Verhoest Van Thiel de Vadder 2021

Agencification in Public Administration
Koen Verhoest, Department of Political Science, University of Antwerp,

Sandra van ThielDepartment of Public Administration and Sociology, Erasmus University
Rotterdam,
and Steven F. De VadderDepartment of Political Science, University of Antwerp
https://doi.org/10.1093/acrefore/9780190228637.013.1466
Published online: 25 March 2021
Summary
Agencification is the creation of semi-autonomous agencies: organizations charged with
public tasks like policy implementation, regulation, and public service delivery, operating
at arm’s length from the government. Although not a new development, agencification
became very popular from the 1980s on as part of the New Public Management reforms.
Three types of agencies can be distinguished, based predominantly on their formal legal
features. Type 1 agencies have some managerial autonomy but do not have their own
legal identity separate from the state or their parent ministry. Type 2 agencies are
organizations and bodies with managerial autonomy that have their own legal identity
separate from the state or their parent ministry. Type 3 organizations have their own
legal identity vested in, and defined by, private law and are established by, or on behalf
of, the government in the form of a private law corporation, company, or a foundation,
but they are predominantly controlled by government and are at least partially involved
in executing public tasks. Specific characteristics of agencies differ between countries
and findings show few systematic patterns: similar tasks are charged to different types of
agencies. A crucial element in the functioning of agencies is the formal and de facto
interplay of autonomy and control, and how this can be explained in a static and dynamic
way. Studies about agencification list three main categories of its effects: economic,
organizational, and political effects. However, there is still a lot that needs to be studied
about agencification, its forms, and its effects.
Keywords: agencies, agencification, managerial autonomy, policy autonomy, result control,

performance, organizational effects, public administration and policy
Agencification as a Phenomenon
Agencification is the creation of semi-autonomous agencies: organizations charged with public

tasks like policy implementation, regulation, and public service delivery, operating at arm’s
length of the government. Although not a new development, agencification became very
popular from the 1980s on as part of the New Public Management (NPM) reforms (Hood,
1991), at first in Western countries and later on also in the rest of the world (OECD, 2002;
Pollitt et al., 2004). There are many different types of semi-autonomous agencies, in different
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countries and policy sectors, and at all levels of government from local to international
(Verhoest et al., 2012). This chapter will focus on agencies at the national level, as most
research into agencification has taken place at that level.
Because there is much controversy about the definition and labels, the discussion in this
article starts with important concepts related to the debate on agencies and agencification. In
particular, the autonomy and control of agencies are discussed; they are two sides of the same
coin and are key to understanding the semi-autonomous nature of agencies. The next part
goes into the spread of agencies across various countries and policy sectors. The institutional
context, such as the state tradition of a country, plays an important role in the creation of
agencies, for example in terms of different legal types of agencies but also regarding the
levels of autonomy and control imposed upon them. As a result, there are few systematic
patterns in how agencies are created, governed and controlled. The same applies to effect
studies: knowledge of the effects of agencification—whether economic, political, or
organizational effects—is limited and fragmented, and those studies that have been done offer
mixed conclusions. This means that there are still many research questions open. Therefore,
the final section of this article presents a research agenda.
Conceptualizing Agencies, Autonomy, and Control
There are many different definitions of an agency, but three elements have proven to be key
(Pollitt et al., 2004; Talbot, 2004; van Thiel, 2012; Verhoest et al., 2010). First, a growing
consensus views an agency as an organization that is structurally disaggregated from the
government, and at the national level from the parent ministry. This does not mean, however,
that all agencies are public law based (more on the legal features later in this section).
Second, agencies are granted a certain degree of autonomy to enable them to operate more
business-like, while they are performing public tasks, like implementing public policies,
1
regulating markets and exercising public authority, and/or delivering public services. For
example, agencies can have autonomy regarding personnel policies and financial decisions, or
about how they execute their public task (policy implementation). The degree of autonomy
varies however per (type of) organization, and the degree of formal autonomy does not always
coincide with actual or perceived autonomy (Verschuere, 2006). And third, at arm’s length of
the government agencies face, at least formally, less hierarchical and political influence than
government bureaucracy. This does not preclude control, either by a minister or the parent
ministry, but the level and instruments of intervention depend on the administrative system of
a country and the amount of formal autonomy granted to an agency. In practice however,
politicians will keep on interfering with agencies, even beyond the boundaries of their formal
control (Pollitt, 2005). The implication of this broad definition is that bodies which are created
by government under private law are considered as agencies, as long as they fit the
abovementioned criteria.
Despite their generic nature, these three elements still allow for a large degree of variation.
For example, countries can have many different types of legal forms. To enable comparative
research, a typology was developed based on an expert survey (van Thiel, 2012; see the
section “Empirical Variety” for more details on the survey). Three types or categories of
agencies were distinguished, based predominantly on their formal legal features. Type 1
agencies are organizations, units, or bodies that have some managerial autonomy but do not
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2
have their own legal identity separate from the state or their parent ministry. These
departmental agencies are the closest to the core government. Examples are the state
agencies in Norway, central bureaus in Hungary, Next Steps agencies in the United Kingdom,
“agenzia” in Italy, state institutions in Estonia and “direct” agencies in Germany (Bach & Jann,
2010; Hajnal & Kàdàr, 2008; Ongaro, 2009; Sarapuu, 2008; Verhoest et al., 2010). Type 2
agencies are often referred to as statutory bodies. They are organizations and bodies with
managerial autonomy, which have their own legal identity separate from the state or their
parent ministry. This type includes, for example, the Dutch ZBOs, the United Kingdom’s Non-
Departmental Public Bodies (NDPBs), statutory bodies in Australia and Ireland, and the so-
called public establishments in Italy, France, Portugal, and Belgium (Allix & van Thiel, 2005;
Corte-Real, 2008; van Thiel, 2001; Wettenhall, 2005). The third type refers to organizations
with their own legal identity vested in and defined by private law, and established by or on
behalf of the government in the form of a private law corporation, company or a foundation,
but which are predominantly controlled by government and at least partially involved in
executing public tasks. State-owned companies (SOCs) and government foundations belong to
3
this category as far as they fit the abovementioned criteria of an agency. Of course, these
three types are broad sweeps and cannot do justice to the specific characteristics of different
organizations in different countries; that would require more in-depth research. However,
because of their broad nature, the three categories allow for comparisons between countries
and legal systems.
Variety among agencies also concerns their levels of autonomy and control. Autonomy means,
above all, to be able to translate one’s own preferences into authoritative actions, without
external constraints (Maggetti, 2007). In public administration literature, autonomy refers to
the level of decision-making competence (discretion) of an agency to take decisions about for
example the management of the agency or how to carry out their task on the one hand, and
the exemption of structural, financial, legal and interventional restrictions on their actual use
of these decision-making competencies on the other hand (Christensen, 2001; Maggetti, 2012;
Maggetti & Verhoest, 2014; Verhoest et al., 2004). Autonomy as decision-making power comes
in two kinds, referring to two different scopes of discretion. First, when agencies have some
decision-making competencies delegated from superior bodies concerning the choice and use
of inputs (financial, human and organizational resources) they have some degree of
managerial autonomy. Managerial autonomy hence mean that agencies are exempted from
certain rules and regulations concerning input management which traditionally enhance the
legality and economy of governmental transactions and constrain managerial discretion.
Second, the scope of autonomous decision-making capacity may also vary because of the
structuring of the primary production processes of the agency and the policies themselves. In
contrast with managerial autonomy, the level of policy autonomy of an agency indicates to
what extent the agency itself can take decisions about: the (sub)processes and procedures it
has to conduct to produce the externally prescribed goods or services; the policy instruments
to use to implement the externally set policy and the quantity and quality of the goods or
services to be produced; and the target groups and societal objectives and outcomes to be
reached by the policy. Policy autonomy indicates, for example, that agencies may take
decisions on individual cases within externally set regulations and laws (definitions taken from
Verhoest et al., 2004, 2010).
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Autonomy should thus be considered as multidimensional, whereby all sorts of combinations
can be found in practice. Service delivery agencies for example often have very limited
autonomy about their task (policy implementation), but high levels of managerial autonomy
(finances, personnel). The opposite, much policy autonomy but almost no managerial
autonomy, can be found in some type 1 agencies, such as inspectorates that are part of or very
close to a parent ministry. Overall, an agency’s level of autonomy is often an agency-specific
mix of managerial, policy, financial and legal autonomy (Lægreid & Verhoest, 2010; Verhoest
et al., 2004). The application of the concept of organizational autonomy to bodies other than
agencies linked local, national or European authorities, like international bureaucracies is
subject of fierce debates (see Christensen & Yesilkagit, 2019, versus Bauer et al., 2019). There
is also often a disconnection between the regulatory governance literature using the concept
of independence in the context of regulatory agencies and the public administration literature
using the concept of organizational autonomy, although both concepts can be considered as
one and the same, or at least very similar (see Gilardi, 2008; Hanretty & Koop, 2012;
Maggetti, 2007; Maggetti & Verhoest, 2014).
Control is described as the instruments and mechanisms used by political principals to

