Public Service delivery in the context of governance: is it co-production or co-creation of value?

This post belongs to a series of three lectures "Changes and current challenges in Public Administration: a focus on the shifts in management modes of public service organizations, value generation logics of public service delivery, and performance management applied to governance"

This lecture focuses on Public Service delivery in the context of Public Governance and discusses how co-production or co-creation of public value fit with the reality of public service delivery.
Given the topic, this lecture mainly draws on three enlightening studies focused on limitations and challenges for both service management theory and public service delivery. This post reflects main concepts discussed in the articles listed below and deliver a summary of their relevant themes through text and slides. The latters have been developed for educational purposes.

The list of articles includes:

  • Osborne, S., Radnor, Z., & Nasi, G. 2012. A New Theory for Public Service Management? Toward a (Public) Service-Dominant Approach. The American Review of Public Administration, 43(2): 135–158.
  • Osborne, S. 2018. From public service-dominant logic to public service logic: are public service organizations capable of co-production and value co-creation? Public Management Review, 20(2): 2
  • Grönroos, C. 2019. Reforming public services: does service logic have anything to offer? Public Management Review, 21(5): 775–788.

INtroduction

This lecture explores the recent developments of service management theory in the public sector. At the starting point of the lecture there is an analysis of the tension between the reality and practice of public service delivery. The reality is meant as the nature of public service delivery in the context of public governance, while the practice refers to the current service management approach in public service organizations.

Mainly, such tension stems from the persisting intra-organizational focus of current service management theory and its tendency to frame public service delivery as manufacture, rather than as an inter-organizational service process, alike Public Governance would request.

Why is current practice of Public Service Management not aligned with the nature of Public Service delivery?

A starting point for a response can be found in the shift in management mode of public service organizations. New Public Management is still influencing current Public Management theory. This mode of management brought within the public sector those managerial approaches and methods widely employed – and implicitly assumed as successfully – in the private sector (e.g., market orientation, performance management, output control, citizen as a customer). New Public Management arose as a response to inefficiency in allocating resources and as a request to improve accountability and performance in public sector organisations. However, the suitability of such methods have been widely contended (Pollitt and Bouckaert 2011). Particularly, the specific complexity of the public sector has limited the adequacy of such approaches (Allison 1982). Public service is not alike private sector. In fact, the inter-organizational, systemic, fragmented, process-oriented nature of public service delivery deeply contrasts with the intraorganizational and transactional view of current Public Management theory (Haveri 2006; Christensen and Lægreid 2010). On the other side, stemming from the private sector, public service management theory primarily borrowed from manufacturing, ignoring the body of knowledge developed in the field of Service Management (Normann 1991).

Disregarding these elements has limited the effectiveness of service management theory. This entailed mitigating the tension between the practice of public service organizations and the complex reality of public service delivery. To this end, integrating current service management theory of public sector delivery with a service-dominant logic may be a way to improve its effectiveness (Lusch and Vargo 2006; Normann 1991).

How a service-dominant approach may contribute to innovate public service delivery

Considering public service delivery as manufacturing is a bounded perspective. Manufacturing transforms raw materials into a physical good which is transferred to the buyer through a sale (e.g., buying a car). Differently, delivering a service (e.g., taking a taxi) is a process in which instrumental activities are conveyed toward an intangible benefits provided to a user (e.g., a safe and timely ride), without implying the transferring of the ownership (Normann 1991).

A second element of distinction concerns the moment when production and consumption occurs. In the case of a good (e.g. buying drugs) production and consumption are discrete events where the moment of production is separated in time and space from consumption. For a service “production” and consumption occur simultaneously (e.g., a surgery treatment) and cannot be separated. Such differences matter for policy aimed at improving efficiency and have several implications for service effectiveness.

A third element relates to the role of the user. In the case of production the user is just a consumer (e.g., ordering a pizza through Uber eats), while in the case of a service, the user co-produces the service by adding something (e.g., eating tailored fine dishes in a glamour restaurant). In this case, service delivery includes co-production since the contribution of the user is relevant at the moment of delivery (Osborne, Radnor, and Strokosch 2016) – what Normann (1991) has termed “the moment of truth” in service provision.

Given these differences, an important aspect of service delivery is the user expectation about the service. It has an influence on individual/community satisfaction. To this end, governing and responding to users expectations through monitoring actual delivery, training and motivating workforce may positively affect the delivery process and thus improving service outcomes (Osborne, Radnor, and Nasi 2012).

