Making Management Auditable: The Implementation of Best Value in Local Government
Michela Arnaboldi ([email protected]) is an Associate Professor in the Dipartimento di Ingegneria Gestionale, Politecnico di Milano, and Irvine Lapsley ([email protected].) is Director of the Institute of Public Sector Accounting Research (IPSAR) at the University of Edinburgh.
Abstract
This article examines the implementation of Best Value—an audit tool of the U.K. government's modernization policy—in local government, specifically in Scotland. This is a study of the impact of this key concept, primarily on the management of these public services. The aim of Best Value Audit is to enhance transparency and accountability of management actions in local government. The article draws on Power's (1997) Audit Society thesis to inform this research. The Best Value approach has been heavily influenced by audit processes and oversight bodies both in its design and implementation. This article supports the Power thesis of the Audit Society: It reveals the manner in which audit practices are deployed by agencies of central government with the intent to shape the management of local government.
This is a study of Best Value Audit (Labour Party, 1997; Scottish Office, 1997; DETR, 1998)—a radical innovation in the U.K. While this research does look at the views of auditors—the traditional auditing research approach—it differs from previous research in its primary focus on: auditees—management and their perceptions of audit; in the longitudinal approach taken in this investigation; and in the context of Scotland which has implications for the portability of New Public Management to other national settings. The article to assess the perceptions of management in local government on how Best Value Audit has impacted upon them and to study whether management sees audit ideas as a critical reference point in guiding its actions. This responds to auditing research identified as areas of neglect: the need to focus on auditees instead of the traditional approach of just concentrating on auditors and audit institutions (Power, 2003) and by investigating what ‘sound management’ in public audit means in practice (Pollitt, 2003).
RESEARCH CONTEXT: BEST VALUE AUDIT AND MODERNIZATION
This section of the article explores the U.K. policy of Best Value Audit by scrutinizing the definitions deployed by audit agencies and government in describing what Best Value is and by examining the implications for the present study. But first, this discussion is placed in context by addressing generic issues of definition and meaning for forms of audit which seek to examine the delivery of public services in both financial and non-financial terms.
Best Value Audit can be regarded as a form of ‘performance auditing’ (Pollitt et al., 1999) or ‘comprehensive auditing’ (Everett, 2003). This area of audit is notorious for the absence of firm descriptions and definitions which are consistently applied, internationally. The term ‘comprehensive auditing’ is a North-American description (Everett, 2003). The term ‘performance auditing’ is applied most frequently to European countries (Pollitt, 2003). However, the central feature of this form of audit is the importance attached to economy, efficiency and effectiveness or ‘value for money’ (VFM).
The lack of rigorous definitions of this form of audit has led to suggestions that, as the vocabulary and practices of performance audit are still evolving, it is premature to fix on a single definition, no matter how subtle (Summa, 1999). One particular subtlety is the manner in which many definitions of ‘performance audit’ include both references to economy, efficiency and effectiveness and ‘sound management practices’ (Pollitt, 2003). This observation by Pollitt stems from a study of the ‘performance auditing’ practices of the supreme audit institutions in five European countries. However, according to Pollitt it was often unclear where the concept of ‘good (sound) management practice’ came from or what it actually meant. Given this circumstance, many of the auditors in this study (Pollitt et al., 1999; Pollitt, 2003) drew on their own notions of what ‘good management’ meant. This dimension—the meaning and practice of ‘sound management’, from an audit perspective—was identified as meriting further research (Pollitt, 2003) and this is one of the objects of the present study.
However, there are alternative interpretations of the reason why this form of audit does not have precise definitions, which are not a function of the stages of development of this branch of auditing. Specifically, it has been suggested (Power, 1997; Lindeberg, 2007) that the reason for the absence of precise definitions of ‘comprehensive auditing’ or ‘performance auditing’ is that the power of audit derives from poorly defined systems and goals and that the act of definition would actually curtail the future role of these forms of audit in the modernization and the transformation of the public sector.
The concept of Best Value first appeared as a line in the election manifesto of the Labour Party as it contested the 1997 general election (Labour Party, 1997). The motivation of the Best Value concept was to replace a market based mechanism of outsourcing (formally named Compulsory Competitive Tendering) with another means of ensuring local authorities services were of quality and at reasonable cost. As the idea of Best Value evolved, it began to embrace these concepts:
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a commitment to continuous improvement;
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the use of economy, efficiency and effectiveness; and
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(and as consequence of 2) an audit framework to ensure the service delivery quality and costs are appropriate.
While the idea of Best Value emanated from that U.K.-wide Labour Party policy document, its development as an operational policy differed in England and Scotland. The practices and legal backing for Best Value in England are unique to England and do not relate to other parts of the U.K. The speed of development of the policy differed between England and Scotland. From the perspective of would-be adopters of Best Value Audit processes, it is typical that they would look at a New Public Management pacesetter, such as England. However, we contend that the experiences of Scotland, as it developed and implemented its own version of Best Value, is of potentially greater interest to reformers or modernizers of government audit practices.
In England in 1998, the government department responsible for local authorities (DETR, 1998) defined Best Value as follows: ‘a duty to deliver services to standards—ensuring both cost and quality—by the most effective, economic and efficient means available’. This was subsequently and rapidly formalized in the Local Government Act of 1999 (s. 3 (1)) as a duty to: ‘make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness’. This regime was located within the Audit Commission (s. 7, Local Government Act, 1999), the government audit agency which was given responsibility for the development of ‘Best Value’ performance indicators and standards (s. 4) for scrutiny of Best Value reviews of local authority activities (s. 5) and scrutiny of the Best Value performance plans expected from each local authority (s. 6). This Act also empowered the Secretary of State to intervene and to take any action which he considers necessary to ensure compliance with the Best Value regime.
While the Best Value Audit regime is a U.K. phenomenon, the devolution of power to the Scottish Parliament created the opportunity for a variant of Best Value to emerge. This makes Scotland a particularly interesting location as a ‘laboratory’ (Jeffrey, 2006) in which the portability and adaptation of ideas emanating from the U.K. level can be evaluated. While the Best Value Audit regime has similarities to that in England, there are also differences, some of which may have arisen over the longer gestation period from initial ideas to statutory requirements. In the initial periods of development, Best Value was defined by the Scottish Office (1997, p. 3) as:
a process rather than a product . . . a process of change and progress . . . [it] promotes changes in attitude, culture and management style within councils . . . [it] requires councils to constantly reflect on what they are doing to measure their successes and shortcomings, and to take action to improve.
This concept of what Best Value Audit is is endorsed by leading figures within public audit in Scotland. The most senior figure in public audit (Black, 1999) located the emergence of Best Value firmly within the New Public Management and argued (p. 2) that:
there is an important role for public audit in identifying and promoting good management arrangements. This is happening to a significant extent through the audit regime which the Accounts Commission applies in local government. Using audit to assist in improving management arrangements is now an important part in the Best Value regime for local government. There may be scope for developing best practice management processes in a consistent and comprehensive basis across the Scottish Executive and all public bodies in Scotland, with public audit being used as catalyst for positive change.
