Research Articles Base: Management Research

Human Resources Management

Performance Appraisal in Organizations   Introduction             Ten years ago, Human Resource Management was almost an unknown term in Asia.  Training, selection, and performance appraisal were given very short shrift, and staff specialists, when they existed, were known as Personnel Managers, or had a dual role of Administration Manager with a “Personnel” tag thrown in for good measure.  Back in those days, Asian companies were not aware of how effective management of the human resource had a major bearing on the bottom line.  The educational sector gave little support.  Professional associations were fledgling to say the least.  A “personnel” position was often something in which you ended up in after failing to make sales and seen as a dead end position.  The National University of Singapore, the government anointed showcase of an Asian university did not offer one unit in psychology.  China funded anything to do with science and technology, but soft sciences such as management and HRM were ignored.   Why Research is required?             A 1993 survey indicated that many Singaporeans are dissatisfied with the performance appraisal systems of their employers.  Reports in the popular press here appear to gloss over the many difficulties presented by performance appraisal and/or performance management systems.             This is to review recent research and thought on overcoming the problems encountered with common appraisal practices, and to suggest options available to Singaporean employers.  An employee survey from one organization is used to illustrate how employee input can be helpful to human resource practitioners in diagnosing problems with appraisal systems and in recommending remedial actions.     Research Methods             Current suggested solutions to these appraisal problems include: 1) modification of the appraisal format either by adding or deleting performance categories, quantifying performance standards, or substituting goal achievement for dimensional ratings; 2) training of appraisers to more accurately observe and evaluate individual performance; and 3) abolishing individual performance ratings and merit-related pay by substituting other performance related policies, group and work unit appraisal, or practices based on total quality management. These suggestions warrant careful examination in light of recent research.   Basis of Evaluation of research methods             The reported 70% of Singaporeans who perceive their appraisal systems to be ineffective is consistent with world-wide reactions to appraisal.  For example, in the United States surveys by both the Mercer and Wyatt consulting firms report that a majority of firms are currently experiencing problems with their performance appraisal/management systems (Cameron, 1995; McNerney, 1995; Stamps, 1995).  One major problem with these systems is an inability to translate organizational goals into appropriate goals for jobs and individuals. Other problems include achieving accurate assessments of individuals’ performance and individuals’ negative and demotivated reactions to appraisal.   Collection and Analysis of Information             Searching for the Perfect Format. The wealth’ of appraisal formats currently available is readily apparent, from graphic rating scales to behaviorally-anchored and behavior-observation scales; and from essays and critical incidents to management-by-objectives and other types of goal setting programs. Despite all these attempts to develop foolproof formats, research continues to reveal that format has little to do with the effectiveness of performance management and appraisal systems (Gomez-Mejia, 1988).  Even pleas for use of objective, quantifiable criteria have not solved appraisal problems (Condrey, 1994).  However, there is evidence that goal setting used in place of ratings can improve the contribution of appraisal processes to individuals’ performance (Klein and Snell, 1994). Rater Training.  Rater training usually focuses on one or more strategies: reducing rating errors, establishing performance dimensions or frames-of-reference, and improving accuracy of observation of performance (Woehr and Huffcutt, 1994).  Rater error training attempts to teach appraisers how to avoid such judgment errors as halo (generalizing from one incident or attribute) or contrast (comparing one employee to another) effects.  Performance dimension training often involves appraisers in developing rating scales which are defined in terms of the performance dimensions they are to measure.  Frame-of-reference training provides raters with a common set of standards with which they are to use to do their rating.  Finally, behavior observation training teaches raters’ processes for improving their abilities to detect, recognize, and recall behavioral episodes of work performance.  An overall review of the studies on rater training shows that as long as appraisers are not forced to follow a predetermined distribution of ratings, each of these approaches helps to produce more accurate performance ratings (Woehr and Huffcutt, 1994). Limitations Arguably, the ideal rater training program should incorporate all of these forms of training in order to maximize rating accuracy.  There is only one major caveat with regard to this research on appraisal training – the performance which must be the focus of the training should represent the ratees’ respective contribution to organizational goals, an identification task which we have yet to do well (Cameron, 1995).   Abolishment of Appraisals. Recently, an increasing number of organizations are abolishing their performance appraisal systems along with their traditional merit-pay plans and replacing them with a variety of programs.  A survey of 181 manufacturing and service companies in Midwestern U.S.A. found that 11% have stopped using annual appraisals and a further 25% are planning to abolish them within the next two years (Antonioni, 1994).  For example, Lyondell Petrochemical replaced its appraisal/merit system with market rates of pay for jobs and profit-sharing bonuses accompanied by special recognition for outstanding individual contributions (McNerney, 1995).  Eastern Realty Investment eliminated its performance rating system and substituted annual reviews of individual’s strengths, contributions, and accomplishments as well as areas for improvement. Its employees who are also at market rates of pay receive lump-sum annual payments. Another alternative to appraisal based merit systems is the return to the old practice of gift-giving.  Gifts as reward for outstanding performance are provided by organizations as diverse as Avon Products, the British Automobile Association, Levi Strauss and the British brewery, Whitbred Inns (Economist, 1994).  Yet, other organizations have replaced performance appraisal of individuals with appraisal of work groups/teams (Campbell et al. 1996; Lawler, 1994).  Work unit performance can be measured by ratios of outputs to inputs which are determined by the unit’s characteristics and objectives.  Feedback from such measures can greatly reduce negative employee reactions if performance is below expectations, as (1) relationship with superiors is not an issue and (2) unit results are more easily accepted by the unit’s employees (Campbell et al.).  However, if an organization’s reward system revolves around team performance; similar financial rewards for each team member can create individual perceptions of inequity as individual contributions are likely to be dissimilar.  Such inequities are thought to be resolved by team members developing their own intangible rewards such as recognition (Lawler, 1994). Another substitute for performance appraisal asks executives and their managers to motivate their employees by focusing on work processes rather than individuals’ behavior – that is, adopting some type of total quality management program.  Deming, one of the strongest opponents of traditional appraisal systems, argued that appraisals, particularly when ranking of individuals was involved, are demeaning to those appraised.  He believed that appraisals allow managers to shift to their employees the major responsibility of creating effective organizational outcomes with the human and material capital available to them (Deming, 1986). Other TQM experts, who have referred to individual performance appraisal practices as the most serious obstacle to the successful implementation of TQM programs, support Deming’s opinion of individual appraisals for several reasons (Moen, 1989; Bowman, 1994).  First, the goal of TQM programs is to constantly strive for the improvement of work processes rather than the improvement of individual employee behavior and/or performance.  Management, in conjunction with its employees, seeks to identify barriers to quality, serves the interests of internal and external customers, and thereby maintains an organizational climate of continuous improvement.  Second, a key to a TQM approach is the concept of variability. It occurs naturally within any work process.  The causes of that variability need to be identified. Deming believed that less than 10% of variability is usually under the control of employees.  By holding employees accountable for their performance through performance appraisals, managers fail to address the problems their employees face with the work processes.  Therefore managers miss the opportunity to control most causes of variability in performance, and contribute to suboptimal organizational performance.  Third, statistical process control is used to systematically uncover, communicate, and deal with problems that impede quality and productivity.  The process is seen by all involved as that which needs evaluating and blaming, not the employees.  As long as management has selected and/or trained employees to be competent in their jobs, appraisal of their performance becomes unnecessary.  The employees who contribute the most to the organization are asked for input into how their personal processes enable them to accomplish more than their peers so that they may be emulated. Individual performance appraisal, which usually assumes that employees are solely responsible for their performance, can only divert attention from the sources of most performance problems within the work system.  Employees become defensive for many reasons, not least of which is fear of losing Out to their peers and are not motivated to improve the work system (Bowman, 1994).   Application of Recommendations                     Given this research evidence and expert recommendations for improving performance appraisal systems, how should HR executives apply this knowledge?  First of all, continuous assessment of personnel practices should be an ongoing HR practice.  An especially effective method of evaluating appraisal practices is to ask for anonymous feedback about the system from both appraisers and appraised.  Secondly, with this feedback, many problems can be identified and effective solutions can be derived from the application of our recently gained knowledge about appraisals.  As an example, we will review the results of such a feedback exercise carried out within a currently, highly successful Singaporean organization, and illustrate how to interpret the findings and suggest appropriate countermeasures.             The appraisal system consists of two components – a review of the past year’s performance and a developmental assessment of potential for higher level jobs and accompanying training needs.  The content of the two components is also well-conceived.  The review of the past year’s performance includes sections outlining the job involved and the extent of its dynamic nature, a description of the achievement of the previous year’s goals which were established for the appraisee, a discussion of the factors that aided and impeded goal achievement, mutual identification of areas of future development, a listing of goals for the upcoming year and space for employee comment about the review.  The potential assessment categorizes the employee’s current performance in terms of expectations regarding performance levels for his position, as well as certain attributes deemed necessary for higher level positions. This system, in particular the review of past performance, follows state-of-the-art principles in terms of: 1) using goal achievement in place of dimensional ratings, 2) tying goals to job responsibilities, 3) recognizing the dynamic nature of jobs and adjusting accordingly, 4) identifying and addressing factors affecting performance outside of an employee’s control, and 5) seeking an employee’s input and reactions to the appraisal process.  The recommended characteristics of the organization’s approach to assessment of potential include: utilization of multiple raters, several rating dimensions, and only a few categories of rank.   Conclusion Although the degree of dissatisfaction with this appraisal system is consistent with the degree of dissatisfaction in performance appraisals in general, it is important not to generalize about the findings of this case because of the myriad of reasons for shortcomings in performance appraisal systems. What is generalizable about this case is the importance of obtaining feedback about rater and ratee reactions to the implementation of any new appraisal system. Are not organizations better off pilot testing changes in their performance appraisal practices with small subsets of their employees before making radical changes in their systems as was done in this case?  It is hoped that our arguments are persuasive in suggesting just how difficult it is to implement and maintain an effective performance appraisal system in any organization, let alone in a case like the one detailed here involving an excellently performing organization (Labig & Chye 1996). Credit:ivythesis.typepad.com

