When the halo wears off: a recent United Nations report, Unlocking the Human Potential for Public Sector Performance, shares some lessons from two decades of global diffusion of New Public Management thinking and practice

Public Manager, The, Winter, 2005 by Kristinn Sv. Helgason, Vilhelm Klareskov

The World Public Sector Report 2005: Unlocking the Human Potential for Public Sector Performance, released in October 2005 by the United Nations Department of Economic and Social Affairs, looks at how governments are tackling some of the key human resource management (HRM) challenges facing the public sector. Among its policy recommendations, the report cautions developing countries against overzealous adoption of private-sector practices in public management. Private-sector practices, the report argues, are not a panacea that can address all the problems confronting the public sector, but only one part of a needed comprehensive reform.

This article, born of this thinking, examines lessons from two decades of New Public Management (NPM) diffusion and adoption by governments, in the area of public-sector reform generally and in the field of HRM specifically. In particular, it highlights some complex issues governments need to consider when embarking on the implementation of two popular NPM instruments: outsourcing and performance pay. It also echoes the view expressed by many public administration experts that a too-aggressive application of NPM instruments has the potential to undermine the quality, integrity, and commitment--in other words, the professionalism--of the core civil service.

Doctrine or Tool Kit

NPM can be viewed as both a particular doctrine and a distinctive tool kit of administrative techniques. As a doctrine, it combines insights from economic theories of institutions with practical lessons from business management, the latter selected because they conform to these theories. The theories begin with the assumption that everyone is motivated by the desire to maximize personal preferences. From this assumption, such models as principal-agent and the budget-maximizing bureaucrat are derived. Thus, to align the agent's self-interest with the principal's objectives, both should be monitored according to rules, constraints, and performance agreements that incorporate incentives, rather than according to the principles of obedience, trust, or building joint commitments.

NPM was essentially doctrine-driven, especially in its early years. A common phenomenon among the reform-minded progenitors of NPM was their rush to implement and extend their initiatives before evaluating the consequences. However, even if rigorous evaluations have been few and far between, the lessons of experience have pointed to some common trends in HRM due to the spread of NPM doctrine and practices:

HRM in the public sector became similar to its private-sector counterpart. Economic efficiency was one of the most important standards of reform, achieved, for instance, by reducing the size of the public sector.

Many efforts were made to give line ministries and line managers greater flexibility and freedom in HRM through various decentralization and devolution policies.

In return for providing greater flexibility and freedom to agencies, governments tried to secure accountability of line ministries and line managers in HRM by stressing the performance and ethics of the civil service.

NPM has been promoted as a "global model," often recommended by influential international agencies. When these agencies assist and advise developing countries, governments are tempted merely to copy when, in fact, the challenge is to adapt and select on the basis of the principle of "starting from where you find yourself."

NPM Experiences around the World

Today, only a handful of governance systems are systematically structured to reflect NPM doctrine and make full use of the NPM tool kit. Perhaps the best-known examples are the Anglo-Saxon countries of Australia, New Zealand, and the United Kingdom, which also reaffirm the origins of NPM and the extent to which it is a creature of those cultures.

Australia

The experience of Australia shows that devolved management,coupled with a set of clear central goals and policies (for example, cost-cutting), can be an effective instrument for achieving change. From the mid-1980s, NPM-style reforms were driven largely by transforming the public-expenditure management process under the guidance of the Department of Finance. Managerial reforms, such as one-line budgets and performance monitoring of program outputs and outcomes, were accompanied by, among other things, the creation of internal markets, semiautonomous agencies, user fees, and charges set to recover costs and contracting-out.

Throughout these years, the government of Australia acquired the reputation of being a sound financial manager, meeting budget targets, showing fiscal discipline, and successfully targeting and cutting expenditures when needs and circumstances required. Much of this was achieved by more targeted strategic management at the agency level, bringing efficiency gains. At the same time, it required strong political direction and some old-fashioned fiscal discipline and controls to "squeeze" these savings from the system.

Western Europe

All Organization for Economic Cooperation and Development (OECD) countries have engaged in some degree of public management modernization of their traditional bureaucracies while also generally seeking to retain the core values of impartial competence that these bureaucracies embodied. It has often been observed, however, that there is a marked variation in the extent to which they have adopted "managerialism" and NPM doctrine and tools.