Reforming the Public Sector in Eastern European and Former Soviet Union Countries: A Systematic Literature Review

To provide an overview of PSM reforms in EE and FSU countries experiencing the transition from socialism to capitalism, first, a classification framed around politicoeconomic systems is used, as this allows for a more comprehensive overview of the changing PSM practices in the region. In the past, the sample of selected countries belonged to the Eastern Bloc, comprising the USSR and satellite states, built on the principles of planned economy. Importantly, in the following analytical sections, the distinction between EE and FSU countries is made, based on the contrasting speed of economic recovery during the first years of transition, the ease of state building and internal political influences on the process of reform (IMF, 2000). Second, the time span of 1991–2017 has been chosen, to provide a snapshot of developments of PSM reforms in EE and FSU countries during the quarter of the century after the dissolution of the USSR. The final boundary was limiting the papers written in English only (Mauro, Cinquini, & Grossi, 2017).

We started with the identification of keywords. Given the broad focus of this SLR, the following keywords were used in the search: reform, public sector, and the name of one of 28 EE and FSU countries. The expression “public sector” rather than “public sector management” was used as a keyword because it yields a wider search result. To provide a holistic overview of the existing body of literature, the search was framed by Scopus, Web of Science (WoS), and JSTOR databases, which, as the major databases (Paoloni, Mattei, Dello Strogolo, & Celli, 2020), have often been used in previous literature reviews on similar topics (e.g., Mauro, Cinquini, & Grossi, 2017). The process of finding eligible papers is summarized in Figure 1.

Fig. 1:

To identify the studies (step 1) we conducted search rounds in each of three selected web-search engines, 28 search queries were framed. During searches, Boolean logic was applied to frame the search by combining selected keywords (e.g., “reform” AND “public sector” AND “the name of one of 28 EE and FSU countries”) for each search round. For Scopus and WoS databases, the queries were made by limiting the search to abstracts, keywords, and titles. In JSTOR, the query was limited to “articles, full-text, and 33 journals.”

A total of 1,523 papers was obtained from these searches.

In the next step (screening), each paper was manually assessed. First, we limited the papers based on the publication source. This review included papers published in international peer-reviewed journals ranked in the ABS (2015) Academic Journal Guide. This Guide was used to filter journals and include those in the sphere of public management (the subject area “Public Sector and Health Care”) to provide a universal overview of reform directions; therefore, other journals were excluded. Thus, 33 academic journals (Appendix 1) were used to limit papers (from 1,523 until 54).

In the end, the eligibility check was performed. Titles and abstracts of 54 papers were read. In some cases, a general search of keywords was applied within the paper, to ensure the relevance of the paper’s content. At this stage, duplicates and loosely focused papers (8 articles) were removed. This resulted in a sample of 46 coherent eligible papers used for the analysis.

The main dimensions for the framework selected for this study are extrapolated from previous literature reviews (van Helden & Uddin, 2016; Anessi-Pessina, Barbera, Rota, Sicilia, & Steccolini, 2016; Paoloni et al., 2020; Broadbent & Guthrie, 2008) focusing on the analysis of different public sector areas and in various contextual settings; these were slightly transformed, due to the features of the current dataset. As a result, the following dimensions were used to analyze papers on PSM reforms (Table 1): Tab. 1:

Framework for descriptive analysis of eligible papers

The analysis showed that two-thirds of the selected articles were research papers (see Table 2). Those categorized as research papers included records with a well-defined theoretical framework or reference to particular scientific paradigms, as well as studies that emphasized a more researched context and could either apply a theoretical approach or be context driven.

Approaches used by research papers to investigate the directions of PSM reforms in EE and FSU countries varied significantly: for instance, qualitative evaluation of New Public Managemnt (NPM) effects on public administration reform (Vakulchuk, 2016); mapping of (de)agencification, along with analysis of the impact of the change of events on this process (Nakrošis & Budraitis, 2012); or democratization reform’s components (i.e., structural decentralization and institutional democratization) in the training of civil servants (Witesman & Wise, 2009).

Other papers consisted of general reviews, viewpoints, and a literature review. Placing the context of the study at the fore, general reviews (28% of publications) investigated developments in the public sector with the introduction of new techniques, for example social health insurance in Bulgaria (Atanasova et al., 2011), or provided normative recommendations for the overhaul of public administration (Rice, 1992). Although less represented, two viewpoints and a literature review depicted developments of PSM reforms in EE and FSU countries, providing more evidence of the reforms’ trajectories. For instance, Dan & Pollitt (2015) analyzed publications on NPM reforms in CEE to support the NPM reforms’ impact across the region, even though the success of these reforms varied. Watson (2000) shared the Bulgarian experience in establishing local participatory practices, and Vladetic (2013) analyzed the new legislature designed to reform Serbian communal services.

