New Public Management in the Governance and Management of the NHS - Case Study Example

Case study report on New Public Management in the governance and management of the NHS Executive Summary New Public Management has had a significant impact upon the public sector in the UK. The application of NPM has been driven forward by a strong, central government in the UK and there has been substantial reforms made to the way that the public sector is run. This paper examines the concept of NPM and the impact of the political ideology in driving the reforms forward. The three broad phases of development of NPM within the UK can be summarized as: Drive for reduction of public sector expenditure Improving efficiency through evaluation of performance Introduction of market type mechanisms and organizational change in the delivery of public services This case study presents an overview of changes introduced as a result of this development and argues that the New Labour Government has not moved away from NPM, rather it has incorporated NPM concepts within a framework of modernization. Introduction The UK is widely viewed as a lead reformer of New Public Management, with evidence of a rapid and radical reform programme introduced across the public sector in the 1980s and 1990s. It is undeniable that the UK has had a leading role in the development of NPM. McLaughlin and Osborne (2002) even suggest that there is an argument to claim that the UK was the birthplace of NPM. The adversarial style of its implementation is also a key feature of the UK model (Clark 2000) and this is linked to the political ideology of the Conservative Government, led by Margaret Thatcher, and the constitutional framework that dictates the pace of change. The UK had been viewed as managerially inept (Kingdom 2000: 34) before NPM. In the UK in the 1980s it is easy to regard NPM as a direct result of Thatcherism. There is a strong argument that the success in embedding NPM in the UK can be attached to the drive from the centre, and significantly the Prime Minister. However it is still developing, following the change in government in 1997. What seems to have occurred is that the emphasis of the debate was driven initially by ideology but overtaken with debate about improving the management of the public sector, regardless of ideology. The election of the New Labour Government in 1997 could have been expected to have impacted upon the direction of the NPM movement in the UK. However many of the pre existing agendas have continued and in some cases accelerated, for example the move to more private finance of services in the public sector. The election of the New Labour Government in 1997 did not reverse the reform programme, although it did refocus around their policies of the modernization agenda (Bovaird and Loffler 2003). New Public Management Hood (1991) (Hughes 2003: 4) coined the term New Public Management (NPM). The key concepts of NPM emerged as a challenge to traditional public administration in the 1980s In the 1980s there were serious economic difficulties that affected the western capitalized states, resulting in enormous pressures on government spending and this spurred debate on the review of public sector spending across the countries in a move to reduce the spiraling costs. The growth of debate within countries was compounded by the growing influence of transnational public organizations such as the European Union (EU), International Monetary Fund (IMF) and the World Bank. These organizations directly encouraged countries to follow the economic and private management principles being advocated through the use of this new public management and it can even be argued that the global implementation of NPM is a policy ambition of these international organizations (Bevir, Rhodes and Weller 2003). Clark (2000) suggests that the growing influence of these transnational organizations and their active support and steering towards NPM was one of the significant drivers in developing the view of a global structural trend of NPM. There is a general consensus of the key components of NPM, although there can be some variations. The most widely used definition comes from the seven characteristics put forward by Hood (1991) of 'hands on professional management, explicit standards and measures of performance, greater emphasis on output controls, a shift to disaggregation of units in the public sector; a shift to greater competition in the public sector and a stress on private sector styles of management practice (Hughes 2003: 5). Rhodes (2003) provides a useful summary of the '3 Es' of economic, efficiency and effectiveness, and market competition. Pollitt (2001), Clark (2000) and Rhodes (2003) identify three broad phases of development of NPM within the UK which can be summarized as: Drive for reduction of public sector expenditure Improving efficiency through evaluation of performance Introduction of market type mechanisms and organizational change in the delivery of public services Broadbent and Laughlin (1997: 497) come to a similar conclusion and highlight the importance of the Raynor Scrutinies, the Financial Management Initiative and the Next Steps Initiative as part of these phases of development. The drive for reduction of public sector expenditure was central to the ideology of the 'new right' and the Thatcher government. This policy was implicit across the workings of all government departments and was transferred on to the local deliverers of services. The commitment towards this reduction is reflected in the legislation and other requirements imposed through a radical programme of reforms during the 1980s and 1990s. The multitude of changes introduced to the operation of the public sector all contained the central goal of reducing the cost of delivering public services. For example, in the first phase of reform, from 1979 - 82, an Efficiency Unit was set up and led by Sir Derek Raynor, a leading figure in the business world (Kingdom 2000: 35). There are