Organizational mergers

Mergers of government agencies should be better prepared and have concrete objectives, and their economic impacts should be assessed and monitored. The purpose of the mergers is to make government agencies more effective and efficient but they do not necessarily lead to any major changes in their organizations.

In the audit, the NAOF examined whether the central government steering system provides a workable basis for effectiveness and efficiency in the merged organizations and whether the objectives set for the organizational reforms are achieved. Two recent reforms were used as examples of agency mergers: the establishment of the Finnish Competition and Consumer Authority in 2013, and the establishment of the Finnish Food Authority in 2019.

Central government has not had any common principles or guidelines for agency reforms that would provide a basis for examining the reforms from the perspective of the agencies and the organization as a whole. Furthermore, central government does not have separate guidelines or common practices that would guide the assessment of the need for structural changes such as agency mergers and the preparation, implementation and monitoring of the changes. Such guidelines did not exist when the reforms examined in this audit were carried out. However, in December 2021, the Ministry of Finance issued a recommendation on the principles to be observed in the organization of activities in central government agencies.

Mergers can only be effectively monitored if the objectives set for them are sufficiently concrete and if processes and success criteria or indicators are in place to determine to what extent the objectives have been achieved and to monitor their impacts. In fact, the monitoring needs should already be considered when a merger is still in its planning stage. The audit showed that in the organization and carrying out of their core tasks, the agencies still rely on the management practices and management systems used in the old agencies.

In 2013, the Finnish Competition Authority and the Finnish Consumer Agency merged to form the Finnish Competition and Consumer Authority operating in the administrative branch of the Ministry of Economic Affairs and Employment. The Finnish Food Authority was established in 2019 in the administrative branch of the Ministry of Agriculture and Forestry by merging the Agency for Rural Affairs and the Finnish Food Safety Authority Evira. In the merger, some of the information management services of the National Land Survey of Finland’s IT service centre and the supervision of the use of plant protection products, until then the responsibility of the Finnish Safety and Chemicals Agency, were also transferred to the Finnish Food Authority.

The economic, digital and other impacts of the mergers resulting in the establishment of the Finnish Competition and Consumer Authority and the Finnish Food Authority were assessed very generally or even poorly during the preparatory stage. No economic or other impact assessments were carried out. Only summary background reports on the potential benefits of the mergers and, in the case of the Finnish Food Authority, on both benefits and risks were quickly prepared as a basis for the organizational change.

Performance management in the Finnish Competition and Consumer Authority and in the Finnish Food Authority has changed from detailed steering to broader upper-level steering of more strategic nature. However, the mergers of the agencies have had little impact on performance management. Both the performance targets and organization of the performance management have remained more or less unchanged even though the performance targets are now more strategic in nature. The impacts of the mergers on the government agencies’ performance cannot be directly assessed, as their performance agreements do not set out separate targets and indicators on the basis of which the impacts of the mergers would have been monitored. For this reason, the impacts of the reforms on operational performance cannot be directly assessed. Thus, performance indicators and impact assessments linked to the merger objectives should be used in future agency mergers.