Introduction
New Public Management (NPM) is a term that various governments have been using since the 1980s to modernize the public sector. The NPM reforms are meant to change the old system of traditional public administration and come up with a revamped system of public administration (Lynn, 1998).
According to Larbi, Key elements of NPM “include various forms of decentralizing management within public services, increasing use of markets and competition in the provision of public services, and increasing emphasis on performance, outputs and customer orientation” (Larbi, 1999, pp. 1). These reforms were necessitated by economic, social and technological factors. The existence of economic and fiscal crises has increased the need in the financial system a high technology that would make delivery of public services less costly.
The Origin, theory and principles of NPM
The origin of NPM
The New Public Management approach to public management was founded on a critique of bureaucracy as the organizing principle within public administration (Dunleavy, 1991).
He claimed that bureaucracy was plagued by progressive inflexibility which was based on complex hierarchical rule based systems and top-down decision making which caused it to become increasingly distant from the general publics’ expectations. According to Kelly (1998), NPM focused on what was believed to be the critical aspects of private sector modes of organizing and managing public sector and public administration.
While the State Owned Enterprises continued to incur losses due to poor management and inefficiency by its managers, the private sector mode of management was claimed would help these government institutions out of those problems hence enhancing service delivery to the people of the countries concerned.
Governments were urged to incorporate the techniques of business administration and business values which included the values of competition, a preference for market mechanisms as a way of social choice and respect for the entrepreneurial spirit (Yamamoto, 2003). Following these recommendations the public sector reforms have started been initiated and as a result governments institutions have started moving forward in terms of profit making, and accountability (Mathiasen, 1996).
In Japan for instance, scholars have tried to look at the various techniques that the government used in order to make her the most industrialized country in Asia because the new public management ideas were introduced in Japan few years back through the assistance of programs set out by the World Bank and the International Monetary Fund (IMF).
Principles of NPM
NPM as a term can be used to describe; organization and management design, how the new institutional economics can be applied to public management, and a pattern of policy choices.
According to Hood (1995), there are several NPM principles that include: An emphasis on hands- on professional management skills for active, visible, discretionary control of organizations, explicit standards and measures of performance through clarification of goals targets, and indicators of success, A shift from the use of input controls and bureaucratic procedures to rules relying on output controls measured by quantitative performance indicators of success, A shift from unified management systems to disaggregation of units in the public sector, An introduction of greater competition in the public sector so as to lower costs and achievement of higher standards through term contracts, A stress on private sector style management practices such as the use of short term labor contracts, the development of corporate plans, performance agreements, and mission statements (Hood, 1991) and finally, Stresses on cost cutting, efficiency, parsimony in resource use (Yamamoto, 2003).
The Theory of NPM
According to Ewan (1996), new public management is a fusion of contractual elements in the field of institutional economics such as the principles of measuring performance and introducing competition and of the management by objective in the field of business administration.
Therefore to Ewan, new public management unites the institutional economics and managerialialism from business management thought which therefore means that new public management strategy should balance effort involving the use contractual arrangement as a tool of output controls and managerial freedom (Matland, 1995).
Factors responsible for New Public Management Reforms
The idea of New Public Management started in the developed countries like United Kingdom, Australia, Canada, and New Zealand. Therefore, the developing countries in Africa and Asia were forced into adopting these reforms by pressure and influence from these countries. The new public management reforms are a result of the following factors;
The first factor is related to Economic and fiscal crises of the state. Countries adopting the NPM are concerned about their balance of payments, cost of providing public services, and the size of public expenditure (Jennings, & Ewalt, 1998). In the United Kingdom for instance, the fiscal crisis led to an IMF intervention with a demand for financial reforms while some blame was placed on leaders who were non reformist.
When the Western governments were faced with fiscal crisis they initiated measures not only to cut but also control public spending. Just as was the case with the United Kingdom, Australia and New Zealand reorganized and modernized public bureaucracies hence prioritizing public sector management reforms.
The second factor is about change in political context. Poliit (2007) argues that Reagan’s election in 1978 did provide some fresh impetus for market oriented reforms in the public sector which was already under pressure to reform. The case was the same in Australia and New Zealand which both brought reforms oriented governments. He further says that the strategies to cut the size of the public sector were buttressed by an ideological campaign to reverse the growing reliance on the government.
The Development of information technology is another factor enhancing the development of new public management reforms. The development and availability of information technology provided the necessary tools and structures to make workable managerial reforms in the public sector. Refined information became important in the management because executive agencies were put in place which enhanced accountability.
Public administration and management context also played a significant role in reforming the new public management.
The 1970s and early 1980s crisis were believed to have been as a result of failure of public administration institutions and hence improving their performance was largely believed to be critical to recovery and adjustment (Milward, 1996). For example, in Ghana there were 235 State Owned Enterprises (SOE) at the beginning of Economic Recovery Program most of which were making losses thus contributing nothing to the growth of the economy in terms of revenue generation.
However when the government intervened, the SOE sector increased from 1.1 billion cedis in1982 to 735 billion in 1987 in 1986 (Yamamoto 2003). From the late 1980s public sector reforms became part and parcel of Structural Adjustment Loans (SALs) which provided institutional support.
The other factor is international experiences. When communism collapsed in there was a wind for change in most of the Western world which also spread across many developing countries in crisis that they had to reform (Kaboolian, 1998). The factors that dove reforms in particular were the structural lending conditions which pointed toward market and private sector approaches to public sector management under the guise of new public management.
There is also Good governance that leads to superb public sector management reforms and hence influences new public management reforms. In 1980s, there was a debate about good governance. Its requirements provided a new approach to public sector management reforms.
