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Public Management and the Essential Public Health

Functions

PEYVAND KHALEGHIAN and MONICA DAS GUPTA *

The World Bank, Washington, DC, USA

Summary.This paper provides an overview of how different approaches to improving public sec-tor management relate to the so-called core or essential public health functions such as disease sur-veillance, health education, monitoring and evaluation, workforce development, enforcement ofpublic health laws and regulations, public health research, and health policy development. Usingthe principles of agency theory, the paper summarizes key themes in the public management liter-

ature and draws lessons for their application to these core functions, especially in low- and middle-income countries. 2005 Elsevier Ltd. All rights reserved.

Key words public health functions, public service delivery, public management, health policy,

provider incentives, developing countries

1. INTRODUCTION

This paper provides an overview of how var-

ious approaches to improving public sectormanagement relate to the so-called core oressential public health functions (EPHFs) 1

such as disease surveillance, health education,monitoring and evaluation, workforce develop-ment, enforcement of public health laws andregulations, public health research, and healthpolicy development. The purpose of the paperis to summarize key themes in the public man-agement literature and draw lessons for theEPHFs. To this end, we use agency theory (orthe principalagent problem), which examines

how a principal (e.g., the central government)can ensure that the agents (e.g., local imple-mentation agents) incentives are consistent withassuring the principals objectives. 2 Using thisapproach, we highlight implications for theEPHFs of management reforms which seekto assure effective service delivery by creat-ing incentive structures through mechanismssuch as purchaserprovider splits, contracting,provider payment reforms, and decentraliza-tion. Section 2 summarizes new public man-agement and related approaches. Section 3

reviews traditional approaches to publicadministration and their relevance to theEPHFs. Section 4 summarizes lessons.

Two points are essential to understandingthe discussion that follows. The first relatesto the nature of the EPHFs. In economic

terms, most EPHFs are public goods. Thismeans that they are nonrival (i.e., consump-tion by one person does not restrict consump-tion by another) and nonexclusionary (i.e.,their benefits accrue to the entire populationand cannot be restricted to a discrete group).For example, once erected, a health educationbillboard benefits everyone who views it, nomatter how many people do so (i.e., nonrival);and anyone who wants to view it can, given itspublic location (i.e., nonexclusionary). This isdistinct from private goodse.g., cancer treat-

mentwhich, like most commodities, are bothrival and exclusionary. Some disease control

* We are grateful to George Alleyne, Varun Gauri, Jeff

Hammer, Jaya Nair, Sanjay Pradhan, and Shahid Yusuf

for comments and suggestions. An earlier version of this

paper was prepared as a background paper for the

Disease Control Priorities Project of the US National

Institutes of Health. The findings, interpretations, and

conclusions expressed in this paper are those of the

authors and do not necessarily represent the views of the

World Bank, its Executive Directors, or the governmentsthey represent. Final revision accepted: February 11,

2005.

World DevelopmentVol. 33, No. 7, pp. 10831099, 2005 2005 Elsevier Ltd. All rights reserved

Printed in Great Britain0305-750X/$ - see front matter

doi:10.1016/j.worlddev.2005.04.001www.elsevier.com/locate/worlddev

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(i) Splitting and contractingSplitting refers to the creation of separate

agencies to purchase and provide services, theformer contracting with the latter on the basisof expected outputs rather than controlling

them in a hierarchical way. Contracting in-cludes not only publicpublic contracts, as inthe case of purchaserprovider splits whollywithin the public sector, but also the use of pri-vate firms or providers to deliver governmentservicessometimes in competition with publicprovidersthrough contracts with a purchas-ing entity. In both cases, the idea is to moveaway from public management via hierarchicalcontrol and toward management by contract.

Splitting purchasing from provision has sev-eral effects. By separating the two functions, it

allows purchaser and provider agencies to eachconcentrate on their area of comparativeadvantage; forces purchasers to be explicitabout what they want from service providers;and helps purchasers hold providers to ac-count. It also allows private companies to com-pete for public contracts, in principle improvingefficiency. Some countries have taken the con-cept to great lengths. In New Zealand, eventhe military is divided into a purchaser, theMinistry of Defense, and a provider, the De-fense Forces. In this case, the motivation was

not to introduce competitive pressures, sincethere is still only one provider, but rather to im-prove accountability relationships and makeexplicit the governments expectations of themilitary (Bale & Dale, 1998).

These reforms have also been implemented inseveral developing countries, though not asextensively as originally thought. 8 As severalstudies have pointed out, implementing a gov-ernment by contract approach requires strongmanagement capacity and good informationsystems and can impose significant administra-

tive costs, particularly for services where mea-surement is difficult. Contracting is onlyeffective when outputs can be clearly specifiedand performance clearly measured (Bennett &Mills, 1998); and even then, different organiza-tional and contractual models can lead towidely different outcomes for the same service(Mills et al ., 2004). Contract specificationmust be clear, information must be availablefor monitoring purposes, and an arms-lengthrelationship must exist between governmentand provider (Batley, 1999). While this may

be the case for some preventive healthservicesimmunization, cold chain manage-ment, campaign-based activities, or nutrition

interventions 9it is not the case for mostEPHFs. Why? First, because measuring perfor-mance in the EPHFs is complex, costly, and re-quires strong information systems; second,because contract management of this sort re-

quires technical and administrative capacitiesthat are weakly developed in many countries,for example, in monitoring, negotiation, andprompt payment (McPake & Mills, 2000).

