The Social Context Of A Value For Money Based Reform

The social context of a ‘value-for-money’-based
administrative reform
Panagiotis Karkatsoulis

Introduction
Browsing through the administrative reform programmes of developed countries
(OECD 1997a, 1998a) and the related bibliography (Halachmi, 1999), it is
obvious that these programmes consist of tools which refer to different scientific
models. No doubt, all these programmes have some common ideas, but they lack
a unifying concept that could serve as a comprehensive descriptive and analytical
framework and, at the same time, produce new actions and combinations of
actions.
The lack of a homogenous theoretical background for administrative reforms,
which could be attributed, among others, to the general theoretical insufficiency
of modern administrative science, can not be overcome by just solving problems
pragmatically. This reaction, although insufficient, has been adopted by the
majority of experts, politicians and bureaucrats and has set the pace for modern
administrative reforms. It is worth mentioning that the old schism between the
rational–normative and empirical–descriptive sciences still seems to exist despite
the efforts to surpass it (Luhmann, 1966).
As we wait, however, for administrative science to react ahead of the adminis-
trative reality, it has become imperative to elaborate descriptive models for the
comprehension of administrative reality — or better still administrative realities.
Such models are of great value for countries and administrations that apply
reform programmes, since they provide a framework and help to avoid unneces-
sary actions in the sense of resources saving.
In search of such a concept we meet the ‘value for money’ (VFM) principle.
There is no doubt that the VFM principle is implicit in most — if not all —
modern administrative reforms. Better Quality Services at Optimal Cost (Cabinet
Office, 1999) seems to be a self-evident strategy for public administrations that
undertake a reformative process.
This principle, substantiated in modern administrative reforms, unifies the two
different managerial philosophies that are known through the entrepreneurial

Dr Panagiotis Karkatsoulis is Scientific Advisor to the Ministry of Interior, Public
Administration and Decentralization, Athens, Greece. CDU: 65.012.3(100)
International Review of Administrative Sciences [0020–8523(200009)66:3]
Copyright © 2000 IIAS. SAGE Publications (London, Thousand Oaks, CA and New
Delhi), Vol. 66 (2000), 463–478; 014029

464 International Review of Administrative Sciences 66(3)

management and total quality movements, respectively. In this sense, we con-
sider that the VFM principle constitutes a step towards the required unifying
concept: economy and administration are organized and analysed on the basis of
a common theoretical model, which adds to the administrative action one more
analytical and practical dimension: the economic. The administrative action is no
longer analysed or realized only with legal considerations; it also addresses
the economic aspect. Today ‘value’ constitutes an important parameter of the
administrative action and ‘economy’ — the economic dimension of administra-
tive actions and reforms — is fully incorporated in modern scientific, political
and administrative analysis and practice. Besides, through the reinforcement of
the traditional ‘transparency’ or through the ‘Quality Movement’, everything
that up until now has been considered to be an appropriate practice for ‘good
administrative services’ was embodied in the VFM principle.
However, in the process of incorporating economy into administrative science
and the practical management of the state, especially in the field of rendering
services to the citizens, we face two major perils.
The first one lies in the process of decision-making if the economic dimension
of administrative actions and reforms is considered to be only of marginal
interest. Legality generally constitutes the cornerstone for the approval or dis-
approval of an administrative action — when this criterion is violated, the
action/decision is immediately eliminated or annulled. This does not apply to the
criterion of economy, since administrative actions may ignore what economy
dictates without their essence being annulled but it is impossible to ignore
legal/constitutional orders.
This fact indicates the hierarchy between the legitimization criteria for admin-
istrative action and, therefore, for administrative reforms. The justification of
economic or managerial principles, namely their functioning as ‘ultima ratio’ for
administrative action, has not yet been achieved, despite the theoretical and
practical progress that has been made in recent years. What the adherents of
administrative reform must do is more and better work in order to achieve this
strategic goal.
The second danger is the exact opposite: the risk of administrative action and
reform becoming ‘economized’. When the principle of VFM is interpreted as a
way to ensure low economic cost, we witness the shrinking of the administrative
action to one of its dimensions, i.e. the economic. Although the administrative
phenomenon has many economic aspects, it is not identified with the economic
one. If we insist on the reductive thinking that there is no difference between
private and public, between market and state, the state will lose its socially differ-
entiated functions. What we need, instead, is the redefinition of the state — its
‘reinvention’, to express ourselves in a trendy term; this is impossible though as
long as the economic system displays a pure interventionist character, violating
the autonomy of the other social subsystems.
In the absence of a wider scope that could provide the VFM principle with new
referential points beyond ‘legalism’ or ‘economism’, we will be forced to choose

