Current Impact and Future of New Public Service Management - Term Paper Example

New Public Management in UK New Public Management in UK Writers Name Institution Name 1. INTRODUCTION In the UK and New Zealand, in early 1980s an innovative idea and notion for public management came into existence which was popular as New Public Management (NPM). This concept of management is related to the advancements and developments in the public sector. Its actual purpose is to organize the necessary modifications and variations in a company and the way the government acts. There are several features associated with the philosophy of NPM. The main areas of concern are managing the yield, the origination of market and the quasi-market systems, conventional bureaucratic organizations, customer based services and the devolution of management rights (Hood 1991, OECD 1995). Hogget in 1991 with almost same view point for the NPM shared that the novel systems for public sector management needs to be elastic in accordance with the production methodologies and the human capital planning (Hoggett 1991). He further emphasized on the alternative production processes that are not focused on the centralized industrial bureaucracy, rather they should be based on those production techniques and arrangements of an organization that are internally and externally decentralized units (Hoggett, 1991). In UK economic problems like high rates of inflation and unemployment and stern criticism against the efficiency and quality of public services has increased the pressure exerted on the UK government. Prime Minister Thatcher was a committed woman who had a clear idea about what she wanted to do and how she wanted to promote beneficial and positive changes in the government. The NPM movement became more and more popular and as a result the Clinton Administration in America adopted this movement in the early 1990s. Although America had a balanced economy at that time, still it was facing a lot of problems in the civil services identical to the ones in UK. The NPM movement took form in Vice President Al Gore’s 1993 “National Performance Review” under the slogan of “reinventing government”. The position of the public sector was being questioned because of problems such as accumulated debt and extreme external environmental change recognized by the OECD (1995) as “deregulation and internationalization” and the government was being pressurized to change the management of the public sector. The World Bank, the OECD and the International Monetary fund around the world have advocated the NPM reforms. Furthermore, the NPM is spreading to other countries as well. In the UK, NPM has exposed itself in its break from administration by set procedure and rules in the field of health service. The NPM is being defined as a collection of characteristics, which are against the traditional methods of administration. The new public management increased competition by giving organizations greater self-sufficiency, separating the purchasing and providing functions and positioned them close to the government (Ferlie, 1996). New accountabilities and controls along with more regulation were brought due to all these changes. The way in which the society holds all the public services to account for relying on answerability through the elected governments, results in increasing regulation and law and order (Day et al, 1987). 2. NATIONAL HEALTH SERVICE (NHS) The National Health Service was founded on the 5th of July 1948 to provide quality healthcare to all the citizens from all the social classes, based on their needs rather than money. The NHS is managed and backed by the Department of Health, which also decided on the overall health policies. Taxpayers of the country fund the NHS. The Department of Health has the responsibility to provide quality health services to the citizens with the help of NHS. The main aim of NHS is that patients should be given the first priority. The structure of NHS has bought some major and important changes in the way different organizations within NHS work with each other. 3. KEY DRIVERS OF CHANGE IN PUBLIC SERVICE MANAGEMENT (PSM) 3.1 A blurring between private and public Management tools, which have been proven to be successful in the private sector, are applied by the NPM in public sector. The hiring of staff and the compensations provided to them are kept flexible by the NPM. All the top executives in the public sector are should acquire management skills just like the top executives in the private sector. They should be independent in making flexible decisions regarding hiring and compensation of staff. This NPM approach towards the management of public sector was founded on the analysis of bureaucracy (Dunleavy, 1991). It is said that bureaucracy is weighed down due inflexibility based on complex hierarchy of rule and top-down decision taking processes. This has caused the citizens to be disappointed from bureaucracy. The main aim of the NPM movement was to reflect what was seen as serious aspects of private sector methods of managing and organizing (Dawson and Dargie, 2002). The tools and techniques of the private sector and its management were assumed by the public sector and public administration (Metcalfe, 1989). Although the government itself remained rigid, expensive, bureaucratic and inefficient, the public sector was compelled to go through fundamental and essential changes (Pierre, 2000). In the 1980s, companies were exposed to ruthless and challenging competition on the international front and had to fight for new opportunities. The innovation of management was promoted in the private sector as described by authors such as Peters and Waterman (1982), and Deal and Kennedy (1982). The government is encouraged to employ the techniques used in business administration and all the concerned business values. These values include the value of competition, inclination towards market mechanisms and respect for entrepreneurship (DeLeon and Denhardt, 2000). Since the 1990s, public sector has had to go after the “best practice” model of private management instead of just accepting the differences between private and public sectors. For example in NHS the trend was more of that of public organization and NHS reported to a host of bodies who regulate or review what they do and how they do it. Regulators with the current system varied a lot with their authorities, powers and approach towards NHS and that is why the activities that they performed varied greatly in their individual effort as well and there were so many roles that were performed by two people at the same time which means that these roles were highly duplicated and outperformed. Most of the regulators deal with a single facet of the NHS organizations that they regulate health and safety, medical education, the administration of mental health legislation, etc rather than the organisation as a whole. Organizations in the NHS often complain of inspectorial overload. Even if several agencies had serious concerns about the performance of a particular organisation, it is unlikely that any one of them would be able to see the bigger picture of organizational failure. 3.2 Cuts in public expenditure in some areas and increases in others The local government conducted tendering of goods and services. Through this, local authorities conducted work first manually then against the private sector provision, the professional services were evaluated under contract. This process was extended to the central government because of the competition of quality or market testing reforms. In order to provide public services funded by the taxpayers or by some other arrangement, the Private Finance Initiative increased private investment in both the central and local government. Because of this reform various schemes involving the private sector were introduced which included a range of services from bridges, prisons, roads and educational and health infrastructures. At the time when government spending was on the rise, seeking the help of alternative service providers resulted in a decline in civil servants. General Government Expenditure increased in real terms (1997/98 prices) from £231.5b in 1979 to £255.8b in 1989 to £321.5b in 1999, a total rise of 39 per cent (Chancellor of the Exchequer, 1999) However, civil service numbers decreased from 733,000 in 1979 to 587,000 in 1989 to 481,000 in 1999, a total fall of 34 per cent over the same period (Cabinet Office, 2000). For example in NHS, a significant driver for change was the growth of expenditure on the NHS, an outcome not foreseen at the time of the 1946 National Health Service Act. In the context of the introduction of NPM, it may be significant that the mid-1980s were particularly notable for the severity of the NHS resource crisis. 3.3 Privatization At the time when reforms were introduced in the way the government intervened in economy and society, the NPM changes were taken in the same period of time. The most important change was the privatisation of state owned enterprises including the selling of British Telecom in 1984, British Gas in 1986, water supplies and sewerage in 1989, electricity from 1990 and railways in 1994. There was a lot of privatisation in other areas too. The council houses were rented off. In some socio economic areas, deregulation was implemented for example in road transportation. While in other areas it was increased along with the establishment of new regulators. These regulators protected the goals of the public sector in the operations of the utilities which were privatised. The NPM reform efforts were the not the only important and prominent developments in the public sector. The interdependence between the United Kingdom and other European Union countries increased too. The policy-making system of the central government has become more and more incorporated in the European Union systems more than ever. Some of the policy making has shifted to the European Union level from the nation state (Holliday, 2000). But the trends in NPM were a clear and prominent change in the provision of public service in the 1980s and 1990s. 3.4 The replace of public service professionals by managers Incentives including competition were given to public sector providers to motivate them through NPM. Services to the private sector providers were also rendered. The competitive pressure increased on the public sector as a result of increasing the use of private sector providers in delivering public services in the compulsory competitive tendering and competing for quality schemes. A purchaser-provider divide was introduced among the GP ‘fundholders’ performing along with the other health commissioning bodies as hospitals and purchasers involved in providing services. During practice, this scheme was unable to provide competition in the