Human Resources Management

Performance Appraisal in Organizations Introduction Ten years ago, Human Resource Management was almost an unknown term ...

Management Organizational Behavior

Part I: Issues and Events The top three day-to-day issues (in leadership, management, organizational behavior) I now face in my actual or aspired to job are gender discrimination in the workplace, lack of strong leadership skills on the part of the managers, and dominating colleagues. Regarding the first issue, the working environment is run by a managing partner who is a micro manager who treats the women in the office as 2nd class citizens. The men are moving up the corporate ladder and the women are not. There is gender discrimination in the workplace which favored the males. Females on the other hand are not given the equal opportunity to prove their worth. The reason why I am still working here despite the apparent gender discrimination is because of the bonus incentives.             The lack of strong leadership skills on the part of the managers is very bad for the organization. This creates a domino effect and even the simplest of things becomes difficult. To create a strong organization, it must start from the top and all the rest will follow. Without strong leadership skills, there would be poor organization and results of the work. Another thing is that this would not give motivation to the workers.             With regards to the dominating colleagues, these are people who think they know it all or are in close ties with individuals holding higher positions. They exhibit power which they rightfully do not have. This creates tension in the workplace and affects my overall job performance as well as satisfaction.   Part II: Personal Thinking Styles             Based on the results of the LSI styles profile, the style that is strongly descriptive of me is the Affinitive style. The particular score for this style is considered to be of high range. Other “primary” personal thinking styles of me as reflected in the data are: conventional, humanistic-encouraging, approval, dependent and achievement. Examples of professional behaviors or beliefs that illustrate these primary styles are my being relaxed and at ease with people, my avoidance of conflict, and being considerate.             The “backup” personal thinking styles as depicted in the results are self-actualizing, avoidance, perfectionist, competitive, oppositional, and power. These personality styles are not very descriptive of me and are shown to be also found in many other respondents. Examples of professional behaviors or beliefs that I have illustrated my backup styles are being open about my self, avoiding decisions, and having the strong need to win.             On general, the results of the personality style profile showed personality styles that are more constructive and passive/defensive. These pertain to satisfaction needs and people orientation. Areas in which I might identify examples of my behavior illustrating my primary and backup personal styles are in the planning, organizing, staffing, directing, and controlling within the organization.             My limiting style would be being affinitive. When we talk of affinitive, this would mean involving other people or groups. Everything that is done seems to be with respect to other people. Affiliations have been deemed important to the point that the self could not be given enough priority. To cite one good example why this could reduce my effectiveness, being affinitive allows my judgment to be influenced by my liking to other people. Being affinitive would mean that in choosing a person to do a task, I would select someone I like or I don’t like depending on what the task is. This would be very unfair.   Part III: Conclusion and Reflection             My LSI results more or less described exactly how I professionally behave. Compared to the other respondents, there are personality styles which I have discovered are not normally used by the others. On the other hand, there are also personality styles which I share with the majority of the respondents.             My LSI results make me more aware of myself.  This is helpful in that I can improve where I think I had been lacking and continue to enhance that which I already have in me. This could help me improve my professional behavior and myself in general. Credit:ivythesis.typepad.com

Management Organizational Behavior

Part I: Issues and Events The top three day-to-day issues (in leadership, management, organizational behavior) I now face in my actual o...

Management Paper Revised

Executive Summary   The organization being chosen to carry out such change management process analysis is the computer industry and the organization company in focus is amicably regarding DELL Computers. Thus, changer processes in business organizations involves the reality behind every process and is considered as a daily cycle in dealing to various issues and concerns of the organization as it depends on the managements actions and its respected change of nature in dealing with effective change management as directed at overcoming anger and resentment evolving into a program that supports acceptance and internalization. As a consultant commenting on the organizational change process choosing DELL organization as the focal point for discussion and analysis for this presentation, my role to the organization is to have a clear emphasis dealing to the external and internal change drivers and other essential points needed for the realization of purpose for this report presentation for the senior management of the DELL in providing factual information that will be able to give a better substantive spontaneity of understanding of such organizational state needed for selection and the application of the appropriate management models as well as concepts per se.    Credit:ivythesis.typepad.com

Management Paper Revised

Executive Summary The organization being chosen to carry out such change management process analysis is the computer industry and the...