Karkatsoulis: VFM-Based Reform 465

between one or the other, mutilating each time the dynamic of the administrative
reform.
This paper has a double purpose: on the one hand to indicate the danger lurking
in one-sided reforms; and on the other hand to present a theoretical ‘umbrella’ for
modern administrative reform and, especially, for the VFM principle that will be
wider than the ones presented by legal, political and economic science. Modern
social theory provides us with such a perspective. Hence, in the first part of this
paper, a list of management tools based on the VFM principle is presented and
criticized from a sociological point of view. In the second part, the methodologi-
cal limitations of the scientific fields involved are indicated and the theory of self-
referential social systems, which could transcend these limitations, is analysed. In
the third part, the implications of the theory of self-referential social systems in
the administrative reform are elucidated.

Background methodological assumption of reforms that incorporate the
VFM principle
Appraising the success of the reforms, which have incorporated the VFM
principle, we consider such programmes to serve two major objectives:
1. the rationalization of budgets through limiting the deficits, increasing
the revenues and applying the rationale of ‘cost–benefit’ — as in the market
economy — to administrative action; and
2. ideological support to the political/administrative system in order to resolve
the legitimization crisis arising from inefficient policies which did not correspond
to the citizens’ needs and expectations.
We presume that these objectives are common to both continental European
and Anglo-Saxon countries and that the political, economic or cultural particular-
ities of each country are expressed in the way in which they implement reform.

Management tools for the rationalization of the budget
Administrative downsizing. Achieving the first objective was tried through
tools that contribute directly or indirectly to the rationalization of budgets such as
privatization, the merging of services and, generally, every functional or struc-
tural reform that was aimed at administrative downsizing. We can distinguish two
periods in which the actions within this scope were taken by both central and
local authorities. With respect to Europe, we can place the first one during the
Conservatives’ terms of governance, during which the drastic downsizing of the
administration constituted an absolute priority (Cameron et al., 1995). Size, how-
ever, was not related to the operations for which the organizational structures
exist. According to this understanding, the number of these structures should be
curtailed in as much as they present certain pathologies, such as overlapping, a
control and coordination deficit, lack of individual responsibility and a low
degree of collective responsibility. In the second period, that of social-democratic
government, we trace a different managerial style, though it is not always
accompanied by a different kind of practice. Nowadays, the emerging trend is to


define the administrative size of a public organization according to the functions
it performs and not according to the specific structural characteristics. The motto
of the 1980s, ‘small is beautiful’, seems to be replace by another motto, ‘beautiful
is beautiful, no matter whether it is big or small’.
The ‘regulatory reform’ movement. In this category of tools we can also place
the simplification of administrative procedures and the institutionalization of
rules for better regulations, namely ‘regulatory reform’ (OECD, 1997b, 1998b).
The efforts, mostly by supranational organizations, to create a common orienta-
tion and reference framework for legislative matters concerning the deliberation
of markets, the enhancement of competition and the creation of new jobs seem to
have had a good reception by the participant countries. The scepticism of some of
them reflects nothing but the significance of their institutional, social, political
and economic circumstances and the need for further conceptual elaboration.
It is true that regulations illustrate not only the instrumental logic in solving
specific economic and social problems, but also the patterns of the socially
legitimized collective behaviours and actions, which sometimes are based on
popular beliefs and superstitions, i.e. on a very special ‘Weltanschaung’ that
often constitutes an irrational value system. In this sense, we have to bear in mind
that an adequate common orientation pattern for legislative matters can occur
only by speculating on the very specific national circumstances and values and on
the painful procedure of their continuous osmosis with global reform ideas.
Otherwise, the danger of oversimplification and generalization becomes evident.
If we do not proceed in this direction, any circumstantial choice might either
be legalized as adequate and conforming to the general model or dropped as
inadequate and non-conforming to national particularities.
Performance-based budgeting and the performance-related incentives. Top-
ranking reformative instruments, which reflect par excellence the VFM principle,
are performance-based budgeting and financial management, especially the per-
formance-linked pay of staff/line personnel.
The difficulties in implementing such systems lay, in particular, in their con-
flict with the values and practices consolidated through the bureaucratic system
of administration. Inside the red tape, public services and public servants stand
for the common interest — a notion that cannot be estimated in economic terms.
Budgetary assistance to public services as well as the remuneration of public
servants have a symbolic significance which results in the notion of compensa-
tion for their services rather than a salary based on the quantity and quality of
their work. According to traditional bureaucratic doctrines, payments and budget
do not constitute important preconditions for the existence and operation of a
service. The general philosophical principle, on which payment and the budget
are based, is that of equity — i.e. almost equal compensation for equal service.
Bearing in mind that differentiated work does not exist in a bureaucracy, the
equallization of salaries is a natural consequence.
This traditional belief has been eroded in modern public organization —
especially in the case of public services with economically measurable work —