internal market. But it did cause the purchasers to choose their choose of suppliers and made them aware of different suppliers among health service providers ( Pollitt, Birchall and Putman 1998). In an attempt to help users of public services to make more informed decisions about public services and quality providers, league tables for performance in local and education services were published (Pollitt and Bouckaert 2000). Steps were taken towards giving the public sector employees more individualized and motivating schemes. The Senior Civil Service was created in the central government to include more formal evaluation of the civil servants. It did not follow limitless competition; instead it wanted to protect the culture of a career service with movement of staff around the entire system and common values. 3.5 An emphasis on the public as customer and on customer choice Before NPM, outputs had of course been crucial for citizens as public service receivers, and also for governments in their capacity as the providers who were required to generate the optimal effects from their policies. However, inputs and processes had been stressed much more than outputs, because of the difficulty of measuring public service outputs objectively and because of the necessity for democratic control of the processes whereby public money is utilized. 3.6 Introduction of performance management Although James Wilson (1989) defined traditional bureaucracy as having overarching goals, NPM requires the precise definition of goals, targets, and indicators of performance measurement. As a counterpart to the discretion and flexibility allowed, the output-orientation described in the third principle requires organizations and staff to work to performance targets; this breaks up traditional input controls and rule-governed process-orientation. Resource allocation and rewards are linked to measured performance (Hood, 1991) in order that transparency and accountability may be strengthened. Performance evaluation of programs or policies is one public sector reform that is based on this principle. 4. TWO THEMES OF NEW PUBLIC MANAGEMENT 4.1 Disaggregation According to Barzelay “Splitting up large public sector hierarchies in the same way that large private corporation earlier moved from U-form to M-form (multifirm) structures; achieving wider, flatter hierarchies internally; and respecifying information and managerial systems to facilitate this different pattern of control. In the public sector this theme implied a strong flexibilization of previous government-wide practices in personnel, IT, procurement, and other functions” (Barzelay 2002), plus the construction of management information systems needed to sustain different practices. For example NHS after the implementation of NPM was divided into subsections where the emphasis was placed on every area of healthcare. The most important change that took place was that the regulators started working hand in hand with the other stakeholders, building a strong relationship rather than simply focusing on their own individual concerns with the organization NHS. This approach involved designing regulatory methods to involve groups such as patients, consumers, staff, and partner organisations in regulation. In the past these regulators had powers but had limited resources which hindered the move they planned to take on any project but after this tripartism implementation, it allowed them to to extend their oversight by using other stakeholders as informants and agents for change. 4.2 Competition Introducing purchaser/provider separation into public structures so as to allow multiple different forms of provision to be developed and to create (more) competition among potential providers. Competition processes were implemented internally so that the resources can be allocated. In the past the areas of the administration that were considered to be of importance were reduced and the number of suppliers was increased. The competition components have generally proved less reversible. But one main rollback (also linked to disaggregation) affected the concept of quasi-markets, which was decisively scrapped in the late 1990s in the United Kingdom's National Health Service (NHS). The logistical and cognitive requirements of pricing 15,000 different hospital procedures proved to have stimulated a considerable growth of back-office administrators to the detriment of frontline staff numbers and patient treatment. In the Italian National Health Service, quasi-market mechanisms introduced in the late 1990s are also being phased out in favor of direct government controls, partly responding to increased fiscal pressures that the NPM system worsened and could not control. 