varying reports of the success of this drive but Rhodes (2003: 93 - 94) suggests that by 1982 there had been a saving of 170 million and 16,000 jobs a year, consequently significantly impacting upon the staffing levels of the civil service. Central to the NPM reforms of the 1980s and 1990s was the objective to replace the old 'traditional' bureaucracy of the public sector with a system that was more based on private sector values of flexibility and responsive structures. For example the Financial Management Initiative was introduced in 1982 and was a philosophy of decentralization, with devolved responsibility for budgets and performance targets. It required a new form of financial and general management skills. During this second phase of reform the National Audit Office and Audit Commission were created as regulatory bodies to implement the philosophy of the 3 'Es' of economy, efficiency and effectiveness (Rhodes 2003). Performance indicators began to emerge across the public sector and in the NHS there was an influx of recruitment of general managers. The introduction of performance measurement and performance management has been widespread across the public sector, within the operations of local authorities, police, NHS, education, central government departments etc. A lot of progress has been made in the development of performance management and measurement (Flynn 2002). However there is criticism directed at the consequences that have arisen from its implementation. Flynn (2002) agrees that progress has been made but he is concerned with highlighting the problems that still need to be addressed, namely caused by the fact that performance measurement is used for different purposes which means that measures which may be appropriate for external accountability may not be the right ones to use for effective management. Performance measurement and management are at the centre of the NPM reforms and essentially represent central control of local priorities. Flynn (2002) argues that further work is needed to improve the use of performance measurement and management in order to ensure that all relevant measures are subject to performance management and this cannot be achieved without consultation with managers and workers in deciding upon the true measures of success and the involvement of service users in choosing what relevant criteria defines success in their eyes. The structure of the public sector was radically changed through the implementation of the NPM reforms. The creation of new service delivery agency and internal markets with a focus competition completed changed the landscape of organizations. Flynn remarks that public sector managers have had to respond to the need to operate in markets according to how the markets have been established, for example where competition has been introduced they have had to control and reduce costs and where the public sector has lost in competition with the private sector this has resulted in greater private sector involvement in public services. It is also argued (Flynn 2002) that the introduction of this new private sector markets and organization has had the effect of weakening the influence of the trade unions as wage bargaining was affected by the amount of money available for wages in the contract price. A major implication of this new structure of service delivery has been the fragmentation of services and organization where individual services are provided by different companies or the fragmented units of the public organizations and whilst this may help to improve the concentration of managers on single tasks, it also makes coordination of services more difficult. (Rhodes 2003 and Flynn 2002). The difficulties in trying to integrate the highly fragmented institutional structures created in the name of decentralization and functional relevance has had an impact. As Painter (1999) points out a 'differentiated polity' can undermine the ability of governments to govern and can prevent effective co-ordination of public services. It is the public who are the 'losers' in this case (cited in Horton and Farnham 2002: 252). It is difficult to define the results of the NPM reforms, despite the many claims put forward, as there is limited research on which to base definitive conclusions about its impact or its outcomes. Flynn (2002) suggests that this not only because of the rapidity of changes but also because of the lack of policy evaluation that had been taken previously. The above discusses some of the benefits and criticisms of the NPM reform policies which include: increases in productivity and cost effectiveness; more focus on customer needs and service users; decentralization; improved financial accountability. The counter claims are that the implementation of these policies has resulted in negative consequences. Horton and Farnham (1999) raises the issue of high transaction costs involved in introducing and operating many of the new management systems; de-professionalization of groups; low morale amongst public sector employees; the erosion of the public sector ethic; and the contentious debate concerning the democratic deficit, arising from the fragmentation of service deliverer and loss of autonomy of local government. NHS NPM was first introduced into the NHS following publication of the Griffiths Report (Rowe and Shepherd 2002). As a result of this report there was substantial changes implemented across the NHS, with the replacement of NHS public administrators, who had traditionally followed an agenda set by the medical profession, by general managers whose task was to achieve central government goals of financial restraint through NPM techniques such as programme budgeting and performance monitoring. However as Rowe and Shepherd (2002) note the medical profession will always hold a certain level of power as managers are dependent on them for delivery. NPM took a strong hold across the NHS in the very early stages with the development of the NHS Internal Market, which at