International Journal of Public Administration

ISSN: 0190-0692 (Print) 1532-4265 (Online) Journal homepage: http://www.tandfonline.com/loi/lpad20

The Effect of More Demanding Public Services

Quality Standards on the Organization of Service
Providers

Guido Capaldo, Nicola Costantino & Roberta Pellegrino

To cite this article: Guido Capaldo, Nicola Costantino & Roberta Pellegrino (2017): The Effect
of More Demanding Public Services Quality Standards on the Organization of Service Providers,
International Journal of Public Administration, DOI: 10.1080/01900692.2017.1295263

To link to this article: http://dx.doi.org/10.1080/01900692.2017.1295263

Published online: 13 Mar 2017.

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INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION
http://dx.doi.org/10.1080/01900692.2017.1295263

The Effect of More Demanding Public Services Quality Standards on the

Organization of Service Providers
Guido Capaldoa, Nicola Costantinob, and Roberta Pellegrinob
a
Department of Industrial Engineering, University of Naples Federico II, Napoli, Italy; bDepartment of Mechanic, Mathematic and
Management, Politecnico di Bari, Bari, Italy

ABSTRACT KEYWORDS
This research aims to investigate the effects that more demanding quality standards have on the Organization of public
organization of public service providers. A hypothetical research model showing the relationship service providers; public
between the quality of public service and the organization of public service providers was tested service performance; public
services quality standards;
through a survey carried out with managers of water companies located in Italy. Results show that
regulations
the new regulations impact on the organization in terms of resources and the performance
management system, while the degree of centralization (i.e., the hierarchy of authority and degree
of participation in decision-making) is not significantly related to the more demanding quality
standards.

Introduction
The theme of improving public services has received
great attention across the globe in recent decades
(Boyne, 2003). Despite the great importance of the
topic, the concept of service improvement is still
vague and, above all, inherently political and con-
testable (Boyne & Gould-Williams, 2003). The per-
formance of public service providers is, in fact,
judged by multiple stakeholders (e.g., consumers,
taxpayers, staff, and politicians) who may adopt
differing criteria to evaluate public services and
may assign different importance (i.e., different
weights) to the same criterion (Boschken, 1994;
Heffron, 1989; Rainey, 1997). It follows that it is
difficult to define a fixed and universally applicable
set of criteria for evaluating whether improvement
has occurred. Nevertheless, there are some tangible
elements of public services, such as quantity, speed
of delivery, and effectiveness that are likely to be
evaluated by all stakeholders, even if the valuations
differ between groups over time.
The literature on the conceptualization and mea-
surement of organizational performance in the pub-
lic sector proposes several criteria for evaluating
whether performance has actually improved
(Ammons, 2001; Boyne, 2002; Carter, Day, &
Klein, 2002; Pellegrino, Ranieri, Costantino, &
Mummolo, 2011). These are: the quantity of outputs
(e.g., number of operations performed in hospitals,
hours of teaching delivered in schools, number of
houses built), the quality of outputs (e.g., speed and
reliability of service, courtesy of staff), efficiency
(i.e., ratio of outputs to financial inputs) and value
for money (i.e., cost per unit of outcome), equity
(fairness of the distribution of service costs and
benefits between different groups), outcomes (e.g.,
percentage of pupils passing exams, percentage of
hospital patients treated successfully), consumer
satisfaction (which may be a proxy for some or all
of the above, depending on the questions posed to
service users).
If all other variables are equal, an upward shift in
any of these aspects of service performance can be
taken as evidence of improvement.
In addition to defining the concept of service
improvement and its measurement, much of the litera-
ture has so far focused on identifying the sources of
public service improvement, namely on examining the
determinants of public service performance (PSP).
While researchers acknowledge that a distinctive fea-
ture of public sector management is the extent of reg-
ulation by external bodies (Boyne, 2002), only very few
empirical studies have examined the impact of regula-
tion on PSP (D’Aunno, Hooijberg, & Munson, 1991,
Wolf, 1993; Molnar & Rogers, 1976). In particular,
public service providers are not free to choose their