Black also identified value for money audit as a ‘powerful tool’ in challenging professional groups to make them more accountable for their performance. This location of Best Value Audit within management by leading practitioners of public audit was endorsed by the chairman of Audit Scotland, the supreme audit institution for Scotland (Percy, 2001). In discussing the implementation of Best Value Audit, Percy made the following observations:
To audit Best Value is not about auditing outputs but auditing the process. It is not the auditors’ job to second guess the policies agreed upon by elected members but it is the auditors’ role and indeed the officers’ role to ensure that there are arrangements in place to achieve Best Value through continuous improvement in effectiveness, economy and efficiency. To achieve Best Value means that an organization needs to have proper management arrangements in place. Such arrangements ensure that business plans are prepared, scrutinized and monitored to ensure that they achieve their objective. The auditor of Best Value therefore needs to have the experience of assessing the adequacy of management arrangements to ensure probity, regularity, effectiveness, efficiency and economy. [This] requires judgement as to the most appropriate arrangements for the body in question and judgement as to whether the processes are functioning to achieve their objectives.
This articulation of the role of audit in Best Value represents a strong belief that auditors should identify weaknesses in the management of local authorities and point to improved methods of management (Percy, 2001). These observations by leading figures within public audit in Scotland are exemplified by the manner in which the audit oversight body for local government (The Accounts Commission) has developed Best Value.
The concept of Best Value has now been codified and is required by statute in the 2003 Local Government Scotland Act (Scottish Parliament, 2003). This Act lays a formal, statutory duty upon local authorities to ‘make arrangements which secure best value’ (s. 1(1)), in which Best Value is defined as ‘continuous improvement in the performance of the authority's functions’ (s. 1(2)). In undertaking Best Value, local authorities are required to have regard to ‘efficiency, effectiveness, economy (and the need to meet equal opportunity requirements)’ (s. 1(4)). Also, in presenting this legislation, the role of the auditors in determining what contributes Best Value is enshrined in this Act under ‘enforcement’ (s. 3), which gives the Accounts Commission statutory authority to investigate Best Value in local authorities.
The statutory codification of the Best Value framework has given primacy to oversight bodies. Indeed, the Accounts Commission (Accounts Commission, 2003, 2004), has responded to the 2003 Act by devising an action plan for the audit of Best Value in local authorities. This action plan identifies two aspects of Best Value implementation which reflect the desire of its proponents to change the values of local authorities by the requirements that (a) ‘there should be an explicit and systematic approach to integrating Best Value into everyday working practices and involving staff in developing the organization's approach to Best Value at all levels’ (Accounts Commission, 2004, p. 5) and (b) ‘key discussions and decision-making should be undertaken in a transparent and accessible way and reasoning behind formal decisions is clearly documented and traceable’ (Accounts Commission, 2004, p. 8).
These developments are explored further below, through the lens of Power's (1997) Audit Society, which is discussed next.
THEORETICAL FRAMEWORK: AUDIT SOCIETY
The depiction of a society in which audit practices dominate much of everyday life in a manner which creates an Audit Society (Power, 1997) has been described as one of the most significant contributions to thinking on public management reforms (Lapsley, 2008). Indeed, English and Skaerbek (2007) regard Power's work as highly influential in shaping how researchers think about the auditing of performance in public bodies. It is evident from the above account of the design and implementation of Best Value that this form of audit has the potential to reach into the everyday lives of local authority managers who may have been untouched previously by audit practices and processes. Next, we explore the merits of Power's Audit Society as a frame of reference for the evaluation of Best Value Audit.
This conceptualization of the role of audit in society commenced with Power's (1994) observation of the phenomenon of the audit explosion in the U.K. Power's (1994) report not only identified the range of, and manner of, this spread of audit practices, it also elaborated upon a critique which laid the foundations for the Audit Society (Power, 1997). Power (1994) identified a number of manifestations of the audit explosion, all of which enhance the influence of auditing on society. This included the use of formal documents outside their original context and in ways unanticipated by those who may have designed them; the role of audit in articulating images, with rationalizing and reinforcing public images of control; the spread of audits and audit talk which coincides with a fundamental shift in patterns of governance in advanced industrial societies; the focus of new audits is not on primary activities, but on other systems of control; the extension of audits can make organizations more obscure and the audit process remains publicly invisible; audits have problematic criteria of success and are generally only publicly visible when they are seen to fail; audit shapes the activities which it controls in critical ways and represents a very particular conception of accountability (Power, 1994, pp. 4–9). Clearly, in this exposition Power (1994) did not envisage the audit explosion simply as an expression of an increased volume of audit activity. These were significant ways in which the manner and conduct of audit shaped public services, in potentially problematic ways. More recently Power (2003a) has reflected on the concept of the audit explosion and concedes that the form of the audit explosion is more institutionally varied than originally indicated, although he contends that the basic claims of the audit explosion (Power, 1994) remain relevant and provide a challenge to attempts to reform and redesign audit practices.
This problematization of the role of audit in society was further refined in Power's (1997) seminal contribution to an understanding of public sector audit and its ramifications. This study located the explosion of audit activity within the international phenomenon of New Public Management (Hood, 1991, 1995)—an issue to which we return in this section. Within Audit Society (Power, 1997), the audit explosion is reaffirmed, but the wider implications of the role of audit in society are evaluated. Power advances the thesis that the pervasive presence of audit on society can lead to:
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Legitimation and decoupling strategies,
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Colonization and culture change, and
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Displacement of core organizational activities.
In each of these instances, the act of audit compliance has the possibility of producing the following outcomes.
On legitimation, Power (1997, p. 96) observes the potential for audits to produce ‘comfort or organizational legitimacy’, because the audit per se is a rationalized ritual. Audit can achieve making things auditable by having auditable measures of performance and systems of control and the reliance on expert opinion, all of which can contribute to legitimation.
Drawing on the seminal work of Meyer and Rowan (1977), Power (1997, p. 96) observes that, ‘even though audit files are created, checklists get completed and performance is measured and monitored in ever more elaborate detail, audit concerns itself with auditable form rather than substance’. In this way, the impact of the audit process may be marginalized. Therefore, in researching legitimation activities as a consequence of audit, there may be elaborate processes in evidence, but the manner in which organizational actors view such activities is crucial. If members of organizations do not value audit processes and reports and indicate a willingness to conform to the form of such activities, rather than a belief in the substance of audit, there is prima-facie evidence of legitimation. A second indication of legitimating activities can be found in the activities of managers, if they choose to articulate internal structures rather than to actually manage them. Third, and perhaps most importantly, efforts may be made by organizations to decouple the audit process from the core activities of the organization by the creation of barriers (such as audit committees, audit officers, internal auditors). However, Power (p. 97) contends that the external audit process cannot remain permanently buffered in this way. Therefore, this legitimating activity may be unstable and may not endure, which should be evidenced in researching this phenomenon.
On colonization and culture change, Power (1997, pp. 95, 97) observes that audit may be mobilized to counter and challenge the organizational discretion and power of professional groups with significant autonomy. In this way Power observes that VFM auditing is ‘explicitly a vehicle for organizational change’. The process of compliance with the demands of auditors is not neutral, in Power's view—the act of compliance may result in the dissemination and implanting of the values underlying the audit approach and thereby achieve colonization. Power's thesis has initiated a number of research studies (including the present one). For example, Skaerbek and Thorbjornsen's (2007) study of Danish defence systems explores issues of colonization and culture change. Also, Viklaelsø (2007) investigates the embedding of audit within hospital information systems, with subtle changes in meanings and practices arising from performance audit.
