Impact of New Public Management on the Society

Introduction

In the past decades, there have been numerous changes globally resulting in the transformation of society. For instance, there has been a dramatic change with regard to information technology resulting in the growth of the global economy. This is due to the fact that there has been increased global integration. The public sector has also undergone numerous transformations over time. The transformation of the public sector has resulted from the government’s efforts to modernize the operation of public sectors. The shift in the management of the public sector has mainly occurred in industrialized countries. For effectiveness in the operation of the public sector, the government formulates various public sector policies. The transformation in the public sector has resulted from a change in the role of government and its agencies towards society. A change has also occurred in relation to service delivery and employment within the various public sector organizations. This has culminated in the emergence of a public sector model which is generally referred to as New Public Management (NPM) which has been in existence since the 1980s. According to Sanford, New Public Management refers to an agreement amongst various parties that include the public, their elected representatives, and the public service (p.3). The general public and the politicians desire effective services from the public sector organizations. To achieve this, more managerial autonomy is given to these public sector organizations. To this end, New Public Management entails increasing efficiency within the operation of public sector organizations. This is through the incorporation of business and other market principles that are mainly related to the operation of the private sector into the public sector. This means that the public sector becomes more lean leading to a reduction in public activities. Through the NPM, there is a shift of the concept of public administration to public management. The discussion of this paper entails an analysis of the impact of New Public Management on society.

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Key elements of New Public management

Managerial ism

In relation to public administration, managerialism refers to the process of incorporating business management concepts that are aimed at increasing profitability and efficiency into diverse public agencies. Amongst the business management concepts that are considered include strategic management concepts such as planning, organizational redesigning, and re-engineering. The objective of integrating managerialism in the public sector is to increase economic efficiency in the public sector (David p.12).

Through the managerialism concept, new public management has resulted in the increased discipline in relation to the utilization of public resources.

Market competition

New public management has also integrated the concept of quasi-market. Through this structure, it has become possible for the public sector to attain efficiency that results from a free-market effectively. This is due to the fact that the equity benefits of the traditional public administration model are not lost. The adoption of the quasi-marketing concept has led to the integration of contracting and competitive tendering. This has resulted in the creation of a competitive environment amongst the various agencies that provide services to the public. Integration of market competition concept into the public sector has made the public institutions to be more customers oriented. This has culminated in the public sector firms emphasizing more on the quality of the services delivered according to the needs of the users.

Factors that have resulted in the emergence of New Public Management

Economic pressure

In most economies, there was increased pressure for change in the operations of the public sector. For instance, the United Kingdom and New Zealand governments experienced numerous pressures to change the operation of the public sector and had the necessary mechanisms to enhance the change. The main objective of changing the operation of the public sector was to increase the rate of economic growth. This is due to the fact that these countries were experiencing fiscal crisis leading to imbalance of payment deficits. According to Flynn, there was a slow down in the economic growth in most countries. For instance during early 1990’s Canada experienced a high economic growth in terms of gross domestic product (GDP). However, there was a reverse in economic growth from 1997 to 2000 leading to a reduction in GDP (p.12).

These imbalances resulted into inefficiency in the government effort to meet its public expenditure. Adoption of the New Public Management would result into cutting of the service delivery cost on the public and also control the cost (George p.23). Upon coming into power in 1979, Margaret Thatcher resolved to change the sluggish rate of economic growth in the country and the lazy public service. This was similar to New Zealand with the election of the Labor Party in 1984. The need for change resulted from the recognition of the fact that the economic policies adopted by the country were not resulting to the desired economic growth. The resolution by the New Zealand Treasury was to adopt a change within the public sector. The changes included economic deregulation and privatization of the stated-owned firms and reforms of the public sector management. This resulted into an adoption of strategies that would result into public sector institutional changes (Barbara p.86).