CONTACT Roberta Pellegrino r.pellegrino@poliba.it Department of Mechanic, Mathematic and Management, Politecnico di Bari, Viale Japigia, 182,
Bari 70126, Italy
© 2017 Taylor & Francis
2 G. CAPALDO ET AL.
own processes and strategies, but must work within the
policy constraints set by higher political authorities
(Hood, James, Jones, Scott, & Travers, 1998). The
most common form of regulation is the adoption of
laws imposing obligations or prohibiting specific activ-
ities (Boyne, 2003). In addition, there are a wide range
of regulatory instruments that include audit, inspection,
financial controls, performance indicators, and/or stan-
dards (Ashworth, Boyne, & Walker, 2002).
On the other hand, the comprehensive process of
change in public sector organization, called New Public
Management (NPM), which is intended to improve
performance, has fostered the diffusion of new regula-
tions with the aim of “imposing” minimum levels of
PSP through the formulation of public service quality
standards. These more demanding quality standards
imposed by the regulations require public service pro-
viders to pay greater attention to service quality and
customer relations than in the past, but without the
possibility of linking each specific standard to a parti-
cular action. Meeting these more demanding service
standards depends, therefore, on a series of organiza-
tional factors or actions that may, in fact, alter the value
of the standards, rather than any single individual
actions.
This means that once such standards have been fixed
by the regulations, service providers have to operate in
such a way as to meet them and to avoid huge penalties
if they fail to do so. How the organization reacts to this
kind of regulation has not been investigated in the
literature. On the other hand, studies on organizational
change in public sectors investigate factors that can
influence the outcome of initiative for change that
may potentially contribute to its successful implemen-
tation (see Fernandez & Rainey, 2006 for a comprehen-
sive review). These studies do not link organizational
change with improved public sector performance.
The objective of this research is to fill this gap in the
literature. In particular, the main research question is as
follows “What are the effects of more demanding qual-
ity standards imposed by the regulations on the orga-
nization of service providers?”
To answer the above research question, this study
investigates the effects of more demanding quality stan-
dards on the organizational variables that are tradition-
ally believed to be most linked to performance, such as
resources and organizational structure. The research
also explores the impact that the public service
improvement imposed by the regulation through the
formulation of higher quality standards has on the
adoption of the performance management system.
This objective was accomplished by developing a
research model for the increase in public service quality
standards and organizational change in public compa-
nies. Then, focusing on the specific case of the water
service, the model was used to test the hypotheses by
conducting a survey with managers of water companies
located in Italy. In fact, the Authority that regulates the
electrical, gas, and water service in Italy (AEGSI) has
recently defined new standards for the quality of the
water service (measured, e.g., by the time required to
make a quotation, the time taken to carry out work, or
for connection to the water distribution network, etc.).
The remainder of this article is organized as fol-
lows. Next Section presents the theoretical framework
and hypotheses development. The data collection
method and research design are then described.
Section Results presents the study’s findings, which
are then discussed. Conclusions offer suggestions for
future research.
Theoretical framework and hypotheses
development
This section discusses the constructs of the research
model and the research hypotheses.
Assuming that the more demanding quality stan-
dards imposed by the regulation mean higher PSP,
this article develops some hypotheses that relate the
new public service standards to some organizational
variables that are believed to be linked to perfor-
mance, as discussed in the relevant literature. The
aim of the following survey was to check the validity
of the research hypotheses, and to identify the more
significant ones from the organizational point of
view.
The theoretical framework for the change in public
service standards and organizational variables is dis-
cussed below and illustrated in Figure 1.
Resources
The common idea that more resources will lead to
better results is the basis for both the strong theory
that higher public expenditure is a sufficient condition
for improvement because this must result in a higher
quantity and/or quality of public services, and the weak
theory suggesting that greater spending is a necessary
but not sufficient condition since the resources must be
effectively managed in order to deliver the maximum
potential benefits (Boyne, 2003). On the other hand, the
majority of the empirical results reveal no significant
relationship between either financial resources or real
resources and service performance (Bohte, 2001;
Bradley, Jones, & Millington, 2001; Meier, Polinard, &
Wrinkle, 2000; O’Toole & Meier, 2001). This is

Figure 1. The research model: hypothetical model of the public service standards and organizational variables.
coherent with the theory that inefficient public man-
agers fritter away extra money without any improve-
ment in performance or that public agencies may
become focused on maintaining or expanding their
power rather than paying attention to performance.
Boyne (2003) confutes such conclusions by highlighting
a flaw in many of the empirical tests in studies support-
ing such conclusions. He finds that a typical study
includes measures for both financial and real resources
in a single statistical equation. In contrast, in a more
plausible model, financial resources may be used to
obtain real resources and these real resources may
influence service performance. This last conceptual
model suggests that the correlation between the two
links in the resource chain (financial resources and
real resources, and real resources and service perfor-
mance) is positive, and the inclusion of the two mea-
sures in the same equation will reduce their statistical
significance. This is confirmed by recent black box
theories of public management that stress the role of
resources by asserting that managerial skill and capacity
are critical components for achieving improved service
(Andrews & Boyne, 2010; Ingraham, Sowa, &
Moynihan, 2004). Several scholars of public manage-
ment have emphasized the role and the importance of
INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 3
resources in achieving organizational goals. Rainey and
Steinbauer (1999) hypothesize that public agency effec-
tiveness depends on the utilization of technological
resources and the development of human resources.
Holzer and Callahan (1998) also point out the impor-
tance of technology and human resources in govern-
ment performance. In addition to human resources
(Selden & Jacobson, 2007), appropriate investment
plans also enable public managers to provide a service
of consistent quality year after year (Ebdon, 2007),
while strong IT systems are crucial for cross-organiza-
tional coordination (Ling, 2002). Therefore, it is rea-
sonable to suppose that the greater the real resources
available for the organization, the higher the perfor-
mance. This leads to the following hypothesis:
H1. More demanding quality standards positively affect
real resources
Organizational structure: Hierarchy of authority
and degree of participation in decision-making
The literature on PSP broadly focuses attention on the
internal characteristics of public organizations that can
4 G. CAPALDO ET AL.

