What is new public management (NPM)?

What is new public management (NPM)? Examine the theoretical basis for the NPM. Access whether the ideas of NPM have any impacts on the way Hong Kong's public service operates.

'The rise of new public management (NPM) over the past 15 years is one of the most striking trends in public administration."1. It is an undeniable fact that there is a dramatic change in the operations and role of the public service. The change in terminology from public administration to public management reflects the change.

Traditional model of administration is considered as obsolete and has been effectively replaced by this new model of public management. In this paper, I will attempt to describe what a new public management is and outline its theoretical base. Lastly, I will also try to evaluate whether the ideas of NPM have any impacts on the way Hong Kong's public service operates.

What is the New Public Management

According to C. Hood (2002), NPM, likes most administrative labels, is a loose term2.

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All the same, NPM aroused strong and varies emotions among bureaucrats as it is considered as the only way to correct for the irretrievable failures and even moral bankruptcy in the old public management. Since 1970s, there was a series of major reform of the public sector in the UK, New Zealand, Australia, US and many other OECD countries. The traditional model of administration which emphasis on passive, rule following, bureaucracy is no longer applicable. Instead, the application of business principles to the public sector which focuses mainly on efficiency, active and achieving results become dominate.

Generally speaking, the key features of the new public management can be attributed as follows:

i) Active professional management

One key feature of NPM is the focus on active professional management rather than merely overseeing operations. Senior public servants are no longer viewed as just supervising the operations of their departments but rather are expected

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to actively manage them. As a senior public manager, he has to specify the organization's missions, goals and objectives and design a long term strategy in promoting and enhancing the efficiency as well as the effectiveness of the organization.

ii) A focus on results

Managers are not just ensure the routines are followed. Instead, they should be responsible for achieving results. To achieve this end, clear objectives or goals are established, explicit standards are set and measures of performance (performance indicators) are required. Generally speaking, rewards and penalties are linked to the success or failure to achieve these performance indicators. A focus on this is on economy, efficiency and effectiveness

iii) Improved financial management

The new public management puts a greater emphasis on output controls which focus on results rather than procedures and processes. Budgets are liable to be linked to particular programmes with targets and time frame set rather than just focused on inputs and neglected what to have achieved. Under the new model, budgets need to reflect what is to be delivered. Optimal use of resources as well as streamlining the procedures with a view to enhancing efficiency should be adopted. New spending initiatives only gain approval if corresponding savings can be achieved elsewhere.

Read more: Essay About New Public Management

iv) Greater politicization of the public service

The new public managers are no longer neutral figures but are more likely to be committed to supporting the government that appointed them. A condition of their appointment is to have the same values or policies thinking as adopted by a particular government.

v) Flexibility in staffing

Lifetime tenured employment is no longer applicable and the new public managers are appointed on performance-linked contracts which may or may not be

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renewed. They will be fired or dismissed should their performance does not meet the required standard. Recruitment to the public service is possible at all levels, with the options of people moving into and out of the public service according to their abilities and the organization's needs. Promotion is based on one's ability rather than seniority.

vi) Flexibility in organization

The disaggregation of the large organization into discrete entities can facilitate control and management. This takes the form of a small core of senior managers determining policy and various agencies carrying out the tasks assigned. One of the aim of this process is to separate the policy responsibilities from those who deliver services to the public.

vii) A shift to greater competition

Privatization or the contracting out of government tasks which the public service had previously performed in house was part of the effort to reduce the size and role of government. Borrowing from notions of competition in the marketplace, these processes not only stimulate competition but also enhance the efficiency as well as effectiveness of the government.

viii) New politicians-bureaucrats relationship and new relationship with the public

The relationship between senior public servants and their political 'masters' has changed from one that was more technically narrow to one in which there is a much closer relationship. Senior public servants are expected to take more scope in interaction and communication with their master in order to achieve organizational goals. Similarly, a closer relations between government officials and members of the public who are seen as 'clients' whose needs have to be met in the same way as though they were customers of government services are advocated.

The theoretical foundation of NPM

The theories upon which new public management is based are drawn from

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economics and private management. The emphasis on results, efficiency and measurement is clearly derived from economics. The application of the ideas on new-classical economic theory; public choice theory; principle/agent theory and transaction theory is related. Under the economics approach, it assumes that individuals are all rational beings and self-interested. They are solely motivated by personal material gain and that public servants are not immune from this behavior. These views challenged public service privileges and beliefs in public service self-sacrifice. They seriously attack on bureaucracy as an organizing principle as it results in inefficiency and ineffectiveness. Instead, it promotes the reducing government in general and gave a methodology for designing market-based public policies. Only through market competition, consumer sovereignty and choice provide incentives to lower costs, the government can be run in a most efficient way.

The second theoretical basis for public management can be found in private management. The most important point imported from the private sector is the focus on objectives. Making results the primary aim and eradicating the concept of bureaucratic organization. They advocate the application of the following types of market discipline into public service activities which include i) focus on relations between government officials and members of the public who are seen as 'client' whose needs have to be met in the same way as if they were their 'customers'; ii) to emulate the competition of the marketplace with government agencies competing against each other of private companies to deliver certain government services and lastly iii) to leave private enterprise to perform duties that previously taken up by government.

The changes on the way Hong Kong's public service operates.