intentionally influence the behavior and decisions of the agency. Political principals can be
parliament, a minister, the government, or a ministry. They can exercise control in several
ways (Verhoest et al., 2004). Firstly, control can be ex ante or ex post and oriented on either
input or results. In practice, ex ante control is mostly focused on inputs (through restrictions
on how agencies should manage their resources) and ex post on results (in the form of
performance agreements). Secondly, government can control through appointing, steering
and evaluating agency managers and board members. This is called structural control.
Thirdly, financial control through budget allocation can be utilized. A fourth type of control is
inducing competition or collaboration. Lastly, establishing formal and informal contacts
between agency management and their principals is another possible mechanism (more on
this when the autonomy and control of agencies is explained).
Empirical Variety
Further variety among agencies can be found in the tasks they execute and the policy sectors
in which they operate, the way in which parent ministries steer and control agencies in their
policy sector, as well as in the speed of their creation in different countries.
Tasks and Policy Sectors

In the expert survey mentioned in the section on “conceptualizing agencies, autonomy and
control,” experts from 21 mostly western countries identified which type of agency was in
charge of 25 selected public tasks (van Thiel, 2012). The tasks that have been charged to
agencies in almost all countries are: meteorology, bureau of statistics, unemployment benefits,
taxes, employment office, immigration, and museums. There are some patterns as to what
type of agency is charged with a specific task. For instance, tasks related to security
(prosecution, prisons, police, intelligence, and immigration) are mostly carried out by
government units or type 1 agencies; they are not put at great arm’s length. The same applies
to tasks like registration (statistics, drivers licenses, vehicle registration, meteorology, and
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land register). Tasks concerning payments (unemployment, taxes, EU subsidies, student loans
and development aid) are executed more often at a distance, usually by type 1 or 2 agencies.
The railways, the national airport, the national broadcasting company and to a lesser extent
road maintenance and national museums have been corporatized (type 3) in the studied
countries, or even completely privatized. Forestry is the only task that is carried out by all
three types of agencies in the various countries. Housing and hospitals are tasks that are
typically decentralized to lower level governments.
The findings show however few systematic patterns: similar tasks are charged to different
types of agencies, both between and within countries. For example, payment of benefits can
be charged to a type 2 agency in one policy sector (e.g., unemployment benefits) but to a type
1 agency in another sector (e.g., economic subsidies), in the same country. This could point to
differences in style between ministries (van Thiel, 2006) but there are also differences
between countries caused by administrative traditions. This point will be discussed more in
depth in the section on explaining autonomy and control of agencies from a static and
dynamic perspective.
Control at Arm’s Length