affect service quality. In particular, it has been hypothe- The performance management system
sized by policy makers and scholars that the degree to
Efforts to improve performance in public sector orga-
which decision-making is centralized or decentralized
nizations have fostered the spread of performance man-
is a determinant of PSP (Andrews, Boyne, Law, &
agement practices (Hood, 1995) falling within the so-
Walker, 2009).
called NPM approach (Lane, 1997). Performance man-
For organizational theorists, the degree of centraliza-
agement practices include setting the goals to be
tion within an organization is indicated by the hierar-
achieved and measuring and evaluating performance
chy of authority and the degree of participation in
(Heinrich, 2002).
decision-making, since these aspects reflect the distri-
Despite the great attention devoted by governments
bution of power across the entire organization (Carter
to performance management practices for improving
& Cullen, 1984; Glisson & Martin, 1980; Hage & Aiken,
public service, a fundamental question posed by several
1967, 1969). Indeed, a large number of studies on
researchers is whether performance management will
organizational structure in the public, private, and non-
actually improve public sector performance (Verbeeten,
profit sectors measure the extent of centralization by
2008). A rather limited number of empirical studies
assessing both these dimensions of centralization (Allen
investigate the impact of PM practices on public orga-
& LaFollette, 1977; Carter & Cullen, 1984; Dewar,
nizations (van Helden, 2005) and they generally focus
Whetten, & Boje, 1980; Glisson & Martin, 1980; Hage
on the relation between one specific factor of the per-
& Aiken, 1967, 1969; Jarley Fiorito and Delaney 1997;
formance management system and performance. Some
Negandhi & Reimann, 1973). Hierarchy of authority
studies assert that clear goals and measurable results
refers to the extent to which the power to make deci-
allow organizations to reduce ambiguity regarding
sions is exercised at the upper levels of the organiza-
objectives and to gain coherence and focus in pursuit
tional hierarchy, whereas participation in decision-
of their mission (Kaplan, 2001; Rangan, 2004).
making pertains to the degree of staff involvement in
Furthermore, the use of incentives may increase per-
the determination of organizational policy. A centra-
formance (Bonner & Sprinkle, 2002). Some researchers
lized organization will typically have a high degree of
have found that performance management may also
hierarchical authority and low levels of participation in
result in unintended managerial side effects (e.g., de
decisions about policies and resources, whereas a
Bruijn, 2002; Hood & Peters, 2004; Vakkuri & Meklin,
decentralized organization will be characterized by
2006). In particular, a performance management sys-
low hierarchical authority and highly participative deci-
tem that does not account for difficult circumstances
sion-making. Thus, where only one or few individuals
beyond the control of the management causing perfor-
make decisions, an organizational structure may be
mance failure may discourage managers from perform-
described as highly centralized. By contrast, the least
ing well, thus decreasing rather than increasing the
centralized organizational structure possible is one in
organizations’ performance (Andrews, Boyne, Law, &
which all members of the organization are responsible
Walker, 2005, 2009; Verbeeten, 2008). Therefore, it is
for, and involved in, the decision-making.
reasonable to assume a positive relationship between a
However, there is still comparatively little research
well-designed performance management system and
investigating the effects of the degree of centralization
performance. This leads to the following hypothesis:
on PSP (Andrews et al., 2009). Empirical studies in the
private sector have failed to find a consistent or sub-
H4. The more demanding the public service standards,
stantial relationship between centralization and perfor-
the higher the importance of adopting a performance
mance (see Bozeman, 1982; Dalton, Todor, Spendolini,
management system
Fielding, & Porter, 1980; Wagner, 1994).
Overall, theoretical arguments suggest that centraliza-
tion is likely to have positive effects on performance, even
though the evidence is weak or nonexistent (Andrews
Research method
et al., 2009). This leads to the following hypotheses:
Given the research model described in the previous
H2. More demanding quality standards positively affect section, this study measures four constructs:
the hierarchy of authority Resources, hierarchy of authority, participation in deci-
sion-making, and the performance management sys-
H3. More demanding quality standards positively affect tem. A qualitative research method was chosen to
the degree of participation in decision-making. examine the proposed hypotheses.
 INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 5