5. NEW PUBLIC MANAGEMENT IN NHS As Farnham et al illustrates “The reorganization of the health service under the last government was one of the most far-reaching reorganizations facing any of the public services” (Farnham & Horton 1993) and was largely led from above by central government. According to Ham “A significant driver for change was the growth of expenditure on the NHS, an outcome not foreseen at the time of the 1946 National Health Service Act. In the context of the introduction of NPM, it may be significant that the mid-1980s were particularly notable for the severity of the NHS resource crisis.” (Ham, 1992) According to Griffiths “Managerialism arrived in the health service with the delivery of the NHS Management Inquiry, prepared under the leadership of Roy Griffiths.Griffiths singled out 'consensus management' for particular criticism. Lacking, at that time, a clear system of general management, the Inquiry argued that in the health service 'there is no driving force seeking and accepting direct and personal responsibility for developing management plans, securing their implementation and monitoring actual achievement.” (Griffiths Report 1983) In another instance Griffiths illustrates “As a solution, Griffiths recommended the immediate introduction of general management at all levels of the service. In addition, the Inquiry made recommendations concerning the future involvement of clinicians, particularly doctors, in the running of the NHS: ... they [doctors] must accept the management responsibility which goes with clinical freedom. This implies active involvement in securing the most effective use and management of all resources.” (Griffiths Report, 1983) Central Government's response to the Inquiry was to largely accept both the analysis and the recommendations made. Harrison in this context explains that “Health authorities were therefore instructed to have general managers in place by the end of 1985. The piloting of 'management budgets', through which clinicians were to become more closely involved in, and responsible for, resource decisions, was also extended by government. Finally, recommendations made by the inquiry to establish new bodies at the centre of the health service were also acted upon.” (Harrison et al. 1990) As Mark et al explains “The introduction of general management in the mid-1980s was concerned with no less than 'challenging 40 years of administrative culture.” (Mark & Scott 1992) Moon et al explains “In essence, this meant challenging the role of the NHS professionals, doctors particularly. Many clinicians were indeed deeply sceptical of general management, challenging the Inquiry's claim that private sector management techniques could appropriately be introduced into the health service.” (Moon & Kendall 1992) According to Ham “Consensus management was also defended by representatives of the NHS professions, whilst some—particularly nurses—feared an erosion of their influence through the introduction of more autocratic management style.” (Ham 1992). The health service managerialism of the 1980s ushered in a new concern for efficiency, budget balancing, cost improvement and service evaluation (Moon and Kendall 1992). Managers, too, demonstrated acceptance of the NPM principle of greater individualism in respect of NHS employment, by submitting themselves to performance review and short-term contracts. The hoped-for closer involvement of clinicians in resource management, however, was less immediately forthcoming, reflecting particularly the continued strength of the medical profession. General management has also been interpreted as the precursor to the later, and more extensive, NHS reforms of the 1990s. (Mark & Scott 1992) Indeed, the 1989 White Paper Working for Patients (Department of Health 1989), later implemented in the NHS & Community Care Act (1990), can be interpreted as heralding a major step forward in the incorporation into the NHS of NPM doctrines. According to Stewart et el, “The separation of purchasing and providing and the introduction of the internal market, for example, led to the NHS '... changing from being an integrated, hierarchical bureaucracy to becoming a dispersed network of organizations interacting on increasingly market-based principles.” (Stewart & Walsh 1992) In the reforms of the early part of the present decade there is ample evidence of the NPM themes of disaggregation, competition and use of contracts. In the health service as elsewhere in the public sector the real capacity of managers to assert power over the established professions has been relatively limited. Doctors, in particular, have remained a “major stumbling block to cultural change in the NHS” (Mark & Scott 1992) throughout this whole period of NHS managerial change, successfully maintaining a position of considerable independent strength. As Lloyd et al explains “Despite the shift in power towards general managers from the mid-1980s onwards and the enhanced capacity of manager’s post-1990 to exercise control over medical professionals, local managers have still experienced difficulties in managing their doctor colleagues.” (Lloyd & Seifert 1995) Reorganization of the NHS and the incorporation of NPM principles and practices have led to a changed relationship between the service and the service's users. General management was concerned with responsiveness to consumers (Stewart & Walsh 1992), whilst Working for Patients (Department of Health 1989) intended to extend this by making services more responsive to patients through the use of market mechanisms. (Ham, 1992) Consumerism was also evident in the introduction of The Patient's Charter (Department of Health 1995), which established explicit standards for the delivery of care. Latterly, concern for outcomes and quality has been expressed through the drive towards evidence-based care and treatment, which under the last government became one of the health service's medium-term priorities. (NHS Executive 1996) 6. EVALUATION AND IMPACT OF NEW PUBLIC MANAGEMENT (NPM) New Public Management changes have been quite evident which are positive effects as well