New Public Management Developments - Term Paper Example

PUBLIC SECTOR ORGANISATIONAL TYPE By Location NHS to illustrate the successes and Failures of new public Management Developments Introduction “In the early 21 century, defining a public sector precisely can be a difficult task. The world is undergoing financial crises; governments are continually under pressure to provide more services from a strained resource base” (Funnell, Cooper & Lee 2012, p.1). This has since resulted in the blurring of the line that differentiated public from private sectors as a lot of changes have been implemented, particularly pertaining to managerial ethos that has given more freedom to the managers in the public sector to enhance their performance. In actual fact,Bandy (2011) explains that the public sector in different countries cannot be directly compared as what is and what is not public expenditure varies. For instance, in the U.K utilities such as water, gas and electricity are provided by the private sector, while in some countries these are public services. All the same, Funnell, Cooper & Lee (2012) make it certain that there are elements of the public sector that can be readily recognised without much effort. For instance, education, policing and defence are core government services that have traditionally been provided by the government. To avail these public services the government often invests public money, “public money is the money that the government gets from taxes and spends on the provision of public services” (Bandy 2011, p. 2).This brings in one of the clear distinctions between public and private sectors, Bandy (2011) explains clearly that whereas the private sectors are out to make money; money for the public sector is the means to the end. More so, these public services can further be divided into two: public goods and merit goods. To start with, “Public goods are those that arenon- rival (one citizen enjoying the benefits of the good does not prevent another from doing so) and non- exclusive (nobody is prevented from accessing the good)” (Samuelosn&Marks 2012, p. 471).For instance, a Contagious disease is a non-marketed public good; it lacks market prices, thus it would be hard to value it, carrying out a survey would be an option only that it would be costly, prone to error and reflect sampling bias. On the other hand, “Merit goods are commodities which are excludable, but which for reasons of equity the government decides to provide them” (Bandy 2011, p. 4). Incidentally merit goods tend to bear externalities; With reference to Samuelson & Marks (2012) Externalities are explained to be costs (negative) or benefits (positive) that are as a result of production by certain economic agents that are however predisposed to others; Pollution is a negative externality because it affects the residents that are in the surroundings of the production site like an industry.Imunization against contagious diseases act as a positive externality because it protects the larger society from catching the disease. Irrespective of the ambiguity that seems to come with clearly defining public sectors there are some aspects that can be used to identify public sectors. “Public sector organisations can be identified according to: financing arrangements, ownership, management and accountability arrangements”(Funnell, Cooper &Lee 2012, p.2). The financing arrangement is quitesignificant in public sector agencies, inclusive of all state departments; this is because this agency or organisations often receive funding from the budget that sustains their projects and daily operations. IncidentallyGorsky (2006 says that, it is important to note that there are some organisations that no longer depend on government funding to run but they were initially founded on government funding. “On the basis of funding the source, the public sector can be said to be composed of agencies which belong to either the budget sector and depend upon taxation for their funding, or the non-budget sector” (Funnell, Cooper & Lee 2012, p.3). Accountability arrangements are in line with transparency and how well the public sector can prove its work. Record keeping is how public sectors can attain this, thus record-keeping is essential in all existing public sectors. Additionally, “the information in the records may wholly or substantially available in a variety of other sources and forms” (Smith 2007, p. 133).This is to ensure that the important records are accessible in time of need as they do play a crucial role. The diagram below illustrates how funding happens is like in public sectors Figure 1: Classification of Public Bodies - (Funnell, Cooper & Lee 2012, p.6) This paper will however be looking into one of the public sectors; National Health Service (NHS); with the intention of portraying how public sector organizations run. It will further narrow down on the successes and failures of New Public Management Developments. Finally the paper will look into the new developments in the New Public Management (NPM) area. National Health Service as a Public Sector; its successes and Failures The audit commission (2006) affirm that NHS is a unique and complex sector with 600 diferent organisations each performing its own functions.The NHS is a uniqueProwle (2009) says that the National Health Service often entails several types of organizations; a health authority, NHS trusts special health authorities and community health council. Each one of them has a role that they play; firstly the health authorities are concerned with the health policies and the services that ought to be delivered. NHS trusts provide hospital, community and ambulance services to a wide range of patients. The community health council on the other hand, often acts as the voice of the people to NHS and lastly the special health authorities who are divided into two: NHS Supplies authority and NHS information authority. They are concerned with NHS supplies and the information and IT departments