• The concept of NPM and the objective of outsourcing

1.1  Purpose of the research   After extensive debate and implementation of various concepts of New Public Management (NPM)[1] during the last decade, public management scholars have recently turned to the evaluation of theoretical frameworks and reinvention efforts in a more critical and objective manner.  NPM proponents focused on their attention on market efficiency, entrepreneurship and performance-based/benchmarking management in the public sector.  There are four major elements of NPM, including use of market-like mechanisms, decentralization, improvement of service quality, and customer satisfaction. In particular, under the aegis of the Clinton Administration, reinventing government (reinvention) was initiated, popularized and diffused into various public agencies, different levels of government, and even other countries. NPM and reinvention are very closely related and often used interchangeably but these two concepts are not necessarily identical. They are different in terms of the scope of and emphasis among various managerial reforms. Developed mainly in the European context, NPM is considered an umbrella concept of neomanagerialism that includes various managerial reforms for market-efficiency, decentralization, devolution, customer satisfaction, and quality improvement. The term “reinventing government” reflects a narrower application that indicates an American version of NPM emphasizing market efficiency, customer satisfaction, public entrepreneurship, and competition. Jones and hompson (1999)[2] summarize the difference between NPM and the American reinvention:  While a set of reinvention values –such as efficiency, cost-effectiveness and customer satisfaction–has been forwarded by NPM proponents, an alternative set of administrative values–such as accountability, democratic procedure and equity–has been reemphasized in reaction to the entrepreneurial government paradigm. The tension between the reinvention values and the alternative administrative values seems to remain in the NPM literature and invites a dialectic reaction of reform calling for accountability, equity and other non-market indices. 1.2  The outstanding policy of HKSARG   In response to the managerial wave of reinvention, some have expressed caution by highlighting the threats to public accountability and democratic values. Public servants may have internalized a mixed sense of managerial values under these circumstances, where two different sets of contending values—i.e., the reinvention values (market efficiency, competition and outsourcing) and alternative administrative values (equity, accountability, control, and publicness)—coexist, if not altogether amiably.    Despite numerous analyses of the theories and practices of government reinvention through both normative studies and empirical studies, little research has been conducted to assess overall adoption and implementation of various managerial innovations with a broad sample base. Many of the extant studies have been done by using anecdotal and case-study methods and most of these have viewed reinvention at the federal level.[3]  Recently, some attempts have been made to explore the implementation of government reinvention at different levels of government with multiple cases or a larger sample.    .  There are some explicit objectives in this study: (1) the  condition of outsourcing and the susceptibility of local government of systemic corruption; (2) the condition of the degree to which the service can be easily specified in terms of performance measures; and (3) the condition of the degree to which a service disruption would initiate a crisis of confidence in government (4) the condition of the number of potential providers of the services ( 5) the condition of the economic costs and benefits of transitioning to the outside provision of a service (6) the condition of the orangizational costs and benfits of transition costs and core competencies (7) the condition of the political and social costs and benefits of making the change. 1.3  Methodology   Based on the analysis of the conditions for successful outsourcing are that organization should know the importance of specialization , market discipline , flexibility and cost saving . Firstly, I will list out the condition required for successful outstanding laid down by Simon Domberger . Afterwards, I will list out the other conditions required for successful outsourcing laid down by Paul Seidenstat. Finally, the economic costs and benefits and organizational costs and benefits of transitioning to the outside provision of  a services will be analyzed.      LITERATURE REVIEW   2.1       Introduction   In this chapter, I will first introduce the concept of between New Public Management and Outsourcing. Then the details of outsourcing will be discussed in the second part of this chapter. There are many scholars working in the field of outsourcing. Some of them are focus on the pros and cons of outsourcing and some of them are focus on the conditions required for successful outsourcing. In this dissertation, I will not focus on the pros and cons of outsourcing but will analyze the conditions required for successful outsourcing.                                  Although this dissertation if focus on the conditions required for successful outsourcing, there are still many scholars doing research in this field. In this chapter, I will discuss the theory from two scholars i.e. Simon Domberger and Paul Seidenstat. At the end, I will identify the gap between the theories and indicate which theory I will adopt as the theoretical framework of the dissertation.   2.2       The Concept of New Public Management and the Objective of Outsourcing   Over the last decade, the term of New Public Management (NPM) is widely used in academic, governmental and organizational discussion and the debate over the nature of the NPM also becomes more and more serious. The idea of NPM is origin from a set of public sector reform in the 80s and 90s.At that period of time, the public services were neither efficiency nor effective. As a result, either cost containment or quality improvement was requested from the community. On the basis of these beliefs a trio goals, cost containment, public support and performance improvement, emerged as central drivers for reform[4] . In order to achieve the above trio goals, public managers tried to adopt the private sector mode of organizing and managing.   One of the most critical aspects for the reform is to use contact as the dominant means of control instead of the hierarchies. Other aspects followed, including the introduction of what were seen to be ‘business-like’ management practices in human resource management (appraisal, performance management and seeking to recruit senior managers from the private sector) and a requirement to account, and to pay, for capital utilization.[5] One of the leading scholars in the field of NPM is Christopher Hood and his article ‘A public management for all seasons?’ is still the most widely used concept of the idea of NPM. He describes NPM as a doctrine, or at least as a label for a set of administrative doctrine which he and other identified as ‘New’. Before the concept of NPM, public administration was always focus on institutions, politics and value system. On the other hand, NPM referred to private sector management practices, including performance incentives, and to markets. According to Sandra Dawson and Charlotte Dargie. “NPM drew on two competing conceptual frameworks. One, skin to managerialism, supported the introduction of private sector practices, which included attempts to manage professionals, introduce performance measures and incentive reward system. The other, with us its emphasis on markets, derived from variants of public choice, rational choice and ‘New institutional economics’, and led to an emphasis on decentralization and competition that is at odds with the centralizing tendencies of the other[6]. Christopher Hood defines the nature of NPM and states it comprises seven doctrines:-   ·                    A focus on hands-on and entrepreneurial management, as opposed to the traditional bureaucratic focus of the public administrator; ·                    Explicit standards and measurers of performance; ·                    An emphasis on output controls; ·                    The importance of the disaggregation and decentralization of public services; ·                    A shift to the promotion of competition in the provision of public services ·                    A stress on private sector styles of management and their superiority: and the promotion of discipline and parsimony in resource allocation.[7]   The concept of privatization definitely falls into the doctrine of disaggregation and decentralization of public services, and the promotion of competition in the provision of public services.[8] According to Ascher, he defines privatization as ‘an umbrella term that has come to describe a multitude of government initiatives designed to increase the role of the private sector. [9]. Privatization includes different forms of alternative service production and delivery schemes. In general, there are nine forms of privatization and they are service shedding, asset sales, franchising, vouchers, grants, subsidies, public-private partnership, volunteer activities, contracting in, contracting our and competitive contracting. Among the above privatization options, contracting out or outsourcing is the most commonly used privatization option. Outsourcing involves a binding agreement by which a government pays a private firm or outside entity to provide all of part of a specific service. It is because, on one hand, the government retains the ownership and overall control of the outsourced services or goods, on the other hand, the government employ the private company to provide the services or goods that delivered in-house previously. According to Ascher, she describes outsourcing as the situation where one organization contracts with another for the provision of a particular good or service. It is an essential form of procurement, in the sense that contractors may be considered supplies, but in common usage it has come to refer more specifically to the purchase of an end product which could otherwise be provided in-house by the purchaser. [10] To conclude, the terms of New Public Management, Privatization and Outsourcing are interlinked. By using the concept of NPM defines by Christopher Wood, privatization is one of the administrative tools for the public managers to implement the concept of NPM in the public sectors. The terms of outsourcing is one the administrative tools under the umbrella of privatization.   According to John A. O’Looney, there are three main objectives to outsource a government service and they are to reduce, make more efficient, and to reform government services.[11] , To reduce means many things which includes to reduce the services by allocating less resources to contractor and to reduce the size of the government.   Another objective is to enhance the efficiency of the government. ‘This can occur through a number of mechanisms, including (1) restoring competition, (2) tapping economies of scale, and (3) discovering the most efficient production techniques. [12] The last objective is to reform the government by introducing competition and to manage contracts rather than manage programs.      2.3       Conditions required for successful outsourcing laid down by Simon Domberger   Regarding the conditions required for successful outsourcing. Simon Domberger lays down four keywords for successful outsourcing and they are Specialization, Market Discipline, Flexibility and Cost Saving. In the following, I will discuss the details of each keyword separately.   