New Public Management (NPM) has become a significant trend in public administration worldwide over the past 15 years. While most research on this topic focuses on the UK, NPM is not exclusive to Britain.
The rise of NPM can be linked to four major administrative trends:
● Efforts to reduce government growth in terms of public spending and staffing.
● The shift towards privatization and outsourcing of government functions, with an emphasis on local service provision.
● The use of automation, especially in information technology, to improve the delivery of public services.
● The emergence of a more international agenda, focusing on general issues of public management, policy design, decision-making styles, and intergovernmental cooperation.
NPM is a broad term that encompasses various administrative doctrines. It is a convenient shorthand for the set of similar reform ideas that have dominated the bureaucratic reform agenda in many countries within the OECD (Organisation of economic cooperation and development).
NPM, like many administrative terms, is a flexible concept. Its value lies in its ability to serve as a shorthand for a collection of similar administrative principles that have shaped bureaucratic reforms in various countries within the OECD since the late 1970s. Although its definition is vague, NPM has evoked strong and diverse reactions from bureaucrats.
On one end of the spectrum, there are those who believe that NPM is the only way to address the significant failures and ethical shortcomings of the “old” public management. On the other end, some criticize NPM as a destructive force that undermines the century-long development of a distinct public service ethos and culture.
The rise of NPM has also sparked debates about how to label, interpret, and explain the movement. People question the true nature of NPM and whether its novelty lies primarily in its presentation or its content. Why did NPM gain popularity, and is it a universally applicable approach?
This following article would aim to focus upon these questions and basically upon the broad appeal and applicability of NPM.
WHAT THE EMPEROR WAS WEARING : THE DOCTRINES OF NPM
New Public Management (NPM) is a public administration doctrine developed in the 1980s. It emphasizes market-oriented principles and management techniques to improve the efficiency and effectiveness of public services. NPM advocates for decentralization, performance measurement, result-oriented contracts, competition, and customer orientation. It aims to introduce private sector practices, such as strategic planning, performance-based incentives, and accountability, into the public sector. NPM seeks to enhance service quality, reduce bureaucracy, and promote responsiveness, ultimately aiming to achieve better governance and outcomes in public administration.
WHERE THE DESIGN CAME FROM: NPM AS A MIX OF OPPOSING IDEAS
One way to understand the origins of NPM is to see it as a combination of two different streams of thought. One partner in this mix was the “new institutional economics.” This branch of thinking emerged from the development of public choice theory (expects to study and influence people’s public choice processes to maximize their social utility), transaction cost theory (theory accounting for the actual cost of outsourcing production of products or services including transaction costs, contracting and coordinating costs etc.) , and principal-agent theory ( describes the pitfalls that often arises when one person or group, the “agent” is representing another person or group called as the “principal”) after World War II. It drew on works by scholars like Black and Arrow, as well as Niskanen’s theory of bureaucracy. The new institutional economics contributed to a set of administrative reform ideas centred around contestability, user choice, transparency, and a strong focus on incentive structures. These ideas were quite different from traditional views of “good administration” based on military-style hierarchies and the elimination of duplication.
The other partner in this “marriage” was a series of business-oriented managerial approaches that had been influencing the public sector. This tradition followed the principles of scientific management and emphasized the importance of professional management expertise. It advocated for giving managers discretion, prioritized results, and highlighted the significance of organizational culture and the measurement of outputs. This wave of managerialism in the public sector was less analytically driven and more pragmatic than the new institutional economics approach.
The compatibility between these two partners is still a subject of debate. The slogan “free to manage” can differ from “free to choose,” and conflicts can arise, especially when the NPM revolution is driven from the top-down rather thanfrom the bottom-up. The relative influence of each partner varied across different countries, even within the Westminster model tradition. For instance, New Zealand had a more dominant synthesis of public choice and transaction cost theories, resulting in a coherent and analytically driven NPM movement. On the other hand, the UK and Australia placed greater emphasis on business-type managerialism, leading to a more pragmatic and less intellectually elegant form of NPM, sometimes referred to as “neoTaylorism.”
The potential tensions between these partners were not resolved through a single coherent exposition or definitive philosophy. The New Zealand Treasury’s Government Management report of 1987 came closest to presenting a comprehensive NPM manifesto. It is worth noting that much of the academic literature on NPM lacks in-depth elaboration or wholehearted commitment to the concept.
