The early 1980s and 1990s saw the emergence of New Public Management (NPM) theory of running public organizations. This concept originated from the UK and USA during the times of Margaret Thatcher and Ronald Regan. It has since been implemented in other OECD countries like Canada and New Zealand. In Australia NPM was introduced by the Hawke-Keating Governments (1983-96) and extended by the Howard Government (1996-2007). The governments of the time, increasingly under political pressure to cut down expenditure and administration costs turned to the public sector for ideas and hence the birth of the NPM (Gruening, 2001). This paper seeks to define NPM and list its advantages and disadvantages in the delivery of human services. The paper will also explore the implications of NPM for non government welfare organizations.
NPM has been defined by Wolfgang (2005) as the transfer of business, market principles and techniques from the private into the public sector, based on a neo-liberal understanding of state and economy with the aim of creating a trim, reduced, minimal state. The goal of NPM is also to reduce public activity inorder to increase business efficiency, effectiveness and general performance of the public sector, while delivering a quality service for the public. This was achieved by cost cutting and outsourcing public activity to non government welfare organizations (NGOs) through competitive tender processes. In Australia, services like aged care; disability services; child, youth and family support; alcohol and drug services; mental health services among others, were contracted out to NGOs. NPM also focuses on the removal of bureaucracy in favor of ‘loosely couple quasi autonomous units’ (Lynn (2006:107), allowing managers to manage according to private sector practices leading to self regulation and profit maximization.
Advantages of NPM
One advantage of NPM is decentralization that leads to greater flexibility where managers can respond quickly to consumers. According to Siedentopf and Sommermann (2004, p.4), this flexibility ‘’…encourages managers to take risks and be more entrepreneurial…’’. It is argued that this has the added advantage of increasing efficiency and creating customer driven change leading to a better targeted and effective allocation of resources, also resulting in greater customer satisfaction.
Accountability is also another advantage of NPM. This is achieved through the measurements of outcomes rather than accounting of inputs. Service providers (NGOs) are in a contractual relationship with the funder (Government) and have to justify their performance and expenditure by reporting on achievements. If agencies don’t achieve the agreed outcomes with the funder, often they lose the contract. If they achieve the desired and agreed outcomes, then they maintain their funding. This linking of performance to pay by NPM is meant to motivate agencies to be effective. The problem is, often some managers cut corners, and may not build good relationships with clients because they are focused on results. Another shortcoming of this focus on accountability and results is that agencies are put under pressure with administrative requirements to justify their expenditure to the funder, which again takes away from their core responsibility of working with people.
One major advantage of NPM is reduction of public expenditure. According to Ormond 2004, Australia has saved between 15-20% of taxpayers’ money by contracting out services while maintaining or improving service levels. The same sentiments are shared by, Lynn 2006:104 who argues that NPM was seen as a “panacea for achieving a more frugal, more efficient…more effective…governments”. Also, this rivalry via competition is viewed as the key to lower costs and better standards (Falconer, 1997) as well as giving consumers a wide choice of services. But where monopoly exists in the market, consumer choice if removed, and prices...
Please join StudyMode to read the full document