Most of the papers (46%) were qualitative, as indicated in Table 3, and used interviews and/or secondary data analysis as the main tools for data collection. The majority of qualitative papers were descriptive and exploratory in studying PSM reforms, which means that, in most cases, they did not refer to any theory. The purpose of these papers was, for example, to describe how civil service structures in a particular country were constructed (Condrey, Purvis, & Slava, 2001) and what factors hindered the human resource management (HRM)-based reforms (Common, 2011), or to illustrate a case of creating nonprofit organizations in line with health sector reform (Brinkerhoff, 2002).

There were fewer quantitative papers (15%): primarily descriptive, with several explanatory and no exploratory studies. Lastly, slightly less than one-third of publications had no explicitly stated methodology.

Most of the selected papers (76%) did not use any explicit theoretical approach or, in some cases, provided a fairly pragmatic form of theorization (Table 4). A rather low level of theorization in publications on PSM reforms was also observed in previous literature reviews (e.g., Broadbent & Guthrie, 2008; Goddard, 2010; Jacobs, 2012). The explanation is possibly embedded in the research topic itself, since most of the authors chose to describe the public management reform experience by revealing the new context. Identifying a scientific paradigm in those papers that studied the reform process was challenging, as the scholars provided extensive literature overviews on a topic with normative conclusions and little theoretical contribution. Such an approach might be a relevant conclusion for NPM ideas, which cannot be identified as an established paradigm (Gruening, 2001). However, it was often used by researchers as a way of theorizing.

Around 24% of the papers were based on a single scientific paradigm, while publications with multiple paradigms did not appear in the search. Interestingly, papers including a positivist paradigm were prevalent. Using a range of theories, these papers studied public sector developments by adopting the following approaches: political economy (Rinnert, 2015), new institutional economics (Raudla, 2013), market orientation in the public sector (Kowalik, 2011), fiscal decentralization (Guess, 2007) and initiatives for conducting public sector reform (Witesman & Wise, 2012). Surprisingly, few papers used interpretive paradigms; those that employed public choice theory (Nemec, Merickova, & Vitek, 2005), new institutional theory (Schnell, 2015), and theory on policy implementation (O’Toole, 1994).

The majority of papers (63%) studied reforms in the context of a single country, while 37% studied multiple countries (Table 5). Ukraine and Kazakhstan, with four papers each, were the most studied single countries, while three papers were published on Polish reform experiences.

Almost a quarter of the papers studied three or more countries. Primarily, EE countries captured more research attention. Researchers referred to them as groups of countries, that is, Central and Eastern Europe (Dan & Pollitt, 2015), European countries (Tambor, Pavlova, Golinowska, Sowada, & Groot, 2013), Eastern Europe (Rice, 1992), or the Baltic countries (Jacobs, 2004), or as particularly selected countries, for example, the Czech Republic, Hungary, Romania, Serbia, Croatia, Slovenia, and Slovakia. However, several papers with an exclusive focus on FSU countries were also identified (Footman, Roberts, Mills, Richardson, & McKee, 2013; Mikesell & Mullins, 2001).

The overall picture of the geographic focus seems to favor EU neighboring countries in Central Europe, quick reformers—the Baltic countries (Estonia, Latvia, Lithuania) —as well as powerful nations with great potential for natural resource extraction in the Eurasian region (Russia and Kazakhstan). Smaller countries in Southern Europe, some of which also belong to the Balkans (Croatia, Bosnia and Herzegovina, Montenegro, Serbia), in Central Europe (Belarus, Moldova), and in Central Asia (Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan) received less research attention. This might be due to lack of or unavailable data in some of these countries or an unstable political situation that prevented researchers from studying the context more closely (e.g., ethnic conflicts in former Yugoslavia). For more detailed information on the geography of public sector reforms, see Appendix 2.

The final categorization focuses on PSM reforms (Table 6), reflecting the content of contributions. Organizational scope of reforms covered issues of organizational restructuring, such as specialization, coordination, scale, and (de)centralization (Pollitt & Bouckaert, 2017).

The topics discussed within “organization” were as follows: why problems might occur when introducing contracting out (Nemec et al., 2005), change of agency relationship in primary healthcare after the implementation of financial responsibility delegation (Kowalska, 2007), and transformation of road administrations from complex public organizations into lean networks during the road sector restructuring process (Robinson, 2006). Specific attention here was given to privatization features in EE and FSU countries (Savas, 1992; O’Toole, 1994).

Papers investigating transformations associated with public sector employees focused directly on civil service reform (Condrey et al., 2001; Neshkova & Kostadinova, 2012) or HRM reform (Common, 2011) or emphasized either the role of public administrators, their behavior, and readiness to implement reforms (Witesman & Wise, 2012) or the importance of “realignments of the mind sets and skill requisites” of civil servants (Saner & Yiu, 1966, p. 61).