the same time enabled administrative decentralization and managerial devolution. at the same time as further reinforcement of centralized budgetary and strategic control (Flynn 2002: 65). The election of a Labour Government in 1997 brought a surprising shift in their constitutional commitment to public ownership which Flynn (2002: 44) argues was more than more than a change in attitude towards nationalized industries as it also represented a shift towards the idea of a mixed economy in general and a tolerance of encouragements of private pensions, schools, hospitals, home helps and refuse collection companies. The Labour Governments policy towards the NHS contained some continuities with the past and some changes. Drive for reduction of public sector expenditure The New Labour Government came to power in 1997 with less overt antagonism towards the public sector, including the NHS. There was a change in the driving force on cost reduction for public sector managers towards the end of the first term in office of the New Labour Government, with the objective of increasing spending plans in public spending as a proportion of GDP (Flynn 2002: 43). A consensus began to emerge between the Conservative and Labour parties from 1997 and in the campaign for the 2001 general election the Conservative Party mostly accepted the spending plans as necessary to improve public services, implying a more relaxed attitude to public spending and its impact on the economy than that of the pervious conservative governments (Flynn 2002). Improving efficiency through evaluation of performance The New Labour Government has continued to maintain central control through a system of performance target setting and measurement. The election manifesto of 1997 contained specific priorities for reducing the size of waiting lists and the time spent waiting for treatment however the government was not satisfied that the existing arrangements were adequate to meet these pledges and therefore they introduced new arrangements which replaced the internal market with an attempt at centralization in which the 'centre' would 'set standards, monitor performance, put in place a proper system of inspection, provide back up to assist the modernization of the service and , where necessary, correct failure' (Flynn 2002: 68) Introduction of market type mechanisms and organizational change in the delivery of public services Whilst the New Labour Government abandoned the system of the internal market and competition a key aspect to note is that the new government did not reverse the decision to separate the functions of commissioning and providing services with budgets allocated to the commissioners. As Flynn (2002: 67) notes this was one of the most significant of the previous changes as it aimed to change the balance of power away from the service providers, although the power shift was not as great as it might seem, because the service commissioners are dependant on the providers for the services they fund. It is clear that the New Labour Government has been willing to use the private sector, by either contracting out items such as psychiatric services and terminations of pregnancy or using private provision for waiting list initiatives (Flynn 200: 68) indicating that the government has come to the view that the mixed economy is appropriate in the NHS. The new arrangements for the NHS were introduced as part of the New Labour Government's Modernising agenda for public services. Rowe and Shepherd (2002) argue that the approach of the modernization agenda, particularly within the NHS Plan is rooted in the new public management concept, particularly through developing responsiveness through Patients Forums and PALS and advice structures as a participatory approach. Conclusion The NPM approach to the NHS and the wider public sector has not diminished to any real extent. The New Labour Government that came to power in 1997 did not reverse any of the major conceptual changes to the way the NHS was being governed and managed. However, what is clear is that it is no longer political ideology that can be argued as the reason for NPM, as John Prescott said: 'Traditional values in a modern setting should be our guide, not an ideological argument about public or private ownership (DPM John Prescott, LGA Conference 8 July 1999 cited in Flynn 2002: 42). References Bevir, M., Rhodes, R.A.W., and Weller, P. (2003) 'Traditions of governance: interpreting the changing role of the public sector', Public Administration, 81:1, pp. 1-17 Bovaird, Tony and Loffler, Elke (eds.) (2003), Public Management and Governance. London: Routledge. Broadbent, Jane & Laughlin, Richard (1997) 'Evaluating the New Public Management Reforms in the UK: A Constitutional Possibility' Public Administration, 75, pp 487-507 Chandler, J.A. (ed.) (2000), Comparative Public Administration, Cambridge: University Press. Clark, D. (2000) 'Public Service Reform: A Comparative West European Perspective'. West European Politics, 23:3, pp.25 - 44 Flynn, Norman, (2002), Public Sector Management. 4th edn. Essex: Pearson Education Limited. Horton, Sylvia and Farnham, David, (ed.) (1999), Public Management in Britain. London: Macmillan Press Ltd. Hughes, Owen E. (2003), Public Management Administration: An Introduction. 3rd edn. New York: Palgrave Macmillan. Kingdom, John. (2000), 'Britain', in Chandler, J.A. (ed.) (2000), Comparative Public Administration, Cambridge: University Press. McLoughlin, Kate, Osborne, Stephen P, and Ferlie Ewan (eds.) (2002) New Public Management: Current trends and future prospects. London: Routledge. Pollitt, C. (2001) 'Convergence: the useful myth', Public Administration, 79:4, pp. 933-947 Rhodes, R.A.W. (2003), Understanding Governance: Policy Networks, Governance, Reflexivity and Accountability. Philadelphia: Open University Press. Rowe, Rosemary & Shepherd, Michael (2002) 'Public Participation in the New NHS: No Closer to Citizen Control' Social Policy and Administration, 36:3, pp 275-290 Read More