Functions such as surveillance are so com-plex and spread out that monitoring a privatecontractor would be a costly exercisehowevergood the indicators chosenand might lead toprincipalagent related efficiency losses such asthose observed when hard-to-monitor servicesare decentralized (Hurley et al., 1995). Effectivemonitoring also requires a high level of techni-

cal capacity within government, without whichcontractors will take advantage of their infor-mational advantages vis-a-vis the governmentand fail to be held accountable. 10 Even formore straightforward services like curativecare, the monitoring function often proves dif-ficult to design and sustain in the long term. 11

A common argument for contracting out to theprivate sector because capacity is low in gov-ernment in developing countries is thereforeflawed: for contracting to work well, capacityneeds to be high. Governments with a low

capacity are likely to have a low ability to write,monitor, and enforce contracts for complexservices. Contracting should therefore be ap-proached with care and not as a substitute forstrengthening the capacity of government itself.Given the high transaction and monitoringcosts involved, efficiency gains are unlikely(Batley, 1999).

(ii) Managerial autonomyEssential to effective management by con-

tract is giving line managers the autonomy

to fulfill their contracts however they see fit.Thus, as part of NPM reforms, governmentsnot only drew up contracts for public agenciesthat specified outputs rather than inputs; theyalso gave their managers the autonomy to man-age inputs and human resources and developimplementation strategies without interference.In some countries, this has involved legislativechanges to place public agencies under corpo-rate law and remove them from civil servicerules; in others, it has involved efforts to relaxthese rules directly. 12

Given the complexity of contract-based ap-proaches for the EPHFs, is managerial auton-omy relevant to these activities? The answer is

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problematic, given the time lags involved andthe presence of so many confounding variables.

Public health activities also require extensivecollaboration between staffin contrast tocurative care, where much depends on the pro-

viders behavior aloneand incentive schemesfocused on individuals can therefore have anegative impact on effectiveness by reducinginformation-sharing and cooperative behavior.The example of China is instructive in this re-gard. When public health agencies were forcedto compete, their willingness to share informa-tion and work collaboratively declinedasdid their ability to carry out surveillance, healthpromotion, and other joint activities effectively(Liu & Mills, 2002). On a more positive note,Vietnams recent experience with shared incen-

tives in commune health stationswhere bo-nuses accrued from curative service deliveryare shared with public health staff, and wherethe performance of public health staff reflectson the stations ability to win awards and rec-ognition from central and provincial healthauthorities as a unitseems to have workedwell. 13 An important distinction is that in Viet-nam, public health services receive their operat-ing funds separately from curative services, viadirect central grants, and are not cross-subsi-dized from curative care revenues as they are

in China. Without a dependency relationshipbetween the two services, cooperative incentivesbecome easier to implement. Examples fromTaiwan and Korea show that groupwide incen-tives work well for public health staff (Sunget al., 2003; Yu, Lee, Lee, & Kim, 2003). Inboth countries, central health agencies use com-petitions, nonmonetary awards, and group rec-ognition to encourage good performance bypublic health units. These incentives, combinedwith the respected technical authority of thegranting agencies and their reputation for fair-

ness in making awards, have institutionalizedefforts to perform well and are weighted towardcollaborative organizational behaviors condu-cive to effective public health action. This is alsoillustrated by Tendler and Freedheims (1994)account of health workers in Ceara, Brazil.

These points lead to three conclusions: Thefirst is that for performance pay to be usefulfor the EPHFs, measurement indicators needto be chosen carefully. Complex instruments,while accurate, may be unworkable and costly,while instruments that are too simple may in-

crease the likelihood of opportunistic behaviorand have other perverse effects. Second, theysuggest that performance incentives in public

health should be team or network based ratherthan individualized, given the importance ofcollaboration. Third, they highlight the rolethatnonfinancialincentivesrecognition, train-ing opportunities, etc.can play in encourag-

ing a good performance in a sustainable way.

(c) Decentralization

Decentralization was a common theme inhealth and public sector reforms in the 1990sand remains so today. Its assumed benefits cen-ter on the fact that it brings decision-makingprocesses closer to the community and therebyimproves the quality of information availableto local decision makers, ensuring that localdecisions are relevant and adapted to local

needs and improving the ability of the publicto hold decision makers and their agents (i.e.,public officials) accountable. However, thereare few empirical studies illustrating the opera-tion of these assumed benefits and whether andfor what activities they materialize.