Political commitment

The political leaders appreciated the need for changing the operations of the main public sector institutions. The impetus for change amongst the political leaders resulted from two main theories that were proposed by the economists. These include the public choice and the agency theories. The public choice theory proposes that there are personal interests amongst the politicians to increase their departmental budgets. The result is that there will be an increased growth within the public sector in relation to the private sector. On the other hand, agency theory contends that there is a principal- agent relationship that exists within a particular contract. The information available to the principal and the agents together with their bargaining skills describes the nature of this contract. The public servants who were the agents had for a long time exploited the information advantage (George p.24).

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Increased innovation in the state and local government

There was increased innovation in the various practices of the local and state government. Information about these changes in programs was effectively disseminated to the public through reliable networks. An example of such innovations is the 1986 Ford Foundation in the State and Local government’s programs. This innovation was aimed at limiting the public criticism of the government by publicizing the effectiveness in the operation of government programs. In US, Bill Clinton was amongst the reformers of the federal government. This is evident from the fact that he delegated to his Vice President Al Gore the duty of ensuring that there were effective reforms within the federal government. The recommendation of the findings of the board that was instituted by Al Gore included the incorporation of the concept of New Public Management. This was through reducing red tape within the operation of government institutions, and incorporation of Information Technology. The effect is that there would be increased efficiency and effective customer service within the public sector. Through this innovation, a reduction of $ 108 billion within the first five years of reformations in the federal government was expected. The size of workforce in the public sector would be reduced by 12% (Sanford p.5).

There was immense commitment within the two principals to reform the public sector. The reformation of the federal sector required the presence of executive orders and other legislative changes. Clinton provided the legislative changes on piece-meal basis where some of them were accepted by the Congress.

Development in information technology

The availability of information technology provided the necessary structures to enhance reformations within the public sector. Through information systems, managerial decentralization in the public sector has been effectively implemented through institution of the executive agencies. Implementation of decentralization demands a high level of accountability. Information technology increases confidence in decentralization since it becomes possible to report information related to performance (George p.12).

Benefits of new pubic management to the public

High quality services

The incorporation of New Public Management concept has resulted into increased efficiency in the operation of the government. Amongst the reforms that have been made to the public sector is the integration of information technology. This has resulted into an improvement in the quality of services delivery to the public. For instance, information technology has resulted into development of electronic government. This makes it possible for the citizens to receive various government services more efficiently. The government has integrated the private sector concept of customer focus. Through this, the NPM has resulted into a trend where the priority of the government is to deliver services to the tax payers. Through information technology, the citizens are able to access information. In Canada, the government has considered information technology as one of the avenues of transforming the public sector, evident in the case of United States. The major technologies that have been integrated in the public sector include the internet, electronic kiosks and the electronic transactions.

The incorporation of the concept of competition within the operation of public sector has resulted into increased efficiency and effectiveness within the public sector. The concept of competition is meant to improve service deliverey within the public sector. This is due to the fact that the best public sector sets the basis for improvement of the other sectors. The effect is that high standard in the delivery of services is achieved within all the public sectors.

A high quality of services within the public sector is also enhanced by the incorporation of the concept of total quality management. Total quality management is a business concept that implies consistency in meeting of the customer services. Through incorporation of this concept in the public sector, the society receives quality services from the government. For example, amongst the public sector where the concept of total quality management has been adopted in United States is healthcare. The government is more concerned on improving delivery of health care services to the public. For instance, within the public health care system, the government aims at improving the quality of service delivery with respect to family planning and other related reproductive health. Through total quality management, the public is able to receive services effectively (Jalan, Taman, p. 302). Through the total quality management concept of NPM, there has been an increase in value regargarding the quality of services that the citizens receive from the public sector.

Increased Accountability

Amongst the themes of NPM, is the need to increase the level of accountability within the operations of the public sectors. This has made it possible for the government to be able to hold the individuals in the public sector accountable financially. To ensure increased accountability, there has been incorporation of management accounting concepts such as the balanced score cards and the Activity Based Costing (ABC). Through the ABC models, it is possible to identify the activity centers in the various public sectors thus increasing the chances of assigning cost to the private sectors. Currently, there is an increase in the demand for public services within the society. On the other hand, the financial resources are limited. Through ensuring financial accountability, there is a reduction in the level of fraud within the public sector.