In researching colonization through audit processes and procedures, Power (1997) identifies a number of factors which would indicate the presence of this facet of organizational life. First, audit activity spills over to all parts of the organization and becomes a dominant reference point for all organizational activity. Second, the values and practices of auditing penetrate deep within the core of the organization. This situation would be evidenced by new ways of thinking, by new incentives and new perceptions amongst organizational actors on what is and is not significant. Third, in Power's view outright colonization is rarely successful. Attempted colonizations produce varying forms of resistance and conflict amongst actors within organizations, and we should therefore expect to see evidence of this.
On displacement of core organizational activities, in The Audit Society Power (1997, p. 120) advances the case that auditing, in general, but performance auditing in particular, has dysfunctional impacts or ‘reverse effects’, in which there are unintended consequences of audit activity. He argues (pp. 95–7) that the audit process may fail because its side effects may actually undermine performance. Such impacts include the displacement of core organizational activities by the fulfilment of the audit agenda. In researching these impacts of audit, the following conditions may be observed: information overload, misdiagnosis, decline in organizational trust, the presentation of reports that ‘audit works’ (even if it does not), and a desire that ‘auditable performance’ becomes an end in itself (pp. 120–1). This may occur where there is a preoccupation with providing information which supports the demands of auditors, and in so doing lacks the capacity to deliver on other organizational tasks.
However, the Power thesis has attracted some critical comment, and we examine these issues here. First, it has been suggested that Power's (1997) Audit Society confuses the meaning of ‘audit’ and ‘inspection’ and that he conflates the two in his thesis of the pervasive existence of audit (Bowerman et al., 2000). Bowerman et al. observed that the situation of public sector audit was more complex and multi-dimensional than implied by Power. Their major reservations were over the use of the term ‘audit’ as a societal descriptor. In their view, much of what Power included in ‘audit’ was beyond the confines of traditional concepts of audit and its application. For example, the bracketing of ‘inspection’ with ‘audit’ does not address fundamental differences in these activities. This is acknowledged by Power (2003a). However, while there are indeed differences, particularly as inspections have a different focus, reporting system and evaluation process, they do complement each other (Public Audit Forum, 2002). This shift is now recognized by the locating of the inspectorate within the Audit Commission and by the creation of an Audit Forum to facilitate collaboration between auditors and inspectorates.
A second criticism concerns the portability of the Audit Society idea. Pallot (2003, p. 151) is rather critical of Power's (1997) interpretation of the activities of the U.K.'s supreme audit institution as being U.K.-centric. Specifically, she argued that the description of the U.K.'s National Audit Office as ‘one in which the political accountability to the electorate is supplemented if not displaced by managerial conceptions of accountability’ as unlike the New Zealand situation, in which the Audit Office had challenged many aspects of the advocacy of new managerialism on NPM. However, Pallot's comments, in turn, should be seen in the context of a severely contested terrain in New Zealand, in which the Treasury and Audit Office were in open confrontation to be the dominant influence with the central government. Pallot (p. 139), for example, cites examples of external consultants challenging the need for an Audit Office, seeing them as a duplication of existing mechanisms of accountability, challenging the merits of VFM work and advocating the use of private sector auditors to replace government auditors. This critique is a cautionary warning to exercise care in the interpretation and transferability of ideas such as ‘audit explosion’ and ‘Audit Society’. An observation with which Power (2003a) has concurred.
One further strand of Power's (1997) expression of the Audit Society which has attracted comment is the potential outcome of using audit as a legitimation device. On the one hand there are those, such as Everett (2003), who see the Audit Society thesis as advancing an explanation of audit as a ritualistic or formal process, which verifies the means rather than the ends. While this captures part of the Audit Society thesis, it does not capture the wider issues—the fundamental shift in society, not just an issue of method or how the audit can be portrayed. Pollitt and Summa (1999) and Pollitt (2003) are somewhat dismissive of this aspect of the Audit Society thesis, without offering a serious rebuttal of the case advanced by Power. However, Power (2003b) has suggested that there have been few studies of the legitimating activities deployed in the face of audit. But most importantly, Power (1997, p. 98) states that the outcomes which he depicts for the Audit Society require an empirical test, to which this article seeks to contribute.
The concept of the Audit Society is located firmly within the New Public Management phenomenon by Power (1997, 2003a). However, within this context there is debate over the significance of audit. Bowerman et al. (2000, p. 85) challenge the claimed causal power of audit in generating change in the processes of public sector management. Furthermore, Pollitt (2003) offers an elaborate interpretation of the direction of causality between New Public Management developments and developments in audit, with influences flowing in both directions. In Pollitt's view the main direction of influence seemed to be from public management reform to audit. In our view this locus of the Audit Society and the audit work which it promotes within the New Public Management is best captured by English and Skaerbek (2007), who identify an interrelationship, and mutual co-dependency, between the NPM and performance audit. This latter perspective concurs with that of leading public sector auditors (Black, 1999).
This positioning of audit work—essentially ‘performance auditing’—within the NPM recognizes the contribution of audit both as a control mechanism and as a framing device in the shaping of public management reforms (English and Skaerbek, 2007). However, one distinct aspect of this prevalence of audit appositely noted by Power (2003b) is the need to focus the attention of future research on a new subject—the auditee, rather than the present tendency to focus on auditors and audit institutions. Skaerbek and Thorbjornsen (2007) adopt this perspective in a study of the Danish defence system in which they reveal an identity crisis amongst officers in the armed forces as they seek to come to terms with performance audit on their activities. The outcome has important implications, with the emergence of ‘warrior-managers’ as hybrids (Skaerbek and Thorbjornsen, 2007). Our article seeks to further address this gap in understanding the impact of audit on auditees by focusing on the experience of managers in local government.
BEST VALUE: PRIOR RESEARCH
While Power (1997) identified three characteristics of the Audit Society, he noted that there have been a limited number of legitimation studies of it (2003b). While we recognize the potential for legitimation activity in the face of reform, this is further evidence of the limited scope for the more elaborate legitimation activities articulated by Meyer and Rowan (1977), such as decoupling of the technical core from external legitimating functions in organizations in the era of New Public Management. This literature review confirms that studies of this phenomenon in the context of Best Value have focused on the other two dimensions:
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Displacement of core activities.
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New management culture.
Those two strands of the literature on Best Value are central to the Audit Society thesis, and evidence in support of them is supportive of Power's (1997) thesis. While these effects of Audit Society—culture change or colonization and ‘displacement’, or unintended ‘reverse effects’ (Power, 1997)—are dominant in the Best Value literature, we are sensitive to the possibility of legitimating activity within this study. However, these aspects of Best Value are examined next from the perspective of prior research, and articulate the contribution of this article to our knowledge of this novel policy.