Specialization   The first condition for successful outsourcing is that organization should know the importance of specialization and also intends to focus on specialization. Simon Domberger defines ‘Specialization’ as ‘Concentrating on those activities in which the organization has established a distinctive capability, letting other produce supporting goods and services.’[13]   Regarding specialization, Simon Domberger introduces the concept of core activities and core competencies. According to Alexander and Young (1996). ‘they suggest that there are four meanings associated with core competencies or core activities. They are 1) activities traditionally performed in –house; 2) activities critical to business performance; 3) activities creating current or potential competitive advantage; 4) activities that will drive future growth, innovation, or rejuvenation. Among the above four meanings, the first one is relatively meaningless as everything produces in-house is core activities or core competencies.’[14]   After knowing the meaning of core competencies, organization needs to identify them among the goods and services produced in-house. Two aspects of core competencies need to be known. According to Prahalad and Hamel (1990), they suggest that ‘organizations should not simply think they are producing products only. Organizations should rather to cultivate the competencies which will be more enduring than the products they currently produce, will not diminish with use, and will be the platform form which they will launch new and successful products in the future.’[15] One of the examples quoted by them is Sony’s capacity to miniaturize components and audio-visual products.   Prahalad and Hamel also states that ‘Outsourcing can provide a shortcut to a more competitive products, but is typically contributes little to building the people-embodies skills that are needed to sustain product leadership’ [16] which means outsourcing the provision of key parts and components can lose and organization its core competence, or the opportunity to create one. They warn that before surrender economic activities to an outside supplier, organization must think very careful and thoroughly the potential gain as well as the loss. Simon Domberger further adds one point that organization should consider the losing of technological competence to potential competitor. The concept is especially valid in the high-tech industries including computer, telecommunication and the like. The knowledge of high-tech not only is risky and costly to acquire but also can keep the organization ahead in front of the other competitors in the market.     To sum up, specialization can make economic benefits by concentrating on activities in which an organization is relatively more efficient, total value added is maximized.   Market Discipline     According to Simon Domberger, another condition for successful outsourcing is market discipline. He defines market discipline as ‘the process of identifying conditions in which the purchaser is separated from the provider and a formal transaction takes place under contract. [17] Simon Domberger states that market discipline provides a couple of advantages. They are 1) separation of purchaser from provider; 2) focus on performance; 3) effective interface between purchaser and provider:; and 4) competition.     The separation of purchaser from provider means one party concentrates on consumption and another on production. Simon Domberger states that ‘the implications of the separation of market participants are far-reaching: there are not two organizations where previously there was on: the financial impact of the activities each becomes transparent through the splitting of the organization accounts: and the cost of resources used in providing services across organization boundaries comes into much sharper focus. The separation also enhances incentives to perform and to delivery services that meet client needs. Once the separation of purchaser from provider, purchaser can select another contractor who performs better or provides better terms.[18]     The focus on performance has impact on both the purchaser and provider. Before entering into any contracts, the purchaser must think very carefully the nature of goods or services required from the provider. According to Simon Domberger, ‘prior to contracting many public sector organizations did not specify the goods or services provided in-house. [19]  By outsourcing, purchaser not only needs to specify the details of goods or services required but also to monitor the goods or services provided by the provider. Thus, the focus on performance has a positive effect on service quality.    The effective interface between the purchaser and the provider starts with the contract. Generally, the service contracts are relationship contracts rather than spot contracts. The relationship contracts require exchange of information and data between both parties to evaluate the contract. One of the options to deal with under-performed provider will be the contract termination. However, it will impose cost on both parties. Therefore, the relationship contracts provide a basis for both parties to start a constructive dialogue to discuss the strengths and weaknesses of the provider and the nature of their relationship.   Simon Domberger also mentions that the market discipline introduces competition to the purchaser and provider. Simon Domberger states that introducing competition has significant and positive effect in working practices, innovative approaches to work redesign, and, as a consequence, significant cost saving. The force of competition will be discussed more thoroughly in the part of cost savings.   Flexibility   According to Simon Domberger the third condition is that organization should know the importance of flexibility. He defines flexibility as ‘the ability to adjust the scale and scope of production upwards or downwards at low cost and rapid rate.[20]   In order words, flexibility means the speed and cost of an adjustment to changes in demand or supply situations. And a flexible system means the cost and speed of adjustment to external stimulus is lower than the other system.     It is common that output adjustment is less costly and more rapid in small organization. It is because output adjustment often requires dismissal of staff and disruption of internal relationship. Therefore, by outsourcing to numerous small organization, the output adjustment can be made more quickly and easily.   Simon Domberger quotes Benetton as the example of flexibility. He states that the success of Benetton not only because of its sensibility to customers’ tastes but also of its outsourcing strategy by contracting producing to small organization, which makes Benetton change its product design quickly, easily and less costly. Finally, Simon Domberger states that ‘other things being equal, smaller organizations tend to breed closer-knit working communities, in which commitment to organizational objectives is easier to elicit. This adds to the ability of small-scale enterprise to respond rapidly to external change.[21]     Cost Saving   The last condition is the intention to reduce cost. Simon Domberger defines cost  savings as ‘lower resource costs of service delivery compared to in-house production.[22] Not many people will challenge that competition drives price down. A classical example in Hong Kong is the service fee of mobile phone. Before the Hong Kong Government opened up the telecommunication market, PCCW (previous Known as CSL) enjoyed the monopoly and set the service fee at a very high level. However, after the opening of the market, the power of competition surfaced and the fee decreased tremendously because of the vigorous competition in the market.     Some people may argue that competition drives price down as it also drive the quality of goods or services down too. However, according to Simon Domberger, it is not the case. He uses Fig. 2.1 to illustrate his argument.   From Fig. 2.1 shows that the price for non-competitive contracts is 28 while the price for competitive is 16. On the other hand, the cleaning performance indicators for non-competitive contract is 0.56 while the indicator for competitive contracts is 0.63. The figure shows not only competitive contracts reduces price but also increases the quality. Simon Domberger further mentions that the result of one study is not convincing. But the study sows that it is possible that competition can drive down the cost as well as raise the quality.   Simon Domberger further states that public sector purchaser will not follow the concept of ‘lowest price win’ but rather follow the concept of ‘value for money’. The concept of ‘value for money’ further guarantees the quality of goods or services outsourced will not be decreased.   In addition, as mentioned in market discipline, purchaser will pay more attention on performance. Simon Domberger explains that ‘the greater emphasis on performance has resulted in more reliable and accessible information on quality than was available prior to contracting. This increase in information should lead to improvements in quality, since it is now more difficult for vendors to shade quality without being caught our. In sum, it should not be surprising to see in quantitative studies that the introduction of contracting, and the competition that accompanies it, tends to enhance quality irrespective of its influence on prices.’ [23]     2.4 Conditions required for successful outsourcing laid down by Paul Seidenstat   Paul Seidenstat is co-editor of Privatizing Education and Educational Choice, and Privatizing Transportation Systems. He is Associate Professor of Economics at Temple University. His recent research has been in the area of state and local government finance and management. In his book ‘Contracting Out Government Services’, he states that because of the growing fiscal difficulties of state and local government and the increasing opposition to fax increases, outsourcing becomes one of the methods to ease the pressures by cutting cost so as to avoid raising taxes or drastically cutting the level of services provided by the government.   Paul Seidenstat defines ‘outsourcing as a management tool as well as a device to realign the public-private sector mix. The managerial objectives include cutting costs, improving the quality of services produced, or both. Most frequently, the primary aim has been to cut costs in order to relieve budgetary pressures rather than to improve service, especially since assessing the equality of output of many government services can be a complex and time-consuming activity. Outsourcing was also aimed at increasing the flexibility of government operations such that expansion, contraction, or complete elimination of specific services could be accomplished with fewer obstacles and with greater speed. [24]   Paul Seidenstat lies down very clearly that certain environmental factors must be present for successful outsourcing. The factors are 1) political support; 2) managerial/political leadership and 3) a supportive private market structure, in the following, I will discuss those factors in detail.   Political Support     ‘Overcoming the bias toward the status quo protected by the stakeholders who receive monopoly rent is essential. A strong case must be made for change; the case must speak to the benefits to be received with a provision/production arrangement in comparison to the costs that may have to incurred.’[25]  Therefore, voter and legislative support introduces an opportunity for outsourcing and to allow the new structure a chance to show its advantage.    