Managing in the Public Sector

New Public Management

Authors: (B00185272)

Module: Managing in the Public Sector

Module Code: BUSN09021-9289

Date of Submission: 01/07/2015

Word Count: 2,200

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The late 1980s public administration has evolved to demonstrate a businesslike

approach that is known as NPM (New Public Management). The author of this

paper will explain a brief history and the introduction of Christopher Hood’s seven

tenets of NPM and discuss the assertion that NPM has made managing in the

public sector similar as managing in the private sector. By demonstrating tools

that’s used in the private sector but also used in public sector with an end result.

The author will assess a strategy which involves a scorecard and examples of

Renfrewshire Council services, including service improvements within the

community with an overview of other public sector companies and a description of

the private companies finishing with a conclusion.

(Hood, 1991) labeled NPM as an abbreviated name for a set of generally similar

administrative doctrines that controlled the bureaucratic reform agenda in many

Organization for Economic Cooperation and Development (OECD) countries from

the late 70s early 80s and procedures of the public sector in order to make it

competitive and efficient in resource and service delivery (Hood 1996, p271) Figure

1 provides seven doctrinal elements of NPM with a meaning and a justification.

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Figure 1: (Hood, 1991)

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It’s worth noting that such seven elements of NPM don’t occur in every situation

meaning if one element is absent from the list, it does not compromise the NPM

strategy. (Pollitt 1995,p133) states that such list of elements is a ‘shopping basket’

for whom, who wish to reform the public sector however internationalization NPM

has significant variations from country to country as they don’t have a single

intellectual provenance but do support common themes. In the past, most

Organisation’s for Economic Cooperation and Development (OECD) countries;

Australia, New Zealand and Sweden amongst others have experienced exposure to

the seven doctrines (Hood, 1995). Although OCED countries have experienced

exposure, over the period of the twentieth century, numerous countries have

witnessed changes in the public service that’s being provided (Pollitt, 2003, p.19)

These changes in reforms (Pollitt 2003,p.19) suggests that it impacts the

connections between the public and private sectors in a range of ways which still

continue to change and develop in today’s world, for example;

“In many OECD countries ‘public-private partnerships’ (PPPs) have become

very fashionable, especially in the area of urban regeneration, transportation

and other infrastructure”

“Many other public services have been ‘contracted out’. This means that the

public authorities still retain responsibility for seeing that the service is

provided, and still pay for it and set the standards and requirements for it, but

the actual work of delivering the service is undertaken, on contract, by some

other organisation” (Pollitt, 2003, p.19)

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The New Public Management (NPM) concept emerged in the United Kingdom (UK)

and many developed countries in the 1980s (Hood, 1995). According to (Hood,

1995, p.48) the description of The New Public Management is the term used to

describe a change in public management since the change of power from the

election in 1979. At this time, Britain’s first female swept to power at the doors of

NO 10 Downing Street on 4 May 1979. As newly elected Prime Minister, Margaret

Thatcher (Conservatives) served three consecutive terms in office (BBC, 2015).

During this period of time, the concerns were on the development of new

mechanisms for the accountabilities within the public sector. (Oliver and Drewry

1996, p.1) discuss “the years since 1975 when Margaret Thatcher became the

Prime Minister have particularly associated with radical programs to reform public

services, both substantively, in terms of the nature and range of services provided

by the state and institutionally, in terms of the way in which service provisions is

organized and funded”. Albeit the state dominated and organized public services, it

was not achieving to deliver quality services efficiently or effectively to society

before the rise of NPM in the early 1980s.

Before the Thatcherism era, (Mackie 2005,p.5) discusses that the Plowden

Committee (1961-1963) was a key influence on the relevance of management in the

public sector, controlling the Public Expenditure which recommended a series of

reforms in planning and control and economic management. (Keeling 1973)

supports that such decisions by the Plowden Committee were essential to allow any

significant improvements in management within public service.

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(Mackie, 2005, p.2) continues, “In 1968, the Fulton report (1968) gave a further

description of ‘management’ which was wider than any given previously and that

was much more consistent with the use of the word business.

Management in the public sector are more engaged which passes through to senior

level, allowing them to participate in operational and management strategy with a

more ‘hands-on approach’ requiring a clear responsibility for action (Hood, 1991).

An example of this, is the government outlining their own expectations for the

organisation in the public sector to achieve results, however the public sector

(organisation) will draft up its own strategic goals to submit for authorization to

implement such goals (Mackie, 1995). These goals could include but not

exhaustive, standard of performance, explicit and specific targets, performance

indicators and reporting. While considering Strategic planning, it’s also worth

taking into account of performance and value for money?