The large-scale creation of agencies has led to a new governance dilemma for political
principals, in particular parent ministries: how to control agencies that operate at arm’s
length, which have been granted managerial autonomy and are often no longer under direct
hierarchical control? Traditionally, the principal-agent model is used to answer this question
(James & van Thiel, 2011). According to this economic theory, the principal (e.g., a parent
ministry) delegates a task to an agency, describing in some form of written agreement
(‘contract’) what the agency will have to do (results, output), under which conditions, the
budget (input), and which accountability requirements apply, such as performance indicators.
The agency has an information advantage, as they have the expertise and knowledge about
the task at hand. This creates uncertainty and distrust for the principal. The principal will
therefore have to monitor the performance of the agency (control) to make sure that the
agency serves the principal’s interests—and not its self-interest. Under these assumptions,
control of agencies at arm’s length is very tight and detailed, which may restrict the autonomy
of the agency.
Research into how such control is instrumentalized and what its effects are, is scarce and
limited to a select number of country studies: see for example Bertelli (2006a, 2006b) and
Flinders and Tonkiss (2016) on the United Kingdom, and Schillemans (2013) and Yesilkagit
and van Thiel (2012a) on the Netherlands. There are also a few comparative studies: van Thiel
and Pollitt (2007) on the Netherlands and United Kingdom, a three-country study (Flanders,
Norway, Ireland) by Verhoest et al. (2010) and Tonkiss et al. (2015) on the Netherlands,
Flanders, and the United Kingdom. These studies show that control of arm’s length agencies
can be exercised in a number of different ways, for example through (more or less) detailed
contracts, frequent meetings, information exchange protocols, evaluation studies, annual
reports and financial accounts, and board appointments. Different countries, and sometimes
even different parent ministries within those countries, differ in the amount and intensity of
control, depending on among others state traditions: legalistic countries (such as Southern
European countries) use legal instruments more often while countries with a longstanding
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tradition of agencification (such as the Nordic countries) have quite informal and trusting
relationships with their agencies (see 30-country comparison by Verhoest et al., 2012). Some
instruments are used in some countries but not in others, for example in the UK and France
some agencies report directly to parliament, but in most other countries accountability to
parliament is always done by the parent minister. Ministerial accountability is still the most
common form of accountability, even though new forms of accountability have been
developed, such as accountability to societal stakeholders and customers (Overman et al.,
2015; Schillemans, 2008).
Little is known so far about the use and effects of control at arm’s length, but the few
evaluation studies that exist (see the section on effects of agencification for more discussion
on the lack of evaluation studies) seem to point to dissatisfaction about the relationship
between agencies and parent ministries, particularly on the side of the agencies (van Thiel,
2016). Neglect, distrust and continued meddling particularly in case of incidents are typical
aspects of the agency-ministry relationship (Pollitt, 2005) and highly related to the central role
of distrust in principal–agent relationships. Some scholars have therefore turned their
attention to a different model for control at arm’s length: the stewardship model (Schillemans,
2013). This model assumes that the joint interests of agencies and principals will lead to more
trust and results control rather than input driven control. First findings on the application of
this model show that principals mix instruments from the two models (Schillemans &
Bjurstrøm, 2020)—something which is theoretically considered detrimental to the relationship
(Davis et al., 1997).
Diffusion Patterns
th
Agencification has been present throughout the 20 century (Schick, 2002) but accelerated
from the 1980s with the rise of NPM. The most striking increase after 2000 was found in
Central and Eastern European countries, as agencification became a condition for EU
accession (Beblavý, 2002; van Thiel, 2011).
NPM propagated an agency model in which agencies have high levels of managerial
autonomy, but constrained levels of policy autonomy. Ex post result-oriented control through
performance contracts would define output-oriented targets. Moreover, the NPM agency
model saw a strict separation between policy development, done by the parent ministry, and
policy implementation, done by agencies, as optimal. However, this pure model has proven to
be hard to find in practice (Verhoest et al., 2012).
The most notable trend at this time is the rationalization of agencies, by merging agencies,
reintegrating them in their parent ministries or by abolishing them. Several governments have
announced reforms—usually aiming at a reduction—of the number and forms of agencies, for
example in Hungary, the Netherlands, Finland, Sweden, Ireland and the United Kingdom
(Flinders & Skelcher, 2012; Hajnal, 2010; Pollitt et al., 2004; van Thiel & Verheij, 2017). In
most federal countries, reforms have not accelerated significantly, at least not at the federal
level (Ongaro, 2009). Countries like Italy, Spain, Israel, and Tanzania are slow reformers.
Moreover, reforms in the last decade often seek to attenuate the division of policy
development and policy implementation and to link them more strongly with each other, by
improving information flows between agencies and ministries or by involving agencies more
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intensively in policy development. Related to this are efforts to link agencies stronger with the
core of the government by involving them in the execution of cross-cutting objectives or
government-wide strategic plans, or by including them in the financial consolidation of
government (Verhoest, 2018). Also the proliferation of management support functions like HR,
financial management expertise and other back-office functions as a consequence of
agencification have been countered in some countries by forcing or inducing agencies to
cluster these activities in or take them from shared service units (Elston & MacCarthaigh,
2016; Elston et al., 2018). These trends are more in line with post NPM doctrines and whole-
of-government reform ideals, and quite in contradiction with the NPM ideal type agency-
model (Bouckaert et al., 2010; Christensen & Lægreid, 2007).
A second pattern relates to a shift in preferences for particular types of agencies. In many
countries, the number of semi-autonomous organizations (type 1) increased in the past
decennia, whereas statutory bodies (type 2) were more popular before. This shift can be
explained by the introduction of specific agencification programs aimed at type 1
organizations (James, 2003; Rommel & Christiaens, 2009; van Thiel & Pollitt, 2007) and
because of concerns about democratic deficits of type 2 agencies (Christensen & Lægreid,
2007; Gregory, 2003; Halligan, 2007; Smullen, 2010). Because type 2 agencies operate at a
larger distance, political principals are concerned about a loss of control and accountability of
these bodies. However, there are also shifts in the other direction. For example, the
Scandinavian countries have been the first to establish type 1 agencies on a large scale but
have undergone around the turn of the millennium many corporatizations i.e. creation of type
3 agencies (Lægreid et al., 2006, 2008). Another mixture of reforms can be found in the
United Kingdom and Australia, which have both created large numbers of agencies in the
past. These reforms, however, date back some time (Australia: 1980s, UK: 1990s) and do not
reappear until 2009. Finally, some countries (like Austria and Ireland) show no clear systemic
pattern of agencification.
In sum, there are two more generic patterns—rationalization programs and shift in
preferences for types of agencies—but not all countries display these in the same way or
direction, as this also depends on their starting position. It is, however, clear that agencies are
involved in numerous changes throughout their life cycle (with potential negative effects;
Wynen et al., 2019, 2020a, 2020b). The next sections delve into the causes and consequences
of the variety in agencies, their autonomy, and control, as discussed so far.
Explaining Autonomy and Control of Agencies: Static and Dynamic