Displacement of Core Activities
From the inception of Best Value, there has been scepticism over the role of audit. Freer (1998) was sceptical of the capacity of auditors and inspectors to make the judgements necessary to secure Best Value. A related issue is the elaborate processes of audit necessary to deliver on Best Value (Boyne et al., 1999; Martin, 1999; Davis and Wright, 2004). Indeed, Martin (2000) identifies the reliance on audit in Best Value as a very significant development. Stewart (2002, p. 4) elaborates upon this critique:
Best Value is in danger of becoming a time-consuming and over-inspected process in which carrying out the procedures has become more important than the challenge Best Value was intended to provide. The process of inspectors reviewing each review seems an unnecessary burden. It is also a danger when it is assumed that inspectors are necessarily correct, reflecting the new doctrine of inspectoral infallibility . . . there is a danger that targets will be achieved at the expense of services, or aspects of services, not covered by targets. This process depends on the fallible judgements of inspectors and assessors, with the danger that it will become more important to satisfy the inspectors than the local electorate.
This critique is accentuated by Freer's (2002) observation that the array of reports from inspectors and auditors can be confusing and exhibit no signs of joined-up thinking, and Davis and Wright's (2004) observation that the information flows from Best Value review reports are as likely to induce uncertainty as clarity.
There is some evidence of the significance of audit in Ball et al.'s (2002) case study of a local authority involved in the pilot stages of the Best Value initiative. There, the authors noted concerns with the need to demonstrate Best Value and the difficulties over measuring what actually constituted continuous improvement. McAdam and Walker (2004) also reported time-consuming processes which were central to Best Value. There is also some relevant survey evidence: Enticott et al. (2002) reported that 67 per cent of their respondents were concerned that inspections led to a focus on Best Value, which may have affected service delivery; Higgins et al. (2004) reported concerns of Best Value officers that there was the likelihood of Best Value inspections skewing resources to certain activities and away from others. Furthermore, Entwistle and Laffin (2005) review central government regulation of local government authorities and point to the dangers of being excessively prescriptive and bureaucratic in seeking to improve the performance of local government. However, Entwistle and Laffin stress that they do not have evidence of the actual operation of Best Value. Therefore, while the Best Value initiative does raise questions over the contribution of auditing in the minds of many commentators, stronger evidence is needed on whether this is indeed the case.
New Management Culture
Another distinct aspect of the Best Value initiative is the aim of culture change. The declarations of government to secure a fundamental shift in local government culture is particularly evident from its desire to dismantle large departments for specific local government services by depicting them as ‘monolithic silos’ and by seeking the involvement of a whole range of communities on setting priorities in local authority planning (Martin, 1999). Most importantly, this desired change was to allow Best Value to achieve a culture of continuous improvement within local authorities (Martin, 2000; Boyne et al., 2002a).
However, the nature of the change sought by the Best Value initiative is especially challenging. Ball et al. (2002) depict this as seeking change of a second order, requiring a redefinition of the ‘genetic code’ of the organization. In Ball et al.'s view, the specific requirement that local authorities seek continuous improvement will only work well if this aim is linked to cultural and behavioural change at all levels of these organizations. Similarly, Boyne et al. (2002b) observe that Best Value has many similarities to Total Quality Management initiatives which require large scale cultural change and take time to produce expected improvements in performance. Indeed Nelson and Henderson (2005), in a study of the experience of U.K. recreation centres with Best Value, make cautionary observations on the achievements of culture change and on the inference that the desired outcome of culture change will actually deliver continuous improvement. Where there is evidence of culture change in studies of Best Value implementation, the researchers tend to see this as preliminary, tentative. Entwistle and Martin's (2005) study of partnership working between local authorities and private or not-for-profit providers commented on the need for a transformational approach to make this work. Also, Bovaird and Downe's (2006) study of Best Value commented on the negative impact of the Best Value inspection regime. They also observed a continuing resistance to the Best Value agenda of competition, contestability and choice. However, they did report evidence of improved networking and connectivity across a range of actors and stakeholders in local government. Nevertheless, they did point to the need for further research on this evidence of culture change.
Therefore, little evidence is available from prior research on whether the desired culture change has in fact been achieved and whether there has been displacement of core activities within audited organizations. Despite the lack of evidence of legitimation studies in Best Value, we remained alert to the possibility of legitimating activities in Best Value audit. Also, given the above observations, it is evident that a longitudinal perspective is necessary to determine if this has in fact happened. The above review of prior research on Best Value demonstrates the importance of this topic. It also reveals the complexity of Best Value implementation and the need for further empirical evidence on what Best Value means in practice, which this article seeks to address.
RESEARCH METHOD
To investigate the perceptions of managers within local authorities on whether they were being made ‘auditable’ by the mechanism of Best Value Audit, as part of the wider phenomenon of the Audit Society (Power, 1997), a combined research approach was adopted (Denzin, 1978). First a longitudinal perspective was considered necessary, given the complexity of the topic (Pettigrew, 1989). Data collected over the period 1997 to 2007 included documentary evidence and fifty-three interviews. Second, the researchers scrutinized policy documents of oversight bodies and central government to gain insight into the aims of policy makers (Green and Thorogood, 2004). Third, case studies were undertaken to assess the perceptions of managers. Fourth, while the primary focus of this research is on management, an additional audit perspective was obtained by interviews with government auditors involved in Best Value to test out their intentions for this form of audit.
In the initial phase (1997) of the development of Best Value, discussions were held with central government officials with responsibility for the new policy of Best Value, with local authority organizations and contacts within local government, to gather background information. In the development phase (1998–2000), a case study approach was adopted.
The need to guarantee a significant variety of data, perspectives and problems (Yin, 1993) led to the adoption of a multiple case study method. Four local authorities were selected on the basis of several attributes (see Table 1) which could influence the trajectory of adapting to the Best Value regime.
| Population | Revenues (£m) | Rural/urban split | |
|---|---|---|---|
| Stuarta | 400,000 | 551 | Urban |
| Eastona | 150,000 | 200 | Urban |
| MacDonalda | 105,000 | 133 | Rural |
| MacKaya | 349,300 | 382 | Rural |
- a Pseudonyms to preserve the anonymity of the study settings.
The four organizations represent, for this research, an embedded case study where key actors within the local authorities are the sub-units of analysis (Yin, 1994). Interviews with these actors were the main source of evidence in each case study. Interviews with key actors were semi-directed and lasted approximately an hour. A checklist was followed, but the researchers, as suggested by Yin (1993, 1994), asked additional questions, arising from the debate on Best Value issues. At each site interviews were held with senior members of management and senior elected members of these local authorities: chief executive officers, directors of finance, directors of key services in Best Value policy and elected members. In addition, the research team maintained contact with key informants at the case study settings as the Best Value regime was implemented.
In the mature phase (2004–07), when Best Value was formally codified and had statutory backing, additional evidence was gathered from Best Value auditors. In addition, evidence was gathered from lead officers responsible for Best Value as the managers in local government who would be best informed and have the best overview of the nature and outcomes of Best Value implementation (Higgins et al., 2004). Interviews were held with Best Value officers after the statutory prescription of Best Value in 2004 and again in 2006. This approach recognizes the need to say in touch and to revisit case study settings to gain a fuller understanding of what has happened (Bryman, 1989; Gallmeier, 1991).
RESEARCH RESULTS
The research results are reported in three ways: (a) a discussion of perceptions of what Best Value was, and what it would become, in the initial phase (1997) of its introduction; (b) an examination of managers’ perceptions of the impact of Best Value in the development (1998–2000) and the mature (2004–07) phases of implementation; and (c) an examination of the views of auditors which encompasses the entire period of the Best Value project to date.