as negative effects which has caused the damage to the decrease in cost, better organization and effectiveness. Some of these negative effects were because of social interference and were applied to the public management. Sieber wanted to have the interference which could produce different effect which was based on unintended systematic effects. NPM changes always have a bad effect which affects the achievement of the goals. (Sieber, 1981) The NPM problems led the policy makers to change the NPM system. NPM was trying to solve changes which had lots of difficulties created by itself. The labor government elected in 1997 did not like the changed agenda. The new government depended on the state to get to its goal as compared to the previous administration which was not serious in its work. The negative effects along with the policy makers’ attempts to change the NPM system were not the same and some parts of the NPM had a lasting legacy. NPM form, private firms, and semi-governmental firms increased the variety of administration and system. But it did not have unity and the solution and the rules were given by the separate body. UK government had a long standing feature because of the different responsibilities between the central government. There were also some differences between the policy making and the changes between central and local administration. The problem got worse due to the new changes because information had to go through a long way across different organizations which had different interests and the central government had a difficult time in these small networks and could not guide the network to highlight the national priorities. There were vast problems in contracts and quasi-contractual agreements. The public sector could not see its own achievement and the private firms were just looking forward for the profit. The contracts were closed in services to some of the firms where the public sector changed its aim. The problem was clearly seen in information technology contracts and was linked to the lack of the government to deal with trans-national contractors who had little bit of experience on how to deal with the governments. Private Finance Initiative secrets had an inconsistency with the public accounting like the public audit and the financial accounts being given. To settle the monitoring contracts, transaction costs had to be looked up related to Private Finance Initiative agreements. The policy makers were not happy with the changes of NPM and caused the realistic private sector. Importance was given to partnership that had the same interest and can work in a group to achieve the goals regardless of organizational, public/private boundaries. This is the same system, but importance has been increased. The partners should support each other and respond to the problems of the citizens to overcome the problems of a joint government who worked in a different way from policy making and provision to policy makers and people who are responsible for the changes. There are confusing proposals at this level that are changing at the path of development. The Public Partnership programme included the Private Finance Initiative to achieve the goals in the long run, so that it is not facing the same problems as the private sector to get the public services for the profit. It is still not evident if the new implementation does not have the negative effects of PFI projects. Action zones encouraged the groups to work together for profit, charity, and private firms in health and education. There should be unity between the public and private sectors to get the same benefit for to help in the funding of schools. At central government policy making level, there are challenges to start the board of individuals ranging from sectors to policy. There are around 300 new task forces and advisory panels since the year 2000. People’s Panel supported the public opinion for the public services for the future. The second NPM in the public and the private sectors did not challenge the government officials in the same way as it should do. It had some negative side effects while damaging the public sector philosophy when it was looking at the profit. It did not look for the gain from giving the public services and to work for the same goals sector wide. There were some fraudulent things going on and the Public Accounts Committee report looked over these corruptions, but all these problems were clearly seen in career and narrow organizational terms instead of achieving the public goals. The private firms manipulated the public sector while seeking for the profit. The suppliers of information technology offered a low price for the initial contracts and also started a system for the work to be re-tendered some other time. Some of the firms in Private Finance Initiative projects had excessive profits which was causing a concern to other firms. According to Klein “With this new, centrally driven emphasis on national frameworks and standards, the creation of new monitoring bodies and the obligation of NHS organizations to provide services which meet explicit quality and efficiency standards, the future NHS may present a more radical challenge to the health professions than did the reorganizations of either the 1980s or the early 1990s. The drive to improvement, for example, is backed up with the clear promise of direct action against local NHS organizations which fail to