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Accountability within the public sector is also enhanced through the integration of the concept of auditing and other monitoring mechanisms. This has resulted into increased transparency within the operation of the government. Through the tools used in monitoring performance and accountability within the public sector, the society has benefited from the effective utilization of the taxpayer’s money.

Accountability has also been increased with the incorporation of Performance contracting amongst within the various government departments. According to George (p.23), performance contract refers to a covenant that is either written or negotiated between the government or its agencies and units which deliver services to the public. The purpose of incorporating performance contracting in the public sector is to facilitate the process of evaluating the performance of the public sector organizations more effectively. As a result, this makes it possible to evaluate the performance based on the results acquired other than being confined to the bureaucratic regulations. This is through incorporation of the concept of performance management which ensures that there are expectations set concerning the duties of the public servants. New public management entails a comprehensive reporting structure detailing the government’s achievements. Performance management also entails pre-determination of the expected results and a feedback mechanism which ensures that there is a well established responsiveness within the public sector. This can either be through positive or negative rewards such as incentives and sanctions respectively.

Decline in Inequalities

Increased information availability amongst the citizens has resulted into a high probability of highlighting the existing inequalities. This makes it possible for the government to address them comprehensively. It has also become possible to continuously track the possible disparities in the desired outcome. The availability of information enhances the probability of making changes to the relevant policies. This means that through incorporation of the concept of NPM, the citizens have been greatly incorporated in the process of public policy formulation. This has resulted into an increase in power amongst the citizens from the acquisition of more knowledge. This is due to the fact that they can be able to provide information that would enhance the formulation of policies by stipulating the changes that they desire done within the operation of public sector (Kate, Stephen & Ewan p.150).This means that the availability of information to the public increases the ease of administration within the public sector. Through adoption of business concepts, the society is able to understand the operations of the government well.

Increase in Business Chances for External Organizations

NPM incorporates the concept of competitive tendering with the objective of increasing efficiency in the operation of the local government. The public healthcare system and the local government are amongst the public sectors that have integrated completive tendering. This concept entails inviting of tenders from the external organizations in the event of these public sectors conducting a particular activity. The issuing of tender to the external organizations is based on a competitive basis. The details of the particular job are circulated amongst the potential contractors. The contractors bid for the job by specifying specific details such as price, duration to be taken and the description of the how the task will be undertaken. The external organizations may either be private firms or non governmental organizations. The NPM concept of competitive tendering requires that the issuing of the tender to be based on the quality of operation, speed and history of the contractor. These firms are more effective in the execution of the tenders compared to the public sector firms. Through this, the society benefits by effective acquisition of tenders from the public sector thus promoting the operation of these firms.

Business opportunities to external organizations are also increased through the incorporation of the concept of contracting out. This refers to the concept where the public sector purchases various services from the private sector. The effective operation of the private sector requires availability of diverse services. Some of these services include printing, catering, cleaning, maintenance of public sector assets amongst others. There are diverse private sector organizations that offer such services. According to research, it has become evident that through contracting out, public sector can save up to 20% in terms of cost while the quality of services is greatly improved. A number of countries such as New Zealand, Australia, UK, Nordic countries and USA have greatly adopted the concept of contracting out various support services in the operation of the public sector. For instance in the US , the government contracts out the fire services while UK and Australia contracts out prison services to the unemployed. The table below illustrates the percentage cost in terms of saving in public sector in various countries as a result of contracting out services.

Country Percentage cost saved
United States 20
United Kingdom 20
Australia 15-20
Sweden 9-25
Denmark 5-30
Iceland 20-25

Source: Derry, Ormond, ‘New management what to take and what to leave.’