and many attempts have been undertaken to introduce and apply modern systems
of financial management in the public sector. Nevertheless, the constitutional
consolidation of the equity principle, in combination with the equalizing inter-
pretation of regulations concerning the pay system by the courts and the dominant
corporate culture, raise heavy barriers for a wider application of modern pay
systems, which are tailored according to the VFM principle. Thus, it is imperative
to continue to redefine the key notions of public accounting methodically, to
re-organize the competent services and to affect the legal culture of the judges.

Reformative tools for the ideological support of the political/administrative
system
To realize the second objective, namely ideological support for the political/
administrative system, the reforms strengthening the VFM principle often include
actions of environmental scanning, strategic planning and policy analysis,
monitoring and evaluation in different levels of government. The attempt to
incorporate managerial principles in both their earlier (e.g. PPBS) and newly
fashioned forms (e.g. strategic planning) has stumbled especially over bureau-
cratic rationales and structures, which do not reinforce the conduct and operation
of such actions. The degree of resistance to such reformation efforts varies
according to the intensity of the bureaucratic culture in each organization.
Nevertheless, the fact that the dimension and the quality of administrative reform
differ in every national and social order, since reform includes values and tradi-
tions of this very society, must not be overlooked. That is to say that the extent to
which traditional and modern managerial principles are incorporated into the
administrative system depends on the specific social character of the public
organizations in each country, e.g. the extent to which a culture of organizing,
evaluating, controlling, etc. exists in a society and its public organizations.

Decentralization in the context of VFM
In order to enhance the effectiveness of the political/administrative system,
measures such as an extended decentralization of competence and resources
management to lower governmental and local authority levels are implemented in
different public administrations. Although decentralization is most significant
for the central political/administrative system, since it is forced to find a more
strategic role, its positive performance at lower levels is doubted. The effective-
ness of decentralized administration in problem-solving in everyday life raises a
lot of questions about the adequacy of the applied differentiation between central
and local planning and coordination. The measures that are usually undertaken
for the improvement of these administrative actions are frequently neutralized by
the unpredictable social dynamic concerning the definition of ‘centre’ and ‘local’.
By this we mean that the quest for a stable rational criterion to distinguish
between local and state affairs cannot be accomplished, since the viewpoint of the
observer — the one who draws the distinction — changes every time. This means
that the framework for evaluating the decentralization attempts also changes.


Nevertheless, there is a general trend not only to transfer competence to the
governmental level closest to the citizen, but also to form an all-embracing net-
work of state services at the local level. It stands to reason that the results
of local governance are different in every country, according to the existence of
etatism and to the quality of the culture of accountability during the exercise of
state power.

