ model of performance measurement (Johnsen & Vakkuri 2006, Johnsen 2007), and it is therefore particularly interesting whether KORA’s publication of comparative performance figures represents a ‘break’ with this tradition. If we focus on comparative indicators of municipal performance, the Danish government has been a forerunner with regard to the publication of comparative ‘Municipal Key Figures’ concerning structural and financial conditions and expenditure, and capacity and staff in the main service areas (Council of Europe 1997). The system allows the individual municipality to compare itself with a national or county average, and it can also handpick individual other municipalities for comparison. (Council of Europe 1997: 16). However, the figures have served as a benchmark and starting point for local decisions rather than as a judgment of relative levels of performance (OECD-PUMA 1997, p. 51). For example, the system has not been used to produce rankings of the municipalities or to ‘steer’ the municipalities through targeted rewards or sanctions. It can be argued that the municipal key figures represent a formative approach to evaluation which makes it possible for those organizations under evaluation to analyze their own inputs, outputs and processes rather than a summative approach to evaluation, which produces judgments of final results. With respect to the recent indicators from KORA and the Productivity Commission. It has not been the original intention to produce rankings of the municipalities, and it has also not been the intention to ‘steer’ the performance of each municipality. However, the intention has been to calculate an aggregate efficiency potential which can be used by central government in its overall dialogue with the municipalities about their economic framework. The analysis is, in other words, meant to be relevant to the government’s steering of the municipalities as much as to the municipalities’ own budgeting and rationalization procedures. Furthermore, the government and KORA chose to respond to the public interest in its analysis by publishing the individual performance scores. These scores are presented as summary judgments on the service levels and productivity of each municipality relative to others. It is difficult to argue with the positive value of having a high score. At the same time, it is difficult to interpret why a given municipality has particular size of score. KORA offers the municipalities to produce ‘mini’ reports with information about the municipalities which are used to set the stand for judging their level of performance, and it is also possible to buy a more detailed report, which makes it possible to follow the calculations behind the municipality’s 18

score. However, the calculations remain complex and probably not immediately interpretable to local politicians. It may then be argued that the new publications represent a step away from the ‘Nordic’ path of decoupling comparative figures from central evaluation. The indicators are not only a starting point for local political discussions; they also represent an official judgment of the productivity of Danish municipalities – and of each municipality. Their relevance to the dialogue between the government and the (individual) municipalities seems significantly increased with the elaborate calculations which take account of potential objections to the normative value of the figures. In other words, there seems to be a potential for increased central steering – and decreased politicization of budgeting at the local level.
The new performance regime for Danish municipalities does not equal Comprehensive Performance Assessment. It is much less centralized, comprehensive and bureaucratic. On the other hand, it is based on a benchmarking technique which may increase its viability and impact in the long run. In any case, the developments during the latest decade do, in my judgment, represent a path breaking change of the performance regime for Danish municipalities – away from a ‘Nordic’ path characterized by decentralism, disaggregation and decoupling from top-down objectives towards one characterized by centralism, comprehensiveness and coupling to top-down steering. This change was not accomplished immediately. In fact, judging from a distance of 3-4 years from the Structural Reform and the establishment of the Evaluation Institute, it looked like the initiative had been so modified that it did not change the prevalent approach to performance measurement and evaluation. However, a few years later – and after a change of government – the political intentions behind the establishment of an Evaluation Institute seem to have been realized to a much larger extent. This poses the question of how changes are accomplished despite the biases and self reinforcing mechanisms which speak for continuity in the short term. This question will be discussed over the next couple of pages.
In much of the literature, there is a propensity to explain continuity based on cultural and institutional factors, whereas political change is explained in terms of openings for more or less 19

unpredictable strategic action. In this paper, it is argued that the dichotomy between institutional explanations and windows for strategic action need not be painted so starkly. It is, to some degree, predictable from the institutional and policy process literature when openings for change will arise, and when that change will be sustained. It is to be expected that election results can lead to political and institutional change. This argument resembles Kingdon’s argument about how windows may open in the ‘political stream’, but it is also not irreconcilable with institutionalist arguments about the type of government and how it depends on both institutional rules and electoral results. In the present case, the elections in 2001 created a window for a more majoritarian type of policy-making and for a Structural Reform which was not based on parliamentary and corporatist consensus. One of the elements, which were not based on consensus, was the establishment of a governmental Evaluation Institute for local governments. It is, on the one hand, predictable that this initiative would be modified through process of policy formulation and implementation in a consensus-oriented and decentralised political system. On the other hand, the establishment of the institute turned out as one important foothold for the subsequent development towards more centralised and comprehensive performance evaluation. It is also to be expected that economic crises will create openings for change. This argument is consistent with Kingdon’s argument about how windows may open in the problem stream, and it is also consistent with the large role played by external – often economic – crises in historical institutionalism. It is also somewhat predictable that the need for link between economic crisis and local productivity improvements will be strong in a country like Denmark where a large share of the national product is spent by municipalities. In the present case, it may be argued that the financial crisis and the Resurrection Package served as an opening for a second step towards the creation of a potential governmental evaluator of the municipalities. However, as argued above the merger need not have led to an institute with a focus on comparative performance evaluation, and in 2012 it was also difficult to predict that the institute would take on the task of producing an aggregate efficiency potential for the municipalities service and productivity scores for each municipality. Ideas seem to have played an important role in making it possible to use the openings for comprehensive productivity analysis. The DEA method and its reasoning is a policy idea which has been around in the performance management community for some time. In 2012, the creation of KORA and the establishment of the Productivity Commission made it possible for the idea to become a solution to the government’s problem of addressing the productivity of the municipalities. 20

In other words, it may be argued that changes are not only the result of short-term windows which make it possible to couple the three ‘streams’. This ‘coupling’ may also take place over a somewhat longer period. In other words, policy change requires that the political situation is relatively open, that there is a certain level of problem pressure – and not least that there is a supply of relevant policy ideas. However, the factors need not be present at exactly the same time. Why? Reform ideas are not forgotten because they become thwarted in the first round of policy making. They survive in the political/administrative system and may become reactivated when the next window for change arises. Enduring change is accomplished through gardening rather than engineering (March & Olsen 1989).
The performance regime for Danish municipalities has moved two steps in the direction of Comprehensive Performance Assessment. The reasons are to be found in a combination of the reform windows opened by the Structural Reform and the financial crisis – and the presence of relevant policy ideas. Once reform ideas – such as performance evaluation – have won a foothold in the administrative system they may achieve their own ‘endogenous’ development dynamic.
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