Perspectives
A first group of studies explains the autonomy and control of agencies as static phenomena.
One of the most influential studies on agencies was carried out by Pollitt et al. (2004). They
proposed that the autonomy and control of agencies can be explained by both political-
administrative culture and task characteristics, such as complexity of the task, political
salience and measurability (TSPD: task specific path dependency model). Research since has
indeed proven that structural-organizational factors, task-related elements, and country-level
specifics interact in explaining agency autonomy (Gilardi, 2008; Lægreid et al., 2006; Verhoest
et al., 2010). However, it is unclear which of these factors is most decisive or whether and
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which specific combination of the three sets of factors explains different levels of autonomy
and control best (Magetti & Verhoest, 2014), although a study by Bach et al. (2020) shed light
on how these factors each play a role in determining agency personnel autonomy.
The first set of factors, the formal structure of agencies, theoretically affects organizational
behavior as it determines the positions of actors and the rules concerning who performs a
particular task and in which manner (Christensen et al., 2007; Egeberg, 1999). The concept of
instrumental rationality assumes rational policy makers will design formal structures allowing
agencies a pre-defined level of autonomy. The legal type of agency can then be used to
measure the level of structural disaggregation. However, while some studies support the idea
that agencies with a legal type further away from the government have more autonomy
(Egeberg & Trondal, 2009; Painter & Yee, 2011), others fail to confirm this hypothesis (Bach &
Jann, 2010; Maggetti, 2007; Verhoest et al., 2004; Yesilkagit & van Thiel, 2008). Similarly,
some empirical studies observe positive effects of the size of an organization on the autonomy
of agencies, as larger agencies have more resources to perform their tasks (Egeberg &
Trondal, 2009; Hawkins & Jacoby, 2006; Verhoest et al., 2010; Verschuere, 2006), and to build
up expertise and power—which would mean that they can resist controls from superior bodies
(Carpenter, 2001). However, other studies find a negative relation between the size of an
agency and its autonomy (for example, Bach, 2010). Furthermore, research has disputed the
belief that agencies with a governing board have more autonomy based on the notion that the
board can balance the influence of ministers with other interests from experts and clients as
well (Verhoest et al., 2010 versus Bach, 2010). It would therefore seem that the structural
autonomy of the agency is not always a good predictor of its levels of autonomy and control.
Research on the effect of task characteristics, the second set of factors, also shows ambiguous
findings (van Thiel & Yesilkagit, 2014). According to the TSPD perspective, organizational
forms and practices follow a functional adaptation to the aims and task of this organization
(Maggetti & Verhoest, 2014). Indeed, some studies using rational choice, principal agent
theory or transaction cost theory prove that service delivery tasks are more easily measurable
and can be autonomized more effectively than other tasks, but other studies refute this (Lonti,
2005; Verhoest et al., 2010, versus Pollitt et al., 2004). Likewise, whether regulatory agencies
are more autonomous because markets require long-lasting commitments, as posited by
credible commitment theories, is not always confirmed (Bach, 2010; Gilardi, 2002; Majone,
1997, versus Verhoest et al., 2010; Painter & Yee, 2011). A third line of research, on political
salience, is also still open for debate. The expectation is that with the delivery of salient tasks,
ministers are inclined to control and monitor more intensely. This implies less autonomy for
agencies involved in the delivery of salient tasks. Pollitt et al. (2004; see also Painter & Yee,
2011) support that point, while others do not (Bach, 2010). One possible indicator of salience
is the budget size; agencies with a larger budget are expected to have less autonomy
compared to agencies with a smaller budget (Pollitt et al., 2004), but empirical analysis
presents mixed findings (Verhoest et al., 2010).
The third set of factors, country-specific path dependencies like politico-administrative culture
and level-administrative traditions, clearly matter for agency autonomy and control (Bach et
al., 2017; Bianculli et al., 2013; Pollitt et al., 2004; Schedler & Proeller, 2007; Thatcher &
Sweet, 2002). Pollitt and Bouckaert (2017) have pointed out that countries with a common law
tradition are said to place more value on independence and entrepreneurialism compared to
countries with a Rechtsstaat tradition who opt for traditional bureaucratic control systems
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with low agency autonomy. Yesilkagit and Christensen (2010) demonstrated that
administrative traditions play a role (Painter & Peters, 2010); countries with a long-standing
tradition of delegating authority will create new agencies more easily. Other researchers
investigate the role of actor constellations and veto points in influencing the decisions taken
by agencies (Huber et al., 2001; Huber & Shipan, 2002). Countries with strong corporatist
traditions and high levels of policy conflict (for example multiparty coalition cabinets) or with
more political uncertainty in the form of a short lifespan of cabinets, are expected to have
more autonomous agencies (supported by Moe, 1990, but not by Yesilkagit & Christensen,
2010, and Verhoest et al., 2010). Lastly, using Hofstede’s (2001) cultural theory, Verhoest et
al. (2012) pointed out that power distance and uncertainty avoidance affect organizational
autonomy.
The studies mentioned in the previous paragraphs consider agency autonomy predominantly
as a static phenomenon and as a feature of the dyadic result between the agency and its
political principals. However, more and more scholarly attention is devoted to the dynamic
and relational character of agency autonomy in a multi-actor and multi-level context (Maggetti
& Verhoest, 2014). Due to the institutionalization of agencies, deliberate agency strategies,
and dynamics on the side of the political principals, agency autonomy can change over time.
Wilson already pointed at the relevance of having a clear mission and identity for building
organizational power and legitimacy in 1989 (Wilson, 1989). In the years since, researchers
showed how agencies gain de facto autonomy through identity-building and
institutionalization (Busuioc et al., 2011; Groenleer, 2009, 2014; Yesilkagit, 2004). Similarly,
embedding an agency in a strong network of support and building a strong reputation in the
eyes of relevant audiences, enables agencies to forge more autonomy or, in times of crisis,
protect their acquired autonomy (Carpenter, 2001; Carpenter & Krause, 2012). In that
perspective, Boon, Verhoest, et al. (2020) studied what determines the audiences that public
agencies target for reputation management. Other work discusses which organizational
features determine their media attention (Boon et al., 2019) and their reputation (Boon,
Salomonsen, et al., 2020). The emergence of trust between the political and administrative
principals and the agency can also result in more de facto autonomy (Verhoest et al., 2015).
Contradicting the commonly held belief that agencies will be reluctant to have close contacts
with their principals in order to safeguard their autonomy, trust is enhanced by more intense