To develop the survey instrument, a pool of items Data collection

measuring the constructs of the research model was
The data were obtained from a questionnaire survey
identified from the literature. Next, a survey was used
distributed to managers of some water companies located
to collect data from a sample to assess the instrument’s
in Italy. More specifically, a list of firms operating in the
validity and reliability and test the relationships hypothe-
Italian water industry was drawn up based on informa-
sized in the research model. The Italian water industry
tion obtained from the website of Utilitalia (Utilitalia,
was used as a source for collecting data. In fact, the
2016), the Italian federation embracing the firms operat-
AEGSI has recently defined new standards for the quality
ing in the water, environment, electricity, and gas indus-
of the water service (measured, e.g., by the time required
tries. Within this list, only those companies that operate
to make a quotation, the time taken to carry out work, or
in the water industry (202 firms) were selected. Indeed,
for connection to the water distribution network, etc.)
the 202 firms serve catchment areas ranging from a
(L’autorità per l’energia elettrica il gas e il sistema idrico,
minimum of a few hundred thousand residents up to a
2015).
few million. The companies not included in this list are
very small and operate mostly at municipal level.
According to the recent Italian legislation, these small
Content validity companies are destined to disappear, since they will be
merged with bigger ones. Hence, the (initial) investigated
A structured questionnaire was designed and used to
sample comprises the majority of companies operating in
collect the data. All the measures used in the survey
the Italian water industry. Questionnaires were delivered
instrument were developed from the literature. The
via e-mail. A total of 37 completed questionnaires were
items were measured on two Likert scales of 1–7 or
received, representing an 18,32% response rate.
1–5, depending on the question (with lower numbers
Table 1 shows a brief profile of the research
representing “strongly or totally disagree” and the
participants.
higher ones “strongly or totally agree”). A neutral
The sample of responding firms is representative of
response, “neither disagree or agree”, was adopted to
the population, where most of the companies are
reduce uninformed responses, since it assures respon-
located in the North, while the remaining companies
dents that they need not feel compelled to answer every
are almost equally distributed between South and
questionnaire item (Wilcox, 1994).
Central Italy. The proportions of the respondents in
terms of share ownership of the representing firms
were as follows: public 57%, private 8%, and mixed
Pretest and pilot-test 35%, thus reflecting the Italian situation.
Finally, the survey was carried out over a short
The identified constructs and their items were scrutinized
period of time (from April to June 2016) and during
and verified through a series of face-to-face interviews with
the application phase of the new standards in the
a number of selected managers, interviewed to elicit their
perceptions on these constructs and the items measuring
them. A draft of the main empirical research questionnaire
was reviewed by participants during the face-to-face inter- Table 1. Descriptive statistics.
Respondents characteristics
views. Since no major adverse comments were received
Position Director 38%
from the respondents, the slightly modified pilot study Executive 62%
questionnaire was taken as the final empirical question- Length of service (in the <5 years 43%
current role)
naire for the investigation. The questionnaire is divided ≥5 and ≤10 years 35%
into two sections. The first section refers to the general >10 years 22%
Education Postgraduate 27%
characteristics of the respondent and the firm, while the Graduate 51%
second section includes questions that measure each of the High school 22%
Share ownership Public 57%
constructs used in the research model. Items in the form of Private 8%
statements, relating to each of the variables, were used to Mixed 35%
(Public share—Mean/std (0.5477/0.1)
measure the individual constructs under investigation. dev)
Where possible, the different statements used in develop- Location South Italy 22%
North Italy 59%
ing the questionnaire were based upon statements or vari- Central Italy 19%
ables that had been previously used by researchers. Sample, N = 37
The Appendix presents the questionnaire constructs
and the items used to measure each construct.
6 G. CAPALDO ET AL.