Benchmarking in the VFM concept
Measures under the VFM rationale also comprise the rearrangement of govern-
ment, especially those agencies that are responsible for the reform. In order to
achieve better results many useful instruments with a significant additional value
have been developed: systems of linear organization and alternative frameworks
for labour relations on the basis of individual responsibility (e.g. contracts
between employers and employees, managers and politicians in charge) are help-
ful tools for this goal. To these tools ‘benchmarking’ should also be included. The
idea developing some kind of competition between the various public organiza-
tions is one more step towards the new managerial state.
In the case of benchmarking, the impact of the dominant social and political
culture is decisive for its success and its expansion between more public organi-
zations. A low-risk estimation is that benchmarking has more possibilities of
succeeding in Anglo-Saxon countries, where there is a strong tradition of com-
petition and where the state is more subsidiary in character. In contrast, in most
European countries, where a tradition of etatism and protectionism prevails, com-
parative performance measurement between services does not evoke favourable
reactions. If we contemplate the globalization of this measure, namely to
encourage countries to follow benchmarking proposals, we have to find a way to
combine their particular values and practices with those of benchmarking.
Total Quality Management and VFM. In the category of reformative actions
that reinforce the social legitimization of the state by strengthening the VFM
principle, we also include the ones that improve the communication between
public organizations and citizens-users of the provided services. The tool that has
been most successfully used and has proved to be enduring is ‘Total Quality
Management’ (TQM) (Juran, 1995). In many countries, not only Anglo-Saxon or
European ones, which promote the improvement of quality of public services, we
witness an extended application of the statistical methods of social sciences along
with the conduct of customer satisfaction surveys (Klages and Masser, 1997).
The standardization of quality control for both products and services with the aid
of electronic technology seems to be an adequate way to overcome the weak-
nesses of the classic bureaucracy in providing services that stand up to the
modern citizen’s expectations and needs.
The Quality Movement, in the way it appeared and was implemented more in
the private and less in the public sector, had its biggest success in administrations
in which the social values and administrative culture were sympathetic with
its principles. The Quality Movement is based — as is well known — on the


principles of Zen Buddhism and was first inspired and developed in the Far East.
However, its attractiveness is not to be found in the idea of continuing improve-
ment, but in that of the internal and external client.
Quality-oriented management attempts to upgrade the ‘human capital’ of the
enterprise and re-establish the ‘subject of the administrative action’, namely the
‘employee’, putting him/her at the centre of administrative planning. It is obvious
that the anthropocentric dimension of ‘quality’ motivates the administrations
actuated by these values and reproducing this kind of culture more than those
which consider the rationalization of the system (structure and functions) to be
more important.
In any event, it is worth mentioning that the initial quality concept was
especially fruitful, since — being so flexible — it was enriched with special
cultural characteristics from the American and the European tradition. The
structure of the current quality concept has left the initial concept intact. In this
way, ‘quality’ evolved to be a universal and global model of governance with a
multicultural character that permits its easy adaptation to different social, politi-
cal and cultural circumstances. At the same time, its main disadvantage, inherent
in every concept with such a flexible and wide structure, transforms it into a quasi
‘platform concept’ that loses its analytical ability while possessing a great
descriptive force.

Information technology in the service of VFM
A notable contribution to the achievement of a modern legitimization of
the state through VFM reforms has been made by information technology. The
intensive incorporation of new electronic technologies into the new administra-
tive practices creates the necessary conditions for a citizen’s access to public
policies. The dominant culture in every society plays, of course, a very important
role in the degree of integration of electronic technology into the administrative
system (Korac-Kakabadse and Korac-Kakabadse, 1996). We can measure this
integration on a scale from ‘elementary’ to ‘full incorporation’. In the first case,
administration has only an instrumental relationship with information tech-
nology, while in the latest, administration moves from the bureaucratic model to a
new administrative system characterized by values like standardization, speed,
accuracy, effectiveness, etc.

The need for an interdisciplinary approach to the understanding of
administrative reform methods and practices
Political and administrative executives responsible for planning, implementing
and evaluating reforms in the spirit of the VFM principle hardly ever occupy
themselves with epistemological/theoretical and practical concepts that propose
alternative solutions to relevant problems, considering that it ‘is none of their
business’. Their job is, supposedly, to find ‘practical’ solutions to problems
induced by bureaucracy. In the course of time, some of these ‘solutions’ are
proven to be not particularly original, while others create bigger problems than