contacts and reporting (van Thiel & Yesilkagit, 2011). Autonomy and accountability do not
necessarily conflict with each other (Busuioc et al., 2011).
This link between autonomy, control and trust reflects the relational notion of autonomy. It is
increasingly acknowledged that agency autonomy is the result of the agency’s operating
within supra- and transnational, national, regional and sectoral networks in which they
interact with other actors (other agencies, stakeholders, the public and media; cf. Yesilkagit &
van Thiel, 2012b), besides the interaction with the political and administrative principal
(Korinek & Veit, 2015). Such collaboration enhances an agency’s legitimacy and reputation,
which can contribute positively to its autonomy as well (Rommel, 2012; Rommel & Verhoest,
2014). This has been demonstrated mostly for EU agencies so far (Bach & Ruffing, 2013; Bach
et al., 2015, 2016; Egeberg, 2006; Egeberg & Trondal, 2009; Maggetti & Verhoest, 2014;
Ossege, 2015; Ruffing, 2015; Yesilkagit, 2011; Zito, 2015). An alternative line of research into
the relational notion of autonomy refers to the strategizing behavior of agencies to resist
changes, for example the efforts in the last decade to reduce the number of agencies
(Dommett & Skelcher, 2014; Flinders & Skelcher, 2012; Overman et al., 2014). These studies
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show that agencies can use their network contacts, resources and autonomy to counter
certain reforms to their organization. The most important partner in strategizing against
externally imposed reforms is the parent ministry, which underscores again the importance of
interrelations rather than distance between agencies and ministries.
The increasing recognition that agency autonomy is more a socially constructed phenomenon
is related to all this. The social constructed phenomenon arises from perception,
interpretation and interactions by actors, rather than from an objective reality. Work by the
COBRA network and others do acknowledge the perceptual nature of autonomy, with the
underlying assumption that agency managers will not necessarily act by following the formal
affiliation of their organization. Instead, managers act upon the autonomy they perceive to
have and the control or influence they perceive to be confronted with. However, most
definitions and operationalizations of autonomy and independence used in research are
imposed by the researchers upon reality. If one argues that autonomy and/or independence
only affects behavior when it is perceived to be present, how respondents define and
construct this concept in social interactions should be taken into account. This kind of
research is only developing since 2010. Among others, Jackson (2014) studied how regulatory
independence is understood in the eyes of its beholders. Korinek and Veit (2015) investigated
how during micropractices of ministry–agency relations the agency is gradually constructed.
Molenveld et al. (2020) studied through Q-methodology how agency staff perceives central
coordination efforts for cross-cutting objectives and its impact upon, among others, autonomy.
Effects of Agencification
Despite the fact that agencification has been a major element of NPM reforms in many
countries, its effects have not been studied very often (Dan, 2014; Dan et al., 2012). There are
some notable exceptions (such as Dan, 2014, and Overman, 2016a) but research is scarce.
Studies that do exist list effects in three main categories: economic, organizational and
political effects. These categories refer to the expectations of politicians at the time of agency
creation (Overman, 2016b). Because political effects such as the loss of control and the
accountability of agencies have been discussed already in the subsection on diffusion
patterns, this section will focus on economic and organizational effects. Given the scarcity of
research, some findings from non-European research will be referenced.
Economic Effects
Drawing upon principal-agent theory, property rights theory and managerialism, it was
expected that the creation of semi-autonomous agencies would lead to performance
improvement because of two underlying and mutually reinforcing principles: “letting
managers manage” by granting them managerial discretion and freeing them from political
interference, and “making managers manage” by shifting the control by political principals
from inputs to results (Osborne & Gaebler, 1995). Agency performance is understood here as
economy, efficiency, effectiveness as well as the quality of services.
The empirical evidence for these expected effects is rather patchy and overall inconclusive.
For example, a case study of Japanese agencies by Yamamoto (2006) found that perceived
change in operational autonomy resulted in reported increases in performance, but such
Page 10 of 26
effects were much less clear or absent for financial management autonomy, HRM autonomy,
and organizational management autonomy. In the case of Korean executive agencies, Kim and
Cho (2014) show that both human resource management autonomy and financial autonomy
have statistically significant negative relationships with performance, whereas systems for
performance evaluation and rewards for result control are significantly and positively related
to agencies’ performance. Braadbaart et al. (2007) found strong relations between the
managerial autonomy of water utilities in Africa, Asia and the Middle East and six out of eight
of their key performance indicators. Bilodeau et al. (2007) established that corporatization of
agencies (type 3) in Canada had a number of positive effects: “output and revenues increased,
the revenues-to-expenditures coverage gap narrowed, and cost-efficiency and employee
productivity improved following corporatization” with most of these changes being
statistically significant (Bilodeau et al., 2007, p. 119). There were also other, more mixed
findings in a longitudinal study of the reported performance of sixteen agencies in Quebec
(Quenneville et al., 2010): for revenue and revenue-over-cost indicators on average substantial
and statistically significant increases were found, while average reported performance in
terms of output, productivity, and cost remained relatively stable during this period. There is,
however, considerable variation between agencies and over time. Similar patterns are
observed in Talbot’s (2004) study of U.K. agencies.
Review studies confirm the mixed findings from case studies. Verhoest et al. (2004; see also
Verhoest & Lægreid, 2010) reviewed ten empirical studies, of which only half showed positive
effects of formal or de facto autonomy on performance. Overman (2016a) reported on five
studies from which three claim to have found positive outcomes and two claim to have found
negative outcomes. A comprehensive review of effects of agencification in Europe by Dan
(2014) found that 72 studies out of 519 studies of NPM reforms across Europe were focusing
on agencies, of which only 28 studies were considered to be sufficiently strong in terms of
methods and evidence used. From these studies, it was concluded that although “these
findings point to certain improvements in outputs and outcomes in some countries […] the
picture is far more nuanced with evidence of trade-offs and consequences in other
areas” (Dan, 2014, p. 233; Dan et al., 2012). A review study by Andrews (2011) showed that
most studies do not find any relation between agencification and local efficiency.
At macro-level, the effects of agencification on government-wide performance are also not