absence of other time-specific factors (for instance, no Table 2. The standard change construct.
other modifications were imposed by the AEGSI at the Item Standard
code Observed variables Mean deviation
time).
Resources
B1 New employees or staff people hired – –
B2 New personnel training programs 3.31 1.16
developed
Results B3 New equipment for staff people 3.65 1.16
B4 Development of investment plans 3.81 1.60
B5 Implementation of IT system/informatics 4.96 1.68
The data obtained from the questionnaire were ana- process
lyzed using a statistical software package. AMOS 21.0 Hierarchy of authority
B6 Hierarchy levels between top 1.30 0.67
software was used to conduct structural equation mod- management and lower level
eling (SEM) to test and analyze the relationship B7 Managers reporting to the top 1.39 0.96
management
hypothesized in the research model. The SEM approach B8 Strategic decisions made by the Chief 1.68 1.28
is usually adopted to simultaneously understand the Executive
B9 Strategic decisions made by the Corporate 1.39 0.88
causal relations among the various constructs; each Management Team
construct is measured according to one or more Participation in decision-making
observed items (measures). Kline (2011) notes that the B10 Maximum level of expenditure/ – –
investment on which the Corporate
ability to analyze both observed and latent variables Management Team decides
distinguishes SEM from some more standard statistical autonomously
B11 Level of involvement of lower levels in the 1.54 1.07
techniques such as analysis of variance and multivariate strategy process of problem identification
regression, which analyze observed variables only. B12 Level of involvement of lower levels in the 1.46 0.99
strategy process of problem-solving
SEM is used to analyze two models: a measurement B13 Level of involvement of lower levels in the 2.04 1.40
model (confirmatory factor analysis, CFA) and a struc- strategy process of goals definition
B14 Level of involvement of lower levels in the 2.04 1.37
tural model (Anderson & Gerbing, 1988). If each mea- strategy process of results analysis
surement model is identified, then the structural model Performance management system
B15 New standards affect the management- 4.50 1.59
is also identified (Maruyama, 1998). by-objective
The responses are analyzed to compute their mean B16 Adoption of performance management 4.71 1.76
system
scores and standard deviation, as shown in Table 2. B17 Incentives mechanisms based on goals 4.88 1.75
achievement
B18 External factors affecting the goal 4.21 1.41
achievement
Assessment of the measurement model Items with—under the mean and standard deviation columns are deleted
in the re-specified models
To ensure correct identification of the model, the mea-
surement models and the structural model are sepa-
rated. If each measurement model is identified The first measurement model was the Resources
independently, then the structural model is identified model. This model was evaluated using the five items
(Maruyama, 1998). shown in Table 1. The model was checked to assure
Therefore, the first step of the analysis is to test the that the parameter estimates exhibited the correct sign
measurement models by means of a CFA, to ascertain and magnitude and were consistent with the underlying
whether the identified items are loaded onto a com- theory. One of the five items exhibited either large error
mon latent factor. The specified measurement model variance or insignificant parameter estimate. This item
was found able to ascertain the extent to which the was considered unimportant for the model and was
surveyed items actually measured their respective thus deleted (Byrne, 2013). The model fit indices
constructs. A summary of the model fit indices is (Table 3) show that the chi-square (χ2) statistic has
given in Table 3. statistical significance (χ2/degree of freedom = 2.6)

Table 3. Goodness of fit measures for the measurement models.

Goodness of fit indices Recommended value Resources model Hierarchy of authority model Participation in DM model PMS model
Χ2/degree of freedom ≤3 5.201/2 = 2.601 1.721/2 = 0.861 2.695/2 = 1.348 5.815/2 = 2.908
Normed fit index (NFI) ≥0.95 0.909 0.968 0.946 0.931
Comparative fit index (CFI) ≥0.9 0.932 0.999 0.984 0.947
Root mean square error of ≤0.1 0.1 0.001 0.098 0.1
approximation (RMSEA)
 INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 7