Articles with a focus on performance measurement used the context of EE or FSU countries to argue for the introduction of performance measurement systems and to exemplify governments’ experiences after their implementation. Publications related to financial management studied such topics as social health insurance reform (Atanasova et al., 2011), public procurement procedures (Yakovlev, Tkachenko, Demidova, & Balaeva, 2015), or public sector budgeting reform (Mikesell & Mullins, 2001). Several papers on transparency and open government included democratization reform (Witesman & Wise, 2009), citizen participation (Watson, 2000), and the introduction of anticorruption policies (Schnell, 2015).

The last category included papers on mixed reforms. Publications referred to different aspects of PSM reform, for example, a literature review by Dan & Pollitt (2015). However, most studies described several reform components, with one of them dominating slightly.

Initially, the content of public sector changes in EE and FSU countries was primarily concerned with organizational issues and HRM, highlighting the importance of artful navigation of public service to successfully implement PSM reforms. As previous studies concluded (e.g., McGuinness & Cronin, 2016; Rho, Jung, & Nam, 2020), a change might be negatively perceived by public servants, since it often clashes with established values in an organization (Andrews, 2011). As a result, this potentially leads to resistance to change, thus compromising the reform result; therefore, starting with redesigning FSU and EE public organizations and public service delivery was crucial (Saner & Yiu, 1996). Besides a precise focus on changing the skills of public servants, the need for HRM reform was motivated by the optimization of the number of public sector employees, to reduce costs. At the same time, the studies highlighted challenges occurring when designing HRM reform to achieve devolution of personnel responsibility, due to the rather low maturation level of personnel and civil service systems in EE and FSU countries (Condrey et al., 2001).

At the same time, when moving to market-based practices, it was essential to focus not only on employees but also on changing organizational structures, rules, and routines. The lack of adequate rules in CEE and FSU for public service delivery systems could have served as a breeding ground for corruptive practices (Nemec et al., 2005). The experience of postsocialist EE and FSU countries starting reforms aimed to redesign organizational practices through the privatization of state-owned enterprises to address such problems in the public sector as: inconsistency in ownership of state property, appropriateness of methods of evaluation, the process of buying and selling state property (Savas, 1992), and, in some countries, chaotic division of public and private resources (Jakobson, 2001). Furthermore, studies focusing specifically on designing public services’ provision highlighted the multilevel character of PSM reforms. The decentralization of services was launched to increase the efficiency and reduce the costs of public services, while making them more responsive to citizen needs locally (Mayne & Vigoda-Gadot, 2018). Meanwhile, reforms focused on eliminating “obsolete” agencies, redesigning basic government systems (i.e., the public finance), as well as reforms of civil service systems, were conducted at the central government level, to transform the role of government (Rice, 1992). Therefore, after identifying specific shortcomings in the public sector, each country tailored the content of PSM reforms to address the limitations, given the peculiarities of their local context. For example, several countries selected the following tools under the reform of the public financial system: transition to accrual and cost-center accounting; improvement of public procurement legislation; training and retraining of experts in public finances; overhaul of public sector control/auditing procedures; revision of budget processes and procedures (Mikesell & Mullins, 2001).

The implementation of PSM reforms has been not only interlinked with HRM and organizational aspects but also placed greater attention on transparency and open government issues. Most of the papers that focused on implementation discussed the effects of various contexts (O’Toole, 1994) and exogenous and endogenous factors (Nakrošis & Budraitis, 2012) on the reforms. The endogenous factors affecting implementation were the influential interests of hospital management and staff during the restructuring of hospital care (e.g., Fidler, Haslinger, Hofmarcher, Jesse, & Palu, 2007) or political empowerment while implementing new practices related to increased transparency in the public sector (Schnell, 2015). The importance of exogenous factors was evident from tracing the role of consultants during public sector reform implementation (e.g., Condrey, 1998). As one of the studies showed, with the help of American experts, citizens became more engaged in the process during the development of the municipality’s strategic plan (Watson, 2000), thus increasing local democracy and government openness. Other cases of consultants’ contribution to the implementation of reforms related to the co-creation of new public sector practices (e.g., related to performance-based budgeting) together with the state authorities (Raudla, 2013).