What limited evidence does exist shows thatrealization of these benefits has not been uni-versal, and that decentralization needs to becarefully designed in order to avoid pitfalls(Khaleghian, 2004). In some countries, decen-tralization has led to corruption and elite cap-

ture because of inadequate checks andbalances at the local level. In others, localdecision makersunconstrained because ofthe lack of accountability mechanisms at thelocal levelhave continued much as they didbefore, showing greater allegiance to centralsuperiors than to local representatives. In manyothers, local officials have found themselveswithout the basic administrative capacity totake on their new roles, leading to failures inservice delivery and the basic functions of gov-ernment. In yet others, decentralization policies

have weakened central government agencies tothe extent that their corrective hands are tied,leading to policy fragmentation, an inabilityto take residual responsibility when jurisdic-tions fail, and an inability to adjust for interju-risdictional inequalities. 14

In addition to capacity and institutional pre-requisites, a further set of conditions is neces-sary for decentralization to be successful.These relate to the nature of the activity beingdecentralized. Put simply, activities and servicesthat are visible to the public, that have direct,

measurable benefits to individuals and forwhich the public is prepared and able to expresswants and preferences tend to fare better under


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decentralization than others. School manage-ment is one example. Since parents have avested interest in the effectiveness of theirschools, and since they are ableeven if with-out perfect accuracyto judge the quality of

the schools activities, devolving the responsi-bility for schools to a local government canbe an effective strategy, as can introducing com-munity co-management in the form of schoolboards. 15 But public health functions, andmany public health services, do not have thesecharacteristics. They are either invisible, hardto measure, or have benefits that are difficultto quantify for individual communities andare therefore neglected by self-interested localauthorities. Akin et al. (2001) summarize thetheoretical argument as follows:

decentralization can lead to an increased governmentprovision of private goods at the expense of publicgoods. This is because local governments. . .will tendto vote to provide the goods for which citizens revealpreferences. They will therefore tend to spend on pri-vate goods type curative care clinic visits rather thanon public goods type services such as health educa-tion and communicable disease control. Small gov-ernments may, therefore, behave too much likeindividuals, with the residents not revealing theirpreferences for public goods but in fact for privategoods provided publicly. The hypotheses from themodel, therefore, suggest that, in contrast to the con-

ventional wisdom, decentralization of allocationdecisions for services such as health care may in factreduce societal welfare.

Khaleghian (2004) argues that, in the ab-sence of strong central pressure or financialcontrols, community participation can impactnegatively on immunization programs. 16

Other studies tend to confirm this argument. 17

In Uganda, local governments spent less onpublic and semipublic goods after decentraliza-tion than before it, with a consequent under-provisioning of essential public health services

such as immunization. In the Philippines,decentralization shifted the balance of healthexpenditures away from prevention and to-ward curative care. In Nicaragua, local author-ities ignored central directives to allocate 46%of their health expenditures to primary healthcare and instead allocated larger shares to sec-ondary care, with immunization coverage inthe affected districts falling by up to 50% inthree years. In Indonesia, tight competitionfrom other sectors led local mayors to aban-don their commitment that 15% of their bud-

gets should go to health. Similar phenomenahave been noted in Tanzania, Uganda, andColombia.

This raises a dilemma for the EPHFs. On theone hand, many EPHFs need local adaptationand tailoring to be effective and cannot beimplemented in a rigid, centrally determinedway. This is especially true in large and diverse

countries with interjurisdictional differences inlanguage, culture, or epidemiological profile.On the other hand, decentralizationin thesense of formally transferring the responsibilityfor these functions to local governmentseemsnot to work well either. Different approacheshave been used to resolve this dilemma. Somecountries have retained central managementof the EPHFs but established field offices toadapt and tailor them to local needs. This wasthe prevailing pattern before the 1980s, whenthe dominant model of decentralization in

developing countries was deconcentration tofield staff rather than devolution to independentlocal governments (Manor, 1999). The advan-tage of this approach is that it preserves interju-risdictional consistency and prevents localneglect of invisible services (or those that donot bring in more votes); but without somemanagerial autonomy, local adaptation mayfail to materialize. The other methodwhichhas become more common in recent years ascountries have adopted wide-ranging devolu-tionary policies, sometimes as part of structural

adjustment effortshas been to compensate forlocal control of the EPHFs by retaining a mea-sure of central influence through financial con-trols such as grants-in-aid or earmarked funds.This is typically a second best solution imple-mented after the EPHFs have been devolved,since reversal of decentralization policies sel-dom occurs (Dillinger, 1994; Manor, 1999);and it faces a number of implementation prob-lems in developing countries, not least of thembeing the difficulty faced by central healthauthoritiesthemselves reduced in strength

and number by decentralization policies thattypically reduce the size of central govern-mentin monitoring the activity of local gov-ernments. So while formal devolution makesadaptation more likely, it makes central over-sight more difficult and in turn can have a neg-ative impact on the effectiveness of surveillance,health promotion, and other efforts.

