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           The New Public Management & its Legacy  

“New Public Management” (NPM) is a slippery label.  Generally, it is used to describe a management culture that emphasizes the centrality of the citizen or customer, as well as accountability for results.  It also suggests structural or organizational choices that promote decentralized control through a wide variety of alternative service delivery mechanisms, including quasi-markets with public and private service providers competing for resources from policymakers and donors.  NPM does not claim that government should stop performing certain tasks.  Although the New Public Management often is associated with this policy perspective, NPM is not about whether tasks should be undertaken or not.  It is about getting things done better.

NPM was conceived as a means to improve efficiency and responsiveness to political principals.  Its origins were in Parliamentary democracies with curiously strong executive powers, centralized governments, and little administrative law.  In this archetypal setting, NPM seems to embody the idea of a cascading chain of contracts leading to a single (usually Ministerial) principal who is interested in getting better results within a sector portfolio over which he or she has significant and relatively unchallenged authority.

One area of reform that illustrates many of the NPM principles is the creation of semi-autonomous agencies for service delivery (Aucoin 1996).  The NPM argument for agencies is that service providers should concentrate on efficient production of quality services, with the distractions of evaluating alternative policies removed.  The discussion of the creation of “executive agencies” in the UK and the similar developments in Australia, Canada, France, Iceland, New Zealand, and Norway has been replete with references to clear, well-defined targets that allow providers to concentrate on their core business.  Similarly, policy-making is seen to be more focused, more rigorous, and sometimes even more adventurous if it can be made without the undertow of concern for the existing service providers.  And once purchasing has been detached from policy-making, there are opportunities for creating contract-like arrangements to provide performance incentives.

Has the NPM won?                                                         [ TOP ]

In the late 1980s and early 1990s NPM was presented as “a public management for all seasons” (Hood 1991) or the “one-best way” (Gendron, Cooper, et. al. 1999).  Many managerial innovations are well packaged, but NPM was distinctive in that it carried overtones of the end of history, suggesting that we were lucky to be in public management at a time when the truth had been discovered (Osborne and Gaebler 1992).

Undoubtedly, NPM has left its mark.  Yet measured against its self-proclaimed universal relevance, NPM clearly has not become the predominant public management paradigm in developing countries.  Any review of public management developments in any less developed country demonstrates that hierarchical bureaucracies have not been replaced substantially by chains of inter-linked contracts.  Certainly, there have been very significant reforms, particularly in the water and health sectors, that have drawn from the NPM menu (Minogue, Polidano, et. al. 1998; Batley 1999).  But most government functions are still performed by vertically integrated bureaucracies functioning pretty much as Weber imagined.

Did it work?                                                                    [ TOP ]

While there is relatively little NPM to be found in developing countries when compared to the early predictions, there is even less evaluation of NPM’s impact.  The most comprehensive overview of NPM type reforms is offered by Batley (1999).  Summarizing the conclusions from a 5-year review of “the changing role of government in adjusting economies” in South Asia, Sub-Saharan Africa and South America, Batley finds that the effect of NPM reforms has been mixed, at best, with some improvements in efficiency and mixed effects on equity.  On the downside, he notes that the transaction costs of radical reforms to autonomize service delivery agencies tend to outweigh the efficiency gains of unbundling, and that reforms that seek to separate purchasers from providers sometimes reduce accountability.

Autonomization stories are common, but success seems relatively rare.  (See Difficulties with Autonomous Agencies).  Extensive creation of arms-length agencies is reported by Mukherjee and Wilkins (1999).  However, severe problems have been reported in Central and Eastern Europe, and in the former Soviet Union.  The use of autonomy as an attempt to escape inevitable closure rather than as a device for improving efficiency is reported in Africa (Ives 1998). Case studies of the autonomization of agricultural research organizations in Africa, Asia and Latin America found “serious problems in achieving the desired goals” (Nickel 1998).  Meanwhile, the successes of autonomization in the health sector seem to be predicted more than found, although clearly there are some successes (Castaneda 1997; Harding and Preker 1999).  On balance it is difficult to disagree with Polidano’s (1999) conclusion that evidence of the impact of NPM is “perplexingly equivocal.”  Polidano emphasizes the importance of contingency factors, arguing that few generalizations are possible concerning NPM.