Best Value: Initial Phase
When Best Value was launched in 1997, the Minister for Local Government in Scotland made a series of pronouncements on what this initiative was intended to achieve. In the first instance, he observed that there was a need to change ‘the cultures, attitudes and behaviours’ of local authorities to ensure value for money (Chisholm, 1997a). That statement was made to the annual conference of the Accounts Commission, the government audit body. It is consistent with Power's (1997) colonization critique. Within days of that statement the Minister focused on the need for partnership and the need for councils to be effective and efficient in service delivery in an address to the annual conference of the Association of Direct Labour Organizations, which promotes the interests of service providers in local government (Chisholm, 1997b). This Minister then addressed the annual conference of the Society of Local Authority Chief Executives, where he emphasized the partnership elements of the new arrangements for local authorities and the need for them to be responsive and democratically accountable (Chisholm, 1997c). Within a few days, a rather complex picture of what is ‘Best Value’ had emerged.
This complexity was suggested at a preliminary interview to gather background information on this project with two central government officials charged with the responsibility of developing this policy, as the following statement illustrates: ‘What is Best Value? Nobody knows, is the short answer. It's developing. It's an alternative approach. The difficulty about it is that it is about attitudes and cultures.’ This perspective is reaffirmed by the views of the chairperson of one of the working parties established to take forward the development of Best Value. This chairperson commented on the need to change organizational culture to introduce real change envisaged by Best Value. A senior auditor at the Accounts Commission made similar observations at this time, stressing that Best Value would create an environment of continuous improvement.
However, the first government policy document on Best Value (Scottish Office, 1997, p. 1) makes the following observation:
The report recognizes that significant elements of Best Value are already being developed by local government and the Accounts Commission. It seeks to build on established and emerging arrangements and processes. For example, it recognizes that Scottish councils already have a statutory duty to seek value for money in all their activities and that audit procedures exist to monitor their performance in this respect.
This initial statement on Best Value indicates the possibility of colonization through Value for Money audit, as Power indicates. The depth and strength of its implementation might also result in the displacement which Power cautions against. Also, the elements of continuity open up the possibility of legitimation, the other strand of Power's Audit Society. This possibility can be seen from background interviews with a senior executive within the Convention of Scottish Local Authorities (COSLA), an umbrella organization with the aim of promoting the interests of local government and from a finance officer at Stuart, one of the case studies in this article. The COSLA official saw Best Value as building on an approach called the Business Excellence Model developed by the European Foundation for Quality Management which COSLA had promoted. This picture of continuity is also reflected in the comments of the finance officer from Stuart, who saw Best Value as capturing a lot of council's policies in which innovation in service delivery is central and in which the management of this council see themselves as a ‘model’ local authority. If existing practices, processes and structures satisfy the demands of Best Value, there is the possibility of legitimation of existing activities rather than dramatic change. This depends crucially on how Best Value develops and is implemented. Next, the implications of this are examined, by focusing on our primary interest group—the managers in local authorities—both as Best Value develops and as it becomes a mature policy with statutory backing.
Audit Society: Managers’ Perspective
The second phase of this research explored the extent and manner in which Best Value has penetrated local authorities. In this, we sought to gather evidence on whether managers and officials acted upon Best Value guidance. The overall experiences of local authorities studied are summarized in Table 2. The evidence reveals what ‘Best Value’ means to key actors in local authorities. Overall, broadly similar experiences were found in the implementation of Best Value, with the exception of two case study sites. However, there were some interesting contrasts within the case studies: scepticism about key elements of Best Value, alongside a willingness to support Best Value, with claims of existing practices already in place similar in approach to Best Value. There is evidence of Power's (1997, p. 18) critique that the practice of audit rarely functions according to the official blueprint. Within the four case study settings, MacKay exhibits some limited signs of culture change. Only Stuart can be seen to have responded positively to the Best Value philosophy, but even here there remain doubts and we describe this situation as ‘nascent’ rather than conclusive, as shown below.
| Dimension | Case study | |||
|---|---|---|---|---|
| MacKay | Easton | MacDonald | Stuart | |
| Displacement | ||||
| Initial perception | Positive | Positive | Positive | Positive |
| Subsequent perception | Positive | Positive | Positive | Positive |
| Cultural change | ||||
| Initial perception | Negative | Negative | Negative | Negative |
| Subsequent perception | Limited | Negative | Negative | Nascent |
These findings are of two different dimensions of Best Value implementation as identified in the literature: (a) Displacement of core activities because of the requirements of compliance with the Best Value regime and (b) Management culture as a key determinant of the adoption of Best Value. Each of these aspects of Best Value implementation is discussed below.
Best Value and Displacement: The Development Phase
Powers’ (1997) critique of an inspection society within the U.K. public sector and its potential displacement of key resources were manifest during the interviews. Despite a feeling that the Best Value approach was not entirely new, interviewees nevertheless saw Best Value as different, particularly because of its scope and systematic nature. This in itself gave rise to misgivings, particularly over the displacement of resources in service provision to cope with the bureaucracy of Best Value. As the Director of Education at Stuart expressed it:
the dilemma facing the city is how much time you devote to a bureaucracy that inevitably goes out on Best Value . . . the great fear is that it will go the other way. One just wonders whether Best Value is becoming too much of a burden, with too much devoted to it other than actually delivering the service, and that's my greatest worry.
These concerns over the displacement effect of Best Value were reiterated across the board amongst senior executives at MacDonald. The Director of Education's comments typified this:
the concern is the work involved and finding the way to do it effectively, and what else are you not going to do if you are doing that. There is a slight concern, well more than slight, within the Education Service in particular, that we are spending a lot of time auditing these days, much less time actually delivering.
Experiences with the displacement of existing work activity to undertake Best Value reviews were also reported upon at Easton. Consider the following statement by the Director of Housing:
Where we had a whole range of things agreed with our tenants, for instance, that we were going to do this year, we have not been able to do these because everybody has been directed to Best Value. Everything we are doing is diverted to Best Value.
At MacKay the senior management team presented a strong picture of commitment to Best Value. But there were some indications of reservation over possible displacement effects. As the Director of Strategy at MacKay expressed it:
One of the things the Heads of Service have been talking to me about (and I fully agree with them) in the last week, is we’re so stretched that we don't really know if we have the staff to carry out the Best Value work. You know we’re really beginning to worry about the kind of things that we want to take on in terms of Best Value—have we actually got the people we need to work on it?
These findings exhibited a consistent picture of nervousness around what Best Value is and may become—a distraction from service provision—on the part of expert commentators and senior managers in local government.
Best Value and Displacement: The Mature Phase
While these experiences of the case study settings are consistent with Power's (1997) depiction of the displacement of core services to meet the burden of the inspection society, the later evidence is more complex. In 2004 the Best Value managers at all of these case study sites reported after five years of ‘Best Value’ that compliance with the requirements of Best Value did not divert resources from their local authorities front line services. Stuart, for example, implemented Best Value as an integral part of service resource allocation and the resource implications were restricted to the reallocation of ‘one or two’ staff as coordinators. Similarly, at MacKay Council, while the Best Value manager conceded that preparation of submissions for audit could be time-consuming, in his view there was no considerable diversion of resources to compliance from frontline services. In particular, this was, in his view, because ‘continuous improvement’ was integrated into their management thinking.