As implied above, the decision on which pathto take is politically driven and does not neces-sarily follow the logic of technical or economiccriteria (Smith, 1997). The implications for the

EPHFs therefore differ according to localpolitical factors, including political factorswithinthe health sector (Collins, 1989). Several

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generic issues do emerge, however, from theabove discussion. First, the EPHFs are inher-ently poor candidates for devolution to localgovernment control, particularly when localgovernments are weak. Even if this devolution

occurs, it should not be accompanied by full fis-cal responsibility for these functions, since theincentive environment facing local govern-mentseven in industrialized countries suchas the USAtypically leads to underfinancingor underprovisioning. Second, and irrespectiveof the path chosen, decentralization policiesshould not be allowed to reduce the strengthor capacity of central government agencies con-cerned with the EPHFs. Without strong centraloversight and support, whether of deconcen-trated field offices or of health officials in local

government, the delivery of key public healthfunctions will suffer. Central public health staffserve a number of important functions. Inaddition to oversight and technical supportof health staff at subnational levels, theyreceive and interpret information for the benefitof policy makers, and have the interjurisdic-tional perspective necessary for effective diseasecontrol. 18 Third, effective managementof EPHFswhether in a deconcentrated ordevolved setuprequires better measurementinstruments and attention to management.

3. A RETURN TO THE OLD PUBLICADMINISTRATION?

Given the extent of market failures in thehealth sector, particularly for public healthfunctions, and the limited administrative capa-city of governments in most developing coun-tries, the role of NPM-inspired reforms islimited and a return to old public administra-

tion might appear necessary. This does notimply that public health should be managedin a centralized, bureaucratic, and unresponsiveway. It just means that other approaches tostrengthening management need to be found,ones that take into account the characteristicsof the public health functions and focus onimproving their delivery by the governmentitself. This section summarizes three suchapproaches: management capacity building;reforms to improve organizational climate;and efforts to improve performance by improv-

ing accountability, both hierarchically withingovernment and externally to the public andcivil society.

(a) Management capacity building

Russell et al. (1999) highlight the limitedcapacity of service managers in developingcountries and give examples of how even basic

administrative taskssuch as record-keepingand paying suppliers, etc.are carried outpoorly and inconsistently. 19 Strengtheningthese capacities is a necessary precondition forimproving management: hence, perhaps, theaffection of donors for training activities andmanagement-strengthening exercises. But thiskind of direct, training-oriented capacity-build-ing is not sufficient: changes in the broaderadministrative context are also necessary. Insome countries, for example, unit managersare forced to make repeated visits to superiors

in the capital to gain approval for basic admin-istrative functions such as releasing pay andsigning leave forms (Nchinda, 2003). This isnot evidence of weak administrative capacitybut rather of weaknesses in administrativesystems and rulesthe weakest areas beingfinance, accounting, and human resourcemanagement (Russell et al., 1999)that areequally important targets for corrective inter-vention. Similarly, the lack of general manage-ment skills is not always a matter of poortraining; it just as often reflects centralized deci-

sion-making structures and rigid civil servicerules that deprive managers of the opportunityto use develop these skills, often in spite ofnumerous donor-sponsored training activities.As a result, managers may either leave the pub-lic sector, lose their skills, or use them for per-sonal rather than organizational gain (e.g., bycovering the tracks of corrupt activity moreeffectively).

One area of specific relevance to the EPHFs isthe ability of managers to collaborate acrossagency lines (Das Gupta et al., 2003). Many pub-

lic health functions rely on coherent, coordi-nated action by a number of agenciesdiseasesurveillance agencies, local governments, waterboards, private medical providers, etc.andbreak down when this collaboration is weak.The ability to collaborate is not an inherent qual-ity of managers; indeed public choice theoristsbelieve that managers actually have the reverseincentive, that is, to compete with other agenciesand expand their own turf. The negative impactof this kind of behavior on public health func-tions is obvious. Reversing it requires a combi-

nation of direct interventions, for example,sensitizing managers to the importance of col-laboration, and institutional changes that facili-


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tate and require it, such as joint strategies, for-mal collaborative relationships, staff exchanges,and incentive structures that encourage ratherthan inhibit teamwork. 20

This implies several things for the EPHFs.

First, it suggests that training programs formanagers will by themselves be insufficient tosustainably improve performance. Second, itshows how complex administrative reformscan only be implemented on a foundation ofgood general management. Third, it illustratesthe substantial effect which institutional contextcan have on managers ability to gain and usetheir skills. Put simply, efforts to strengthenmanagement of the EPHFs would need to gobeyond training to also consider changes inthe institutional environment, or if change is

not possible, to find ways of insulating pro-grams from its harmful elements. We next dis-cuss two approaches relevant to the latterpoint: changes in organizational culture andmethods to improve accountability.

