Institutional design in democratic contexts. The case of the German Bundesanstalt für Arbeit

Term Paper, 2002
18 Pages, Grade: 1,0



1. Introduction

2. The case of the Bundesanstalt für Arbeit
2.1 The crisis of the Bundesanstalt für Arbeit
2.2 Reform programmes

3. Institutional design
3.1 Institutional design in the case of the Bundesanstalt für Arbeit

4. Is design necessary?
4.1 Experiential learning and incremental adaptation
4.2 The German public sector reform path
4.3 Inefficiencies in processes of learning and adaptation

5. Is design feasible?

6. Is design legitimate?

7. Strategies for institutional designers
7.1 Mobilization of attention
7.2 Stabilization of attention, energy and resources

8. Critical evaluation

9. Concluding remarks


1. Introduction

Institutional choice and design are currently important topics on the political agenda of European welfare states. Olsen (1997:207f) observes that many governments are turning away from the centralized welfare state-project and try to reorganize political institutions, in particular relationships between the state, society and citizens. He identifies four major reform projects: the democratic decentralization project, the civil society project, the market society project and the European integration project. Currently, the market society project seems to be most influential, aiming at the creation of a new political and social order with the competitive market as core value.

Also in Germany the welfare state has come under pressure. High unemployment figures have recently received the greatest attention and most public concern. In this context, the revelation of major dysfunctions in the Bundesanstalt für Arbeit (Federal Labour Office) led to a scandal and forced the government to launch a comprehensive reform programme. This raises the question if institutions can be deliberately changed in modern democratic states.

The analysis of this paper refers to the above-mentioned reform programme of the German Bundesanstalt für Arbeit (BA) and addresses the following questions[1]:

Firstly, the concept of institutional design will be applied to the reform programme.

Secondly, it is assumed that potential design is dependent on basic institutional features of democratic policies. The question is then: In what way do democratic contexts affect the possibilities for institutional design - making it necessary, politically feasible and legitimate?

Thirdly, taking into account these possibilities and constraints for institutional design, two alternative strategies for potential reformers are identified, which enable them to exploit opportunities for design.

The paper is structured as follows: Firstly, the case of the Bundesanstalt für Arbeit and the reform programme will be shortly described. After that, efforts for institutional design will be identified in the reform programme. The following sections will then discuss the necessity, feasibility and legitimacy of design in democratic contexts before introducing the reform strategies. The final section is a critical evaluation of some aspects of the concept.

2. The case of the Bundesanstalt für Arbeit

2.1 The crisis of the Bundesanstalt für Arbeit

After investigations in five German employment offices in October 2001, the auditors of the Bundesrechnungshof (Federal Audit Office) found that the statistics concerning job placements were flawed: the number of jobs actually procured by the employment offices was substantially lower[2] than the numbers published by the BA which is at the head of the ten employment offices at state level (Frankfurter Allgemeine Zeitung FAZ, 7 Feb. 2002). The report was published on February 5th 2002 and led to a crisis of the whole organization of the BA. After initial resistance, the president of the BA, Bernhard Jagoda, finally renounced his office on February 20th due to increasing pressure by several members of the Bundestag (FAZ, 21 Feb. 2002).

2.2 Reform programmes

Already on February 14th the board of management of the BA (with the chair alternating between representatives of employers and unions) agreed upon several measures to reform the BA. These "self-made" changes are: concentration on job placement while giving up a number of other tasks, setting up call-centers as job agencies in each employment office, establishing a new focus in personnel development (as modern service providers and personnel managers), setting up a management of complaints for customers and employees and starting an organizational review by a group consisting of representatives of employers, unions and the government (BMA 2002).

On February 22nd, the federal government finally launched a more comprehensive two-stage reform programme for the BA (ibid). The underlying principles are: service provision in competition; concentration on core tasks with job placement at the centre and a more efficient, customer-oriented management.

The legislation necessary for the implementation of the first stage is to be adopted until July 2002. These immediate steps consist of:

- modernization of management structures: transformation of the BA from a public authority to a service provider with private sector management structures: it will be managed by a board of management; the new chairman will have a fixed-term contract and be no civil servant; the management will be controlled by a board of directors, comprising representatives of employers, unions and local government;
- more competition in job placement: unrestricted access for private job placement agencies (unemployed people can choose between (government-payed) placement by either private or state agencies) and increased cooperation between state and private agencies;
- more quality and customer orientation: benchmarking (i.e. competition) between government employment agencies, bonus-payments for successful placements etc.