deliver on agreed standards. Managers, too, may be required to pay much greater attention to clinical concerns as they become directly responsible for the quality of services delivered.” (Klein 1998) The main aspect of the UK’s public service has been completely changed by the theory and practice aspects of the managerialism, with no part of the public sector altered more than the health service. In reorganizing the management and delivery of public goods and services, NPM has also altered the nature of government and the relationships which exist between the state and its citizens. As Rhodes illustrates that “NPM fragments service delivery, undermines public accountability, and diminishes the possibilities of central strategic planning. This process he terms the 'hollowing out of the state.” (Rhodes, 1994) Marketization and contracting out raise the possibility of government being abandoned. Dunleavy and Hood's illustrates that public sector reorganization raises constitutional issues, there has been comparatively little public debate during the period of the rise of NPM on what precisely should be the core responsibilities of government. (Dunleavy and Hood, 1994) The minimal state, having failed to maintain any conception of its essential centre, risks divesting so much of its previous role and responsibility through 'radical outsourcing' that even elected government's ability to steer is threatened. 7. FUTURE OF PUBLIC SERVICE MANAGEMENT The trajectory of UK public sector reform appears to have changed in the past five years. Whilst most of the 1980s and 1990s were dominated by centrally directed New Public Management reforms to make more use of private sector bodies to deliver public services, introduce more competition and marketisation in the public sector and create output focused corporate units the current reform efforts are being directed at encouraging partnerships and ‘joining-up’ the delivery of policies and services. This approach softens the competitive elements of NPM but maintains the mix of public and private sector bodies delivering services and the systems of output focused units operating in decentralised systems. There is little evidence of the re-emergence of traditional, large, integrated public bureaucracies. Instead the contemporary structures have been accompanied by more use of regulatory control mechanisms, partly as an ad hoc response to the problems of New Public Management but increasingly as a conscious control strategy. Regulation is seen as a way to steer decentralised systems and assist ‘bottom up’ pressures for improvements by empowering consumers with information about the quality of public services. The analysis of contemporary regulation within the state is at an early stage. Whilst the public interest theory of business regulation has been heavily criticised, the analogous justification for regulation inside government has received much less attention. Regulation may itself create too excessive a burden, both in terms of direct costs and the compliance costs on regulated bodies. The Modernising Government White Paper recognised the dangers of excessive regulation in the public sector by announcing the extension of the deregulation provisions (Part I) of the Deregulation and Contracting Out Act 1994 to the public sector. Some efforts to reduce burdens were contained in the Best Value regime, with heavier regulatory systems used for incompetent or persistently offending local authorities whilst acceptable performers are subject to light touch regulation, reflecting the idea of an ‘enforcement pyramid’ in public sector regulation (Hood, James, Scott 2000). Regulation may not be a stable solution if it cannot ameliorate the problems of externalities and lack of joined-up government and if it is not itself ‘joined-up’. The existing regulatory systems are fragmented and the system has developed in an ad hoc manner. Regulated bodies find themselves pulled in different directions by a small army of overseers. The Modernising Government White Paper welcomed the development of the Public Audit Forum, set up in 1998 and comprising the National Audit Office, Northern Ireland Audit Office, Audit Commission and Accounts Commission for Scotland and re-announced proposals to establish an Inspectorate Forum for the ‘Best Value’ regime for local government. Both these initiatives are intended to encourage discussion of common interests including co-ordination of regulators. However, if regulation itself cannot be joined-up and/or the compliance costs of regulation continue to rise there could be demands for deregulation, in a similar way to the influential demands for deregulation of business in the 1980s, making the current system far from stable. With regard to the health service, the new NHS and the equivalent White Papers for the health service in Wales and Scotland appear likely to reunite the fragments of the NHS through a strengthening of strategic planning. Health Improvement Programmes, for example, will determine overall health strategies for larger, redefined Health Authority areas. Other strategies will include closer partnership within health agencies, and between health agencies and other public sector bodies, including local authorities. Nonetheless, in important respects as identified above, core principles associated with NPM in the NHS look likely to maintain their influence for the foreseeable future. Read More