(b) Organizational culture and institutionalcontext

Just as training efforts are necessary but notsufficient for improving public management,public sector reforms focused on pay, staffing

levels, and government reorganization alonedo not succeed in fostering the changes in workattitudes, ethics, and organizational culturenecessary for significant performance improve-ments to be realized (Lindauer & Nunberg,1994). Some of these changes are actually anti-thetical to the work attitudes necessary foreffective action, such as when competition isintroduced to services such as disease surveil-lance for which interprovider cooperation isessential. 21 Grindle (1997) hypothesizes thatthe missing link in public sector reforms is

a focus on organizational culture. She definesthis as a shared set of norms and behavioralexpectations characterizing a corporateidentity and uses case studies from five high-performing public institutions in developingcountries to illustrate its dimensions. AsStiglitz(1999)points out, government programs oftenfail because of inadequate incentives, but thisdoes not mean that they cannot work.

(i) Factors associated with good performancein public organizations

Grindle (1997)identifies four such factors: asense of organizational mission, defined as awidely held sense of purpose within the organi-

zation; management styles that encourageparticipation, flexibility, teamwork, problem-solving, and equity; clear performance expecta-tions for staff; and managerial autonomy,particularly in personnel matters.

Organizational mission and mystique.Organizational mystique arises whenworkers feel that they acquire prestige anda good reputation by working for their orga-nization, and when their organization has areputation for competence, respect, andsocial contribution. Health staff in Boliviareported a high degree of pride in their orga-nization and a personal commitment tomaintaining its good reputation by contrib-uting to the quality of services delivered(Grindle, 1997). Key elements of this mis-

sion and mystique factor included a strongsense of service among staff; identificationwith norms and values that were thoughtto have universal validity, such as honestyand political noninvolvement; a sense thatthe organization and its employees weresomehow unique, whether in their practiceor the nature of their mission; a sense thatstaff selection was based on competence orskill (and thus, a sense of pride in being partof the organization); and absorption of theorganizations mission by staff, making it a

personal mission as well as an organiza-tional one. These factors were found to beindependent of salary scales or other remu-neration. Promoting the emergence of thesefactors requires committed leadership andexplicit action.In an example from Brazil,Tendler and Freedheim (1994) summarizethe use of public information campaigns bya provincial government to improve thepublic perception and status of first-levelhealth workers. The campaigns had a two-fold purpose: they helped health workers

feel good about their jobs by conveying apositive impression to the community, andthey helped overcome resistance and politi-cal capture by lower-level governmentsinthis case local mayorsby publicizing thehigher-level governments support of theirmission (Das Gupta, Grandvoinnet, &Romani, 2004).

Good management. Grindle (1997) identi-fies four managerial characteristics that arecorrelates of good performance. Theseinclude open and nonhierarchical interac-

tions between managers and staff; managerswho insulate their staff from perverse ele-ments of the institutional environment (e.g.,


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rigid civil service rules, political interference,or demands for patronage); managers whouse incentives and rewards in a consistent,fair way (even those as simple as employeeof the month recognitions); and managers

who encourage teamwork among staff.Fairness in the application of rules anddistribution of rewards is the critical factorhere.

Performance expectations. Organizationsget the best out of staff when staff realizethat their performance affects their careerenhancement. 22 In many developing coun-tries, this message is hard to get across: whencivil service rules or political patronage leadto promotions based on seniority or politicalconnections rather than merit or perfor-

mance, workers have little incentive to per-form well. As Mookherjee (2001) pointsout, in some settings, political superiorsreward or punish compliance with theirown personal agendas, rather than meritbased performance. But some managersand organizations find ways around this,whether by enforcing strict selection criteria(such as examinations or multiple inter-views) to impress on candidates the impor-tance of quality and performance; by usinginduction periods, probationary periods,

and time-limited contracts to communicateorganizational norms and performanceexpectations; by having clear job descrip-tions even when these actions are not partof general civil service norms. The key mes-sage to workers should be that performancematters, and that good performance will berewardedeven if only through recognitionor other nonpecuniary meansand poorperformance punished.

Managerial autonomy, particularly in per-sonnel matters. For an organization to rise

above public sector norms, managers needat least some autonomy in personnel mat-ters. Managers need the autonomy to adver-tise and fill vacant positions, reward peopleon the basis of merit, and sanction thosewho do not meet performance expectations.This basic autonomy is lacking in manydeveloping countries (Das Gupta et al .,2003). Granting managers discretion overthese decisions does not always led to betterperformanceit may actually have thereverse effect if managers use their newly

gained authority for private benefitbut itdoes appear to be an important preconditionfor performance improvement.

(ii) The problem of contextFocusing on organizational culture alone will

not address the problems of a hostile work con-text. Just as workers are not motivated by paychanges alone, they may also fail to respond

to changes in the organizational microclimateif the external environment of civil service rulesand procedureswhat Grindle calls the actionenvironment and others call the institutionalcontextprovides significant barriers to ac-tion. 23 Surveying the effectiveness of healthmanagement reforms in five developing coun-tries, Russell et al. (1997, p. 773) draw similarconclusions about the impeding effect of hostileorganizational climate on managerial change.They point out the difficulty of changing this cli-mate given the entrenched nature of existing

institutions and the influence of vested interestswithin the public bureaucracy.Grindle (1997, p.491)argues that a focus on organizational cul-ture should not substitute for efforts to improvethe broader institutional environment, and thatpromoting organizational characteristics thatcreate positive cultures may be the missingingredient in the disappointing results of manycivil service reforms.

