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 than from 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.