Being defined as “deliberate attempts to change the structure, processes, and/or cultures of public sector organizations with the objective of getting them (in some sense) to run better” (Pollitt & Bouckaert, 2017, p. 2), the results of many PSM reforms in the region marked an “elusiveness of change” (Pollitt & Bouckaert, 2003, p. 19) and ambiguous effects (Vakulchuk, 2016). Constraints for PSM reforms in achieving fundamental objectives (e.g., economic liberalization) in EE and FSU countries were caused by insufficient capacity for modernization and influential cultural legacies of the past (Neshkova & Kostadinova, 2012). Moreover, the necessary actions, such as countrywide legal adjustments, anticorruption measures and context variables, were not always in place to secure the success of reforms (Rinnert, 2015). Moreover, gaps in public managers’ training restricted implementation of major systemic changes in the public sector (Kowalik, 2011). Another important focus of PSM reforms was performance management and measurement, to evaluate public sector practices. Measurement of public sector performance, especially of socially important activities, has been in its infancy in several countries, as the case of community assessments of the satisfaction with healthcare systems showed (Footman et al., 2013). Thus, PSM improvements are hard to assess and often left in the shade (Klun, 2004).

While many studies suggested that reforms caused unintended effects and disappointing results (Hood & Dixon, 2016), in some EE and FSU countries the results of PSM reforms brought positive changes and improvements (Bouckaert, Nakrosis, & Nemec, 2011) regarding NPM tools (Dan & Pollitt, 2015). For example, reforms focused on public procurement led to flexible regulations that resulted in a decline in bid competition but improved contract execution (Yakovlev et al., 2015). Results of reforms in Bulgarian public healthcare showed that, although apparently, the expectations from this reform were met, doubts remain about the achieved overall social benefit, which is due to inefficiencies in the organization of the public health system and a lack of financial resources for healthcare in the country (Atanasova et al., 2011).

Given the complexity and overwhelming transformations that EE and FSU countries faced in reforming public sector practices (Tilcsik, 2010; Babajanian, 2008), the layering of several phases of different reforms was observed. It became clear that incorporating the practices originating from Western countries cannot always ensure the same result in EE and FSU countries (Nemec & Kolisnichenko, 2006), due to economic, governance, and cultural differences within the region (Tambor et al., 2013).

To achieve successful reform results, several barriers should be overcome on the implementation phase. Specifically for FSU and EE countries to enjoy successful PSM reform (Jacobs, 2004), it is important to implement: (1) strategic planning and policy improvement; (2) financial and budgetary management stability; and (3) motivated, qualified, and honest staff. In addition, a key role in the reforms’ success was attributed to the promotion of reforms through citizen participation (Knox, 2008), e-governance (Bhuiyan & Amagoh, 2011), and an optimal balance between responsibilities and administrative capacities (Guess, 2007).

PSM reforms implementation in these countries rely heavily on matching needs in the national context, the level of engagement of international institutions, and specific PSM practices to be implemented (i.e., their scope, content, and sequence); otherwise, the results of the reforms can be easily reversed and are difficult to sustain (Mussari & Cepiku, 2007). This trend resulted in a shift of the reform agenda in the region toward decentralization, clarification of responsibilities, pluralization in providing services, developing the provision of social services, and increased accessibility and efficiency for citizens. When facing the difficulty of finding sufficient resources to provide basic public sector services, for example, healthcare (Brinkerhoff, 2002), the governments tried to enhance structural processes, which could guarantee coordinated, continuous, and high-quality services for citizens (Kowalska, 2007). The case of the healthcare reform showed a change of legal form from a public body to a for-profit unit (Sagan & Sobczak, 2014), aiming to improve the financial performance of hospitals in particular and the healthcare sector in general. However, the evaluation of the reform results demonstrated that a simple change of the legal form does not ensure the achievement of intended goals (Sagan & Sobczak, 2014).

Performance management and measurement reforms were challenging for EE and FSU. On one hand, the introduction of performance measurement and management tools created problems in the “new democracies” transitory factors, compromising the outcome of the reform (Nõmm & Randma-Liiv, 2012). On the other hand, several countries showed that successful reforms of public management systems can occur if certain conditions are met, for example sufficient political support and level of maturity of performance management systems (Verheijen & Dobrolyubova, 2007). Moreover, the comparative analysis of different countries showed that reform results are not always similar under the same conditions (see the case of centralization of services in Estonia and Georgia (Puolokainen, 2017)), but implemented solutions can work by fitting to the national contextual specifics.

To summarize, applying the processual approach allowed interesting patterns of reform trajectories to be observed in EE and FSU countries. The main focus was on changing HRM practices and organizational structures, which first materialized in civil service reforms, privatization, and the changing structure of public entities. The debate on HRM reforms dominated, probably because the transition from socialism to market-led democracy required instant paramount changes in people’s mindsets, later affecting how they would guide the changes in public sector practices. Facing several issues, such as lack of transparency and control, as well as corruption, reforms with a focus on open government, financial management, and performance measurement followed after addressing the drawbacks of reforms launched at the beginning of the transition of EE and FSU countries to a market-based economy.