Increased Maximization of the Social Welfare

Through incorporation of new public management concepts, most governments are adopting the market concept of privatization. With regard to public sector, Hall defines privatization as the sale of the state owned enterprises or assets to individuals in the private sector (p.3).This have resulted into increased efficiency in the operation of the state- owned enterprises. This is due to the fact that there is reduced interference by the government in the operation of the state owned enterprises. Government ownership and control of public enterprises increases the chances of inefficiency in the operations of these firms. This is due to the fact that there is ambiguity in clearly defining the goals of the firm. Through privatization of public enterprises, service delivery becomes more efficient since there is a reduction in the magnitude of government control. Privatization results into these firms adopting the private sector model aimed at maximizing the shareholders wealth. With regard to the public sector enterprises, the government is aimed at optimizing social welfare.

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Running the public sector enterprises by the government increases inefficiency of service delivery since the set objectives can change from a particular administration to the other. This means that there is lack of commitment towards the public sector policies set by the particular governments. The concept of ownership is one reason why public sector enterprises are not committed to the fulfillment of the set goals. Through privatizing of some of the state owned enterprises, the government is able to reduce on its budget deficit. This enables the it to meet most of its expenditures.

Increase in Responsiveness to Demands of the Citizens

The traditional model of public administration is characterized by a high level of bureaucracy which resulted into failure of the public sector. This is due to the fact that the government runs the state owned institutions in monopoly. Through new public management, authority in the operation of the public sector has been greatly devolved. Bureaucracy resulted from the centralization of powers in the public sector. In reforming the public sector by adopting the concept of public management, most governments have realized that the centralized model is ineffective in service delivery.

Devolution has resulted into replacement of the tall organization hierarchies with more lean structures. The lean structures have enabled the formulation of more specific goals in relation to the diverse public agencies. Authority has been devolved amongst the various public agencies such as the ministries, departments, local and central government. This has resulted into increase flexibility which is a requirement of public management. Through devolution, there is reduction in the process of making decisions within the public sector. This has resulted into an increase in responsiveness to the demands of the citizens.

Increased bargaining power within the public

New public management has resulted into incorporation of personnel management concepts into the public sector. Amongst the concepts that have been integrated include systems of job classification and working arrangements, mobility and terms of recruitment. Various public sector departments have the discretion of formulating a personnel management strategy that is efficient for their operation. The only requirement that they are supposed to meet is ensuring that a given degree of unity is maintained. This ensures that there is harmony across the various departments. This has resulted into an increase in the bargaining power of the public upon being recruited into the public sector (Derry Para. 12).

On the other hand, through new public management, employment into the public sector is based on contracts.This is a shift from the traditional public administration model which advocated permanency. The contracts are limited to a given duration of time. This makes recruitment into the public sector to be competitive while the payment is based on merit. This has culminated into increased efficiency within the public sector and a reduction in the total cost of wages. This is due to the fact that the contract is term limited thus reducing the large number of workers in the public sector who are not efficient.

Negative effects of new public management to the society

New public management emphasizes on cost reduction in the operation of public sector. This may result to future inefficiency in meeting the public services. This is due to the fact that NPM may result lead into increased pursuit of efficiency through policies that are flawed. This means that the benefits attained through such public policies will be short term. This will limit the capacity of the government to cater for public service goods and services such as education, health, environment and technology.

NPM have a destabilizing effect in the event that there is no effective control of the change being incorporated in the public sector. Ineffective implementation of change within the public sector may result from mistakes that were made in the process of formulating the policy.The change may be irreversible and distract the provision of public services by the government. Such mistakes in public policy may result into economic and political instability (George p.23).

Through integration of decentralization, the operations of the public sector become fragmented amongst various agencies. This results into loss of public and local accountability. This is due to the fact that most of the public agencies become privatized and in other cases contracted out. This is disadvantageous to the society since there is a threat of an increase in price of the public utilities. This is due to the fact that contracting out is made to firms that have got a profit motive. For example in UK, there has been increased privatization of the electricity industry during the period 1995-1995. The saving of cost as a result of privatization was due to the fact that most of the people in the electricity and the coal industry lost jobs. Those who benefited from the privatization were the new shareholders while the cost of electricity to individual consumers rose. According to a report by World Bank on privatization of the electricity industry, the magnitude of loss to the individual consumers in terms of income loss ranged between 1.3 and 4.4 billion euros. On the other hand the government gained between 0.2 and 1.2 billion euros while the shareholders gained a significant amount of 9.7 billion dollars. This shows that privatization of some of the key utilities such as electricity only benefits the industrial consumers and not the households whose consumption is in small amount.