respectively. Burton (2013) asserts that the National Health Service in the UK has been facing great challenges in this given decade; from suffering government cuts since 2010 to having to deal with a rising budget that is way below healthcareinflation. Incidentally, NHS has also had to, “face demand pressures from a population that is both growing and ageing, greater numbers of patients with chronic illnesses are expected to add 4 percent a year to NHS costs for the next decade” (Burton 2013, p. 128).At this point salaries improved but productivity declined, more so the taxpayers were landed with expensive and long-term debts stemming from hospital projects. However, according to Cass (2006), Demand is not the only concern; patients also demand that the services are of a high quality and are also timely. Incidentally, NHS raises the greatest debates in the UK as compared to other public sectors. Moreover, People argue that it is quite monopolistic, inefficient, operates on bureaucratic management, it is unresponsive to patients and is a huge drainer of taxes. However, on the other hand it is considered by its supporters to be “unique in being free at the point of use, is more efficient than insurance- led health services and is driven by the needs of its patient not private-sector providers” (Burton 2013, p. 128).This supporters say that NHS has greatly improved since the new public management as there is an increase in the number of patients treated, the progress in quality treatment is on the upsurge and the waiting time for treatment has greatly gone down. Undisputedly, it is the world’s largest public sector attracting a population that is as big as 1.7 million. Burton (2013) says it is approximated that in a day; 50,000 people visit its accident and emergency department, 49.000 receive out-patient services while 94,000 are admitted for an emergency. NHS still has a lot at stake considering the demand that is on them. The elderly, especially are in need of the healthcare service constantly and require that itis delivered to them efficiently. In a real sense “the demand among the elderly and those with long-term illnesses and disabilities, continues to grow and if clinical services continue to be provided free without crippling the taxpayerthancost-reductions must be found through efficiency savings” ( Burton 2013, p. 129). NHS being a public sector receives national funding so as to in turn provide a free service to all; this has been a great challenge to the government all over. Irrespective of the pressure it poses, NHS refuses to apply any other alternative (such as creating more room privatisation)that seems to threaten their purpose which is to provide free services. However, as Burton (2013) puts it NHS fails to acknowledge that most people do not mind where they are treated; either in a public or private hospital, all they care about is that their NHS provision remains free at the point of consumption. This only means that the larger public is also not paying attention to the raising of taxes to meet the costs. Chambers (2005) explains that despite this, the public often pushes the blame on the government; after all NHS is a public sector, the government should know better; completely forgetting the fact that NHS has within itself an organizational structure that could be just as liable. This is where the challenge sets in; the government is now forced to ensure that NHS functions efficiently while at the same time allocate funds to it without having to impose heavy taxes on the public. Consequently, the government also ought and by all means to maintain the most important feature of NHS which is free healthcare such that when the public need to access it, it is still free. Interestingly, this challenge is not recent, “the thread that runs through NHS reforms from the late 1980’s onwards is the idea of the market as a mechanism to make health-care provision more efficient, more flexible and more responsive to patient demand” (Burton 2011, p. 130).This has been an issue that the government has tried to tackle since time in memorial. However, since the times have changed, today this challenge is of a different magnitude as it at a time when thehealth service is required to function ona squeezed budget set to last for quite some time.Additionally, NHS has to certain that it can commit large future revenue expenses without affecting their already stretched budgets. Stacey & Griffin (2006) assert that the continuous growth in numbers of managers and staff only reflects the great need to continuouslymonitor and control NHS; which makes this public sector a bit too costly. Themode of employment in NHS can be considered as one of the consequences of the new public management. It is said that “The total employment of NHS has by some 187,000 since 1977 to reach approximately 1.3 million, an increase of about 14 per cent” (Stacey & Griffin 2006, p. 19).Such an upsurge in employment only illustrates the amount of demand that is in this particular section and how much more effort needs to be put in so as to ensure that the government balances things out such as a consistent flow of finances so they do not lack as well as a satisfied public. Moreso, it is asserted that, “more than 60% of NHS expenditure is spent on paying people” (Crisp 2011, p. 101).At some point is alleged that NHS was linking pay to even the skills and performances of their staff. All the same, when it is all said and done NHS only reflects with some kind of special sharpness the policy dilemmas that are found in almost all modern societies. Baker (2007) however, assures that NHS remains unique in terms of being totally clean and more so it is one of the most progressive health services in the world especially because it maintains quality while driving down costs. Most governments since 1979 have been committed to a free NHS while also trying to make it quite responsive to its users, more co-efficient and more marker-led. Burton (2013) says that