Why has the impact in less developed nations been so modest?
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There are three likely explanations for why NPM has delivered less in developing countries than initially claimed.  First, as many providers have remained in the public sector alongside their purchasers, and since there consequently is little or no chance of judicial intervention to resolve disputes, many NPM “contracts” are intrinsically flimsy and need the backing of a watchful public with high expectations for government performance.

Second, Old Public Disciplines, including a public service ethos, remain vital in the NPM era.  As Schick (1998) notes, NPM discussions of performance contracts and decentralized authority all assume that budgets (whether or not expressed in performance terms) function properly to constrain line departments while committing central agencies to the provision of a certain level of funding.  The NPM debate also has assumed that staff – although prone to self-interest and often scheming to capture the policy process – are largely constrained by some clear standards of behavior.  Moreover, it assumes that policy is authoritative and that conflicting or inconsistent ministerial decrees do not undermine the credibility of government policy.  NPM proponents have not seen the need to spell out how these good things come about – but clearly have relied on them as foundations for their reforms.

In many developing countries, the Old Public Disciplines were absent as NPM-like reforms were launched.  This is not a “stages of development” argument in which a long period of tighter control by central agencies is the prescription.  It is an empirical observation that predictable resourcing, credible policy, and credible regulation of staff are pre-requisites for effective contract-like arrangements.  Perhaps there are some quick ways to get those disciplines in place – in which case leapfrogging is a sensible strategy.  But regardless of how they are introduced, these disciplines are fundamental to any conception of performance; and few reforms can gain traction without them (Manning, Mukherjee, et. al. 2000).

A third explanation for the apparent under-performance of NPM in developing countries is simply that the impact of these reforms has been marginal under any circumstances.  Even in New Zealand it is difficult to demonstrate precisely what has improved as a result of the systemic changes (Boston 2000).  Similarly nuanced findings are reported in the UK (Pollitt, Birchall, et. al. 1998).  As a tool for greater efficiency, NPM seems to generate, at best, about 3% savings year-on-year in running costs (see Scott and Taylor 2000).  Given that running costs are small relative to program costs, this is a distinctly modest savings.  In many less developed countries, running costs represent a larger share of budgetary expenditures than in the OECD, and thus a 3% savings would be more significant.  The big financial gains, however, have been connected with privatization and the associated New Public Policy.

Recommended Readings                                                   [ TOP ]