WHY NPM FOUND FAVOUR: THE FACTOR OF ACCEPTANCE
There is no universally accepted explanation for why NPM gained popularity and widespread acceptance. Some scholars attribute it to the political rise of the “New Right,” but that alone doesn’t explain why these specific doctrines became favoured. It’s also puzzling why NPM received strong support from Labour governments, which were ostensibly opposed to the New Right, particularly in Australia and New Zealand. Several possible explanations can shed light on this phenomenon.
* One perspective sees the rise of NPM as a result of its superficial appeal and success, akin to a passing trend or fashion. Critics view NPM as a cheap, popular, and simplistic approach to public management, similar to industrial rationalization doctrines of the past. This explanation acknowledges the cyclical nature of NPM’s popularity and the shifts in its implementation. However, it fails to explain why certain aspects of NPM endured over more than a decade.
*Another skeptical explanation likens NPM to a “cargo cult” phenomenon. It suggests that despite repeated failures, there is an ongoing belief that following specific managerial rituals will lead to substantive success. This cycle of enthusiasm and disillusionment in public management mirrors the cargo cults observed in Melanesia. However, this explanation doesn’t clarify why the NPM variant emerged at that specific time.
*A less skeptical approach views the rise of NPM as the convergence of historically distinct approaches to public administration. It combines the German tradition of state-led economic development by professional public managers with the Anglo-Saxon tradition of liberal economics and a focus on aligning self-interest with administrative duty. Yet, like the “cargo cult” interpretation, this fusion of opposites doesn’t explain why these two traditions merged at that particular time.
*A more promising explanation suggests that NPM emerged as a response to unique social conditions that developed during the period of peace and economic growth after World War II. Factors contributing to the rise of NPM include changes in income levels and distribution, shifting socio-technical systems, the emergence of new campaign technologies, and a more diverse population with less tolerance for uniform approaches to public policy.
*****Among these explanations, the fourth one appears more comprehensive and capable of addressing the specific circumstances surrounding the emergence of NPM. It offers insights into why NPM gained prominence at that particular time and under diverse circumstances.*****
NPM’S CLAIM TO UNIVERSALITY
NPM, or New Public Management, was presented as a universally applicable framework for public management. Its claim to universality was based on two main aspects.
Portability and flexibility: NPM proposed using similar methods and approaches to address management challenges in different contexts, such as various organizations, policy fields, levels of government, and countries. While there were variations and local management styles, they had to align with the fundamental principles of NPM. However, NPM had a greater impact on national bureaucracies and front-line delivery units compared to international bureaucracies and controlling departments.
Critics argued that the freedom to manage under NPM often led to a sense of compulsion and tendencies towards uniformity and cloning, which contributed to its decline.
Political neutrality: NPM claimed to be a politically neutral framework that could effectively accommodate different values and priorities by adjusting the management system’s settings, without requiring a complete overhaul of the NPM program. Advocates of NPM emphasized that it was not exclusively tailored to cater to the demands of a specific political party or ideology. This aspect of NPM aligns with the historical claims of traditional Public Administration, which aimed to be a neutral and versatile tool for achieving the goals set by elected representatives.
COUNTER CLAIM CRITICS OF NPM
Critics of New Public Management (NPM) have raised various counter-claims, though these criticisms are scattered across different sources.
Four main arguments against NPM have emerged.
First, some argue that NPM is all hype and lacks substance, akin to the Emperor’s New Clothes. They believe that NPM has not addressed the underlying problems and weaknesses of public management and that tangible changes are needed, such as legally binding output contracts or restructuring public service employment.
Second, critics claim that NPM has harmed the public sector while failing to deliver on its promise of cost reduction per unit of service. They contend that NPM has led to an overemphasis on management and bureaucratic reporting systems, which destabilizes the bureaucracy and weakens essential frontline services. They suggest applying strict resource control and implementing measurable performance indicators to assess the costs and benefits of the NPM system.
Third, critics argue that NPM, despite its claim to improve public services for all, actually benefits a select group of “new managerialists” (top managers, officials, consultants, and business schools) rather than serving the interests of the public or low-level staff. They propose disproportionate cuts to managerial positions and empowering consumers through systems of direct democracy.
The fourth criticism focuses on NPM’s claim of universality. These critics assert that different administrative values have distinct implications for administrative design that go beyond adjusting system settings. To support their argument, they must demonstrate that the incompatibility lies within the core principles of NPM rather than minor adjustments. They also need to show that different management system implications exist for mainstream values without resorting to extreme or fundamentalist values.
Additionally, they must make a plausible case that an all-purpose culture cannot be achieved. It is important for the critique to address administrative values and not solely advocate for alternative political values. Many criticisms of NPM concerning equity and social costs can be rebutted by NPM proponents who argue that efficiency can coexist with equity and that equity values can be incorporated into target-setting and performance indicators with sufficient political pressure.