However, while these Best Value managers were selected as the source of data with the most comprehensive picture of Best Value development in their local authorities (Higgins et al., 2004), this group represents the Praetorian guard of Best Value implementation in local authorities. Also, these interviews were held just after the introduction of Best Value as a statutory requirement in 2004. Therefore, we tested evidence of displacement further by seeking views on whether the Best Value approach was dominated by form-filling. This was the view at MacKay Council where the Best Value manager conceded that there was a danger of compliance being overly tick-a-box orientated, with a one-size-fits-all approach to local authorities. This view was reaffirmed by the Best Value managers at Easton City and MacDonald. However, this was countered by the Best Value manager at Stuart, on the grounds that Best Value implementation was much more an integral part of service planning and delivery than an add-on. Overall, therefore, while there are proponents of Best Value as non-problematic (such as the Best Value manager at Stuart), we have evidence of the kinds of concerns highlighted by Power (1997) in his critique of audit in society.
By 2006, while the Best Value officer at Stuart was reluctant to describe Best Value audit activity as displacing resources from front line activities, he did concede that the actual audit process for a whole authority Best Value audit was time-consuming and costly. The Stuart Best Value officer observed that the process of the Best Value audit (from inception to final report) had taken nine months. The Best Value Audit Review Team had four members who spent four weeks within the local authority, interviewing over forty-two service officials in the process. The Best Value audit had also involved considerable preparation of documents and briefing of colleagues. However, the comments of the Best Value officer at Stuart are mild compared to these of his colleagues at Easton, MacKay and MacDonald local authorities.
The Best Value officer at MacKay described his local authorities experience of Best Value, as follows:
We had a 65 page Best Value report. It was an efficiency agenda. We need to revisit our capacity to deliver front line services but we are so tied up with audit and inspection requirements that we cannot undertake this crucial activity. This whole phenomenon is so big that it is hard to measure how bad the scale of the problem is in a systematic way. You just have a sense that everybody is involved in it. It just seeps into everyday life.
Indeed, meeting the requirements of Best Value had led to Easton local authority engaging in the production of legitimacy (Power, 2003) to be seen to be undertaking Best Value (with obvious implications for resource use), as the following comment from their Best Value officer elaborates:
A major issue in dealing with Best Value is our ‘board’ which consists of elected councillors, not executive directors. Best Value auditors say we should present tables on KPIs and stress the benefits of budgets linked to policies. But the councillors do not want to read them—real politik. At the end of the day, we say to councillors that we need to make presentations on these kinds of things to keep the auditors happy. This is an audit compliance strategy rather than striving for excellence.
The views expressed by Best Value officers at MacKay and Easton local authorities is reaffirmed by the MacDonald Best Value officer who expressed misgivings over the volume and nature of audit and over the resources devoted to Best Value audits:
We have so much audit. There is Best Value. There is financial regularity. The Social Work inspectorate. Her Majesty's Inspectorate of Schools. Fire Services. Police Services . . . There is masses and masses of audit and inspections which don't add value. Inspection does not help us . . . The level of audit is oppressive. It is about trust or the lack of it in the local authorities and the public sector, generally. As soon as you put a regulatory regime in place it becomes self-serving. It would have been better to put all the resources which have gone into recruiting Best Value auditors into the recruitment of high quality managers for local authorities.
These observations by Best Value officers, with the notable exception of Stuart, underline the apprehension of officers at the case study settings that Best Value could indeed become overly bureaucratic, resource hungry and with displacement effects from other local authority services.
Best Value and a Management Culture: The Development Phase
In his critique of audit in society, Power (1997) identified colonization as a possible outcome of the changes embodied in the inspection society, saying whether this has happened required substantiation by empirical research. The intent for this outcome is evident in our analysis of the development of Best Value in which auditors (Accounts Commission, 2004) define the need for the local government executive to adopt a culture which is more managerial both in outlook and in behaviour.
Our evidence from the developmental phase of this research on whether a ‘culture change’ or a colonization has taken place in these case study settings is largely limited. For example, the Convenor of Social Work at Stuart expressed this as follows:
What we need to create is a culture that is managerial in which officers calculate the risks of doing good preventative work. And that means we need to have a management that will approach that. But when managers are actually scared about overspending, they react in the classic culture of the memo, bureaucratic procedures, and that stifles initiatives, it reduces risk taking, and it moves from a ‘can do’ to ‘tell me what to do’ approach.
The above comments were also made by interviewees at the other case study sites. The leader of MacDonald, for example, highlighted unevenness in management change when he stated: ‘I think the attitude of management has changed, without any shadow of doubt, but in others there is still a culture of change to happen’. At Easton the process of shifting to a more businesslike (customer-focused, problem solving) behaviour was also commented upon, but more favourably. The Director of Housing stated: ‘Local government has had to become more businesslike. It couldn't do anything else. Previously it was much more ad hoc and laissez-faire.’
Despite the above concerns and scepticism, there was evidence of support for Best Value as an approach. There was top management support at Stuart in the shape of the Best Value Review Group, which consisted of leading elected members of the council and proactive senior officeholders, including the Director of Finance. Thus commitment to Best Value at the top of the organization was evident. The Director of Corporate Strategy stressed both the importance attached to Best Value at Stuart and the manner in which it reinforced existing best practices:
Stuart has regarded Best Value as being a very important development and likes to see itself as being at the forefront of Best Value activity . . . we were well down the Best Value path before any of the consultation papers were prepared. So there is nothing new that really comes out of Best Value that we weren't working on before. What Best Value has done has given us an external validation of what we are doing in Stuart.
However, there remained issues about the extent to which commitment to Best Value has penetrated all parts of the organization. Reservations also existed in other councils. For example, the Director of Social Work at MacDonald described Best Value, as follows:
I think it's clever. You know this computer world of hardware, software and vapourware—they sell it but it doesn't exist. I think it [Best Value] has got a touch of vapourware about it. Best Value, I think the notion seems to be ok, but what is it. Our central policy unit is embracing it with great urgency, so we've committed ourselves. Fine. But now again, it's the cold dawn of reality—what have we signed ourselves up to. A massive programme of service review, both at corporate and departmental level, and I'm now nervous about, well more than nervous about not being able to deliver.
Easton has also had explicit top management support for Best Value. Like Stuart, it has established a Best Value Review Group of senior officers and elected members of the local authority. However, there remained doubts about the extent to which this commitment has taken hold throughout the organization. At one level a number of social work staff stated that a strong effort had been made to get across the Best Value message to all levels of staff, but there was nervousness rather than acceptance on the part of some staff, especially over the review process. However, one senior member of the management team at Easton expressed scepticism over the Best Value initiative, particularly over value for money reports by auditors. In a statement which demonstrates Power's (2003) depiction of audit as the production of legitimacy, this member stated:
I have had to say to the auditor, I will fill in whatever forms you ask me to do, because if I don't you’ll probably put some kind of note in the Auditor's report or to elected members, but with all the priorities I've got within Easton, it's not my priority. I’ll do the minimum to make sure that I don't get criticized, I can't do any more than that because I just don't have resources.
