Effects of New Public Management Reforms on Public Organisations - Essay Example

New Public Management reforms

Introduction

Garson and Overman (1983) define New Public Management (NPM) as the blend of private management functions of planning, organising, and controlling with the management of human, financial, and political resources. Margret Thatcher, former prime minister of the UK, is credited with instituting some of the new public management principles in the management of public organisations. NPM espouses a variety of aspects that help in the new management of these public organisations. These include a hands-on professional management, measurement of performance, output controls that are verified by quantitative measures, anddecentralisation in management (Garson & Overman, 1983). Other important principles of new public management include the enhancement of competition, reduction of resources in use, and the use of private-sector management principles.

The Need for New Public Management Reforms

One of the major problems that the previous management strategies for public organisations were facing is that they were unable to provide efficient and reliable services to the people. The failure to respond promptly to the needs of the people contradicts the democratic values of such a country. The deterioration of the economy in some countries also prompted the use of NPM since it proposes a reduction in expenditure of organisation. Public sector spending is the most significant avenue where many countries get to spend the revenue that they collect from the public. A restrain in such public sector spending saw the need for the introduction of New Public Management reforms (Garson & Overman, 1983). There has also been an increase in the cynicism of government bureaucracy. Bureaucracies are the steps and processes that a person goes through before they are offered any services in a public organisation.

Kurunmäki (2009) argues that the level of bureaucracy in these government organisationscause a relatively slow responsiveness in the provision of goods and services. Furthermore, the provision of services by public organisations are subject to disruption by political authorities. New Public Management provides some remedies to the high level of bureaucracy that is seen in public organisations. Garson and Overman (1983) also claim there is a global market-driven economy that is continually growing. Organisations in such economies do not rely on domestic policies and practices, and government organisations need to change their management systems to cope with other firms.

Effect of the New Public Management Reforms on the Public Sector

New Public Management Reforms brings about a lot of changes to the public sector on a number of fronts. One of this is through offering a decentralized form of management in the public service. The main reason for offering such a way of management is to remove the high level of bureaucracy and different forms of hierarchy associated with public organizations. This is done through giving managers in such firms the autonomy to work independently and to use the best practices for higher outputs. The public sector firms are thus downsizing, contracting out their functions to able agencies and disintegrating into smaller and capable business units.

These public organizations also engage in the sharing of costs between the government and the final consumers. Essential services are now being charged to the public where they were previously being offered for free. This arises from the need to reduce the financial burden that the government faces amidst the global recess. This concept is mostly adopted by developing countries to fill the gap between their revenues and the expected expenditure. This is a shift from the focus on input and procedure that the previous policies demanded to an output and results-oriented strategy.One of the major implications that NPM brings in public organisations is that it causes a rise in the quantity of output for the organisations that use it. The incorporation of such management principles in a company improves the productivity and the final output of a company (Kurunmäki, 2009). Public firms that embrace NPM can use quantitative measures to outline their progress in the provision of a particular good or service. The increase in output by a public firm is also supported by the setting of goals in the organisation (Garson & Overman, 1983).

The use of performance standards and methods is one of the most fundamental changes of New Public Management on the public sector. The setting up of specific performance targets gives public firms the basis for evaluating their performance while also improving the accountability of these firms. .These goals will help drive the firm in the right direction while also helping them to focus on some of the main services that they provide. NPM also includes the setting of targets that the employees in the firm should be able to meet after a duration of time. Indicators that measure the progress of these goals and targets are also set by the public firm to assess the performance of the company.

The New Public Management reforms have shown to increase efficiency and productivity in the provision of goods and services among these public firms (Schedler, Proeller, &Schedler-Proeller, 2000). Bureaucracy among public firms is a fundamental problemthat affects the efficiency in the provision of goods and services. It is prudent to note that such levels of bureaucracy are rarely seen in private organisations due to the different models of management that they use. A change in the management strategies of public firms will increase efficiency since it reduces the level of bureaucracy. NPM advocates for the use of private sector management in public organisations.

The Effectiveness of New Public Management Reforms

The use of quantitative financial data has been the main way that companies use to determine their calculability or accountability. Carnegie (2005) argues that in the absence of these quantitative financial data, qualitative information and practices of the company are necessary to determine the accountability of the firm. NPM support the use of qualitative means to determine the accountability of such public organisations. Such is mainly done through a restructuring of the management and some of the operations of a company. There are clear boundaries between monetary and non-monetary systems of accountability which make New Public Management reforms to be insufficient for determining accountability.

One of the reasons that make NPM ineffective in improving the operations and performance of public organisations is that it is difficult to measure the value it creates. Most public firms do not have major competitors and only exist to provide goods and services to the general public. It is imperative to understand that equating the value created by a company with no competitors or no pressure to perform is quite difficult. A change in management is also not likely to improve the situation since these are external factors that are affecting the company.

Changes in accounting practices for some countries across the world are also a key reason for the failure of NPM to be effective in achieving its objectives (McLaughlin, Osborne & Ferlie, 2002). The use of private-sector strategies on public firms has been largely unsuccessful due to a range of reasons. The private sector focuses on financial resources to report on their accountability while ignoring some of their non-financial resources. However, in the case of public firms, the non-financial resources are a major part of the company’s resources and should be included in their financial reports. These public organisations will thus have difficulty in reporting their financial status if they are using the same criteria as private firms. The attempt to use the financial strategies that private companies use on public companies might lead to the misrepresentation of the financial health of the company. NPM will make these private firms be calculable regarding their financial stand but will not help to establish accountability in these companies. It is prudent to note that while NPM may bring about a variety of benefits to the firm and its stakeholders, there are certain limitations on the results that the approach can achieve.

New Public Management and Accountability

Accountability to citizens is one of the responsibilities and obligations that governments had to their citizens. There are various types of accountability involved in the management of a firm. Financial accountability is an example of a fundamental task that the managers in a public firm are liable to the public and the government.Operational, legal, and political accountability are other forms of transparency that public organisations are expected to observe. Sincethe new public management reforms offer a qualitative approach to the management of the firms resources, it would be difficult for these firms to be financially accountable. NPM, however, makes it easy for these public organisations to audit their operational, political and legal accountability (McLaughlin, Osborne,& Ferlie, 2002).

Schedler, Proeller, and Schedler-Proeller (2000) asserts that NPM espouses public reporting which makes organizations more calculable. Public reporting is one of the core elements of financial accountability and also promotes good governance. This involves providing more information regarding the financial and management performance of these public firms to the general public. This concept is based on a variety of pillars. These include the public availability of information, the open preparation of budgets and its subsequent reporting, specifying the procedures for the creation of budgets and a reliable fiscal reporting system. The incorporation of these pillars makes the public organizations to be more calculable.

Conclusion

In summary, New Public Management reforms are the new forms of management that incorporate the private sector management strategies in the running of public firms. These aspects of private-sector management include a hands-on management, a reduction in the use of resources, output control and the measurement of performance. The need for NPM was brought about by the failure of the public firms to provide essential services to their clients efficiently. Thelack of accountability, a need for restraining in public spending and the high level of bureaucracy are some of the main reasons behind the introduction of this approach. NPM has been effective in achieving some of its objectives in public firms and has presented numerous benefits to its stakeholders. However, it has not been able to improve the accountability of these firms despite making them calculable.