the ones they solve. On the other hand, scientists either fall silent or barricade
themselves in ‘their’ science, showing no interest in ‘practical’ problems.
Reforms seem to take place ‘automatically’. A kind of ‘spontaneous order’
appears as a substitute to the interdisciplinary discourse in demand, which is,
after all, very difficult to articulate. Previous efforts during the 1980s to establish
reliable and viable interactions between the social sciences, in which administra-
tive reform is a preferential domain (e.g. economy, sociology, psychology, legal
and political science), produced good impressions rather than good results. The
major problem with these endeavours lies primarily in the fact that even when the
analysis is satisfactory, the proposed solutions are not. Sometimes they are not
even reliable. This phenomenon probably originates from the special multi-
significant nature of administrative ‘action’ itself, which cannot be interpreted by
a single theory or a cluster of theories from a single scientific field (Parsons and
Shils, 1951; Luhmann, 1984).

The limits of every single discipline to justify the VFM reforms
It is a fact that every discipline that treats questions of administrative reform
keeps on dealing with these issues in the particular way of its methodology. The
interpretative space that each science occupies is analogous to the scientific and
public feeling it arouses. Taking the economy as an example, it imposes a certain
style and structure on administrative reform that is, in turn, attached to particular
political choices and government aesthetics. On the other hand, it is widely
known that the ‘monetarization’ of social action meets its limits at the principles
of ‘Rechtstaat’ and the code of democracy.
Our assumption is that all social subsystems (in our case economy, law and
political/administrative system) collaborate, in a certain way, for the construction
of social meanings and actions.
The inability to devise a comprehensive theoretical model in which political/
administrative, economic and legal theories and practices can coexist seems to
have led to an administrative ‘tri-lemma’. Every time we need to make decisions
about the significance of social issues, we have to choose between three alterna-
tives:
1. The political/administrative values and practices are forced to adjust to the
priorities of the legal system, and vice versa.
2. Political/administrative values and practices are forced to adjust to those of
the economic system, and vice versa.
3. Every group of values and practices evolves and reproduces itself without
interaction with the other two.
It is obvious that each of these possible choices/answers to the administrative
‘tri-lemma’ entails certain advantages and disadvantages. The result in favour of
the one or the other depends on the degree to which each system is developed, as
well as on the existence or not of an interventionist culture in each one of them.
The lack of an adequate and homogenous theoretical background for adminis-
trative reforms induces three major malfunctions in public administrations:


1. The first one relates to the absence of connection between the new practices
and their values and the particular national/organizational cultures that prevail in
every country/organization. In this case, the reformative process as a whole
assumes a fashionable and instrumental character with poor or temporary results.
2. The second problem refers to the lack of an appropriate operational plan for
the merging of new values and practices with the traditional ones. The con-
sequence of such a misfit is the development of parallel and never meeting mean-
ings and the coexistence of different organizational cultures within the same
organization; a fact that leads frequently to organizational paralysis.
3. At the same time, a third problem emerges. The VFM principle or the ‘lean
state’ — however labelled — being the scientific paradigm in the new era of
Public Administration, will not be able to gain its differentiation, if it does not
develop an identity code in the form of internal rules (meanings and values). Such
an internal ‘dogma’ can only exist if the new forms of management are able to
assess the different national and organizational experiences and supply the actors
with a system appropriate for the interpretation of their acts. Therefore, we need
to elaborate an adequate model for theory and practice in a way that each one
constitutes the necessary environment for the existence of the other. The theory of
self-referential social systems gives a satisfying response to our needs.

A theoretical proposal for an interdisciplinary analysis of reform models
that are based on the VFM principle
Trying to establish not only the theoretical legitimization of the new managerial
model according to the self-referential doctrine, but also its relationship to other
dominant doctrines elaborated during the last decades within Public Administra-
tion and Public Management is simultaneously an easy and a difficult task.
With this paradox we imply that, if we do not outline very clearly the principles
and the strategic goals of the ‘new managerialism’, as well as the desired practical
results, it would be very easy to find quite a few theoretical models or ideas deriv-
ing from different disciplines that may seem quite similar to the self-referential
approach and, at the same time, to identify many results of the reforms as self-
referential. On the other hand, if we set out explicit preconditions for what should
be characterized as self-referential, it would be very difficult to achieve a com-
prehensive approach that could provide new theoretical boundaries to the
reforms.
Our first thesis is that all discussion about administrative reform could find its
best theoretical justification within the framework of a social theory; that is to
say, if it is conceptualized as a social phenomenon. One could argue that there is
nothing new in this proposal, since interesting analysis — especially within
Organizational Theory — on the role of organizations in society could be found
(e.g. Scott, 1981). Yet, there are many distinct differences — as well as potential
similarities — between the well-known concepts of Public Administration and
the self-referential doctrine; in order to detect these differences, let us review the