  • Allen, R. 1999. “’New Public Management:’ Pitfalls for Central and Eastern Europe.” Public Management Forum 1(4).
  • Aucoin, P. 1996. “Operational Agencies: From Half-Hearted Efforts to Full-Fledged Government Reform.” Choices: Institute for Research on Public Policy, 2(4).
  • Batley, R. 1999. The Role of Government in Adjusting Economies: An Overview of Findings, International Development Department, University of Birmingham, Birmingham, Alabama.
  • Boston, J. 2000. “The Challenge of Evaluating Systemic Change: The Case of Public Management Reform.” Paper prepared for the IPMN Conference "Learning from Experiences with New Public Management," Macquarie Graduate School of Management, March 4-6, Sydney.
  • Castaneda, T. 1997. “Health Sector Reforms in Chile: Deconcentration of Hospital Services and Decentralization of Primary Health Care.” Paper prepared for HDD, World Bank.
  • Dunleavy, P., and C. Hood 1994. “From Old Public Administration to New Public Management.” Public Money and Management (July – Sept.): 9-16.
  • Flynn, N. and S. Pickard. 1996. Markets and Networks: Contracting in Community Health Services. Buckingham, UK: Open University Press.
  • Gendron, Y., D. J. Cooper, et al. 1999. “In the Name of Accountability: State Auditing in the Province of Alberta and New Public Management.” Paper presented at the Critical Perspectives on Accounting Conference, April 22-24, City University of New York, New York.
  • Harding, A. and A. Preker, eds. 1999. Innovations in Health Service Delivery: Corporatization in the Hospital Sector. New York: Oxford University Press.
  • Hood, C. 1991. “A Public Management for All Seasons?” Public Administration, 69(Spring): 3-19.
  • Ives, D. 1998. “Issues Concerning the Use of ‘Agencies’ in the Public Sector.” Presentation at the seminar "Reform of Public Administration,” February 4, Riga, Latvia.
  • James, O. and N. Manning. 1996. “Public Management Reform: A Global Perspective.” Politics 16(3): 143-149.
  • Kelly, J. and J. Wanna. 2000. “Are Wildavsky's Guardians and Spenders Still Relevant? NPM and Budgetary Politics.” In L. Jones, J. Guthrie and P.Steane, eds., Learning from International Public Management Reform. London: Elsevier-Oxford Press.
  • Kernaghan, K. 2000. “The Post-Bureaucratic Organization and Public Service Values.” International Review of Administrative Sciences 66(1): 91-104.
  • Manning, N., R. Mukherjee, et al. 2000. “Public Officials and Their Institutional Environment: An Analytical Model for Assessing the Impact of Institutional Change on Public Sector Performance.” Policy Research Working Paper No. 2427. World Bank, Washington, D.C.
  • Miller, P. 1996. “Dilemmas of Accountability: The Limits of Accounting”. In P.Hirst and S.Khilnani, eds., Reinventing Democracy. Oxford: Blackwell.
  • Minogue, M. 1998. “Changing the State: Concepts and Practice in the Reform of the Public Sector.” In C. Polidano, M. Minogue and D. Hulme, eds., Beyond the New Public Management: Changing Ideas and Practices in Governance. Cheltenham, UK: Edward Elgar.
  • Mukherjee, R. and J. K. Wilkins. 1999. “Unbundling Bureaucracy through Agency Creation.” Adjudicated paper presented at the IPAC National Conference, August 30, New Brunswick, Canada.
  • Nickel, J. L. 1998. “Institutional Reform of Public Research Organizations: Autonomy, Legal Status and Governance.” Working paper prepared for Rural Week, March, World Bank, Washington, D.C.
  • Osborne, D. and T. Gaebler. 1992. Reinventing Government. Reading, MA: Addison-Wesley.
  • Peters, B. G. 1998. “Governance without Government: Rethinking Public Administration.” Journal of Public Administration Research and Theory, 8(2): 223-243.
  • Peters, B. G. 1996. The Future of Governing: Four Emerging Models. Lawrence, KS: University of Kansas Press.
  • Peters, B. G. and D. Savoie. 1994. “Civil Service Reform: Misdiagnosing the Patient.” Public Administration Review, 54(5).
  • Polidano, C. 1999. “The New Public Management in Developing Countries.” Institute for Development Policy and Management, University of Manchester, Manchester
  • Pollitt, C. 1993. Managerialism and the Public Services. Oxford: Blackwell.
  • Pollitt, C., J. Birchall, et al. 1998. Decentralising Public Service Management. Hampshire, UK: MacMillan.
  • Romzek, B. S. 2000. “Dynamics of Public Sector Accountability in an Era of Reform.” International Review of Administrative Sciences, 66(1): 21-44.
  • Savoie, D. 1995. “What Is Wrong with the New Public Management?” Canadian Public Administration, 38(1): 112-121.
  • Schick, A. 1996. The Spirit of Reform: Managing the New Zealand State Sector in a Time of Change. Wellington, New Zealand: State Services Commission.
  • Schick, A. (1998), 'Why Most Developing Countries Should Not Try New Zealand's Reforms', World Bank Research Observer (International), 13, pp. 23-31.
  • Scott, Graham and Taylor, Irene. 2000. "Autonomous Public Organisations In Thailand". Victoria Link mimeo. Wellington, New Zealand.

This page was authored by Nick Manning of the World Bank.  It was submitted on 10/3/00.

Has the NPM won?
Did it work?
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