Governments can enhance performance by creating competition in service, using a

Compulsory Competitive Tendering (CCT) process, which was introduced in the

early 80s in the United Kingdom (UK) that allows the ‘best’ contractor to win over

the public sector organisation that it can provide the best value for money. The

government can then ensure that performance monitoring and reviews take place,

this allows such government to determine costing for a particular service which can

lead to term contracts and other agreements. By being competitive, this may result

in rivalry as this would lead to reducing costs and better service standards (Hood,

1991).

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An example of the tendering process is the Local Government Planning and Land

Act 1980 that formed a set of rules to tender for building and civil engineering work

which was extended in 1988-1992 to other areas, to street and building cleaning,

catering and financial services amongst other sectors which allowed the winning

contractor to use their own employees and by doing such activity, the main

objective is to reduce the overall costs without impacting service and quality. By

changing the pattern of the workforce .i.e. reducing workforce or introducing

younger employees for better productivity which would lead to a competitive

environment with the expectancy of higher efficiency (Flynn, 1996. P58). NPM

suggests that decentralisation has a role to play within the public sector.

(Flynn, 1996) suggest that pushing bureaucracy into characteristics of public life

shifting power from government into elected councils and public service will create

an environment for sustainable growth, better public services and a stronger

society. This is supported by (Falconer, ND) “It is more efficient because smaller

units of activity are better able to establish objectives and work towards achieving

them more quickly and more directly. It is more accountable, because the new

public management replaces the ‘faceless bureaucrat’ with visible, responsible

managers who directly accountable to the public”. Does this mean that managing in

the public sector is the same as managing in the private sector?

(Hood, 1991) explains that the public sector can move away from a military style to

allow greater flexibility in recruitment and rewards, such move would allow private

sector management tools to be used which would have already been established.

(Falconer, ND) explains, it’s important within public management is that such public

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sector should look to seek and behave in a business like environment with business

principles being applied, offering a reward structure for its employees like the

private sector, offering performance pay and flexible working to run parallel with

members of the private sector. On the back of such structure, resource

management must be aware of such labour disciplines.

The foundations of NPM will assist in introducing such disciplines reducing direct

costs financially and labour costs. In such activity, public sector needs to consider

public demands with an attitude of lean thinking, resulting in reducing costs,

reducing waste, while sustaining high quality and customer satisfaction by using a

methodology Six Sigma (Mackie, 2005).

Managers in the public sector must evaluate financial performance, customer

knowledge and internal processes and growth. Such measures are found in The

Balance Scorecard, originally designed by Kaplan and Norton, (Mackie, 2005) The

Balance Scorecard was designed for the private sector which has the company’s

strategy in mind, providing objectives. Managers can establish what’s to be

delivered and sustain the company’s strategy and monitor its development in four

key dimensions as demonstrated in figure 2.

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Figure 2: (Mackie, 2005)

The success for the public sector is not measured by profit (unlike private sector)

but how efficiently and effectively the public sector can achieve the necessities of its

stakeholders with an end result of customer satisfaction (Mackie, 2005).

Ultimately, customer satisfaction can be influenced by state power (Government)

and its reforms, by such movement, the behaviors of public management have to be

pro-active to new policy wishes being introduced by the state. In turn, any decision

made can effect society resulting in public management being challenged from both

sides and politicians need to depend on public managers to achieve their goals set-

out (Pollitt, 2003, p83). The challenges from society can be based on the outcome

of poor elections turnouts, poor communication or general weakness of

accountability. (Joyce, 1999) explains “On the other hand, there are concerns about

the ‘democratic deficit’, meaning that there are problems about assuming that every

direction set by politicians, every priority or policy they establish, is completely in

line with the genuine wishes of the public”. The public sector has to consider a

range of service strategy’s, includes pressure-group lobbying, political bargaining

and legislative mandates and budgeting (expenditure) which can impact local

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authorities. In Scotland local authorities can use annual capital “allocations” which

is provided by the Scottish Executive, which can be used on education, social work,

roads and transport and general services.