In response to these problems, some coun-tries have experimented by delegating func-tions to parastatal agencies. In India, some

disease control programs have been delegatedto semiautonomous agencies that operate withpublic money but outside the formal publicsector. The purpose of these reforms was tounburden program managers from civil ser-vice rules, expand their autonomy in hiringstaff, allocating resources and tailoringprograms to local needs, and introduce com-munity oversight by appointing externalmembers to agency boards. Experience withthese disease control societies has beenmixed. In some settings, autonomy has been

exercised responsibly and programs have be-come flexible, effective, and locally adapted.In others, it has led to increased rent seek-ing in procurement and a change in the distri-bution but not the extent of patronage.Establishing autonomous agencies can alsoundermine the coherence of government ac-tion more broadly (Das Gupta et al., 2003).These agencies can create policy and budget-ary instability in several ways, including bycreating a constituency for earmarked fundsthat undermines the governments ability to

reallocate resources as priorities change; andcreating liabilities for the government if agen-cies borrow against state assets. Above all,


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they seek to bypass organizational problems,rather than resolve them.

(c) Accountability

In the final analysis, the effectiveness of ser-vice delivery depends on the extent to whichthose who deliver it are held accountable fortheir performance. In this section, we considertwo kinds of accountabilities: hierarchicalaccountability, which is based on bureaucraticcontrols within government; 24 and socialaccountability, which involves communities inmanagement and monitoring of programs.

(i) Hierarchical accountabilityThis involves monitoring the performance of

public servants, rewarding them for good per-formance and punishing them when perfor-mance is bad. This is easier for some servicesthan for others. For services where the outputis easy to measurethe number of bricks laidor amount of taxes collectedthis type ofaccountability is relatively straightforward.Tax collection reforms in Brazil, Mexico andGhana bear out this point. In all three countries,tax collectors were given a pecuniary incentivelinked to their productivity in collecting taxes,as a result of which collection rates improved

dramatically. In other countries, pay reformswere used rather than monitoring, the intentionhere being to reduce corruption by raising thestakes due to the higher wages which corruptofficials would forfeit if caught. The BeckerSti-gler theory postulates that these two approachesare interactive, with higher pay and highermonitoring intensity both contributing to betterperformance and reduced corruption (Becker& Stigler, 1974). Studies of corruption andgovernment performance in several contextsconfirm the validity of this hypothesis (Mook-

herjee, 2001).When measurement is difficult, however, it

becomes much harder for supervisors to moni-tor and incentivize staff performanceand cor-respondingly easier for staff to manipulate thesystem in their favorleading in turn to princi-palagent problems and accountability failures.This applies to several of the EPHFs. Surveil-lance, for example, becomes less visible themore effectively it is carried out. Without stronginternal controls and process measures, the firstsign of a failing surveillance system can be a

major outbreak . The same is true of health pro-motion. As a result, these staff operate in anaccountability vacuum and have little incentive

to get it right. Monitoring can also be difficultfor other reasons as well. In the case of healthinspection, problems can arise when inspectorsare expected to survey a large area and thereare few supervisors above them. Unless alterna-

tive measures are in place for monitoring bylocal stakeholders, inspectors have little incen-tive to perform efficiently or honestly, since thelikelihood of being caught or punished is low.

These points have important implications forthe use of bonus payments and other ways ofrewarding good performance. If measurementis weak or imprecise, whether because the servicein question is hard to monitor or because moni-toring is done poorly, it becomes difficult formanagers to identify good performance and re-ward it accordingly. . . Mookherjee (2001)

writes:How does one measure the output of a teacher, or apoliceman?. . . Measuring and rewarding the moremeasurable dimensions may be dysfunctional, sincethey may cause the official to divert effort towardsthose dimensions that are measured, at the expenseof those that are not. For instance, if teachers areevaluated on the basis of their students grades, theymight then be motivated to redirect their teaching toemphasize examination technique at the expense ofreal learning; in extreme cases even to leak examquestions to their students.

This underscores the complexity and danger ofusing personalized incentives as a way to im-prove agency performance. It also highlightsthe fact that choices about monitoring are theproduct of two countervailing forces: the desirefor simplicity, which makes measurement easierand cheaper but runs the risk of creating per-verse incentives, and the desire for comprehen-siveness, which creates more accurate incentivesbut can be costly to implement. Here, too, theinstitutional context matters. In settings wherepolitical corruption is widespread, monitoring

rules are set by politicians who have a vestedinterest in keeping them weak (Mookherjee,2001). Using data from 12 countries, Shirleyand Xu (1998) show how this leads perfor-mance-based incentive schemes to fail. The im-pact of such incentives on cooperative behavioris also relevant, as discussed earlier.