most representative of the traditional administrative concepts in comparison with
the notions of self-reference:
1. Many authors engaged in the administrative phenomenon encourage the
substitution of the old traditional state by the individual responsibility of the
single actor. We can find this same idea in a variety of forms from anarchist to
egocentric theories (Buchanan and Tullock, 1962: 119ff.; Olson, 1978; Elster,
1987; Axelrod and Keohane, 1985). According to these approaches, the legit-
imization crisis of the state could only then be overcome, when the collective
rationality inherent to the state, is replaced by the interaction of single actions
taken by individual actors.
Since the founding fathers of sociology (Durkheim, Weber, Parsons) estab-
lished the meaning of ‘society’ as something more than the sum of individual
actions by individual actors, undoubted progress in the field has been accom-
plished with the emergence of the ‘system’. In the theory of self-referential
systems, the individual actor is a very important element, but s/he is conceived as
a ‘psychic system’. On the other hand, the social system has its proper identity
that does not depend on the identities of single subjects. Both social and psychic
systems are independent and interactive with each other, i.e. they communicate in
as much as the meanings that they share permit.
2. We have also to distinguish self-referential social systems from those sys-
tems which are more ‘images of reality’ and less the reality itself. Such ‘virtual
systems’ have been prominently elaborated by social scientists as well as by
analysts of organizations (Meyer and Rowan, 1977; Burrell and Morgan, 1979;
Berger and Luckmann, 1967; Powell and Dimaggio, 1991). ‘Social Con-
structivism’ together with the old and the new ‘Institutionalism’ have one thing in
common: the denial of anything being real outside our conceptions, our beliefs
and our attitudes. Although the constructivists, as well as the institutionalists,
have contributed a great deal to the enlargement of social theory by proving the
actuality of the mental constructions of reality, they do not recognize the presence
of two partners in the game of cognition (Brown, 1979). If we do not accept the
existence of a reality apart from our conception of it, then the danger of solipsism
is present. In this case, every positive contribution of the phenomenological
approaches — such as the previously mentioned theories and trends — will be
lost.
Beyond every other approach, the theory of self-referential systems advocates
the idea of the distinction between our ideas about the world — no matter what
form they take and on how many levels they are organized — and the world per
se as an external reality. Although the theoretical analysis of the relationship
between the two is rather limited, it is clear ‘that our knowledge about the world
is created while the world appears to us through our knowledge’ (Maturana and
Varela, 1984).
3. The most difficult task for disciples of the theory of self-referential systems
is its scientific labelling: Theory, Meta-theory, Grand Theory or Methodology?
Putting aside the difficulties in giving concrete content to these perplexing terms,


one should be mindful that the theory of self-referential systems has a history of
its own. The first comprehensive version of this theory appeared only in the mid-
1980s with Niklas Luhmann’s monumental book Soziale Systeme. In his work,
Luhmann not only made explicit the notion of the autopoietic system — initially
developed in biology — but also applied it in sociology and other social sciences
(Luhmann, 1998). In comparison with middle-range partial theories, the output
of his work can be identified as a ‘grand theory’. Clearly, it contains all the
advantages and disadvantages of such a theory, but it also permits us to compare
different and often mutually exclusive meanings and assumptions from different
social sciences (law, economy, psychology, pedagogic, etc.). At this point, a
question may be posed: Does this theory constitute another juridical, economic,
pedagogic, i.e. partial, theory; or does it provide us with new insights into the
understanding of the differentiated meanings that each scientific discipline gives
to its key notions?
We can assume that the theory of self-referential systems instructs us on
how to consider other theories. In this sense, it is also a ‘meta-theory’. Moreover,
inasmuch as it offers new definitions to key sociological notions, such as action,
actor, system, meaning, communication, etc. and also a method of combining
them in an entity, we can describe it both as a ‘grand theory’ and a methodology.
4. Recording the implications of the theory of self-referential systems for both
sociological theory and practice, we could summarize them in two sentences:
(i) The theory of self-referential systems could be considered a ‘Paradigm
Shift’ in the social sciences (Kuhn, 1970).
(ii) It gives us the desired flexibility, which is a prerequisite for the practical
implementation of reforms.

