March 2005 · Volume 87 · Number 2 

When Democracy and Efficiency Collide: Leadership in Grant Administration
by Eileen Pierce
Can efficiency and democracy successfully coexist, or is the notion legitimate that these concepts separate like oil and water? In the endless quest for government efficiency and accountability, performance measurement has permeated the public sector. In the (debated) belief that the private sector is better managed, local government has jumped on the performance measurement bandwagon. This author is here to say, however, that the private sector's finance-driven goals are not sufficient for the public sector, and performance measurement is not an end in itself. 
In September 2003, for example, city and county leaders who administer community development block grant (CDBG) program funds received notice to develop performance measurement systems for grant programs, including a requirement to provide performance outcomes information (HUD, CPD-03-09). While evaluation of program and organizational outcomes answers the question of how well government is performing, there are many factors to be considered, including the influence of organizational structure, politics, policy choices, and constraints. 
Implementing a performance measurement system can be a test of leadership itself, but there is a particular challenge with "outcomes funding" that commands the public administrator's full attention. The focus on efficiency and performance should be blended with an emphasis on the values of public service. The leadership challenge for grant administrators is to conserve the democratic values of representation, participation, transparency, and the public good while still maximizing the use of taxpayer dollars. 
Outcomes Funding, What's That?
To be effective in addressing the issue of balancing democracy and efficiency, the public administrator must be clear about what outcomes funding means to his or her locality. Grant administration in the past has often consisted of contractual relationships that focused on inputs, while program evaluations centered on outputs and on such quantitative measures as units of service. 
To determine the extent of effectiveness, however, outcomes measurement provides a qualitative measure of demonstrated return on investment. That is, rather than simply funding an organization based on the number of units of service provided, the public manager uses outcomes funding to focus on investing in the impact on the community of these completed units of service. 
Generally, outcomes funding has been described as a means for grantors to assume an investor approach, much as in the private sector, with an anticipation of return on investment. In other words, localities don't just "count the beans" but provide evidence of results. 
The investor approach in the public sector actually has a dual purpose. The first is to help the funded organization to manage and improve its work. The second purpose is to help the funder achieve desired results through the grant program. These two principles work together toward the achievement of mutually desired outcomes. 
Supporting the concepts of accountability and performance requires devising clear outcomes and defining expectations for performance. The leader interested in conserving institutional integrity should at this time integrate the values that are most important to the city's or county's value system. 
As a result, government leaders are realizing that partnerships exist with funded organizations. Grantmakers must begin to focus on the outcomes of giving, rather than on the giving itself. They should invest time and resources in helping the supported organizations with their capacity to set, measure, and manage outcomes. Within the framework of the partnership, funded organizations should set clear outcomes and action plans and communicate their progress to their funders. 
Results or Democracy?
Another component of outcomes funding that leaders must consider involves the value system of the government organization responsible for allocating the CDBG funds. Although there exists a plethora of regulations attached to CDBG programs, including a requirement for a citizen participation plan, discretion still exists in the actual use of the funds at the local level. Depending on the governmental unit, CDBG funds may be administered directly by the locality, or services may be contracted out to nonprofit or private organizations. 
A key need in administering grant funds is to be clear on the values of the local government that should be preserved. Awareness of different viewpoints will help the administrator determine the mission and desired objectives for his or her own community. To illustrate divergent value systems, the New Public Management (NPM) reform and democratic constitutionalism can be compared with each other and contrasted. 
The two competing value systems both possess valid points. In the 1990s, the NPM and the Clinton/Gore administration's National Performance Review (NPR) attracted intense attention onto the efficiency of government and onto achieving mission-based results. The NPR values an entrepreneurial government focusing on eliminating red tape, in order to be more responsive to citizens as customers by achieving results. Other values include public choice, increased government efficiency, and the belief that the main route to progress lies through productivity as defined in economic terms. 