overall positive. Overman and van Thiel (2016) related the extent of agencification in 25
services to indices on public sector performance of 20 countries, while controlling for
government resources, regulatory burdens and market structure. They found a negative effect
of agencification on both public sector output and efficiency, which “refutes the economic
claims about agencification” (Overman & van Thiel, 2016, p. 611). Some of their conclusions
are supported by an advanced statistical testing of the effect of agencification on the cost
efficiency of governments before and during the financial-economic crisis, performed by
Pérez-López et al. (2015). They found that the creation of agencies, besides the adoption of
contracting out and inter-municipal cooperation “tend to increase cost inefficiency in Spanish
local governments and thus reduce overall efficiency” (Pérez-López et al., 2015, p. 1175).
Page 11 of 26
Organizational Effects
Agencification has organizational impact through (a) the introduction and use of new
management techniques, (b) the intended development of a new, more entrepreneurial
culture, and (c) effects on staff motivation and satisfaction. According to Dan (2014), results
of studies regarding organizational effects provide evidence that agencification has
“intensified and improved management processes as a result of greater managerial flexibility,
and some evidence exists of cultural change with a greater emphasis on identifying service
users’ needs and achieving results” (Dan, 2014, p. 234; see also Hammerschmid et al., 2008;
James, 2003; Pollitt et al., 2004). However, again these results are only to be found in certain
countries and sectors.
Agencies are expected to operate more business-like than governments; they are granted a
certain degree of management autonomy to that effect. The adoption of management
techniques from the private sector, in particular performance management and human
resource management (HRM), is instrumental to this objective. However, the granting of
autonomy does not necessarily lead to the adoption of such techniques; in the case of
performance management, associated techniques were only adopted when parent ministries
imposed more result control (Wynen & Verhoest, 2016) and mainly in large-sized agencies and
agencies with relatively tangible tasks (Verhoest & Wynen, 2018). Moreover, the use of
performance management in the public sector is not without problems (see overview by Van
Dooren & Hoffmann, 2018), also in agencies. Public goods and services are difficult to
translate into indicators as policy objectives are often purposively ambiguous. Political
principals are not always capable or interested enough to develop valid indicators (Pollitt,
2006). And agencies can display strategic behavior, so-called gaming, to manipulate
performance information to appear to perform better than in reality (van Thiel & Leeuw,
2002). Such unintended and perverse effects undermine the expected performance effects—
and make reports on performance effects less trustworthy.
The adoption of HRM techniques by agencies is less often studied (Boyne et al., 1999). An
explorative study into the HRM policies of 30 Dutch agencies (Blom et al., 2019) found that
most (80%) of them use a facilitation philosophy, emphasizing the autonomy of employees,
opportunities to learn, and mobility (internally and externally). In these agencies dominant HR
instruments are: (a) training and development; (b) HR planning; (c) recruitment and selection;
and (d) performance management. The facilitation strategy of agencies is a response to
societal trends and demands; in that respect they are more responsive than their Dutch
parent ministries. However, central government personnel regulations often impose
restrictions on the leeway of agencies to develop their own HRM policies. Differences
between HRM policies of the agencies studied originate mostly out of important internal
driving forces and are therefore very agency-specific (for similar findings on other countries,
see Verhoest et al., 2012). Autonomy and control also has specific effects on the use of
internal decentralization of decision-making competences (Wynen et al., 2014b) or on the
hiving-off of HRM support units (Boon & Verhoest, 2014).
Agencies are also expected to behave more business-like, that is to develop a culture that is
more customer-oriented, flexible and innovative—opposite to the traditional culture of
compliance, details and precision in the government bureaucracy (van Thiel & Van der Wal,
2010; Van der Wal, 2008; Van der Wal & Huberts, 2008). Different studies report contradictory
Page 12 of 26
findings. For example, Egeberg and Trondal (2009) showed that agency managers are less
receptive to political steering signals, compared to bureaucracy, and they are more oriented
toward the needs of their customers. Wynen and colleagues found that the emergence of an
innovative and customer-oriented culture is positively affected by a high level of managerial
autonomy and a high level of result control individually, but negatively affected when both
factors are combined (Wynen et al., 2014a; Wynen & Verhoest, 2015; see also Verhoest et al.,
2007, on innovation and legitimacy of agencies; Lægreid et al., 2011). While agencies are
expected to be innovative, the conditions required for innovation (competition,
entrepreneurialism, risk-taking, no restrictive regulations, resources) are often not present in
the public sector context (Borins, 2000), raising doubt about the feasibility of this objective of
agency creation.
Finally, also regarding staff effects different studies find different effects, in different
contexts. For example, Bilodeau et al. (2007) spoke of increased staff motivation and
productivity after structural disaggregation, but Overman (2016a) found in a natural
experiment of two agencified Dutch organizations and one reintegrated organization, using
longitudinal survey data and interviews, that structural disaggregation decreases staff
satisfaction. There is some debate about the potential negative effects of NPM reforms and
the adoption of business management techniques on the motivation of agency employees. The
Public Service Motivation (PSM; Perry & Hondeghem, 2008; Vandenabeele, 2007) of
employees in public sector organizations does not respond well to private sector incentives
(extrinsic motivation instead of intrinsic) and private sector-like working conditions such as
temporary contracts and performance related pay, which agencies may be expected to adopt
(Pollitt & Bouckaert, 2017). However, studies into this topic are largely lacking.
In sum, the effects of agencification are not at all straightforward. Agency performance
depends on the complex interplay of many variables, like the leadership style, organizational
culture, the clarity of organizational goals and organizational size (see, for example, Boyne &
Walker, 2005). Some of these variables are structural, cultural-institutional, and task-specific
in nature, but others refer to deliberate actions by actors. Verhoest et al. (2010) found that the
quality of management seems to matter most, supporting the “management matters”
literature (Moynihan & Pandey, 2005). Through an inductive analysis of well-performing and
badly-performing agencies in Québec, Quenneville et al. (2010) suggested that agencies
operating in conditions similar to those of small private ventures, with a clear and non-
conflicting mission statement coupled with greater autonomy, perform better than larger,
more constrained agencies pursuing a large number of potentially conflicting objectives.
Innovative behavior by agencies seems to be stimulated by their organizational culture (i.e.,
orientation toward goals, customers, and individual incentives) and the quality of
management, but also by organizational factors like size (staff and budget), kind of task
(service delivery) and possibilities for collaboration with other organizations, including the
parent ministry (Koch & Hauknes, 2005; Lægreid et al., 2011; Martinaitis & Nakrošis, 2009).