Responsiveness to customer needs, and accountability have been identified as aspects of good governance by donor agencies like the United Kingdom and USAID supporting reforms in developing countries. According to the World Bank, good governance calls for a non compromising judicial system and an administration that has efficiency of the highest profile. Guyverson (2007) elaborates the elements of good governance as;
- Public sector management emphasizing the need for effective financial and human resource management through improved budgeting, accounting and reporting, and rooting for efficiency and particularly in public enterprises;
- Accountability in public services, including effective accounting, auditing and decentralization, and generally making public officials responsible for their actions and responsive to consumers;
- A predictable legal framework with rules known in advance; a reliable and independent judiciary and law enforcement mechanisms and;
- Availability of information and transparency in order to enhance policy analysis, promote public debate and reduce risks of corruption (Guyverson, 2007, PP. 1).
The practical applicability of New Public Management
The principles of NPM are applicable in several situations. Firstly, they are applicable in Breaking up monolithic bureaucracies into agencies. This involves a split between a small strategic policy core and large operations arms of government with increased managerial autonomy. Agencies are then required to conduct their relations with each other and with the central departments on contractual basis.
In principle these agencies have greater managerial flexibility in allocation of human resources in return for greater accountability for results. United Kingdom, Australia and New Zealand provide some of the best examples of these agencies. The development of executive agencies has been accompanied by the delegation of authority to senior management in public agencies hence giving top management freedom to manage with clear responsibility and accountability (Terry, 1998).
Secondly, there is devolving budgets and financial control. This involves creating budget centers or spending units (Stamp, 1923). This entails giving managers increased control over budgets for which they are accountable.
Singapore for example has already started a process of devolving financial management as a prelude to creating autonomous agencies. From 1996 ministries and departments were assigned operating budgets based on target output. Ghana on the other hand embarked on a public financial management that involved financial devolvement.
Thirdly is the Organizational unbundling. This involves replacement of traditional, tall hierarchies with more responsive structures formed around specific processes such as paying of benefits as in the United Kingdom (Pollit, 994).
Then there is down sizing. This entails trimming the public workforce so that efficiency and accountability can be enhanced. Downsizing is as a result of concerns over the size of public sector employment which was not effective.
Some countries like Ghana and Uganda in Africa, Thailand and Bangladesh have had to retrench surplus numbers of civil servants in the last ten years. According to Rhodes (1996), it’s worth noting that although downsizing took place in many countries, this did not lead to budget savings which could have been used to improve the salaries and incentives of those who remained.
Limitations of the New Public Management
The presumptions that involving public sector enhances performance may at times not be true and may be only partially truth. According to Osborne 2002, the quality in service provision may fall as an aspirational professional standard may increasingly be replaced by minimalist, economizing managerial standards.
Emphasizing too much on cost reduction, NPM may encourage the pursuit of efficiency in flawed policies with short term gains undermining the capacity of the state to take long term perspective on important issues like education, environment, health and technology. Issues like these ones need to be considered in seeking to transfer New Public Management to developing countries (Bekke, Kickert & Kooiman, 1995).
In developing countries like Ghana it is feared among traditional bureaucrats that the potential destabilizing effects of NPM may get out of control, become unmanageable and do irreversible damage to the provision of public services.
Critics of NPM also points out to increasing inequality as market type mechanisms produce ‘market niche seeking’ behavior by public service providers. Thus the cultural and organizational change in the social provision, expressed in the concepts of markets and individualism may create conditions for social exclusion (Mazamanian & Sabatier, 1983. As a result such reforms may end up harming most of those in need of state provision and welfare safety nets; the poor and the vulnerable.
Other people argue that NPM may promote self interest and corruption as policy makers and senior bureaucrats opt for privatization and contracting out because of increased opportunities for rent –seeking and other forms of misdemeanor (Hjern & Porter, 1981).
There has also been a fall in ethical standards in public life with increasing incidence of greed, favoritism or conflicting interests. In developing countries adoption of NPM may lead to more abuses and arbitrary use of discretion in contracting for example (Kate 2002).
There have also been complaints about loss of public and traditional channels of local accountability as functions are fragmented among numerous agencies and many of them are privatized or contracted out to profit seeking commercial firm. According to Tom 2007 fragmentation makes accountability and monitoring more difficult
There is also a risk of huge increases in transaction as governments and other purchasers struggle to monitor contracts across an increasing and varied number of provider organization.
Therefore we can argue that good leadership is important in all organizations if they are to produce high quality goods and services. This feature of management cuts across cultural boundaries and is not just restricted to the developing countries in the third world in Africa and Asia (Peters & Pierre, 1998). However it’s good to appreciate that this leadership and its outcome is not affected by the culture of a people and therefore it is expected to vary in certain aspects.
The above criticism of NPM has received interest in the active role of the state in some aspects of development. As United Kingdom’s Secretary of State for International Development said, the main focus of development policy which is elimination of poverty could only be achieved through strong and effective states and that the era of complete enmity to the public sector and to state provision was coming to an end (Jan Eric 2000).
Conclusion
New Public Management aim was to enhance cost effective methods as well as accountability. While the adoption of these NPM measures seem to have been of great benefit to some instances, they have also been found to have real constrains in applying them especially in the third world countries. The NPM implementation have raised question even to the developed countries with mature public administration systems (Mead, 1996).
From the factors driving change it’s apparent that the conditions for introducing NPM reforms in developing countries may be very different from those of developed nations NPM reforms in developing countries appear to be based on a common frame work with those in developed countries and therefore seem to follow a common master plan rather than a process or contingent approach (Agranoff & McGuire. 1998).
While the new public management approach may not be a panacea for the problems of public sectors management in developing countries, there should be a careful adaptation of some elements since the implementation needs to be sensitive to realize operations.
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