In contrast, democratic constitutionalism focuses on nonmission-based results that require institutions to become more transparent, representative, and open to public participation. In the opinions of some, this focus on nonmission results has been forcing democratic constitutionalism to take a back seat. 
If this assessment is true, then there exists a conflict in the realm of policy analysis and public value. Policy analysis that is intended to support democratic values might be caught in a current moving toward the domain of economics. Costs, benefits, and efficiency ratios may be coming to mean more than public interest or public value. 
Contemporary policy analysis is spawned in the private sector, which values the bottom line, that of financial return on investment. The distinction between government and market organizations, however, is that citizens expect that government should work in the public interest. The public sector cannot ignore the need to obtain a good return on investment through the efficient use of tax dollars, but the "return" may include additional factors that the free market doesn't necessarily value. 
The numbers do not tell the whole story. The social values of diversity, fairness, and representation are integral to democratic constitutionalism. Albert Einstein might not have been thinking about democratic constitutionalism when he said, "Not everything that counts can be counted, and not everything that can be counted counts." But his statement offers a valuable insight for public leaders to remember while they are balancing efficiency with democracy. 
How to Serve Two Masters
Different sets of values have been presented thus far that appear to be on opposite ends of a spectrum. The dilemma for the public administrator is: Which set of values is most appropriate, or can there be a combination of both? 
Values should be integrated into the structures, processes, and systems of an organization. Democratic values, as indicated, include accountability, transparency, participation, openness, responsiveness, representation, and the rule of law. Professional values include effectiveness, efficiency, service, leadership, and quality. It appears that the modern-day grant administrator is charged with serving two masters. An impossible task? Not really. It may not be easy, but it is achievable. 
Some actions may be taken, based on the answers to a number of self-questions: 
What are your values? The first step a leader should take in implementing an outcomes-funding approach to grant administration is to inventory the values of the environment. Here are several questions and suggestions that can help in the inventory process: 
•	Where are we now? Itemize the values currently supported and practiced in your local government or department. 
•	Where do we want to be? Determine how the desired values can be integrated with the operations of the organization. 
•	How do we get there? Identify the policies or practices that exist or that need to be implemented to integrate these values into the process. 
•	How do we make it happen? The leader must serve as the example of values and most practice accordingly. Leaders have the responsibility of promoting and protecting values, including conserving old values and introducing new ones. 
What is the best approach? Outcomes-based funding is not a new concept, but changing the philosophy from "funder" to "investor" can be difficult for staff and for grant subrecipients. Implementation of the outcomes framework may be more successful and less stressful if pursued incrementally. The change will be resisted because the concept runs counter to traditional processes. 
Anticipate stakeholder skepticism, concern that the focus on outcomes is just another management fad or, worse, that it is intended to be used as a punishment tool. Funders should cultivate partnerships with grantees based on integrity. Practice what you preach; show leadership by requiring outcomes for your own organization or department. 
Incrementalism can allow an administrator to fine-tune and adapt to change, to increase efficiency while reinforcing beliefs and values. Adaptive changes allow small adjustments without changing the core tasks of the organization. 
In the past few years, resources have become increasingly scarce, and communities recognize that their funding processes no longer enjoy as much flexibility in deciding their allocations. Difficult choices are required to reduce funding for existing programs and to limit the support of new programs. As a result, incremental changes in the process may be needed to adjust to the new challenges of scarce resources. Leaders may find that narrowing the focus of investment for grant dollars will be necessary to achieve outcomes and maintain values. 
This is a good time to assess values and to ask some key questions, while faced with the transition to a funding organization based on performance. Supporting the concepts of accountability and performance requires devising clear outcomes and defining expectations for performance. The leader interested in conserving institutional integrity should at this time integrate the values that are most important to the city's or county's value system. 
For example, capacity building and diversity should remain important, while the administrator realizes that measuring performance is just one decision-making tool for fund allocation, albeit a significant one. While maintaining institutional integrity is important in complying with rules and regulations, the administrative conservator cannot ignore his or her responsibility to citizens and other stakeholders. The concerned leader will ask these questions regarding the philosophy of the funding process, as it relates to core values: 
•	How much does performance matter? What other factors are important? 