The basic assumptions of the social theory of self-referential systems
To conceive the special way, in which the theory of self-reference can help inter-
disciplinary communication, we have to refer to the basic assumptions implicit in
it:
1. The society is understood as a system that consists of autonomous subsys-
tems.
2. The social subsystems (in our case, political/administrative, legal and eco-
nomic) consist of the same basic substance, i.e. meanings.
3. Meanings are created, reproduced and withdrawn through a constant com-
municative process.
4. Communication between social subsystems is indirect and lateral. Each
system deposits in the mutual discourse the meanings that it considers communi-
cable. To the extent that they prove to be so, they become the possession of every
participant system.
5. Communication is unequal and defined by the rate of differentiation of each
system. Those more differentiated interfere with the less differentiated ones
(Luhmann, 1990).


The effects of a self-referential analysis on administrative reform theory
Establishing common ground between the different disciplines involved in
administrative reform would have the following positive effects:
1. Primarily, it would safeguard the autonomy of each discipline, since the
inviolate condition for their successful communication is their independence.
2. It would substantially promote each and every one of the involved scientific
disciplines, since it would supply them with new inputs that could not have been
produced by their self-reference.
3. It would give existence to a third, interdisciplinary entity enriching and
challenging scientific knowledge.
From the theory of self-referential systems, we expect the widening and redefi-
nition of the notions and practices of administrative science (old and new), as
well as of the principles of administrative reform in order to support theoretically
the new legitimization of the modern state and administration. Within such a
theoretical framework, management could be inhibitory to simplistic viewpoints
according to which the state and its values have exhausted their dynamic and
must be replaced by ideas and practices that are not, alas, novel and advanced, but
often long worn out and narrow. This way of dealing with the state is dogmatic
and old-fashioned.

A description of administrative reform and the VFM principle on the basis of
self-reference
In the previously mentioned theory, where society is conceived as a non-centre
system constituted by subsystems with a high degree of self-reference, public
administration is defined as distinct and autonomous from the others. Its mission
is the production of socially binding decisions: a task that no other social sub-
system can achieve (Dammann et al., 1994).
In order to attain this goal, public administration draws plans, sets the goals,
chooses the means, evaluates the results and redesigns its own actions. To avoid
any misunderstanding, it is crucial to point out that all the previously mentioned
tools should be understood, within the framework of systems theory, as products
of the administrative system itself. The hard core of these tasks (planning,
monitoring and evaluating) can only be developed inside the system itself
through a self-referential communicative process. It has been argued that all the
previously cited managerial functions can only then have a positive response on
behalf of the system, i.e. the proper results for the needs and capacities of the
system. Any hetero-definition of these functions may cause irrelevant results for
the administrative system; that is to say, the system does not understand, ignores
or rejects the managerial ‘modus operandi’, whether traditional or modern. In this
case, all reformative attempts are meant to fail.
We consider the previously described theoretical concept as an appropriate
basis for the improvement not only of the discussion on administrative reform,
but also of various implementations of reform. Two facts prove the correctness of


our assertion: First, within such an interpretative framework, we can clearly
define not only certain managerial meanings, but also their relationship. Second,
that if administrative reform is conceived according to this concept, it will gain in
social legitimization since it will be organized and formulated both as a techno-
cratic and a social project.
Most of all, we believe that the self-referential concept can provide the appro-
priate justification for different models of administrative reform. We will
mention in the following, some dimensions of the Greek experience in adminis-
trative reform that seem to confirm the self-referential approach.