Loss/Gain in billion euros
Consumers -1.3 to -4.4
Government 0.4 to 1.2
Shareholders 8.1 to 9.7

On the other hand, the increase in contracting out within the public sector results into an increase in the transaction cost. The cost increases from the fact that there are a large number of service providers who have to be paid by the government. The pricing mechanism of these firms in the provision of public services has a profit motive. This means that there will be spill over effects to the citizens in terms of increase in the tax paid. Through NPM, the state welfare collapses due to adoption of market mechanisms. This results to emergence of unethical behavior amongst the providers of public services. This may culminate into social exclusion to the poor.

Conclusion

The numerous transformations within the environment have affected various sectors in the economy. The public sector has particularly been affected. This is through the integration of new public management in public administration. The NPM concepts are aimed at increasing efficiency within public administration. NPM entails two main elements which include managerial ism and market competition. Managerial ism enhances the process of re-invention, reengineering and strategic planning within the public sector. This results to increased discipline and effective utilization of the public resources. Market competition enables the integration of quasi-market concept. This has made it possible for the integration of the concept of competitive tendering and contracting. Market competition has led to more focus in service provision to the citizens.

A number of factors led to the emergence of new public management. These include economic pressure, political commitment, and increased innovation in the state and local government and innovation of information technology. Economic pressure resulted from the increased fiscal crisis. This made various governments to devise mechanisms to reduce cost in public sector. The political leaders were committed at transforming the public sector through formulation of various legislations. Information technology provided the necessary structure to enhance the reformation of public sector. The society has greatly benefited from the adoption of new public management concepts. This is due to the fact that there has been an increase in the quality of service delivered. The improvement in quality of services delivered results from the incorporation of total quality management which ensures that there is consistency in the services delivered to the society. Competition in various public sectors has made it possible to set standards to be emulated by other firms in the public sector. Information technology has resulted into equality in the distribution of public services. This has been made possible due to the development of electronic government.

Accountability in the operation of public sector has also been enhanced. This is through integration of accounting concepts such as ABC and the balanced score cards. There is also increased monitoring of the public sector operation through increased auditing. This has limited chances of fraud which would limit public service delivery. Through integration of information communication technology, the society has an impact in the process of policy formulation. This is due to the fact that they can raise their concern in relation to the particular public policy. This means that the policy formulated effectively addresses the needs of the society which can result into a decline in public policy inequalities.

The concept of contracting out has enhanced the operations in the private sector firms within the society. This is due to the fact that the government contracts out some of these firms to deliver certain services to the public sector firms. The effect is that, there is an increase in business opportunities and hence the social-economic welfare. NPM has made the public sector to be more responsive to the needs of the citizens. There has also been an increase in bargaining power within the society during recruitment into the public sector. This is due to the fact that individual agencies have the discretion of formulating personnel management policies.

Despite these benefits, NPM has not addressed the associated costs to the society as a whole. Through privatization of some utilities such as electricity, the general public is affected with regard to increased prices. There is also a threat in political and economic instability if the public policies are not well formulated. Ineffective policy implementation may result to poor service delivery. Despite of these limitations, NPM has resulted into increased benefits within the society.

Works Cited

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Dhalia, Jalan,& Uda, Taman. “Achieving total quality management in public health systems” Journal of Health Management. 2009, Vol. 141.pp. 15-20. Web.

Edward, David. Managerial influences in public administration. Tennessee: University of Tennessee, 2000.

Jacobs, Kerry & Dahanayake, Sunil. “New public management, managerial ism and value of money: a review of empirical literature with specific reference to Australia.” Canberra: Australia National University, 2008.

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McLaughlin, Kate, Stephen, P., Ferlie Ewan. New public management current trends and future prospects. Rout ledge: Rout ledge publishers, 2002.

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