•	What is our commitment to improving the capacity of organizations and investing in minority-owned businesses? 
•	What are the political realities? Do the values of the political leaders match those of the department or person responsible for grant administration? 
•	Are investments being distributed "in fairness" to diverse groups and program areas? 
•	What about the performance of start-up programs, or programs with an excellent history that have encountered significant obstacles to meeting their goals? 
•	Will resources be allocated only to high-performing, cost-effective programs? Are we committed to assist low-performers in increasing capacity and improving effectiveness? 
•	Is there an agreement on how best to serve the public benefit that can also allow those in authority to make better decisions? 
To do or not to do, that is the question. While there are safety benefits to making incremental change, the leader should not avoid using strategic discretion to adjust to changing priorities that may require a shift in policy objectives. The road to outcomes funding may be less bumpy with incremental implementation, but the reality is that fund allocation is a political process. 
In some circumstances, organizational performance has carried virtually no weight in the decision-making process for fund allocation-a reversal of one of the major reasons to measure the performance of funded organizations. The challenge for today's leader will be to know when to take the risk and seek an opportunity for shifting the emphasis onto outcomes, so that these become a more meaningful piece of the decision-making process. 
Politics or people, which do you serve?Leadership in grant administration involves the ability to influence policy decisions and to evoke a vision for the funding process. Does this mean that the administrator has institutional autonomy? Hardly. There are checks and balances among citizens, the executive cadre, and elected officials. 
Public administrators may exercise a certain amount of autonomy as a condition of independences, to permit bureaucracies to preserve their distinctive values, competences, and roles. The astute leader, although not autonomous in the strict sense of the word, may still exercise independence through the use of knowledge and expertise. This independence may affect policy and its administration while preserving organizational values. 
It is through the knowledge and skills of the bureaucracy that representative functions are fulfilled. When managers and staff conduct research, aid in policy formulation, and provide objective information in the interest of the public good, citizens are appropriately represented. For example, policy changes suggested by administrators may be the results of experience, research, and alignment with other funders in observance of current trends. 
If the administrator allows the "law of the situation" to govern decisions, he or she may preserve institutional integrity and serve the people through leadership that acknowledges the limitations of the position's authority yet recognizes the needs of the community. 
When everyone wants it now. Another aspect of the administrative leader's role is responsiveness. This launches the debate over who does the administrator serve-the politicians or the public? In council-manager communities, it is acknowledged that the elected officials have the final say in funding allocations. This is an accepted approach because elected officials represent the desires of the public. 
Should the administrator, therefore, ignore direct responsiveness to the citizenry and the institution? If the administrator allows the "law of the situation" to govern decisions, he or she may preserve institutional integrity and serve the people through leadership that acknowledges the limitations of the position's authority yet recognizes the needs of the community. 
Sticking to your mission. While it is recognized that the administrator can be influential in policy while preserving institutional integrity, this cannot be done if there is no public and political trust in the department and its employees. If the funding process should be compromised in any way, or if the administration of contracts is lacking in veracity, then years of trust could be destroyed. 
Preventive measures should be in place to ensure that standards are met. To ensure this point, bureaucratic rules and guidelines must be respected and followed. The administrator's obligation to meet the standards preserves the mission of the department and retains the public trust. 
Does democracy indeed reside in the shadow of bureaucratic efficiency? Does efficiency suffer at the hand of democracy? These questions will continue to be debated. Careful leadership will be required to balance the two concepts while conserving the values and mission of the organization. This task is particularly challenging in an environment where reforms are focusing on outcomes, efficiency, and emulation of the private sector. It is because of this environment that sound leadership will be increasingly important to the integrity of the administration of CDBG funds and to the stakeholders. 
Eileen Pierce is administrative services officer in the community development department of Grand Rapids, Michigan (tunyandrod@comcast.net). 
© 2005 International City/County Management Association.