According to Paul Seidenstat, there are two main advantages for outsourcing which are cost containment and quality enhancement. It is no doubt that by introducing competition the operating costs can be reduced. Savas mentions that ‘saving from competitive contracting of public services-the most thoroughly studies form of privatization –average roughly 25 to 30 percent. [26] As mentioned earlier, although reducing operating cost is the main objective of outsourcing, achieving high service quality is also another objective of outsourcing. According to Paul Seidenstat in certain services such as education and prisoner services the quality has improved with impressive results because the nature of the service and the outputs of these services are difficult to define and measure.   Managerial/Political Leadership   ‘The full support of political leaders, especially in the executive branch, greatly enhances the chances the chances of success. Not only is this support required for approval of change, but also enthusiastic and careful backing of the effort often is compelled so sustain it. Well-prepared and ardent political leaders often are needed to overcome the inertia of the status quo.[27]   Paul Seidenstat further states that political leaders should be aware of certain cautions and pitfalls. The first one is there is little competition in the private market. Without any competition, not only saving cannot be achieved but also service quality cannot be maintained. As a result, the process of outsourcing is simply a process of shifting public monopoly. Should there is sufficient competition, the contract should be carefully drafted and monitored. It is because ‘vague contract may lead of less than optimal results, and enforcement may not be effectively practiced.[28] Most importantly, abuse of the public trust and favoritism in awarding contract is another pitfalls. Bidding competition and public watchdog are the useful tools to avoid the undue influence of outsourcing. In sum, the conduct of political favoritism, corruption, and the toleration of poor contractor performance should not be overlooked.       Supportive Private Market Structure   To achieve the maximum benefits of outsourcing, the private sector should be structured such that native suppliers exist to compete in providing the service in the case of load-shedding, can compete for contracts in the care of contracting out or franchising, or can  supply services in the case of vouchers. Without competition, privatization might simply consist of a private monopoly substituting for a government monopoly.[29] With a supportive private market structure, public-private competition is introduced to the government. Outsourcing not only reduces the operating cost and enhance he services quality but also has the effect of weakening the power of public union. Paul Seidenstat quotes the example in the United State, some governors and mayors used the thread of privatization in negotiating with the public servants to persuade them to accept major modifications in their work rules by trading off the idea of privatization. The result was the unions accepted the proposal.   Many people may ask why private sector can produce goods or delivery services with lower cost, at a given level of service when compared with the government. Paul Seidenstat explains that ‘ a competitive market framework will drive unit cost to the minimum level. Only way the private producer accomplishes cost minimization is by limiting labor costs in such ways as using more part-time and lower-skill workers, paying for less time off overtime, establishing clearer job definitions and greater worker accountability, and having more workers per supervisor. Other input  cost can be reduced by holding first-line managers more responsible for equipment maintenance and giving them more authority to hire and fire, shifting toward a higher capital to labor ration, and utilizing more effective purchasing methods. Relating manager pay to profitability can lead to more emphasis on innovative ways to produce, incorporating new technology, dispensing with “red tape”, and making timely decision. On the other hand, changing managers in light of poor performance in a private organization typically can be accomplished with greater speed and with less disruption.[30]   2.5 conclusion   To conclude, Paul Seidenstat’s view on conditions required for successful outsourcing is that should the number of public servants affected is small, specialized services are involved, output can be easily defined and measured, several potential private suppliers exist or entry of others is easy, and the service beneficiaries are numerous, outsourcing goods or services will be implemented successful.    Context     3.1 History of the Hong Kong auxiliary police   There is a long and proud history of part-time policemen in Hong Kong. From 1955, when the great and bloody Taiping rebellion threatened to wash over Hong Kong , 76 volunteers were recruited. Almost ever since, there has been a significant component of civilian volunteers serving in some aspect of law enforcement in support of the regular force. Today, there are 5,700 men and women who wear the uniform of the Hong Kong Auxiliary Police. Their Commandant, an Auxiliary Senior Assistant Commissioner, comes under the direction of the Commissioner of Police. Based at Kowloon Bay and serving in every Region, the Auxiliaries’ contribution to the safety and security of the community is considerable. In addition, the presence of civilians within its ranks helps solidify the role of the Force as part of the Hong Kong family. Over the years, part-time policemen server under various names. Whether they were called the Special Constabulary or the Police Reserve, they were always ready when they were needed. This included times of great crisis, like the seamen’s strike of the 1920s which crippled Hong Kong, and when disaster strikes. Until the 1960s, many leading hongs felt it was their civic duty to encourage staff, particularly young expatriates, to serve as voluntary policemen. They were strong in marine, manning vessels on regular patrols, and in units in the New Territories. There were Portuguese, Eurasian and British-Indian companies involved during the First World War, a total of 642 men. There was a Maxim Gun company and some more fashionable executives of leading merchant houses made up a mounted horse unit. However, the bulk of part-time police, since the dawn of the 20th century, has been Chinese. Today, the mixture of the Auxiliaries reflects the community as a whole; 98 percent are Chinese. Every day, more than 1,000 Auxiliaries report for duty and perform diverse duties. The 300-strong communications company is an all-female section. In case of crisis, they can take over control rooms freeing male counterparts in both Auxiliary and Regular forces to present a strong presence on the streets. When on duty, the bank clerks, sales clerks and schoolteachers who make up the Auxiliaries have the same power and responsibilities as any police officer. This means training has to be intense and effective. Even with many years’ experience, Auxiliaries have to spend 14 full days and 96 hours – the equivalent of 26 day a year – updating their skills and knowledge. Hong Kong has been well served by the loyal, dedicated men and women who give up much of their spare time to help protect their community. Their service is an integral part of the tradition of the Hong Kong Police.   3.2 Changes after 1999 In November 1998, the Police Force set up a Committee to review the Hong Kong Auxiliary Police Force (HKAPF) with a view to improving its management and deployment in the light of changing circumstances. The Committee consists of regular Police officers, including senior Police officers of the five land regions, as well as officers from the HKAPF including its Deputy Commandant. In arriving at its recommendations, the Committee has taken into consideration the views and the morale of the Auxiliary Police officers. When the review was underway, representatives of the Regions have reported the progress at the monthly Regional Command and Management Conferences attended by the Chief Superintendent of the Auxiliary Police Force in each Region. In turn, their views were relayed to the Committee. In addition, the Chairman of the Committee has exchanged views with the Commandant of the HKAPF on the review from time to time. The Committee has made a total of 33 recommendations covering the role, establishment, organisational structure, recruitment and training of the HKAPF. Of the 33 recommendations, 13 have been implemented since 1 April 1999. As the recommendations involve a redefinition of the role of the HKAPF, it is understandable that some officers have expressed concern when the review report was published in mid-March 1999. However, after a series of briefings given to both regular and auxiliary Police officers at different levels, such concerns have been to a large extent allayed. It is now generally accepted that the Auxiliary Police officers will continue to play an important role in providing support to the regular Police Force. They will serve as a trained manpower reserve to support the regular Police officers in crowd management operations during major public events and festivals. They will also be deployed to perform some beat duties as part of their practical training. The Force Management will continue their dialogue with Auxiliary Police officers over the implementation of the remaining 20 recommendations which include a review of the syllabus of the basic training, the appraisal system and discipline regulations of the HKAPF.   Feasiability Study     4.1 Introduction     In this chapter, I will discuss every single condition laid down by John A. O’Looney for successful outsourcing against the actual conditions which the Hong Kong Auxiliary Police is facing. At the end of this chapter, a conclusion will be drawn to indicate as to whether the services provided by the Hong Kong Auxiliary Police can be outsourced.     4.2 The Condition Of  Outsourcing And The Susceptibility  Of Local Government To Systemic Corruption     John A. O’ Looney states very clearly that public managers consider whether to outsource the services, he/she should carefully consider the potential for the outsourcing of certain services to lead to systemic corruption. This process is some how like a risk assessment and this risk assessment is considerable important for the police force.   In early 50’s, 60’s and 70’s, Hong Kong was facing a very serious corruption problem in the police force. All the Hong Kong people were affected by the corrupted police force. The hawkers not only needed to pay the bouncer fee to the triad members but also to the police officers. People had no trust on the police and the integrity of the police was in doubt in the mind of the Hong Kong People.   In order to rectify the problem of corruption, ICAC is established to tackle the problem. ICAC was established in 1974. According to the statistic provided by ICAC, the number of corruption reports regarding government departments has decreased significantly from 2745 to 1974 to 1541 in 2003, representing a decrease of 43. 86%[31] . Both ICAC and the Hong Kong Police have put tremendous effort to rectify the problem. Nowadays, the Hong Kong police not only emphases it is the Asian finest police force but also its honesty and integrity. It is therefore the issue of systemic corruption should be looked into carefully.     You may ask what does systemic corruption mean with respect to outsourcing particular services? John. A O’Looney expresses that public managers should examine the nature of the service itself in light of its potential for tempting a corrupt contractor to influence public policy making and the potential for the contractor to possess the power to unduly influence policy. [32] One of the example he quote is to outsource the policy will lead to systemic corruption. There are two common points for systemic corruption one is the services involves a high degree of discretion and another is the existence of potentially large rewards for exercising the discretion.    