and other indices show acceptable fit measures. The Table 4. Construct validity: Loading factors for measurement
normed fit index (NFI) takes into consideration a cor- models.
relation for model complexity (Kline, 2011). A major Item Factor p-
code Observed variables loading R2 Value
drawback to this index is that it is sensitive to sample Resource
size. The CFI is interpreted in the same way as the NFI, B2 New personnel training programs 0.829 0.59
and it represents the relative improvement in fit of the developed
B3 New equipment for staff people 0.902 0.19 ***
hypothesized model over the null model. The CFI is a B4 Development of investment plans 0.435 0.81 **
B5 Implementation of IT system/ 0.767 0.69 ***
revised form of the NFI, which takes into account informatics process
sample size (Byrne, 2013) that performs well even Hierarchy of authority
B6 Hierarchy levels between top 0.981 0.96
when the sample size is small. The CFI and NFI are management and lower level
0.9 and 0.93, respectively: more than the recommended B7 Managers reporting to the top 0.769 0.59 ***
level 0.9. The root mean square error of approximation management
B8 Strategic decisions made by the Chief 0.451 0.20 *
(RMSEA) assesses how much the given model approx- Executive
imates the true model. This is an estimate of the dis- B9 Strategic decisions made by the 0.569 0.32 ***
Corporate Management Team
crepancy between the observed and estimated Participation in decision-making
covariance matrices in the population (Hair, Black, B11 Level of involvement of lower levels in 0.752 0.57
the strategy process of problem
Babin, Anderson, & Tatham, 2006). The RMSEA is identification
0.1, which is the limit, further supporting acceptance B12 Level of involvement of lower levels in 0.748 0.56 ***
the strategy process of problem-solving
of the proposed model. B13 Level of involvement of lower levels in 0.676 0.46 ***
Next, the Hierarchy of Authority measurement the strategy process of goals definition
B14 Level of involvement of lower levels in 0.731 0.53 ***
model was tested. The 4 items shown in Table 2 were the strategy process of results analysis
used to evaluate this measurement model. The model Performance management system
B15 New standards affect the management- 0.924 0.85
fit indices, reported in Table 3, support acceptance of by-objective
the proposed model. B16 Adoption of performance management 0.831 0.69 ***
system
Participation in Decision-Making was the next mea- B17 Incentives mechanisms based on goals 0.760 0.58 ***
surement model to be tested. The five items reported in achievement
B18 External factors affecting the goal 0.867 0.75 ***
Table 2 were used to evaluate this measurement model. achievement
One of the five items exhibited either large error var- The p-value is not available for some items, because the regression weights
iance or an insignificant parameter estimate. This item of the first variables of each component factor (i.e., construct) are fixed at
1. ***Significant at the p < 0.01 level; **Significant al the p < 0.05 level;
was considered unimportant to the model and was thus *significant at the p < 0.10 level.
deleted. The new model fit indices that were obtained
(Table 3) support acceptance of the proposed model.
Finally, the Performance Management System mea- which in turn depends on the supposed meaning of
surement model was tested. The three items shown in the latent variable (i.e., what the latent variable should
Table 2 were used to evaluate this measurement model. reflect if the model is valid) and the meaning of the
The model fit indices, reported in Table 3, support observed variable (question wording, results of cogni-
acceptance of the proposed model. tive interviewing). An indicator that almost perfectly
From Table 4, it is evident that the regression reflects the latent variable should thus correlate very
weights of all the variables loading onto their respective highly with the latent variable. Other indicators that are
factors are between 0.2 and 0.98, with all p-values lower conceptually more distant from the supposed latent
than 0.1 (which means that all the regressions are variable could result in a lower loading without leading
statistically significant at 90% confidence level). The to questioning the validity of the measurement model
factor loadings for most of the items are within good and latent variable. Looking at the model fit indices for
levels (i.e., above 0.5 threshold; Hair et al., 1998); only each of the measurement models (Table 3), a good fit
two factor loadings are lower. A factor loading is a shows for each of the measurement models. The χ2/df
supposed causal effect of a latent variable and an statistic for each of the measurement models was less
observed indicator, or the correlation of the original than 3.0, suggesting that each of the measurement
variable with a single factor. The factor loadings are models fits the sample data well. The commonly cited
especially useful in determining the substantive impor- fit indices such as NFI and CFI were all greater than
tance of a particular variable to a factor (Field, 2000). 0.90, suggesting a good model fit. Finally, the RMSEA is
Actually, the strength of the factor loadings depends on lower or equal to 0.1, which is the limit, further sup-
the theoretically assumed relationship between both, porting acceptance of the proposed models.
8 G. CAPALDO ET AL.

Assessment of the structural model and hypotheses
testing
The structural model was analyzed on the basis of the
modified measurement models using the maximum
likelihood estimation method. The initial model was
tested as shown in Figure 1 (without the unimportant
items B1 and B10, deleted as explained in the previous
section), resulting in two insignificant path coefficients,
suggesting a lack of support for this model from the
data. Acting on the assumption that the original model
was specified incorrectly, the model was subsequently
modified in stepwise fashion (see discussions of post
hoc modification in Hoyle, 1995; Maruyama, 1998;
Raykov & Marcoulides, 2000) resulting in a final
model exhibiting good fit, as shown in Figure 2.
Figure 2 shows the modified SEM, standardized
coefficients, and model fit indices. All coefficients
shown are significant at the 0.05 level. The χ2/df statis-
tic (2,965) indicates that the modified hypothesized
model fits the sample data well. The other fit indices
shown in Figure 2 also tend to confirm this.
As shown in Table 5, the data supported hypotheses
H1 and H4, namely that more demanding quality stan-
dards are positively related to both the resources used
by the organization to accomplish these new standards
as well as the adoption of a well-designed performance
management system.
Discussion
In line with the initial hypotheses of the research
model, the results of the analysis suggest that the
more demanding public service quality standards
imposed by the regulations are positively related to
resources (Hypothesis 1). This means that the regula-
tions and their requirements in terms of public service
quality standards impact on real resources that the
agency uses to achieve higher performance. In other
words, to increase public service quality as required by
law, the agency needs to increase the available
resources. This finding appears to be particularly inter-
esting since it makes it possible to take a position
within the open debate on this subject. It confirms the
theoretical resource performance model proposed by

Figure 2. SEM results.