The magic NPM-inspired recipe of granting organizations more managerial autonomy while
controlling for their results only thus seems to work under certain conditions and for certain
organizational aspects, and more often this combined recipe has negative unintended
consequences.
Page 13 of 26
Ways Forward: Future Challenges in Agencification Research
This article shows that there is still a lot that needs to be studied to give more clarity about
agencification, its forms, and its effects. Five problems or topics are discussed that deserve
the most attention, but the reader should be aware that this is not an exhaustive selection.
First on the list of important topics to be studied concerns the definition and types of
agencies. The three-way typology as presented in this chapter and used in comparative
studies is not perfect but seems easy to recognize for most country experts. However, it is
mostly based on western countries with certain legal-administrative systems. More research
in other countries would therefore be necessary to improve our knowledge of agencification
as a reform phenomenon, and to test the validity of the typology in different contexts and
administrative cultures. Mapping the numbers and types of agencies will also give more
insight into the existence of trends such as the rationalization (reduction of numbers) of
agencies, and the effects thereof, in other countries besides the ones most studied in Western-
Europe. In that respect, work by Wynen and colleagues show the potential negative effects of
multiple structural changes over time on public agencies, at the level of individual staff
(Wynen et al., 2019, 2020a, 2020b), organizational culture (Wynen et al., 2017) and
organizational autonomy (Kleizen et al., 2018). Related to this is the need to understand how
rationalization as well as the trends to restrengthen the linkages between agencies and their
parent ministries and the center evolve, and how they should be understood in theoretical
terms. Do these trends align with the whole-of-government reform ideas, are they an
expression of the turn to collaborative governance, or should they be considered as an
exponent of the neo-Weberian state (Pollitt & Bouckaert, 2017) that envisage a changed role
for agencies?
The second much needed avenue of research deals with the economic, political and
organizational effects of agencification. Despite high expectations regarding such results,
evaluative research is still scarce—and also often not of good methodological quality as most
studies use qualitative, case-study designs, which hampers systematic and meta-analysis
(Pollitt & Dan, 2013). More review and meta-analysis studies would therefore be needed, as
well as more specific attention for the organizational and personnel effects of agency creation
as they are studied least often. Studies into for example staff motivation and satisfaction are
still scarce, as is research into the HRM of agencies.
This brings us to the third line of research: do agencies indeed operate more business-like
than government bureaucracy? Agency creation is often expected to lead to more efficiency,
innovation and a more entrepreneurial culture and behavior compared to government
bureaucracy. The adoption of business techniques like HRM and performance management
are examples of such behavior. This way of working makes agencies hybrid organizations:
performing a public sector task under private sector conditions. This raises a number of
different questions, for instance whether agencies are indeed such hybrid organizations, and
if so what kind of combinations of public and private are found, is this related to the type of
agency, its task or other characteristics, does it work, i.e., does it render the results expected
thereof, or does it create new, unintended and perhaps undesirable consequences? There is
still a lot of ground that needs to be covered here.
Page 14 of 26
In this chapter the relational nature of autonomy was discussed. It was stressed that the
relationship between agencies and their parent ministry is very important as it determines the
actual amount of autonomy and control of an agency—as opposed to the formal arrangement.
This is the fourth topic for future research that can be considered highly important. Studies
have started to look into the strategizing behavior of agencies (e.g., Dommett & Skelcher,
2014): agencies are not just passive recipients of steering signals from the parent ministries,
but they are actively involved in determining and formulation what their task is, how it should
be carried out, which performance indicators are used, and they have interactions with
politicians such as ministers and members of parliament but also with horizontal stakeholders
such as customers and businesses. The split between policy (parent ministry) and
administration (agencies) has led to a situation in which agencies, because of their
information advantage, often have the upper hand in the relationship with their parent
ministry. This has various consequences for the quality and balance of the relationship but
also for the effectiveness of the relations. More specifically, and this is topic number five,
there is a need for more research into the governance of agencies, underlying models and
instruments that can be used to steer at arm’s length. The application of the principal–agent
model does not always fit with the public sector ethos of agencies (Schillemans, 2013) and
creates dysfunctional relationships as they are based on distrust. The alternative of the
stewardship model is appealing but no panacea. Mixing the two models seems to become the
main modus operandi for parent ministries, but problematic from a theoretical perspective.
How governments and agencies can come to a better inter-relationship is one of the key
challenges in research on agencification. In that context, more research on how trust- and
reputation-building by agencies toward their principals and other actors affect their autonomy
and control should be much more central in research efforts.
Acknowledgments
The authors thank Palgrave Macmillan for permission to reuse excerpts or to rewrite parts of the chapters Verhoest
(2018) and Verhoest (2013). We also thank the Uantwerpen Centre of Excellence GOVTRUST on “Trust and Distrust
in Multi-level Governance.”
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Notes
1. This does not preclude that agencies might be additionally involved in commercial and industrial activities.
2. This definition of Type 1 agencies does not preclude such bodies’ being created by a law issued by parliament (as in
Flanders, where Type 1 bodies are created by parliament although these bodies do not have their own legal identity
separate from the state or their parent ministry). However, creation by a parliamentary act is rare, and in most
countries these bodies would be created under cabinet decision or ministerial order. It might also be the case that
such Type 1 bodies have administrative heads being directly vested with powers and authority under legislation or
statutes to be exercised (largely) free from ministerial direction (like a type 1 agency performing internal audits within
government and of with the head is vested with powers as the ‘Government Auditor’).
3. The acronym quango (quasi nongovernmental organization) usually alludes to agencies that have their own
separate legal identity. Hence, quangos generally refer to type 2 and type 3 organizations (Greve et al., 1999). Please
note that some authors constrain the use of the label “agency” to public law bodies, or bodies fulfilling administrative
tasks. In their view private law bodies or bodies fulfilling besides their public tasks some commercial or industrial
tasks cannot be labeled as an agency. In their view Type 3 bodies like state-owned companies controlled by
government and partially performing commercial and industrial tasks would not fit the label of agency.
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Agencification in Public Administration