In a traditional bureaucracy, there is a very clear and rigid hierarchy in structure. Different tasks were assigned to the different levels and lower levels are responsible to the superiors at the next higher level. Information was passed up through the different levels in and ordered manner. There is a definite 'chain of command' and clearly established procedures for information flow within the department. The conditions under which members of the public service work are standardized. Recruitment is exclusively via the open public service examination at

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the base grade level. Promotion is often based on seniority of service while the salary gradations and increasing prestige are fixed and uniform, corresponded with each level of service. Public servants enjoy life-time tenure. There is no threat of dismissal on the grounds of incompetence. Meanwhile, their career is also rewarded by generous retirement benefits.

Over time, there is a tendency for bureaucracies to increase in size, to become cumbersome and to be far from efficient and effective organizations. In this connection, Governments with traditional bureaucratic type have faced emerging financial problems with growing demands of services and growing resistance to taxation measures. To increase the government's efficiency and effectiveness, private sector management practices have been introduced into the public sector.

To take Hong Kong as an example, the government has put in place a series of measures in the course of the Civil Service Reform since 1999. The main objective was to restructure the administration of the Civil Service so as to make it more flexible and prepare to face the changes and increasingly demanding challenges and meet the demands of society. The principle of "small government" is upheld to contain the size of the civil service. It is evident that the civil service establishment has been reduced from around 198 000 in early 1999 to about 164 600 in June 2005. The following are the highlights of the reform under financial, personnel and performance management.

i) Financial management

Trading fund reform

Hong Kong government introduced the Trading Fund Ordinance in 1993 to allow five selected departments, including the Company Registry, Lands Registry, Office of Telecommunications Authority, Post Office, the Electrical and Mechanical Services Department to operate on a more commercial basis, hence, relying on income rather than voted funds. The overarching goal of a trading fund department is to become a self-financial department and transform government departments into organizations that could do more with less resources.

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Enhanced productivity programme (E PP)

The EEP is a reform that combines both financial and personnel management elements. This reform is delivered into two phases. The first phase is to achieve short-term quantified productivity gains while the second is to enhance productivity by a combination of reduced growth in baseline expenditure, reviews of major spending areas, and changes in the management framework intended to secure a more proactive resource management culture. In fact, during recent years, most of the government departments have undergone the first phase EPP such as the increasing of productivity at department levels in 1999-2000, which takes the form of delivering additional outputs under existing resources; reducing the baseline expenditure by 5% by 2002-03; and the introduction of 'one-line' votes for selected departments so that it allows greater flexibility for departments to allocate their resources.

ii) Personnel management

On 1 June 2000, the government introduced a new entry system and terms of appointment for new recruits to increase flexibility of its appointment system. The practice of hiring staff has changed. As a result, more civil service posts were filled by non-civil service contract staff. Besides, HK government also began to recruit staff from outside the civil service directly into middle-level and higher-level

positions. For example, the Civil Service Bureau announced that it hoped to recruit up to 10 senior Administrative Officers from outside the Administrative grade.

Furthermore, the government has implemented a Civil Service Provident Fund Scheme in place of the pension system for officers who are offered appointments to the Civil Service on or after 1 June 2000 under the new entry terms and when they subsequently progress onto new permanent terms of appointment.

In the meantime, the government also introduced the first and the second voluntary retirement (VR) Schemes in July 2000 and March 2003 respectively to enable existing staff of designated grades with identified or anticipated staff surplus to retire voluntarily with pension benefits and compensation. About 9,800 applications under the first VR scheme and another 5,300 applications under the second VR scheme have been approved. Besides, to enhance the quality and performance of government departments, the government has introduced a Management-initiated Retirement Scheme to provide for the retirement of directorate civil servants on permanent and pensionable terms since September 2000.

Lastly, to bring Civil Service benchmarks more in line with the private sector, the government implemented new starting salary levels for both civilian and disciplined services grades with effect from 1 April 2000. The new salaries apply to all new recruits and serving staff on transfer. Measures to streamline the existing disciplinary procedures were introduced also at the same time. On 1 June 2000, the government introduced a new fringe benefits package which includes revised leave earning rates, a new leave passage arrangement and non-accountable housing benefits for new recruits. Again, in April 2000Moreover, a comprehensive review of the Civil Service pay policy and system has been conducted also in September 2002.

Performance management

Performance indicators are being developed to judge the success or failure of the programmes and rewards and punishments are linked to reviews of performance. A major on-going performance management programme is 'Target-based Management'. The target management process (TMP) helps the government to manage for results. With the help of this process, a government department would know better what its objectives are. Through the realization of the objectives, it can improve the government's overall performance by making it better focus on results achieved and helps the government identity potential shortfalls in programme areas that will affect the delivery of services to citizens.

Conclusion

To conclude, the ideas of new public management is affecting the way Hong Kong's public service operates. Even though the formal power structure of bureaucracy still remains, but conditions of employment and delivery of services are increasingly in accordance with the newer models of public management. To adopt the principles of economics and private management, public sectors are expected to

be operated in a more efficient and effective way with costs savings achieved at the end.

The End

References

i) Public Management and Administration (an introduction), by Owen E. Hughes

ii) Hand out of the "Introduction to Public Policy and Administration" Unit 7 & 8

iii) "New Public Management: Does it exist?" by Jim Chandler, Sheffield Hallam University http://www.psa.ac.uk/cps/1996/jchan.pdf#search=what%20is%20new%20public%20management'

vi)Civil Service Bureau, HKSAR government at http://www.csb.gov.hk/hkgscb/content.jsp?lang_iso=en_uk

v) Efficiency Unit, HKSAR Government at : http://www.info.hk/eu/

1 A public management for all seasons? By Christopher Hood, Public Administration 69 (1991):3-19