The Chief Executive at MacKay was depicted by colleagues as a major driving force for change. This has given MacKay a very distinct structure and management ethos. However, the Chief Executive was careful not to overstate the case:
We can be conservative, with a small ‘c’, in some ways, we’re coming into financial management, we’re still very financially driven as an organization. I guess we have to be because of the nature of the local government funding regime and that can certainly shape inherent conservatism.
There were members of the senior management team who saw the Best Value initiative as supporting better management. As MacKay's Director of Strategy put it: ‘If we’re really serious about management and if we’re managers in this organization then this [Best Value] is the sort of stuff that should be fundamental to our everyday work’. However, there are issues about the extent to which these ideas of management change have penetrated this organization. As a senior policy adviser described it: ‘If you take the innovators and the product champions that's my role. And we have early adopters, early majority, and those that will just never change, laggards who will never buy into this.’
Best Value and a Management Culture: The Mature Phase
All of the above concerns with the implementation of Best Value were reiterated by our key informants, the Best Value managers, in 2004. We approached this by asking them if Best Value was delivering continuous improvement. The answers from these managers were equivocal. At Easton, the Best Value manager remarked that the Best Value regime can lead to continuous improvement. At MacDonald, the Best Value manager remarked that Best Value could deliver continuous improvement, if the organization were so minded, but MacDonald was just not there yet. Similarly, at MacKay the Best Value manager stated that ‘we hope it does’ in response to the question of whether Best Value was delivering on continuous improvement. In his view, while Best Value reviews and target setting were geared to achieving continuous improvement at MacKay, this was not always happening successfully. However, at Stuart, the Best Value manager felt that the requirement to look critically at services had led to improvement; however, the benefit derived did not always persist, in his view.
We addressed this dimension of Best Value implementation further by asking these Best Value managers if (a) the Best Value regime had penetrated to all parts and levels of their local authority, and (b) whether Best Value had resulted in, or contributed to, a change of culture at their local authority. In response to the first of these questions, the general response was negative, although the Best Value manager at Easton said ‘to a degree’. However, the fourth Best Value manager refuted this, pointing to the need for time to achieve culture change, the different levels of adaptation in their authorities.
One Best Value manager (MacKay) stated that he would be ‘surprised if most employees could either attempt to define Best Value or, where they did so, to do so consistently’. These observations were reaffirmed in their responses to the question of culture changes from an outright ‘no’ (Easton) to ‘only a very little to date’ (MacDonald), to ‘staff are much more capable of adapting to change’ (Stuart). Finally, the Best Value manager at MacKay stated that he would be surprised if the majority of employees would relate cultural change to Best Value. Although he did state that there was an ‘awareness’ of the need to demonstrate improvement which had tackled all employees, although they would not see this as ‘Best Value’.
By 2006, a different picture emerged. At both Easton and MacDonald, the pattern of no evident culture change persisted. The Best Value manager of MacDonald expressed this as follows:
We are trying to achieve culture change. We are working towards continuous improvement. But Best Value won't bring about good management on its own. Unless we move away from the importance of the professions and the technical in local authority organizations to a more managerial system, and increase managerial capacity and make it more important Best Value won't achieve it. Best Value does not get a strong enough emphasis on management and away from the professional and technical. Best Value is very much treated as ‘discretionary’. It is about trying to get through a process. In this way, you will never achieve cultural change.
Of the remaining local authorities, MacKay's Best Value officer reported an insidious subtle process which crept into procedures and reporting systems, resulting in an incremental change in the culture of the organization. However, Stuart's Best Value manager depicted a more fundamental change in the underlying culture of this local authority. To achieve this, Stuart had instituted a system of performance appraisal of management linked to Best Value targets. All senior managers in this local authority are subject to 360-degree evaluation by all senior colleagues. Alongside this, individual managers have service plan goals and targets with the aim of improving performance. This instrumental process was said to have achieved a fundamental change in the culture at Stuart, as evidenced by a Best Value audit of this authority.
Despite all the investment in new language, new procedures and new institutional arrangements, there is evidence over their limited penetration at Easton and MacDonald. This applies at the senior management level. It also applies deep within these organizations, as the lower levels of management do not buy in to Best Value. However, there is evidence of a more muted or limited culture change at MacKay, with a more nascent change at Stuart. There is also limited evidence of legitimating activity by these local authority managers, particularly over their attitudes to form-filling for Best Value and, in certain cases, the manner in which the information required for Best Value reporting purposes is regarded. However, there is no evidence of investment in structural changes—such as decoupling—to keep the auditors at bay and, indeed, the intrusive nature of this form of audit makes this option unlikely, with ‘resistance’ in the form of adopting a tick-a-box mentality the most likely form of behaviour which can be regarded as legitimating. These findings substantiate Power's (1997) concern over audit as a colonization and displacement device.
Audit Society: An Audit Perspective
The major focus of this article is on the perceptions of managers within local government on whether they have become ‘auditable’ (Power, 1996) as part of an Audit Society (Power, 1997). The focus on managers addresses a gap in knowledge in the area of ‘performance auditing’ (Power, 2003; Pollitt, 2003). However, while the primary aim is on the managers within the case study settings, the views of a limited number of auditors were also obtained to determine how they saw their role, and whether this was consistent with the Audit Society thesis. In particular, this section now seeks to examine whether there is support for Power's Audit Society concept of the auditor as a ‘colonizer’.
The leading officials in public audit with responsibility for Best Value Audit (Black, 1999; Percy, 2001) have written on this development of audit in a manner which is consistent with Power's (1997) Audit Society thesis. In particular, these leading auditors see a need for a culture change in management (see ‘Research Context’, above) which is consistent with the colonization strand of the Audit Society thesis. These observations by leading government auditors have been reaffirmed by policy statements of the oversight body responsible for Best Value Audit. Furthermore, we present below the views of government auditors responsible for the implementation of Best Value. These additional interviews underline the perspective which auditors bring to bear—the intention to achieve cultural change and a belief that auditors are equipped to have a key role in this process.
There was a consistent view within the government auditors responsible for the development and implementation of Best Value. One senior government auditor who had a major role in determining how management arrangements in Best Value were implemented spoke very positively of the idea of Best Value, which he described as ‘a natural development from Value for Money audit’. In his view, the scrutiny of ‘good management’ within local authorities was a case of ‘auditors helping and supporting managers in local authorities’. This initiative (to issue guidance on what good management was) had been warmly received by auditors in the field, who found the guidance which this unit offered as ‘helping them to understand local authorities better’. This auditor was firm on the benefits of Best Value's stress on ‘continuous improvement, allied to economy, efficiency and effectiveness’.
Interviews with audit managers within the oversight body supported the views of the senior government auditors. The first audit manager stressed that an emphasis on management practice was a key to the delivery of Best Value. In his view, auditors should have a pivotal position in reviews of management in local authorities. This auditor subscribes to what Pollitt et al. (1999, p. 9) describe as an input-output model of public management: the need for organizational objectives and robust measures of performance. Fundamentally, this auditor saw the need for culture change to deliver continuous improvement which he saw as being created by ‘organizational climate’ and ‘an attitude of mind’.
A second government audit manager commented that:
It is important to understand what is the key factor [in Best Value]. It is the VFM attitude of mind that has to develop. In the past, local government were spending or money-oriented. Now they have to give more attention to the value of the services which they provide.