THE THREE CLUSTERS OF ADMINISTRATIVE VALUES
In the context of administrative argument, there are three distinct clusters of values that commonly appear in debates about administrative design. These clusters align with the management values identified by Susan Strange (1988) and Hamon and Mayer (1986). These values can be considered mainstream and traditional in public management and are not esoteric or extreme. The three clusters are as follows:
Sigma-type values: These values emphasize matching resources to narrowly defined tasks and circumstances in a competent and sparing fashion. The focus is on achieving goals with minimal waste and incompetence. Key characteristics include frugality, just-in-time inventory control, payment-by-results reward systems, and administrative cost engineering. Success is measured in terms of time and money saved.
Theta-type values: These values revolve around honesty, fairness, and mutuality. The goal is to prevent distortion, inequity, bias, and abuse of office. Key characteristics include recall systems for removing public officials, procedural controls, independent scrutiny systems, and attempts to socialize public servants in ethical conduct. Success is measured by the proper discharge of duties and public trust.
Lambda-type values: These values relate to reliability, robustness, and adaptivity. The focus is on resilience, endurance, and the ability to withstand and learn from challenges and crises. Key characteristics include redundancy, diversity, and robustness in organizational design. Success is measured by the capacity to avoid system failure and maintain basic assumptions about social defense mechanisms.
● Each cluster of values represents a different approach to administrative design.
● Sigma-type values prioritize resource efficiency and goal achievement.
● Theta-type values prioritize honesty, fairness, and prevention of abuse.
● Lambda-type values prioritize reliability, resilience, and adaptivity.
● Each cluster has different implications for organizational design and control systems.
● There may be some overlap among the clusters, but it is difficult to fully satisfy all three sets of values simultaneously.
New Public Management (NPM) is primarily focused on frugality (sigma-type values) and may have limitations in ensuring honesty and resilience in public administration.
IMPLICATIONS FOR NEW PUBLIC MANAGEMENT
The work of the ESRCS Management in Government Initiative has provided insights into the specific forms of New Public Management (NPM) in the UK and its historical development. However, while it has raised critical questions, definitive answers are still lacking. Two important questions, in particular, require further examination to gain a better understanding of NPM’s intellectual position.
Firstly, NPM can primarily be seen as an embodiment of sigma-type values, with its main claims centred around cost reduction and achieving more with less through improved management and structural design. Therefore, a crucial test of NPM’s “success” is whether it has delivered on these claims, beyond mere rhetorical acceptance. Unfortunately, independent evidence on this aspect remains limited. Dunsire et al.’s (1988) work has made significant progress by attempting to develop indicators of organizational structure and control systems to understand the impact of privatization and corporatization. It tentatively suggests that shifting management structures towards command-orientation and results-orientation is associated with productivity improvements. However, the findings are only preliminary, lacking comprehensive tests for Hawthorne effects or control groups. Further research is necessary in this direction.
Secondly, critics’ skepticism regarding the universality of NPM raises important questions that require rigorous examination. Even if future studies establish a clear association between NPM and frugality, it remains to be fully explored whether such successes come at the expense of integrity, fairness, security, and resilience. NPM assumes a pre-existing culture of public service honesty, yet its implementation often removes safeguards that traditionally ensured honesty, neutrality, and clear boundaries between public and private sectors (e.g., fixed salaries, procedural rules, tenure security, constraints on line management’s power). The extent to which NPM may erode these traditional values needs thorough investigation. Observing the diffusion of NPM “clones” by public management consultants and others in contexts with limited ingrained public service culture (such as many Third World countries and potentially Eastern Europe) will be particularly interesting. The impact on “theta-type” values is likely to be more pronounced in such cases, as changes may occur more rapidly and dramatically compared to countries like Australia and the UK, which still have a foundation of the “public service ethic.”
Moreover, it is important to analyse the compatibility of NPM principles with “safety engineering” and the promotion of “safety cultures.” NPM broadly assumes that public services can be divided into separate “products,” and effective public management involves reducing externalities and focusing on operating within specified parameters. However, it is crucial to examine whether the emphasis on cost-cutting, outsourcing, compartmentalization, and top-down decision-making aligns with frontline safety practices. The occurrence of organizationally created disasters in recent years, including notable cases in the UK, suggests the need for further investigation. Only by testing the limits of NPM concerning narrower administrative values can we determine its proper scope and historical significance.
