Controlling overhead in public sector organizations

What is it about?

Abstract • Purpose - Exploration of various mechanisms for controlling overhead, as informed by a framework based on transaction-cost-economics • Design/methodology/approach - Development of framework for controlling overhead and field study about Dutch public sector organizations for exploring and enriching this framework • Findings - The control mechanism of central steering with a provider-user interface was often seen as the most desirable. Although the mechanism of central steering without such interface was used in about half of the overhead functions, their users argued that the priorities of these functions were insufficiently in line with the goals of the organization. There was little support for the mechanism of an internal market, because it would increase the administrative workload of internal calculations, and it could lead to undesirable differences in overhead use among the primary services departments. Moreover, this mechanism would only be cost-efficient if the line managers of those departments were held accountable for the costs, which is not always the case • Research limitations/implications - The framework based on transaction-cost economics formed a suitable starting point for reflecting on the control of overhead functions, but the empirical findings pointed to revisions in the case of internal market control concerning resistance to administrative work load and avoidance of differences in the supply of internal services • Practical implications - Inspiring public sector managers to reflect on the match between overhead control mechanisms and characteristics of overhead functions • Originality/value - A theoretical underpinning and empirical exploration of a variety of overhead control mechanisms in the public sector

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Why is it important?

This paper can be of importance to practitioners when they have to decide how to control different types of overhead functions, i.e. more bureaucratic or more market-based