A service-dominant approach distingueshes service delivery features from those of manufacturing and focuses on the service as resulting from the application of specialized skills”, where “knowledge is the fundamental [resource].” (Lusch and Vargo 2006, 17).

In this perspective, the user is always a co-producer. Without the contribution and the willingness of the user there may not be service delivery.

Applying such service-dominant logic to public service delivery uncovers relevant implications for introducing a new service management theory.

Preliminary conclusions

A public service-dominant logic recognizes both the relevance of external users and the inter-organizational reality of public service organizations. It also embraces a systemic and a process view of service delivery.

A service-dominant logic to public service management contributes to improve the effectiveness of service delivery and paves the road as a first step towards aligning Public Governance and public service delivery.

Towards a public service logic

Innovating public service organization with the aim of adopting a managerial perspective of service management, do not imply just privatization. It rather requires that a service-dominant logic (Osborne, Radnor, and Nasi 2012; Osborne et al. 2015) as first step of change is deeply rooted on a service logic (Grönroos 2019; Osborne 2018). This new logic assumes co-creation of value, rather than co-production, as central feature of public service delivery in public sector organisations.

The relationship between a user and a public service organization cannot be limited to co-production, since this kind of relationship still is linked to a production model.

Framing public service delivery as value co-creation process

Differently from co-production, where the value creation process is controlled by a public service organization, co-creation portrays a service scheme in which the value stems from the non-linear interactions between the organization and the users (Lusch and Vargo 2006; Lusch and Vargo 2013; Osborne 2018). Let’s compare these two models.

Understanding the differences between co-production and co-creatio requires to provide a definition of a service.

What is a service?

Traditionally, a service is seen a process of interaction between different resources and from these interaction a service emerges (Grönroos 2019).

From a service logic perspective, a service is the application of skills and knowledge to the benefit of users (Lusch and Vargo 2006). In a simple way, a service can be meant as “to help” (Grönroos 2019) and it includes understanding “what”, “why” and “the extent” of such help.

Similarly, the literature on service management has increasingly focused on co-creation of value (Prahalad and Ramaswamy 2004). In this perspective, the role of an organization is not to deliver the service, but to make a “service offering” (Osborne 2018). This offering is meant as a potential to create value. In fact, it is the action of the user as “resource integrator” (Osborne 2018) whic makes such value co-creation effective.

For instance, the value offering by the educational system depends on the quality of a teacher and by other services, such as buildings and facilities. However, what is relevant to the actual impact of an academic course on the knowledge of a student is the time he/she spent at home studying alone and prior educational level together with other personal resources. The engagement of the student and the relative interactions as an end user that co-create value. The public service organization alone, can only make an offering of value.

This alternative view shifts the focus from the performance of the service, as key measure of public service organization effectiveness, to the value co-created. Also, it move away public service organizations from taking a production view of service delivery (even in the case of co-production). Further, such logic enable them to embrace a model in which the value is co-created by the user while using the service in a wider environment that includes other services and personal relationships. In this context, a public service organization makes an offer of potential value and it is how citizens and end-users actually use what is being offered that makes value co-creation working.

Conclusion

To conclude. According to service logic, “Service is to help someone’s relevant processes, such that his or her goal achievement is enabled in a way that is valuable to him or her” (Grönroos 2019, 4).

Traditionally, the value of public service organizations has been conceived as the performance of the service, mainly as the volume of the service. Co-creation of value is at the core of a service logic. This view re-shape the current practice of service delivery. In other words, the end user creates performance and add value to the service offering made by the public service organization which acts as facilitator of the co-creation process. In this perspective, the point of departure to design public service is the users not the organization, which rather has to be configured to facilitate as much as possible the co-creation of value by the users.

As a consequence, the objective of public service management is to provide resources, processes and competences that help the service users’ relevant processes, and due to this help, enable the service users to achieve their goals in a manner that is valuable to them. If gaps emerge between the offering of help and the competencies of the users the quality will be affected.

Given the complexity features of public service delivery, a public service logic changes both NPM and manufacture echoes in public Administration theory and practices. From a practical point of view, it makes current practice (what organizations are actually doing) consistent with the reality – the nature – of public service delivery, shifting the focus of public service management from intraorganizational to inter-institutional perspective (Osborne, Radnor, and Nasi 2012; Osborne 2018).

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