What do these points imply for the EPHFs?First, they suggest that monitoring should notfocus only on outcomes, given their distal anddistant nature, but should instead use carefullychosen proximate measures that can be used to

monitor performance while still being relevantto the production of outcomes. Second, theyhighlight the potential role of information


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choice, or voice; and no amount of control,choice, or voice is useful unless service usershave reliable, accurate, and easily interpretedinformation about the activity they are sup-posed to be monitoring. These linkages are fre-

quently ignored. In India, for example, thegovernment publishes a service charter thatpromises a set of minimum standards from gov-ernment service delivery agencies. But until re-cently, the charter provided no informationon what people could do if these standardswere not being met, giving service providersno real incentive to perform (Government ofIndia, 2002). The same is also true of simplerstrategies: for example, a notice of openinghours on a clinic door means nothing unlessother methods exist for service users to call

the doctor to account should he fail to showup. Also relevant are linkages to other waysof improving service delivery, such as the useof choice, voice, or community co-managementas a complement to contract-based approachesto delivering primary care (Millset al., 2004).

Like political decentralization, these ap-proaches are most effective for private, measur-able services such as water supply, irrigation,education, and primary curative care. Theyare less effective for invisible services suchas the EPHFs, in which communities tend to

be less interested because of their public goodscharacteristics. The media also tends to neglectthese invisible servicesexcept when theybreak down and cause a crisis. As a result,while outbreaks receive plenty of attention,routine service delivery in public health may re-ceive no attention at all. In India, democracyand a free press have helped to ensure outbreakcontrol but not routine disease control, ana-logous to Sens (2000) analysis that they havebeen effective in preventing famines butremarkably ineffective in preventing chronic

malnutrition (Das Gupta et al., 2003). Thus,relying on informational strategies or the mediato hold providers accountable for invisibleservices is not, by itself, a complete solution.

Context is also relevant. If a community isinvited to manage, say, water or irrigationservices, it needs the authority to do so effec-tively. But this authority is not always pro-vided, and community boards find themselvesdelegated with administrative functions butconstrained by civil service rules, patronagestructures, or other impediments to the real

exercise of control. The same could be said ofchoice, voice, and information-based interven-tions, all of which can be compromised by insti-

tutional contexts that stack the deck in favorof poorly performing agencies and their staff.

What can be learned from these strategies forthe EPHFs? On the surface it would seem theanswer is nothing. All of them seem to work

best for services where public demand and inter-est is high, which is not the case with most of theEPHFs. With adaptation, however, the basicprinciples of social accountability can indeedbe applied (with the possible exception ofchoice, for reasons described earlier). Whileaccountability to the public may not be effec-tive, accountability to civil society organizationswith an interest in public health can. This wouldrequire the presence of such groups in society,and efforts to create and support them. It wouldalso require institutional changes to allow the

exercise of these practices, such as freedom ofinformation laws, forums for nongovernmentinputs to be heard, and regulations mandatinga timely government response. For socialaccountability to work for the EPHFs there-fore, two steps are required: establishing a con-stituency for the functions within civil society;and establishing institutional structures to re-lease and disseminate information, allow theexercise of voice, or formalize co-managementrelations in a way that allows accountability toemerge. This represents a fruitful area for policy

experimentation and an important complementto the more direct methods of improving perfor-mance described earlier.

4. SUMMARY OF KEY LESSONS

Curative services, preventive services, andessential public health functions have importantdistinctions that make it impossible for policy pre-scriptions and organizational forms from one tobe applied to the others without adaptation. We

summarize the key lessons of the paper below.Provider incentives are complex and difficult

to design for the EPHFs and cannot be simplytransferred from the experience with curativecare. For example, user fees are not an optionfor the EPHFs because of their public goodscharacteristics. For incentives to be useful,measurement indicators need to be chosen care-fully: complex instruments may be unworkableand costly, while instruments that are too sim-ple may increase the likelihood of opportunisticbehavior. Incentives, where used, should be

team or network based rather than individual-ized and should not neglect the role of non-financial benefits.


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Performance improvement can also beachieved in more traditional ways, for example,by having fairly implemented merit-basedselection and promotion criteria, clear jobdescriptions, etc. These should typically be

implemented before the adoption of compli-cated performance incentive schemes and maybe sufficient by themselves.

Promoting competition among agenciesresponsible for public health functions does notimprove efficiencyon the contrary, it impedescollaboration and technical assistance and cantherefore compromise the effectiveness of activi-ties such as surveillance and health promotion.Organizational reforms that rely on providercompetition (such as purchaserprovider splits)are therefore not applicable to the EPHFs.

Contracting works for some preventive ser-vices but not for the EPHFs. For preventiveservices that are measurable and discrete, suchas immunization or campaign-based programs,contracting can be an effective approachpro-vided there is sufficient government capacity tomanage the contracts effectively. But for theEPHFs, where measurement is complex, expen-sive, and requires strong information systems,contracting imposes transaction and monitor-ing costs that make efficiency gains unlikelyand reduce effectiveness.