Now, let examine whether outsource the services provided by the Hong Kong Auxiliary Police will lead to systemic corruption. The role of the Hong Kong Auxiliary Police is:-   (a)                an internal security trained reserve which with duties as follow: (I) the protection of Key Points; (II) providing staff for Command and Control Centres; (III) providing staff for station Defense; and (IV) the protection of consular Premises.     (b)               a reserve to assist at times of natural disaster or civil emergencies; (c)                a support to the regular officers in the performance of crowd management during major public events and in other pre=planned operations.   The above roles have involved a very limited discretion that the auxiliary offices can exercise. Thus, if we examine the role solely, it will not create a high potential of systemic corruption. However, apart from the above role, the auxiliary officers will de deployed to perform beat patrol duty to discharge his/her constabulary duty. In according to section 17 of the Hong Kong Auxiliary Police Force Ordinance Chapter 233 of the Laws of Hong Kong, even auxiliary officer when on duty may perform duties and exercise powers same as every regular, which means every on-duty auxiliary officer has he same power as his/her Regular counterpart. Discharging constabulary duty may involve a high degree of discretion. For example, police office (both Regular and Auxiliary Police) is empowered to exercise discretion to enforce minor traffic offence and policy officer has the discretion to ‘Stop and Question’ or ‘Stop and Search’ any persons in the public place. The auxiliary officer performing heat patrol duty not only has a high degree of discretion to exercise but also may have a potentially large reward for using that discretion. Using the minor traffic offence as the example. The auxiliary officer may required the offender to pay him/her money instead of issuing ticket. Another extreme example is that whilst and auxiliary officer conducting a ‘Stop and Search’ against a male, some dangerous drugs were found in the male’s possession. The chance of corruption occurs. It is not uncommon that offender will offer bride to the officer for releasing him instead of arresting him.   To conclude, outsourcing the services provided by the Hong Kong Auxiliary Police not only involves a high of discretion in the carrying out of the service but also a large reward for exercising that discretion. It is therefore outsourcing the services provided by the Hong Kong Auxiliary Police will lead to high potential for systemic corruption.     4.3 The Condition of The Degree To which The Service Can Be Easily Specified In Terms Of Performance Measures   John  A. O’Looney states that one of the ways in which competition is believed to lead to greater savings is through innovation or the discovery of new, more efficient means of achieving desired outcomes.[33] . The keyword of John A. O’Looney’s concept is outcomes. If it is difficult to specify measures for the desired outcome, it will be difficult for potential service providers to discover innovative, cost-saving methods to achieve the outcomes. Now, let us examine whether the services provided by the Hong Kong Auxiliary Police can be easily specified. One of the major roles of the Hong Kong Auxiliary Police is provided protective coverage for the key points in HKSAR during an internal security situation. It is very difficult to identify and measure the outcome. It is very difficult to find some objective figure or data to show the protective coverage is good or bad.     For the role of assisting the regular police officers at time of natural disaster or civil emergencies, Once again, it is very difficult to identify some objective figures or data to support as to whether the auxiliary police officer has discharges his/her role competently and effectively. Some people may urge that the number of casualty can be used to reflect the performance of the Hong Kong Auxiliary Police. Bearing in mind that the nature and seriousness of the disaster, the cooperation between different government departments, the quality of the medical service also pay a vital role during natural disaster or civil emergencies.   Another major role of the Hong Kong Auxiliary Police is to support the regular police officers in the performance of crowd management duties during major public events. For this role, it may be easier to identify and measure the outcome. Before contracting, the public managers may state clearly in the contract certain percentage of the required manpower should be provided by the contractor. The public manager may also use the number of complaints as an indicator to show the performance of the contractor. For this supporting role, it is not difficult to identify and measure the outcome.   The auxiliary officers are also required to perform bear patrol duty as a practical training. For this duty,  the number of  ‘Stop and Question’ and ‘Stop and Search’ performance, the number of ticket issued and the number of person arrested may be used to reflect the performance of the Hong Kong Auxiliary Police. However, proper supervision should be conducted when adopting the above productivities as performance indicators. For instance, police officer is empowered to exercise discretion in minor traffic offence. However, as the police officer spotted the minor traffic offence does not acquire the expected traffic ticket, the officer then decides not to exercise his /her discretion. Then the real reason of exercising discretion is distorted. Therefore, without due care and supervision, officers may discharge their role abusively. Apart from the above daily productivity, the number of complaints is also an indicator to show the performance of the contractor.   To sum up this condition, some outcomes achieved by the Hong Kong Auxiliary Police are difficult to specify but some are not. When we compare the three major roles discharged by Hong Kong Auxiliary Police, two of them are very difficult to identify and measure in terms of performance measures. In conclusion, it will be unwise to say this condition can be achieved by the public managers.   4.4 The Condition Of The Degree To Which a Service Disruption World Initiate A Crisis Of confidence of Government     John A. O’Looney states that the essential function of government is to legitimize collective responsibility for the safety and welfare of the citizenry. When a government loses legitimacy, the chaos that follows makes it increasing difficult to reestablish  an order that also respects liberty. [34] It is therefore the public managers should consider the possibility of a crisis of confidence in government would initiate if the outsourced service is disrupted. For example, the government may be swept out of office easily if the government provides poor police service. In the first two services provided by the Hong Kong Auxiliary Police, a common point can be easily identify and which is emergency in nature. The Hong Kong Auxiliary Police will provided security coverage during an internal security situation and provided a reserve during the time of natural disaster or civil emergencies. You can imagine, during the internal security situation or at times of natural disaster or civil emergencies, the security coverage or the supporting role of the Hong Kong Auxiliary police is disrupted, it definitely has a tremendous impact on the confidence in government   Despite the facts that the supporting role of the Hong Kong Auxiliary Police in the performance of crowd management duties during major public events is not emergency in nature, the service failure may also have tremendous impact on the confidence in government. Hong Kong is an international city and many large scale conferences, exhibitions or international public events will be taken place in Hong Kong. Moreover, the HKSARG also organize international forum in order to attract foreign investments and to promote tourism in Hong Kong. Without the support of the Hong Kong Auxiliary Police, the major public events may not be carried smoothly and successfully.   More importantly, according to ‘Indicators of Social Development: Hong Kong 1999’, there is a survey conducted regarding public trust in political actors in which the police force obtains a decent level of trust i.e. 46.4 and the police force is the highest one among all the political actors. [35] The following table shows the result of the survey:-   ———————————————————————————————————-                                                      Mistrust   Mistrust   Average Trust Trust  DK/NO  NA                                                      Strongly                                           Strongly            ———————————————————————————————————–   CE Tung Chee-Hwa                             3.5       18.7     39.2     29.9     2.0       6.2       0.5 Executive Council                                 2.9       17.8     37.8     22.2     0.4       18.6     0.5       Legislative Council                                1.4       14.8     39.0     28.5     0.7       15.1     0.5 Civil Servants                                       1.1       11.9     46.4     29.9     1.0       9.4       0.4 Police                                                   1.4       6.8       38.4     46.4     2.9       3.7       0.5 Urban Council/Regional Council            1.8       18.1     44.2     22.6     0.5       12.2     0.6 District Board                                       1.1       12.2     47.1     22.2     0.5       16.7     0.4 Democratic Party                                  3.1       25.7     40.3     8.9       0.1       21.1     0.7 Political Party                                       5.4       20.9     36.8     15.0     0.7       20.6     0.6 Liberal Party                                         4.1       25.3     39.2     8.2       0.1       22.4     0.7 DAV                                                    4.3       25.3     37.2     9.4       0.2       22.8     0.8   Source: Adapted from Indicator of Social development: Hong Kong 1999   Table 4.1 Trust in Political Actors   The survey is a very strong evident that the public has confidence in the police. To outsource the services provided by the Hong Kong Auxiliary Police not only damages the public confidence in the police force but also undermines the public confidence in governance. To sum up, the major services provided by the Hong Kong Auxiliary Police are very crucial and important and have a great impact on the confidence in the HKSARG. If the services are outsourced and the service provider fails to delivery the services, it not only will initiate a crisis of confidence in the HKSARG affecting her legitimacy but also affect the image of the HKSARG as an international metropolitan. Thus, it is very clearly that this condition can not be fulfilled in the case of outsourcing the services provided by the Hong Kong Auxiliary Police.   4.5 The condition Of The Number of Potential Providers Of the Service     May people support the concept of outsourcing is the understanding that competition will subsequently lead of cost reduction or cost saving. In the book of ‘Outsourcing State and Local Government Services’, John A. O’Looney states two key conditions for competition. The conditions are the existence of numbers service providers and the possibility of segmenting the service for public-private competition.   The Number of Service Providers   Let examine the former first. The public managers should consider the existence of numerous service providers before and after the outsourcing. Maintaining numerous service providers means maintaining the competition, resulting on cost reduction and cost saving.   