In this regard, this auditor identified two key areas in the delivery of this: (a) the use of performance indicators to evaluate the link between quality and Value for Money, and (b) the need to consider quality of services from a customer's perception and to measure clients’ attitudes to services provided. In these processes of focusing attention on best practice and ensuring that public sector bodies strive to improve, this government audit manager stressed the importance of the auditor who ‘analyses, in a more objective way, management arrangements and gives us an independent opinion on areas where effectiveness could be improved and suggestions to realize these improvements’.
The above evidence—the view of leading figures in public audit, the policy documents from the oversight body with responsibility for Best Value and the views of (albeit a small number) of audit managers within the oversight body—confirms a pattern of intent on change on management culture, or colonization. This is confirmatory evidence of Power's Audit Society.
CONCLUSION
This article has investigated the development and implementation of a new system of auditing in local government: Best Value. The locus of this study is within Power's (1997) critique of the Audit Society in which inspections and oversight bodies have increased influence over all aspects of life. This study has as its focus the intended and actual influence of auditors on the perceptions of management in local government through Best Value. This focus was addressed by scrutinizing policy and Best Value Audit papers, by interviewing government auditors involved in Best Value, by interviewing senior managers and elected officials with significant operational responsibility for service delivery, and by interviewing local authority managers with designated responsibility for Best Value. There is strong evidence provided in support of Power's thesis of the Audit Society. In particular, the statutory codification of Best Value in 2003 and the privileged status of government auditors in the definition and implementation of Best Value resonate with Power's Audit Society.
Power (1997) identified three possible outcomes of the progression to the Audit Society: a colonization of ideas (or culture change), auditing assuming a legitimating role, or the displacement of core activities. Results here of the Best Value initiative revealed the following: limited legitimating behaviour, some colonization, but also a picture of resistance in the field. Some evidence is provided of behaviour which can be seen as legitimating the actions of management. We discovered senior managers who said that they would address Best Value in a tick-a-box manner, rather than acting upon its guidance. However, Power has observed few studies of legitimating activities in the face of audit. We contend that this may be a function of the time-dependent nature of some of the evidence mobilized in support of the legitimation thesis. Specifically, while we recognize the fundamental, influential nature of Meyer and Rowan's (1977) seminal article on legitimation in public sector organizations, we would suggest that that it was written in a relatively benign era for public sector organizations. More specifically, while public sector organizations of the Meyer and Rowan era may have experienced financial cutbacks, they were not exposed to the detailed, systematic attempts to change their behaviour or culture, as, for example, evidenced by New Public Management programs or, in the present case, a decade of Best Value audit. This circumstance constrains the level of legitimating activities and enhances the likelihood of colonization and/or displacement activities. This finding has implications, internationally, for researchers in public sector organizations. Meyer and Rowan's research was based on U.S. experiences, but has initiated a wide range of studies in a variety of countries. The observation in the present study—that the classic Meyer and Rowan scenario does not prevail in the circumstances of prolonged NPM activity—merits further research, both in the U.K. and internationally.
Indeed, our scrutiny of the process by which Best Value was defined and made operational established the intent of the auditors to colonize local government. Auditors, in the shape of the government bodies responsible for the audit of local government, had defined what ‘good management’ is, had prescribed this, and were investigating local authorities to see if their guidance was being adhered to. However, the evidence within our case studies is predominantly one of resistance and apprehension on the part of local authority managers with the exception of one case study site, where Best Value methodologies were reported as accepted. However, most local authority managers expressed concerns that the displacement effect of a prescriptive, audit-led concept of good management (as in Best Value) does mean officials are busy making themselves auditable, rather than doing their jobs.
On a wider front, the colonization argument can be depicted as ‘culture change’. The evidence presented here is of limited buy-in to the language and practices of Best Value and of limited culture change. Exceptions to this were those individuals designated as Best Value managers who were to be advocates of Best Value within their local authorities. Even within this group there was scepticism over the extent to which ‘culture change’ had taken place with the significant exception of one case study site where Best Value was acted upon, and another where it was infiltrating the organizations in a subtle, even insidious, way.
These research findings extend our understanding of prior research. In particular, while many commentators have observed from the outside that Best Value may lead to displacement, this research offers more direct evidence from the managers to whom the Best Value process is addressed. Also, earlier research found the concept of culture change or colonization difficult to determine with certainty. This study confirms the elusive nature of this concept and the need for further study of how and where culture change may take place. The findings also locate the auditors charged with the implementation of the Best Value project firmly within the proponents of the New Public Management for modernizing public services.
As noted above, our findings are supportive of Power's (1997) Audit Society. However, Power (2003b) has expressed the view that there has been a dearth of studies which have examined the legitimating effects of audit. This research may contribute to our understanding of why this is the case. In addition to the time-dependent evidence advanced by Power on legitimation in audit (see above) we contend that the effects of displacement, legitimation and colonization are best not studied in isolation. This work provides evidence of intertwining of these phenomena in these study settings as managers are apprehensive about displacement and may indulge in legitimating behaviour or may even appear to succumb to colonization.
This study also has implications for policymakers, both in the U.K. and internationally. The very overt, explicit New Public Management agenda of ‘sound management’, with audit verification, resulted in resistance to change in these case study settings. One feature of this is the time it takes for something so profound as ‘culture change’ to take hold. Only one of these four case studies appeared to have shown some positive responses to the cues of audit process (Power, 1997). In documenting and gathering the information sought by the Best Value auditors, this local authority could be regarded as one which was experiencing ‘culture change’. This raises issues about the manner (explicit) and the means (auditors as enforcers) to achieve this declared aim of culture change. It also raises issues about the trajectory of such policies for fundamental changes in the actions and behaviour of managers within organizations, with the intent of government policy documents looking over-ambitious.
There are wider implications of this study within the international phenomenon of New Public Management. Hood (1995) has depicted the U.K. as a pacesetter in public management reform. As such, it serves as a reference point for policy makers intent on pursuing public sector economy, efficiency and effectiveness. However, as Hood has observed, the discrepancy between rhetoric or advocacy and the actual implementation of these reforms can be significant, which helps to explain the pacesetters and the laggards. The particular attribute of this study setting is that it is located within the U.K. and is exposed to the latest ideas and reform for the public sector. Furthermore, it has the powers to advance at its own pace on many reforms, including in this case, Best Value. In this regard, these findings of this study are more relevant to those economies which are not recognizably pacesetters in reform, but which are intent on the modernization of their public sectors. These findings are therefore of relevance to researchers, policy makers, policy analysts and public service financial managers and managers, generally, in that major group of economies which cannot be regarded as pacesetters.
The overwhelming picture from this detailed study of the implementation of government policy is confirmation of Power's (1997) Audit Society thesis. There is a case for further studies, including cross-sectional studies and studies in different locations in the U.K. and internationally, especially longitudinal studies, of the influence and intentions of ‘audit’ on the complete range of public services. The ‘audit’ intent in this article is evident from policy documents for audit bodies to colonize management: to make management auditable. But while the intent is demonstrable in the articulation of policy, it is uneven in practice. In Power's terms, the audit blueprint does not fit, and does not capture, practice.