Table 5. Hypothesis testing results. Boyne (2003), and confutes the empirical results of
Path the existing studies supporting no significant relation-
Hypothesis Path coefficient Result
ship between resources and service performance
H1 Standard increase → Change in 0.94*** Supported
resources (Bohte, 2001; Bradley et al., 2001; Meier et al., 2000;
H2 Standard increase → Change in −0.115 Not O’Toole & Meier, 2001).
hierarchy of authority supported
H3 Standard increase → Change in 0.185 Not The findings of the study also indicate that the more
participation in DM supported demanding public service quality standards impact on
H4 Standard increase → Change in 0.94*** Supported
PMS the performance management system adopted by the
Significance level *p < 0.10, **p < 0.05, ***p < 0.01. agency (Hypothesis 4). A well-designed performance

management system is necessary for the agency to
improve PSP as required by the regulation. This is in
line with the results of previous research on this sub-
ject. In particular, this finding confirms the theory that
a well-designed performance management system will
improve performance thanks to greater focus on the
clear and measurable results by the organization
(Kaplan, 2001; Rangan, 2004), the use of incentives
(Bonner & Sprinkle, 2002), and the reduction of unin-
tended managerial side effects (e.g., de Bruijn, 2002;
Hood & Peters, 2004; Vakkuri & Meklin, 2006).
The results also highlight that the degree of cen-
tralization within an organization, indicated by the
hierarchy of authority and the degree of participa-
tion in decision-making, was not found to be sig-
nificantly associated with public service
improvement (Hypotheses 2 and 3 were not sup-
ported). To some extent, this finding is consistent
with the results of studies conducted in the field,
suggesting that centralization is likely to affect per-
formance, but the evidence is weak or nonexistent.
Consequently, the study found that the changed
standards are not significantly related to either hier-
archy of authority or the degree of participation in
decision-making.
The above results can be considered relevant for
both the academic and business communities.
The theoretical contributions of the research model
and findings discussed in this article are as follows. First
of all, this research reduces the gaps in the literature
concerning the relationship between regulation and its
requirements in terms of public service quality and the
organization of public service providers. It shows that
the more demanding quality standards imposed by law
are likely to impact on the organization of public service
providers, specifically influencing the resources and per-
formance management system. Secondly, the article con-
tributes to research streams focusing specifically on the
relationship between PSP and specific organizational
variables such as resources, level of centralization, and
the adoption of performance management systems. In
particular, the article provides an interesting empirical
contribution to the open debate on the role of resources
in PSP, showing that resources matter in improving PSP.
Furthermore, it contributes to filling the gap in the
literature on the role of performance management sys-
tems for PSP, showing the positive relationship among
them (van Helden, 2005).
This study provides useful insights for practitioners
dealing with public service quality improvement, be they
managers of public agencies or legislators.
The results support the public service provider in
understanding the impact that the requirements of
INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 9
these regulations may have on the organization in
terms of public service quality. In this sense, the results
support public managers’ decision-making processes
concerning the reorganization of the agency in order
to cope with the more demanding quality standards
imposed by the regulation. Specifically, when regulation
sets new higher quality standards to be achieved by
public agencies, public managers should expect a
change in the organization in terms of the resources
and performance management system rather than the
organizational structure, and specifically the level of
centralization.
The results are also useful for the legislator since
they provide insights into what is required of public
organizations in order to cope with the regulation
requirements in terms of public service quality.
Conclusions
Increasing global attention to the improvement of PSP
has fostered the diffusion of new regulations requiring
higher standards of public services.
This article aims to answer the following questions:
What are the effects of more demanding quality stan-
dards imposed by the regulation on the organization of
service providers (in terms of resources, organizational
structure, management, etc.)?
In order to answer this research question, this article
develops a hypothetical research model that relates the
quality of public service and the organization of public
service providers. In particular, based on an analysis of
the variables that are believed to influence performance,
this study formulates hypotheses on how a variation in
public service quality standards (aimed at improving
PSP) may impact on the organization of public service
providers. Then, focusing on the specific case of the
water service, hypotheses are tested by conducting a
survey with managers of some water companies located
in Italy. Recently, in fact, the AEGSI defined new stan-
dards for water service quality (measured, e.g., in terms
of the time required to make a quotation, the time
taken to do a job, or to connect to the water distribu-
tion network, etc.).
Interestingly, with reference to the context of the
