Business Experts on Public Sector Boards: What Do They Contribute?

• Author: Ian Kirkpatrick,Gianluca Veronesi,Francesco Vallascas
• DOI: http://doi.org/10.1111/puar.12754
• Published date: 01 September 2017
• Date: 01 September 2017

754 Public Administration Review • September | October 2017

Public Administration Review,

Vol. 77, Iss. 5, pp. 754–765. © 2017 by

The American Society for Public Administration.

DOI: 10.1111/puar.12754.

Gianluca Veronesi is associate

professor at the University of Leeds Business

School, United Kingdom. His research

focuses on the governance of public sector

and nonprofit organizations, with particular

attention to the health care sector. He

is specifically interested in exploring the

relationship between governance structures

and mechanisms and organizational

performance in terms of efficiency and

effectiveness. He has published in

Public

Administration, Social Science & Medicine,

and

Organization Studies.

E-mail: g.veronesi@leeds.ac.uk

Francesco Vallascas is professor of

banking at the University of Leeds Business

School, United Kingdom. Francesco ’ s

research interests lie in corporate

governance and financial regulation. His

work examines whether bank strategies and

governance have effects on the riskiness

of banks. His research has been published

in

Journal of Financial and Quantitative

Analysis, Journal of Money, Credit and

Banking,

and

Journal of Banking and

Finance.

E-mail: f.vallascas@leeds.ac.uk

Ian Kirkpatrick is the Monash Warwick

Professor of Healthcare Improvement

and Implementation Science at Warwick

Business School, University of Warwick,

United Kingdom. He joined Warwick in

May 2016 after working at the University

of Leeds Business School, where he

served as director of the Leeds Social

Science Institute. His research interests

are in the management, organization, and

performance of professional services in the

United Kingdom and internationally, with

recent publications in

Public Administration,

Journal of Management Studies,

and

Organization Studies.

E-mail: ian.kirkpatrick@wbs.ac.uk

Abstract : Although public management reforms around the world have given business experts an enhanced role in the

governance of public sector organizations, the impact of this change is poorly understood. Drawing from the literature

on board human capital as a theoretical framework and focusing on the case of hospital boards in the English National

Health Service, this concern is addressed by investigating whether increasing the presence of individuals with business

expertise has any significant relationship with organizational performance. The findings show that while business

expertise appears to have no influence on service quality, it does have a positive effect on financial performance.

However, this only applies to governing boards that are less experienced in terms of their collective tenure. The findings

lend partial support to board capital theory but also show that in certain conditions generic business expertise can be a

valuable asset for public sector organizations.

Practitioner Points

• Little evidence exists on the influence of business expertise on the governance of public sector organizations.

• Greater presence of business experts in the boardroom does not have any effect on the quality of service

provided.

• A higher proportion of business experts at the board level positively influences the financial management and

efficiency of the organization.

• The positive contribution of business experts to process- and outcome-based efficiency is limited to relatively

inexperienced governing boards.

Ian Kirkpatrick

University of Warwick, United Kingdom

Francesco Vallascas

Gianluca Veronesi

University of Leeds, United Kingdom

Business Experts on Public Sector Boards:

What Do They Contribute?

I t is increasingly commonplace for public service,

nonprofit organizations around the world to be

led by top management teams with a wide range

of expertise, including from the commercial sector

(Van der Walt and Ingley 2003 ). The argument that

businesspeople might help improve the performance

of public organizations has been a staple of public

administration as a discipline since its inception

(Thayer 1972 ; Wilson 1887 ). In the United States,

there have been long-standing practices of favoring

political appointees or generalists—sometimes with

business backgrounds and technical expertise in

management—over specialist career civil servants (Lewis

2007 ; Maranto 1998 ). More recently, however, the

desire to make public services more “businesslike” and

“entrepreneurial” (Meynhardt and Diefenbach 2012 )

has become part of the zeitgeist of the New Public

Management (Petrovsky, James, and Boyne 2015 ,

220), encouraged by policy makers, researchers, and

global consulting firms. McKinsey & Company, for

example, identifies the “need for managerial knowledge

and expertise” as one of five global challenges facing

public sectors and suggest that “notions of clear

divisions between public and private skills” have become

increasingly redundant (Barber, Levy, and Mendonca

2007 , 11). In policy terms, a desire to learn from

business experts has led to formal temporary transfers

of workers and, in many cases, the direct recruitment of

businesspeople from the private sector (Verbeeten and

Speklé 2015 ), including senior roles in transnational

agencies such as the World Bank and the International

Monetary Fund. In some countries it has also meant

“de-privileging” public service employment, increasing

flexibility to recruit business expertise directly into

the civil service itself to run public services at more

operational levels (Pollitt and Bouckaert 2011 ).

These changes in the nature of public management

have been justified in a number of ways. It is often

argued, for example, that managers with business

backgrounds will add value to public services,

introducing much-needed commercial knowledge

while ushering in a different mind-set that emphasizes

the importance of financial control and consumer

satisfaction. Related to this view is the argument,

informed by public choice theory, that managers

drawn from outside the career civil service will be

more attuned to the demands of elected politicians