Reviewing the ongoing commitment of Renfrewshire Council, they are undertaking

actions to manage the impacts of the UK Government’s Welfare Reforms which

include the establishing the ‘Council Tenant Assistance Fund’ to assist those

affected under the occupancy rules. The council will also deliver a £138Million

investment program to date to upgrade council homes with new heating systems

and kitchens and bathrooms (Renfrewshire.gov, 2015). The above examples

provide an insight the work the local authority is doing and demonstrates that

service is a priority within local authority. (Mackie, 2005) supports the expenditure

to homes by explaining that council’s own housing stock is ring-fenced within

Housing Revenue Account (HRA) which includes income from rent which

contributes to reinvestment within local authority. Such investment is allowing

Renfrewshire Council to rapidly improve the housing service within, although

compared to the Scottish Housing Quality Standard, improvements have still to be

made which is demonstrated in Figure 3.

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Figure 3: http://www.improvementservice.org.uk/benchmarking/tool.html

Councils have their own each individual targets which is linked to performance and

service plans which relates to having a Single Outcome Agreement (North-Ayrshire

Council, 2015). All Scottish councils share their performance in delivering services

to communities and how satisfied society are with each council’s service which can

be used as a benchmark to review their own performance and drive to make

improvements to service delivery within the councils community.

(improvementservice.org, 2015). It’s not just councils that are public services in the

UK.

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The National or Local Government have Schools, Hospitals, and local parks that

provide a service to society that are known as public sector which costs are covered

from the taxpayer which are unable to be used inappropriately. In public services,

the public does not pay for such facility such as Schools and Hospitals (Gov, 2015).

In recent years, public services are now private services, known as private sector,

an example of this is Rail Travel in the UK, which was privatised in 1993 (bbc,1993).

What are private services? This is a business activity that’s owned and run by

individuals which can be large companies or be owned by one person with an end

result to make profit. (Gov, 2015)

The author of the report has concluded that Margaret Thatcher and the

Conservatives have without doubt rightly or wrongly made an impact in the UK and

still demonstrate some values that was introduced in the late 70s early 80s. In 1991

saw the introduction of the seven tenets by Christopher Hood, which saw the public

sector become more competitive and efficient in resource which appears to have

peaked in the 90s. Does such NPM still a valuable concept in an ever changing

world today? Its theory is still used in today’s environment although times change

and adapt. Such concept of NPM can still satisfy management service delivery but

should be rebranded to support a new era with the current times. Comparing the

two sectors, public and private, it’s clear that the two sectors have a goal to achieve,

however its two separate goals with private sectors goal is to produce profit and

public sectors goal is service delivery to society, therefore public service will never

achieve the same as private sector although its attempted to act like a business.

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BBC News. (2013) Have train fares gone up or down since British Rail? [Online] Available: http://www.bbc.co.uk/news/magazine-21056703 [Accessed 27 June]

Falconer, P, Dr. (ND) Public Administration and the New Public Management Lessons from the UK Experience. [Online] Available: http://mh-lectures.co.uk/pa_npm.htm [Accessed: 5 June 2015].

Flynn, N and Sterehl, F (1996). Public sector management in Europe. Great Britian: Simon and Schuster International Group

Gov.UK. (2015) set up a private limited company [Online] Available: https://www.gov.uk/limited-company-formation/shareholders [Accessed 27 June]

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Gov.UK. (2015) Prime minister announces landmark wave of free schools [Online] Available: https://www.gov.uk/government/news/prime-minister-announces-landmark-wave-of-free-schools [Accessed 28 June]

Hood, C (1991). A public management for all seasons. 1991 Royal Institute of public administration ISSN 003-3298

Joyce, P (1999). Strategic Management for the Public Services. United Kingdom: P. Joyce

Local Government Benchmarking Framework. (2015) Local Government Benchmarking Framework. [Online] Available: http://www.improvementservice.org.uk/benchmarking/index.html [Accessed 24 June]

Mackie, R, Dr (2005). The New Public Management of Scotland. Edinburgh: W. Green &Son Ltd

North Ayrshire Council. (2015) Single Outcome Agreement (SOA). [Online] Available: http://www.north-ayrshire.gov.uk/council/community-planning-partnership/single-outcome-agreement.aspx [Accessed 29 June]

Pollitt, C (2003). The Essential Public Manager. United Kingdom: C. Pollitt

Pollitt, C (1995). Justification by works or by faith? [Online] Available: https://ocw.dsv.su.se/pluginfile.php/252/mod_resource/content/1/Evaluation-1995-Pollitt-133-54.pdf [Accessed 7 June]

Renfrewshire Council. (2014/2015) Development and Housing Services. [Online] Available: http://www.renfrewshire.gov.uk/wps/wcm/connect/0389f0eb-8141-4612-a47c-12bc67d9a946/dhs-SIP2014-2017.pdf?MOD=AJPERES [Accessed 26 June]

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