Decentralizing the EPHFs needs to be ap-proached carefully, since studies from a varietyof political and administrative settings indicatethat local governments tend to have little incen-tive to invest in public goods and systematicallyneglect them. The EPHFs should either remainunder central controlwith managerial auton-omy or other strategies to permit local adapta-tion and responsivenessor subjected toalternative forms of central oversight and controlsuch as grants-in-aid, earmarked funds, etc. Toensure this, the central agencies responsible for

the EPHFs need to retain their strength, ratherthan downsizing across the board as decentral-ization proceeds. This is needed, given the impor-tance of central coordination, oversight, andtechnical assistance for EPHF functions.

The institutional environmentthat is, theformal and informal rules and norms at workin government and society at largeare aninfluential determinant of government effective-ness, and especially for the EPHFs. As a result,

efforts to build management capacity throughtraining are helpful but not sufficient to im-prove managerial effectiveness for the EPHFs.Public sector norms and rules that impede effec-tive administration should be changed wherepossible. If this is not possible, alternativessuch as insulating programs from these normsand rules or promoting organizational culturesand accountability arrangements that achievethis indirectlyshould be pursued instead.

Managerial autonomy is important for theEPHFs as a way of promoting adaptation

and innovation. It should be introduced cau-tiously to avoid abusethough not so cau-tiously that it fails to materialize at allbut itshould also be balanced with instruments to en-sure an appropriate degree of policy and pro-gram consistency across units and jurisdictions.

Strengthening hierarchical accountabilitywithin the public health system is essential tostrengthening the EPHFs. This requires changesin the capacity, autonomy, and behavior of ser-vice managers, but also requires monitoring sys-tems and instruments that are weakly developed

at present in many developing countries.Monitoring is critical but instruments need to

strike the right balance between simplicityand complexity and should be designed foroperational rather than research use. Outcomemeasures are not useful for month-to-monthprogram management which requires moreproximate indicators. Information systems canprovide data inputs for this kind of monitoringbut are frequently too weak to do so.

Standard information and voice-based strate-gies do not work particularly well for the

EPHFs but can be adapted to do so. This mightinvolve constituency building for the EPHFsand the use of civil society and media groupsto monitor and have input to decisions con-cerning them.

NOTES

1. IOM (1987) and PAHO (2002).

2. For descriptions of agency theory in the health

sector, see Hurley, Birch, and Eyles (1995), Bossert(1998), Gauri (2001), and Gauri, Cercone, and Briceno

(2004). The theoretical and technical issues in this

paper apply to both developed and developing coun-

tries, but the lessons are of greatest relevance to

developing countries with fledgling service deliverysystems.


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3. Of course, what goods are actually provided through

public funds is typically resolved through political

processes, which may or may not be influenced heavily

by technical considerations.

4. See, for example,Wilson (1989).For a more generaldiscussion of issues of public management for service

delivery, see the recent World Development Report

(World Bank, 2003).

5. For example, in Vietnam (discussed below).

6. Liu and Mills (2002) and Wanget al. (2005).

7. Zheng and Hillier (1995), Liu and Hsiao (1995),

Bloom and Xingyuan (1997), Bloom (1998), Wang, Das

Gupta, Khaleghian, and Cai (2005).

8. Russell et al. (1999) and Gauri et al. (2004).

9. Such as those reported by Marek, Diallo, Ndiaye,

and Rakotosalama (1999) in Senegal and Madagascar,

for example.

10. McPake and Mills (2000) and Millset al. (2004).

11. Mills, Brugha, Hanson, and McPake (2002) and

Gauriet al. (2004).

12. Mountfield (1997) and Barnettet al. (2001).

13. Khaleghian, field observations.

14. See for Uganda Akin, Hutchinson, and Strumpf

(2001)and Jeppsson and Okuonzi (2000);for Indonesia

and the Philippines, Soerojo and Wilson (2001); for

Nicaragua,Birn, Zimmerman, and Garfield (2000); for

Tanzania, Gilson and Mills (1995); and for Colombia,

Munoz-Nates (1999, cited inWHO, 1999).

15. Jimenez and Sawada (1999) and Filmer (2002).

16. Khaleghian (2004)also presents empirical evidence

of this phenomenon with a multivariate analysis of the

impact of decentralization on immunization coverage in

low- and middle-income countries.

17. Akin et al. (2001), Birn et al. (2000), Solon et al.

(1999 cited in Soerojo & Wilson, 2001), World Bank

(2001a, cited in Soerojo & Wilson, 2001), Gilson and

Mills (1995),Jeppsson and Okuonzi (2000), and Munoz-

Nates (1999, cited inWHO, 1999).

18. Das Guptaet al. (2003) and Das Gupta and Rani(2004).

19. See alsoMareket al. (1999).

20. Chen, Lee, and Phua (2003)andSunget al. (2003).

21. Rob and Zemsky (2002)and Liu and Mills (2002).

22. Tendler and Freedheim (1994)and Grindle (1997).

23. Russell et al. (1997),Wade (1997), andMills et al.(2002).

24. See the citation fromSchick (1998)above.

25. Taylor and Taylor-Ide (2000), Wade (1997), Das

Guptaet al. (2003),Hurleyet al. (1995), andMcKee and

Healy (2000).

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