New Public Management

Definition of NPM

One primary characteristic of NPM involves public organizations adopting the management and organizational forms used by private companies. It challenges two traditional doctrines of public administration: that public sector organizations are “insulated” from the private sector in terms of personnel, structure, and business methods and that they operate in accordance with a precise set of rules limiting the freedom of public officials in handling money, staff, contracts, and so on. In contrast, the NPM movement subscribes to the principle that the formal organization of the public and private sectors should be similar and that managers in public sector organizations should have discretion and leeway in their daily work, so as to make efficient use of allocated resources.

Even if NPM fundamentally espouses economic values and objectives, as a concept, it is loose and multifaceted and encompasses a range of different administrative doctrines. It offers a kind of “shopping basket” of different elements for reformers of public administration. The main components of NPM are hands-on professional management, which allows for active, visible, and discretionary control of an organization by people who are free to manage; explicit standards of performance; a greater emphasis on output control; disaggregation of units; and private sector management techniques. It also includes splitting up public organizations through horizontal specialization (single-purpose organizations) and vertical specialization (structural devolution); increased exposure to competition, contract management, and market orientation (contracting out, purchaser–provider models); increased emphasis on service orientation and user participation (citizen charters); and cost cutting and budgetary discipline. NPM is supposed to score high on managerial autonomy and ex ante control and low on policy autonomy and ex post control.

Ewan Ferlie distinguishes among four different NPM models: the efficiency drive, downsizing and decentralization, the search for excellence, and public service orientation. NPM promises to integrate these themes, linking efficiency and accountability. Other distinctions are between “hard NPM tools,” which address accounting, auditing, and performance measurement, and “soft NPM tools,” which include things such as human factors, user orientation, quality improvement, and individual development.

NPM in a Theoretical Context

NPM reforms are not based on one theoretical foundation but are a collection of reform elements sharing several common characteristics. When NPM reforms are said to be typically theoretical, this often means that contractualism and economic theories dominate. Examples are public-choice theories, principal–agent models, and transaction-cost models. NPM, with its economic performance and market focus, sees other values and considerations embedded in the civil service as more or less unproblematic and not generally threatened or negatively affected by the efficiency and economy focus of NPM.

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