water industry in Italy that was analyzed in this
research, it was found that only resources and per-
formance management systems are affected by the
change in public standards. In particular, the out-
comes of this research highlight that both of them
are positively related to standard change. This
means that the standard change imposed by regula-
tion will require an increase in the resources made
available for the organization and a greater adoption
10 G. CAPALDO ET AL.
of a well-designed performance measurement sys-
tem. As for the impact that the change will have
on the degree of centralization within an organiza-
tion, indicated by the hierarchy of authority and the
degree of participation in decision-making, the
results show that they are not significantly related.
Despite the important contributions, this study exhibits
the methodological limitations typical of most empirical
surveys. The data for the study consisted of responses from
a sample limited to 37 respondents in the specific sector of
the water industry. This limitation should be taken into
account when trying to generalize the results. For the
future, further studies should make use of wider datasets
to ensure the statistical validity of the relationships men-
tioned. Furthermore, to make the results generalizable,
future studies should also investigate other industries
facing the challenge of more demanding quality standards.
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Appendix
Factors/constructs Item code Item
Resources B1 New employees or staff people
hired
B2 New personnel training
programs developed
B3 New equipment for staff people
B4 Development of investment
plans
B5 Implementation of IT system/
informatics process
Hierarchy of authority B6 Hierarchy levels between top
management and lower level
B7 Managers reporting to the top
management
B8 Strategic decisions made by the
Chief Executive
B9 Strategic decisions made by the
Corporate Management Team
Participation in decision- B10 Maximum level of expenditure/
making investment on which the
Corporate Management Team
decides autonomously
B11 Level of involvement of lower
levels in the strategy process of
problem identification
B12 Level of involvement of lower
levels in the strategy process of
problem-solving
B13 Level of involvement of lower
levels in the strategy process of
goals definition
B14 Level of involvement of lower
levels in the strategy process of
results analysis
12
Questionnaire items Likert scale Source
With reference to the situation post-standard-adoption, 5-points Boyne (2003), Bradley et al. (2001), O’Toole and Meier
new employees or staff people have been hired (or (2001), Meier et al. (2000), Bohte (2001), Ingraham et al.
made available) (2004), Andrews and Boyne (2010), Selden and Jacobson
(2007), Ebdon (2007), Ling (2002)
With reference to the situation post-standard-adoption, 5-points
G. CAPALDO ET AL.
new training programs have been developed for
personnel
With reference to the situation post-standard-adoption, 5-points
new equipment has been provided to employees or
staff people
With reference to the situation post-standard-adoption, 7-points
new plans of investments have been developed
With reference to the situation post-standard-adoption, 7-points
a new IT system or new informatics processes have
been implemented
With reference to the situation post-standard-adoption, 5-points Andrews et al. (2005), (2009)
the number of hierarchy levels between the top
management and the lower level with power of budget/
expenditure has increased
With reference to the situation post-standard-adoption, 5-points
the number of managers reporting to the top
management has increased
Strategic decisions for our service are made by the Chief 5-points
Executive more than before the new standard adoption
Strategic decisions for our service are made by the 5-points
Corporate Management Team more than before the
new standard adoption
With reference to the situation post-standard-adoption, 5-points Andrews et al. (2005), (2009)
the maximum level of expenditure/investment on which
the Corporate Management Team decides
autonomously has increased
With reference to the post-standard-adoption, lower 5-points
levels are more involved in the strategy process of
problem identification
With reference to the post-standard-adoption, lower 5-points
levels are more involved in the strategy process of
problem-solving
With reference to the post-standard-adoption, lower 5-points
levels are more involved in the strategy process of goals
definition
With reference to the post-standard-adoption, lower 5-points
levels are more involved in the strategy process of
results analysis
(Continued )
(Continued).
Factors/constructs Item code Item Questionnaire items Likert scale Source
Performancemanagement B15 New standards affect the With reference to the situation post-standard-adoption, 7-points Verbeeten (2008), Van Helden (2005), Rangan (2004),
system management-by-objective the new standards affect the management-by-objective Kaplan (2001), Bonner and Sprinkle (2002), Vakkuri and
Meklin (2006), Hood and Peters (2004), De Bruijn (2002)
B16 Adoption of performance With reference to the situation post-standard-adoption, 7-points
management system the adoption of performance management system has
increased
B17 Incentives mechanisms based on With reference to the situation post-standard-adoption, 7-points
goals achievement incentives mechanisms based on goals achievement
have been introduced
B18 External factors affecting the With reference to the situation post-standard-adoption, 7-points
goal achievement performance measurement systems take into account
external factors that may affect the goal achievement
INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION
13