The changes envisaged by the second stage of the reform programme are more structural in nature and are to be implemented at the latest in 2004. A commission (with representatives from employers, unions, politics, science, consultancies and also the BA and employment offices) is set up to develop concepts for the future tasks and a new organizational structure of the BA. Its chairman is Peter Hartz, personnel director of the Volkswagen AG. The political guidelines are the following:

- concentration on the core tasks of job placement, payment of unemployment benefits and active labour market policy;
- introduction of modern management concepts (like programme budgets) and information technologies;
- regionalization and decentralization of decision-making and development of a culture of readiness to take responsibility;
- the outline touches on plans for a future merger of unemployment benefits and basic welfare assistance.

3. Institutional design

According to Olsen, design is a "purposeful and deliberate intervention that succeeds in establishing new institutional structures and processes, or rearranging existing ones, thereby achieving intended outcomes and improvements" (Olsen 1997:205). In his paper, Olsen analyses radical change, i.e. "fast and major changes in institutional configurations that in significant ways redefine the terms of governance, yet do not break with an existing order" as opposed to incremental change which "refers to slow and gradual changes, processes which are consistent with an existing order, but which in the long run may make existing institutions disappear or new ones emerge" (ibid:205).

3.1 Institutional design in the case of the Bundesanstalt für Arbeit

Falling back on Olsen's definition of institutions as "rules and practices embedded in structures of meaning and resources", where meaning stands for expectations, preferences, aspirations, mentalities and identities (2000:2), some of the changes envisaged by the reform programme outlined above can be interpreted as efforts for institutional design.

The focus on competition and customer orientation is a means to induce changes in the way of thinking and the self-perceptions of the members of the organization itself. New rules and practices can eventually lead to shifts in values and identities of the civil servants within the organization. As Goetz (2000:87) points out, the concentration on legal changes in processes of German public administration reform tends to underestimate the depth of change, and already today "entrepreneurial and market rationalities increasingly complement (or even replace) the classical bureaucratic rationality".

Furthermore, a comprehensive decentralization of decision-making would lead to the establishment of new institutional structures and processes. In this context, the envisaged concept of a "culture of readiness to take responsibility" explicitly aims at changes in aspirations and mentalities of the employees in the job employment agencies. Again, Goetz (2000:87) claims that transformations of this kind are actually happening. He underscores the impact of the recent advancement of management values on administrative culture and claims that these values challenge the traditional bureaucratic rationality.

The BA serves as an instrument for state intervention in competitive markets, e.g. by its job placement function or the payment of unemployment benefits. It is an element of the welfare state. Thus, the reform efforts can even be interpreted as being part of a large-scale project of adapting the German welfare state to the market society-project. Take for example the plans for a future merger of unemployment benefits and basic welfare assistance: although this can only be speculation at the moment, it seems almost sure that such transformations will entail cuts in social security benefits, a further step in the restructuralization of the welfare state.

It is important to keep in mind that the interpretation above assumes certain underlying intentions of institutional designers. The assumptions are based on the goals stated in the reform programme and more general considerations. Also, it cannot be assessed yet if the efforts for institutional design will finally be realized. This assumption relies on the observations made by Goetz (2000). In the following sections, I will turn to the second question, i.e. the identification of the possibilities for institutional design in democratic contexts.

4. Is design necessary?

4.1 Experiential learning and incremental adaptation

Olsen (1997:209) hypothesizes that imperfections and inefficiencies in routine processes of learning and incremental adaptation are a precondition for radical institutional design. In an ideal democracy continuous learning and adaptation of institutions and officials reduce the need for major redesign, they enable governments to detect and counteract failures (ibid:210). But in reality inefficiencies in these processes are quite common. This is due to a limited ability or willingness to learn from experience and act on the basis of new knowledge (ibid:211). Olsen concludes: "The more efficient ordinary processes of learning and adaptation are, the less likely is accumulation of tensions and conflicts and radical change by design or breakdowns" (ibid:209).


[1] The hypotheses and ideas are based on the article by Johan P. Olsen (1997).

[2] Sample audits in the five employment offices in Dortmund, Frankfurt (Oder), Neuwied, Halle and Bremerhaven revealed that 70 per cent of the entries in the statistics were wrongly classified as placements (FAZ 7 Feb. 2002).

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Institutional design in democratic contexts. The case of the German Bundesanstalt für Arbeit
Leiden University
Comparative Government and Civil Service Reforms
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ISBN (eBook)
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Institutional, German, Bundesanstalt, Arbeit, Comparative, Government, Civil, Service, Reforms
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Christina Zimmer (Author), 2002, Institutional design in democratic contexts. The case of the German Bundesanstalt für Arbeit, Munich, GRIN Verlag,


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