The Greek experience from the implementation of the VFM principle in
administrative reform
The implementation of the VFM principle in Greek public administration is very
interesting, considering that, apart from the obvious interest of a case study, it is
implemented in an island area and particularly in the many, small and isolated
islands of the Aegean Sea.
The theoretical interest of such an attempt lies in the fact that the plan of any
administrative intervention in an island should be integral and not rely on the
benefits of synergy between different, more or less similar, reform acts, which, in
other cases, could be important for the success of the reforms.
The Greek reform programme ASTERIAS (STARFISH) relates to the
improvement of the administrative services rendered to the citizens of the islands
by public administrations and constitutes part of a wider reformative programme
called ‘Quality for the Citizen’. ASTERIAS refers to the services provided in the
Citizens’ Bureaux, which operate as one-stop agencies in each municipality
on every Greek island. An employee, specially trained in the use of electronic
technology, provides the citizens with the following services: (1) general admin-
istrative information; (2) specific information about various administrative cases
from websites of national and supranational organizations on the Internet; and
(3) application forms for administrative procedures in competences other than the
municipality organization (prefectures, regions, ministries, etc.). The applica-
tions, which can be found in electronic form at the website of the Ministry of the
Aegean which is responsible for the islands (www.ypai.aegean.gr), are down-
loaded, printed and sent either by fax or by e-mail to the public service whereas
previously the citizen — usually working people — would otherwise have to go
in person.
It is crucial to note that the peculiar nature of the islands obliges us to design a
highly networking administration with the whole spectrum of public services
concentrated at one point and with multiskilled employees in a linear hierarchy.
The island requires, ex definitione, an all-inclusive reform plan with much inter-
action between its elements.
The experience from the first year of the ASTERIAS implementation, con-
cerning the ratio economic cost/outcome, is especially favourable. The need for


citizens to travel for administrative purposes has been drastically reduced, the
number of man-hours saved is noteworthy and the quality of services provided by
the Citizens’ Bureaux has been proved to be better than the one citizens would get
directly from the competent agency.
To sustain all this, we should extend the system to the interior of the adminis-
tration, namely, to the procedures that are necessary for final decision-making.
This field seems more difficult than the previous one, where we only had to cope
with the citizens’ scepticism. We have already faced significant resistance on
the part of the public services that are responsible for the issuing of supporting
documents and certificates. Legalism, bureaucratic culture and corruption
moulded with the special culture of the island are the most powerful impedance to
the island public services. Therefore, we have to elaborate an appropriate strategy
in order to overcome these resistances and problems.

Conclusion
Incorporating the discussion on administrative reform and on the specific reforms
based on the VFM principle into a wider theoretical context can have positive
results for all their social, political, juridical and economic dimensions.
The elaboration and development of a ‘sociology of administrative reform’ can
be very fruitful not only for the specific reformative tools and actions, but also
for the social theory itself. The theory of self-referential social systems has
been proved, through its various applications in different scientific fields (e.g.
economy, law, psychology, pedagogy), to be complex enough to cope with
the social, political and economic circumstances of every country involved in
administrative reform. The intensification of such a discussion is, therefore, an
imperative to the scientists engaged in reformative issues.
If we continue to elaborate the new, managerial reformative tools and princi-
ples by aligning them with the self-referential ones, we will gain:
1. More alternatives to the practical problems that the new managerial model
deasl with. The result of the combination of different disciplines will be an
applicable solution based on the interdisciplinary principles of the theory of self-
referential social systems.
2. Better coordination between the different reformative tools. If we compre-
hend the rules and the boundaries of the reformative process as a whole according
to the doctrine of self-reference, we will be able to lend more flexibility to the
reformative tools stemming from different disciplines. The modernization
process leads to the enhancement of the self-referential ability of every system
involved in it and, therefore, broadens the communication between them. Each
partner is informed of the special properties of the other.
3. Unification of different theoretical/practical models to a new, meta-
theoretical one. The VFM principle can be transformed from a summation of
single actions and tools, justifiable under different methodological concepts, to a
unified, but flexible model for reforming the public sector, with an explicit
dogma.


Bureaucracy as the scientific way of organizing used to be the reality in early
administration, at the beginning of the 20th century. Nowadays, an organizational
system based on self-referential principles will give, in our opinion, the most
pleasant perspective for public administration at the beginning of the next
century.

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The Social Context Of A Value For Money Based Reform

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