most of the improvement in quality of care between 2000 and 2010 was down to increased spending. However, this spending was not matched with proportional productivity. The combination of spending cuts and rising demand, especially in adult care has made NHS manage to make efficiency savings and reduce overheads even more efficiently. Thegreatest weakness in making reforms in NHS has been related tothe structural changes that have eventually resulted in higher cost; and more of it has raised questions whether further structural reforms will only keep raising the costs or improve productivity. Efficiency savings have gone a long way in securing the well-being of patients in NHS; the market is continually becoming demanding as well as the need to use resources. The reforms in NHS are focusing on trying to ascertain that even as people continue to fall sick, the resources within the sector will be used wisely and appropriately to meet demand but also improve on their level of technology. Recent Developments in new public management (NPM) According to Adcroft, Robert & Willis (2005), there isn’t one concrete definition of NPM that is universally accepted; it coukld be considered as a concept with different trends dependent on the circumstances of the particular public sector in context.First and foremost, “New Public Management is a general concept denoting a global wave of administrative reforms that has had an impact on many countries public sectors” (Christense&LaeGreid 2011, p. 1).New Public Management is fostered in possible reforms; truthfully the institutional dynamics of reforms can be interpreted as a complex mixture of environmental pressures, polity features and the previous institutional context.Additionally, Fryer, Antony & Ogden (2009) attest to the fact that public sectors are multi-faceted in nature thus making deleopments in these organizations is very challenging. NPM has been viewed as a reaction to external pressure, all the same Christense&LaeGreid (2011) claim that it is in place to solve problems that have been created by a lack of instrumental performance, economic competition and market pressure. According to Pallot (2006), the main aim of financial reforms should be to exercise control over the existing government. New Public Management is the context in which public managers are likely to find themselves in so as to have skills that are in line with the public sector. Letchfield (2010) brings this out clearly by saying that managers often require an essential set of skills such as data analysis, much more is only required for public managers. Furthermore, Bandy (2011), the nature of the public money and the public sector gives the public managers quite some task with regards to how well they should spend money. A private sector manager does not have such a demanding task because if spending money will bring in more money it is done being in line with the overall goal, “making money”. Unfortunately, “a public sector manager on the other hand has three questions to ask themselves: is this spending within the rules? Can we afford it? Is it value for money?” (Bandy 2011, p. 14).If three yeses are attained, the manager is free to spend the money without a doubt or worry. NPM has various features to it that differentiate it from the previous methods of managing and developing public services. Bandy (2011) says that there are seven broad categories that characterize NPM and are as follows: professional management, explicit performance standards and measures, focus on the output results, desegregation and decentralization, increased competition, private sector management practices and discipline in the use of resources. Essentially, with this perspective, “NPM attempted to correct the inefficiencies and the stultifying effects of the traditional model” (Goldfinch & Wallis 2009, p. 1). To start with professional management will be affected in two ways: Firstly, “there is a need for public managers in general to have financial skills” (Bandy 2011, p. 14). This only means that the entire staff right to the top senior most managers should have hands-on skills on what management entirely entails. Therefore, it only means that these public managers should be prepared to engage in serious finance training as part of skills Acquisition. Secondly, all public organizations will have to employ professional accountants and give them their rightful positions. To contextualize, “the most senior finance manager in am police force willnow be a civilian accountant rather than a uniformed officer; NHS trusts’ boards have to have a finance director as well as a chief executive” (Bandy 2011, p.14).This means that professionalism with regards to sufficient skills will be of the essence in all public sectors. The second characteristic of New Public Management is performance measurement; with reference to Todnem& Macleod (2009) it emphasizes on the need to have Performance Indicators.Most probably these performance indicators are likely to be unit costs for the public service under consideration. More so, Bandy (2011) says that these costs can be with regards to per unit of the service given or per head of the population that has been served. Sensibly, the former (cost per unit of service given) is more logical as it makes accountability easy and efficient.However,Rantanen et.al (2007) point out that there are variouys challenges to performance measurements in public sectors that include: stakeholders, lack of objectivity, ownership of propertry and lack of managerial skills Outputs and Customer Expectations is another one of NPM‘s characteristics; Outcome does affect financial management even though in a subtle way. This is because it is a long-term project; even so, “a public manager should not only measure outcomes, but should monitor short-term measures of inputs, processes and outputs” (Bandy 2011, p.16).The public manager will have an easy time deriving measures of unit costs and productivity upon paying attention