As mentioned before, there are three major roles for the Hong Kong Auxiliary Police and I will discuss reach role in details. The first role of the Hong Kong Auxiliary Police is to provide trained reserve for protective coverage during in internal security situation. So, does Hong Kong have may security companies provided protective any Standard Chartered banks, the first people you seen will be the security guard. The main duty of those guards is to provide security coverage for the bank. In Hong Kong, it is no doubt that there are plenty of security companies providing the service of protective coverage such a Aviation Security companies Limited Which provides security coverage for the entire Hong Kong International Airport, Brink’s Hong Kong Limited and Securicor Hong Kong Limited which provide security coverage for the banks and for cash escort. The second role of the Hong Kong Auxiliary Police is to provide are reserve to assist at times of natural disaster of civil emergencies. In Hong Kong, there are many NGOs established to provide assistance to the community i.e. St. John and Civil Aid Service (CAS). If the service is outsourced to those NGOs, the government can save money by disbanding the Hong Kong Auxiliary Police and also by disbanding the Auxiliary Support Bureau, which is run by regular police officers to provide training and management services to auxiliary officers. In addition, the outsourcing also provides an opportunity for those NGOs to expand, providing more opportunities for the teenagers to participate in community service. Like the previous one, there are numerous service providers in this regime.   The third role of the Hong Kong Auxiliary Police is to act as support to the regular Force in the performance of crowd management duties during major public events. Like the second role, there are some NGOs such as CAS providing the service of crowd management. Besides, man private security companies also provide the similar service. Again, numerous service providers can be found in Hong Kong providing the service of crowd management.   The Possibility Of Segmenting The Services   Let move to the second condition which is the possibility of segmenting the services for public-private competition. Once again, it is no doubt that this condition can be fulfilled easily. For the first role of security coverage, the government can outsource the security coverage of Key Points to one company while the security coverage of Consular Premises to another. For the service of providing staff for command and control centers and for sensitive nature of the jobs, resulting to maintain certain amount lf knowledge of the outsourced services.   For the second role of providing reserve at times of natural disaster or civil emergencies, the government can simply outsource the service to one provider to delivery service during natural disaster while anther during civil emergencies.   For the third role of providing the service of crowd management during major public events, the government can divide the contract into demographic situation. For example, the government can outsource the service of crowd management in Hong Kong Island to one company while the service in Kowloon to another.   To conclude, the condition of the number of potential providers of the service can be easily fulfilled in Hong Kong in respect of outsourcing the services provided by the Hong Kong Auxiliary Police.     4.6 The Condition of The Economic Costs And Benefits of transitioning To The Outside Provision Of A Service   For this condition, John A. O’Looney states that successful outsourcing demands the transition from resources dedicated to service delivery to expertise in contract negotiation and management. Because it is still necessary to delicate in-house resources to contract management, it is important to continue to account for these costs when assessing the costs and benefits of outsourcing a particular service. Essentially, an outsourced services has two overhead or administrative costs: the in-house administration costs and the costs to the contractor.[36] (Remarks: John A. O’Looney, “Outsourcing state the local government services: decision-making strategies and management methods”, (London: Quorum, 1998) p. 40 The latter costs is self-explanatory. The former one is determined by the task complexity and the scale of contracts. According to John A. O’Looney, if the drawing of a contract for an outsourced service involves both general outsourcing skills and specific technical skills and the scale of contracts is small, the in-house administration costs will be high. However, of the contract involves only general outsourcing skills and the scale of contracts is large, the in-house administration costs are low. The in-house administration costs of the mixed cases fall in-between the above two extreme scenarios will be moderate.   Let examine the in-house administration costs of outsourcing the services provided by the Hong Kong Auxiliary Police. In term of scale of contracts, it is no doubt that the scale is absolutely large. The Hong Kong Auxiliary Police has 4,500 and provides a wide range of services to members of the public. If the government is decided to outsourcing the services, the scale of contract will be large enough to reduce the in-house administration costs.   Regarding the task complexity, it is understood that a lay person with reasonable education and intelligence can not be fully understood the services provided by the Hong Kong Auxiliary Policy. The task complexity of each services provided by the Hong Kong Auxiliary Police will be examined in details.   For the role of providing trained reserve for protective coverage during internal security situation, it is very difficult for a lay person to lay down in details what is required to ensure a safe and reasonable protective coverage in Key Points or in Consular Premises. It is also difficult for a lay person to write down in the contract which kinds of weapons are suitable for protective coverage.   Regarding the second role of providing reserve to assist at times of natural disaster of civil emergencies, it is also difficult to a lay person to fully understand the outsourced service. In discharging the role during natural disaster or civil emergencies, officers should at least have the basic understanding of first aid, radio communication and some professional knowledge in cordon and evacuation. Therefore, in the process of contract negotiation and contract management, some professional knowledge and expertise are required.   In respect of the role or providing service of crowed management during major public events, like the first and second role, a high degree of professional knowledge and expertise are required. It will be a difficult job for a lay person to plan, execute and monitor a large scale public event.   To sum up, outsourcing the services provided by the Hong Kong Auxiliary Police involves a high degree of professional knowledge and expertise and the negotiation and management of the contract will demand an extra cost of hiring persons with specific technical knowledge to assist in the negotiations and contract monitoring. Nevertheless, the extra cost is compensated by the large scale of contracts.   According to what John A O’Looney suggests, the in-house administration costs to outsource the services provided by the Hong Kong Auxiliary Police will be moderate.     4.7 The Condition Of The Organizational Costs And Benefits Of Transitioning To The Outside Provision Of A Service : Transaction Costs And Core Competencies   Having considered the in-house administration costs and the costs to the contractor, John A O’Looney suggests to further look into the transaction costs and core competencies of the organization.   Transaction Costs   Learning from experience, many public managers finds that it is very difficult to identify all the services in the contract for outsourcing. However, if a service is not listed in the contract, it is expected that an additional charge will be imposed for additional service. As suggested by John A O’Looney, if the public manager is unable to foresee and plan for any unexpected changes in the outsourced service, the transaction costs such as renegotiating the contract and setting new performance measures will eat up the expected savings.   Now, let examine as to whether the transaction costs will eat up the expected saving in outsourcing the service provided by the Hong Kong Auxiliary Police. According to John A O’Looney, high transaction costs tend to exist when the service is complex, experimental or poorly understood. The services provided by the Hong Kong Auxiliary Police are definitely complex in nature. Take the role of reserve at times of natural disaster as example. First of all, the nature of the natural disaster is difficult to expect. Secondly, the date, time and location of the natural disaster may affect the assistance required from the auxiliary police. Therefore, it is impossible to take all the contingencies into account in the contract. As a  result, the transaction costs to outsourcing the services provided by the Hong Kong Auxiliary Police is high.     Core Competencies     Apart from the transaction cost, John A O’Looney also mentions the concept of core competencies. He stresses that organization should focus on its core competencies to maintain a high degree of competitiveness in the market. He quotes Cannon as an example to illustrate the importance of core competencies. Cannon has put tremendous resources and development in the optics area while outsourced the production line. As a result, Cannon gains the financial benefits in outsourcing ancillary services and also maintains its competitiveness in the optics market.   Now, let explore what are the core competencies of the Hong Kong Auxiliary Police. According to ‘Vision and Statement of Common Purpose and Values’ issued by the Hong Kong Police in 1996, it states very clearly about the vision, common purpose and values pursued by the Hong Kong Police. The details of ‘Vision and Statement of Common Purpose and Values’ are[37]: -   Vision   That Hong Kong remains one of the safest and most stable societies in the world   Common Purpose   The Hong Kong remains Force will ensure a safe and stable society by :   v     upholding the rule of law v     maintaining law and order v     preventing and detecting crime v     safeguarding and protecting lift and property v     working in partnership with the community and other agencies v     striving for excellence in all that we do v     maintaining public confidence in the Force   Values v     Integrity and Honesty v     Respect for the rights of members of the public and of the Force v     Fairness, impartiality and compassion in all our dealings v     Acceptance of responsibility and accountability v     Professionalism v     Dedication to quality service and continuous improvement v     Responsiveness to change v     Effective communication both with and outwith the Force.   According to Service Quality Wing Chief Superintendent Gordon Yeung, the “Vision and Statement of Common Purpose and Values’ provides a clear direction (Vision), specifies the core functions (Common Purpose) and provides guiding principles (Values) to Force members in the execution of duties. [38]. In order words, the core competencies of the Hong Kong Police including the Hong Kong Auxiliary Police are upholding the rule of law, maintaining law and order, preventing and detecting crime, safeguard and protecting lift and property, working in partnership with the community and other agencies, striving for excellence in all that police do and maintaining public confidence in the Force. Having examined the roles play by the Hong Kong Auxiliary Police, the services provided by the Hong Kong Auxiliary Police definitely fall into the category of upholding  the rule of law, maintaining law and order, and safeguarding and protecting life and property. To sum up, the three major services provided by Hong Kong Auxiliary policed are the core competencies of the Hong Kong Police.   