Koen Verhoest, Department of Political Science, University of Antwerp,

Keywords: agencies, agencification, managerial autonomy, policy autonomy, result control,

Agencification is the creation of semi-autonomous agencies: organizations charged with public

Conceptualizing Agencies, Autonomy, and Control

Control is described as the instruments and mechanisms used by political principals to

Tasks and Policy Sectors

Control at Arm’s Length

Explaining Autonomy and Control of Agencies: Static and Dynamic

At macro-level, the effects of agencification on government-wide performance are also not

Carpenter, D. P. (2001). Forging bureaucratic autonomy: Reputations, networks and policy

Christensen, J. G. (2001). Bureaucratic autonomy as a political asset. In B. G. Peters & J. Pierre

Corte-Real, I. (2008). Public management reform in Portugal: Successes and failure.

Egeberg, M. (1999). The impact of bureaucratic structure on policy making. Public

Egeberg, M. (Ed.). (2006). Multilevel union administration: The transformation of executive

Gilardi, F. (2002). Policy credibility and delegation to independent regulatory agencies: A

Gilardi, F. (2008). Delegation in the regulatory state: Independent regulatory agencies in

Groenleer, M. (2009). The autonomy of European Union agencies: A comparative study of

Hofstede, G. (2001). Culture’s consequences: Comparing values, behaviors, institutions, and

Maggetti, M. (2007). De facto independence after delegation: A fuzzy‐set analysis. Regulation

Maggetti, M. (2012). Regulation in practice: The de facto independence of regulatory agencies.

Ongaro, E. (2009). Public management reform and modernization: Trajectories of administrative

Overman, S. (2016a). Great expectations of autonomous agencies [Doctoral dissertation, Utrecht

Overman, S. (2016b). Great expectations of public service delegation: A systematic review.

Pollitt, C. (2006). Performance management in practice: A comparative study of executive

Rommel, J. (2012). Organisation and management of regulation. Autonomy and coordination in a

Schick, A. (2002). Agencies in search of principles. In Distributed public governance: Agencies,

Schillemans, T. (2008). Accountability in the shadow of hierarchy: The horizontal accountability

Vandenabeele, W. (2007). Toward a public administration theory of public service motivation.

van Thiel, S. (2001). Quangos: Trends, causes and consequences. Ashgate.

Verhoest, K. (2013). Agencification processes and agency governance: Organizational innovation

Yamamoto, K. (2006). Performance of semi‐autonomous public bodies: Linkage between

Yesilkagit, K. (2004). Bureaucratic autonomy, organizational culture, and habituation: Politicians

Yesilkagit, K. (2011). Institutional compliance, European networks of regulation and the

Machinery-of-Government Building Blocks: Ministries, Departments, and Agencies

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