to short-term measures. With reference to Bandy (2011) this could be achieved through combining the financial systems with other performance measures. Bandy (2011) claims that there is also the need for public organisations to link their performance Management Systems to their Financial Information systems. Ultimately, this allows them to set a budget as well as performance targets; the organisation would now be operating on the perspective that its budget is consistent with its performance target. Fourthly, Decentralization and delegation of financial responsibility is crucial in NPM as it gives room for the devolution of power across different units e.g. individual hospitals, regional government bodies or even operational teams. Pasquier& Villeneuve (2012) claim that some public sectors have had their department operate as mini-businesses working under a framework of guidance and corporate objectives. Besides involving individuals and communities in service delivery it also pushes the public managers to have with them the essential skills of management as well as extra professional knowledge. Competition and outsourcing is another important characteristic of NPM as it uses a third party to deliver all or part of what the public manager would have. Bandy (2011) says that there are two broad scenarios to this characteristic. Small –scale packages where services are purchased on a routine basis, for instance, health care or large-scale where a service is acquired for a longer period of time; three or even ten years. In this case a public manager will have a budget that covers all the costs when dealing with short-term packages, but will be forced to come up with a budget frequently when dealing with large-scale packages. The sixth characteristic has to do with the application of private sector management techniques. Incidentally, “public-sector organizations are insulated from the private sector, especiallyin terms of underlying principles”(Christense&LaeGreid 2011, p. 4).One of the most applicable private sector techniques has been the broadening of the finance department; referring to Bandy (2011) what was initially financial accounting has now been turned into managerial accounting in the public sector. Undoubtedly, the current shift is to provide a wide range of advice and guidance to senior managers and budget holders. This shift, “has required the accountant and finance staff to learn new skills (such as costing techniques, database interrogation and reporting and communication skills)” (Bandy 2011, p. 18). The last characteristic is discipline in the use of resources wherein public managers are now expected to do much more with much less. “Efficiency savings have been a feature of national budget for many years; the NHS was asked to identify annual cash releasing efficiency savings in the 1990’s” (Bandy 2011, p.19). This in turn saw to it that 3.5 percent annual efficiency savings targets were fitted into the budgetary settlements of local authorities. Therefore, NHS is as functional as any other public sector and if anything it leaves so much to be admired.Moreso with time it will continue to implement policies and NPM more effectively. Fig “International Public Sector Accounting Standards have been developed in recent years” (Shah 2007, p. 29).IPSAS are a set of measurement and disclosure policies for financial reporting on an accrual basis for use by Public Sectors. The function of IPSAS is to offer guidelines, issue standards and occasional papers that are in line with Public sectors. Budding, Grossi&Tagesson (2015) claim that regardless of the progress made by IPSAS; there is a great limitation to the implementation of its accounting system world-wide. “There is an international trend towards the adoption of accrual accounting in the public sector, but there is still huge diversity in accounting reforms and practices” (Budding, Grossi&Tagesson2015,p.50).With reference to Moran, Rein &Goodin (2006) The public sectors tend to lean towards accrual accounting as implementation of new reforms is quite a difficult process.The trend towards modernizing financial systems will continue throughout the years. Coclusion The variety of changes in the public sector has completely and will continue to change the sector in organizational and cultural terms. This in turn has had a substantial impact on the kind of management that is applied in Public Sectors hence the term New Public Management.This great shift has not been easy at all as the reforms have been and continue to be taxing especially as illustrated by the NHS. The government especially has had a lot of trouble trying to create ways of funding without having to impose greater taxes on the public.More so it is clearly visible that, “The New Public Management has been trying to cut costs, stressing masterful management other than modest administration among others” (Bhatta 2006, p. 1). All then same, new public management seems to demand a lot of discipline for it to be successfully implemented. From acquiring a new set of skills, to spending public money effectively; it reflects some sort of ethics that ought to be employed. “The conduct of public business is best advanced where the core values of public service are observed” (Bakvis& Jarvis 2012,p. 63). Therefore, the success of new public management lies on basic public service ethics as well. Reform and change are inevitable. The public sectors in themselves have some effort to put other than looking up to the government entirely, for instance the NHS.” The story of NHS could easily be told in terms of policy drama and organisational turbulence” (Klein 2010, p. 1).All the same NHS has maintained its stability by standing its ground, thus its culture has been upheld strongly. According to Stiorey, Bullivant& Nolan (2011) this translates into the need of public sectors to establish cultures that will continue over time so as to keep them structured. 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