4.8 The Condition of The Political And Social Costs and Benefits of Marking The Change   John A O’Looney reminds the public managers that apart from the financial costs and benefits, the political and social costs and benefits are also needed to be considered before deciding the possibility of service outsourcing. The social costs are mainly tied with the public employee labour unions.   In Hong Kong’s context, disciplinary services are prohibited to form any labour unions. However, staff association is allowed to establish with the approval of Commissioner of Police. In the Hong Kong Police, there are for staff associations i.e. Junior Police Officers’ Association, Local Inspectors’ Associations, Overseas Inspectors’ Association and Superintendents’ Association, to represent their members to liase and communicate with the senor management. However the associations have no collective bargaining power. In fact, the official mechanism for managing civil service labour relations in Hong Kong is consultation, not collective bargaining[39] The above associations only receive members from the regular police not their auxiliary counterparts as member. More importantly, the associations are to represent the views from their members only. There are no official staff associations established to represent the auxiliary officers. Any matters affecting the welfare or the condition of service of the auxiliary officers will be reflected to the senior management through the chain of command. Although a Hong Kong Auxiliary Police Association is established in 2002 by the auxiliary police officers, the association is not recognised by the Hong Kong Police as one of the official staff association. Therefore, there is neither labour union nor staff association to represent the auxiliary officers, making the concept of social costs and benefits mentioned by John A O’Looney not applicable for the service outsourcing of the Hong Kong Auxiliary Police. However, if the services discharged by the Hong Kong Auxiliary Police is outsourced to a private contracting company, the concept of social  costs and benefits will applicable. In Hong Kong although both regular police and auxiliary police are prohibited to form any union, private company is not. Therefore, the staffs of the contracting company can form a labour union to fight for their welfare and benefit. In order to fight for their welfare and benefit, the services provided by the Hong Kong Auxiliary Police may be interrupted by the action taken by the labour union such as work-to-rule, refuse to work, demonstration, sit-in and strike etc. As a result, the public confidence in police may be undermined and jeopardized.    Apart from the social costs and benefits, John A O’Looney further states that political costs and benefits also play a very important role in outsourcing the public service. He has mentioned two political factors to affect the outsourcing. The first factor is some contractors will bet heavily to some political parties in order to retain or gain the contract. This political factor has limited impact in Hong Kong context. In Hong Kong, only 24 out  of 60 members of Legislative Council are elected through direct election. The rest come either from functional constituencies or from the members of an Election Committee. The political parties have very limited power to influence the government policy. The second political factor stated by John A O’Looney is some elected officials will make good use of the cost saved by outsourcing as a political tool to assist them in the next election. According to Basic Law Annex I : Method for the selection of the Chief Executive of The Hong Kong Special Administrative Region, the Chief Executive is elected by a broadly representative Election Committee in accordance with the Basic Law and appointed by the Central People’s Government[40]. In other words. The Chief Executive is not elected through universal suffrage. In addition, the principal officials of the HKSARG is appointed by the Chief Executive with the approval from the Central People’s Government. Although both the Chief Executive and the Principal Officials are not elected through universal suffrage, they are accountable to the HKSAR and Legislative Council. After the change of sovereignty in 1997, the Government has made several policy blunders, like the Airport Fiasco, Penny Stock Incident, legislation of Basic Law Article 23 and SARS outbreak, making the public lose the confidence in government. In addition, the Government is now facing a serious fiscal deficit. Under such an unstable political and economic climate, the Government can use outsourcing to gain the public confidence in governance. In the Chief Executive’s Policy Address, the Chief Executive repeatedly addresses the civil service reform by re-engineering, privatization and etc. In his Policy Address 2003, he further emphasizes the philosophy of ‘Big Market, Small Government’ as the goal of civil reform to gain the public support and confidence in governance.   Although service outsourcing can help the government in some forms, the question of can outsourcing the services provided by the Hong Kong Auxiliary Police bring political benefits to the government is another issue. Police officer not only represents authority but also justice and impartiality. Despite the facts no data to show the public opinion regarding outsourcing police services, outsourcing the services provided by the Hong Kong Auxiliary Police will definitely cause the community to concern whether justice, public safety and law and order can be maintained. More importantly, the issues of corruption and leaking of confidential or e en secret information to the private sector are other crucial matters need to be considered thoroughly. Outsourcing the core competencies of police has great impact on the public and raises the debate among the community.   To conclude, outsourcing the services provided by the Hong Kong Auxiliary Police has limited social and political benefits to the Government. In addition, the social and political costs may be larger than what has been gained.     4.9 Conclusion     Having examined the economical and political situation of Hong Kong, outsourced the services provided by the Hong Kong Auxiliary Police not only increases the possibility of systemic corruption but also initiates a crisis of confidence in the Government when the services are disrupted. In addition, it is very difficult to identify and specify the services in terms of performance measures, and both the transaction and economic costs of outsourcing are quite high, which will eat up the saving resulting from outsourcing. The conditions for successful outsourcing that Hong Kong has are that there are numerous service providers in the private market and the Government will be have political benefits from outsourcing.   To conclude, five out of the seven conditions are unfavorable to Hong Kong context regarding outsourcing the services provided by the Hong Kong Auxiliary Police. Thus, extreme carte should be taken to implement and monitor the outsourcing if the services are decided to be outsourcing.     Conclusion   5.1 Conclusion     As what I have mentioned in Charter one, outsourced the services provided by the Hong Kong Auxiliary Police is somehow controversial in nature. It is not doubt that police works are sensitive in nature. Police officer is a classical example of street-level bureaucrat who has discretion to exercise in discharging his/her duty. Police officer not only represents authority but also justice and impartiality. Outsourcing the service provided by Hong Kong Auxiliary Police will definitely cause the community to concern whether justice, public safety ad law and order can be maintained. More importantly, the issues of corruption and leaking of confidential or even secret information to the private sector are another crucial matters need to be considered thoroughly. Outsourcing the core competencies of police has great impact on the public and raises the debate in the community.   Having considering the overseas experiences in outsourcing police services, the issue is still very controversial and great opposition if faced by the overseas government. More importantly, overseas experiences show that only non-core business can be outsourced. The experiences on outsourcing prison services are also studied. Similarly, the issue is also controversial with great opposition encountered. Not like outsourcing police services, outsourcing prison services has occurred in 70’s but the problem of use of force, delegation of power, public security and interest and corruption are still the issues that cannot be solved.   The HKSAR Government is now facing considerable political and budget pressure and also the public confidence in governance. The public sector reform is one of methods to address the mentioned problems from the community. By using the concept of New Public Management, the government can not only achieve the purpose of cost containment and service improvement but also control the size of the civil servant, achieving the Chief Executive’s public management concept of ‘Big Market, Small Government’. In considering outsourcing the services provided by the Hong Kong Auxiliary Police, the Government is definitely in a dilemma that public security and safety are the trade-off economic and political benefits. Therefore, the decision of outsourcing the services provided by the Hong Kong Auxiliary Police can not be made without serious examination, because of the high transitional and transactional costs, the saving resulted from outsourcing may be significant or even worst. In the social and political realm, it is difficult to conclude whether the community will support or object the idea as no such kinds of data or statistic is kept in Hong Kong. However, because of the unique nature of police service, a serious debate is to be raised in the community. By using John A o’Looney’s doctrine, Hong Kong does not possess enough conditions for successful outsourcing the services provided by the Hong Kong Auxiliary Police.   5.2 Way Forward   The concept of New Public Management has been widely used in the past two decades around the world and the concept is not new to the HKSAR Government. Outsourcing not only injects competition and brings new technology into the government but also constrains the size of the public sector and the public expenditure. Nowadays, taxpayers become more and more concern about how the government is going to spend their fax money and the service quality delivered by the government. Under such a political and budget pressure, it is inevitable that outsourcing is one of the options.   Although the research finds that Hong Kong does not possess enough conditions for successful outsourcing the whole auxiliary police, there are rooms to explore the possibility of outsourcing some services such as the crowd management during festive events. Despite the facts that outsourcing is not a new idea in public sector, the research and study on outsourcing police service are very limited for the sensitive nature of the police service. When the trend of New Public Management becomes more and more intense, it is not doubt that more real life example and trial will occur to bring more innovative and new idea to the field of New Public Management.     Credit:ivythesis.typepad.com

• The concept of NPM and the objective of outsourcing

1.1 Purpose of the research After extensive debate and implementation of various concepts of New Public Management (NPM) [1] durin...