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New Public Management

Anwar Shah, Program Leader, Public Sector Governance, World Bank Institute [email protected] Workshop on Performace Accountability and Integrity Mostar, December 4, 2007

Perceived Problems of Government

· · · · · Too bureaucratic Too big Too inefficient, ineffective Unaccountable, lack of transparency corruption

Core of "New Public Management"

· Not what government ought to do. · But how to do it better · Sometimes advanced as the best solution to government's key problems

­ Builds on principal-agent models and newinstitutional economics

Basic Elements of New Public Management Strategies

· · · · Strategic planning Incentives Flexibility Results

Strategic Planning

· From incremental to comprehensive look at government activities · How: devise a plan for future · Goal: produce consensus of government's direction


· From authority and control to markets and results · How:

­ Create semi-autonomous agencies ­ Write contracts to structure government work

· Goal: replace top-down control with bottom-up focus on results


· From rule based to results based accountability · How: employee empowerment, market based incentives · Goal: free employees to do what they know is right.


· From focus on inputs to results · Defining results but how?

­ Outputs: government activity- service delivery ­ Outcome: impact of government activity

· How: measure, reward results · Goal: fundamentally transform government's operations

Performance Results Chain Application in Education

Program objectives

Improve quantity, quality, and access to education services


Educational spending by age, sex, urban/rural; spending by level; teachers, staff, facilities, tools, books

Intermediate inputs

Enrollments, studentteacher ratio, class size




Informed citizenry, civic engagement, enhanced international competitiveness


Winners and losers from government programs

Achievement Literacy rates, scores, graduation supply of skilled rates, drop-out professionals rates

Alternative New Public Management Frameworks

· Letting managers manage: operational flexibility and freedom ­ few rules more discretion · Making managers manage. Accountability for results. Contracts/work program agreements based upon pre-specified output and performance targets and budgetary allocations new civil service framework · Subsidiarity principle · Competitive service delivery and benchmarking · Incentives for cost efficiency (including capital use)

Tools for Results Oriented Management--external, citizen focus

Question for results-oriented management Management tool Performancebased budget Benchmarking Activity-Based Costing (and others) Full reporting using accrual accounting Balanced Scorecard All these tools are connected to Total Quality Management and such devices used to create a results and participation culture, and work effectively where roles emphasize results. The entire process driven by a citizen focus: Contract information-- what is the final product we must produce and what do we receive to produce such product? How do we know how we are doing in terms of the contract, and in terms of other producers from whom we can learn? How much does it cost to produce such product (the complete cost)? How can we produce the product better so we can be sure of meeting and exceeding our contract obligation and receiving rewards? How do we report our results? How do we manage the new reporting, production, and contract obligations we have, as well as run a citizen friendly administration?

Civil service paradigm under resulted oriented management

Current culture · Rigid rules · Input controls · Top-down accountability · Low wages and high perks · Life-long and rotating appointments · Intolerance for risk/innovation NPM · Managerial flexibility · Results matter · Bottom-up accountability · Competitive wages but little else · Contractual and task specialization · Freedom to fail/succeed

The Practice of New Public Management

· Letting managers manage

­ New managerialism in USA. Australia ­ Autonomous agency model in UK ­ Alternative service delivery framework in Canada Making managers manage ­ New contractualism in New Zealand ­ Client's charter in Malaysia

The Canadian Approach

· Getting Government Right Through Alternate Service Delivery Approach

Alternative Service Delivery Framework

Alternative Service Delivery Options Public Interest Service Shedding Test Privatization - divestiture Yes Abandon No Abandon Role of regulated Employee Takeover Government Test Yes Jurisdictional Public Partnership No devolution - shared services Alignment Realign Realign Contracting Out - franchising Test licensing Yes Yes Government Owned/Contractor External Operated Partner Partner Partnership Private, Not-for-profit Agency self-help - volunteers Test Public/Private Partnership No Restructure Business Restructure Crown Corporation Principles departmental corporation Yes Special Operating Agency Test Improve


Utility Line Organization


An Example: Education grant to Encourage Competition and Innovation

Allocation basis among local governments: School age population (ages 5-17) Secondary distribution to providers: Equal per pupil to both public and private schools Conditions: Universal access to primary and secondary education regardless of parents' income, improvement in educational outcomes. No conditions on the use of grant funds. Penalties: Public censure, reduction of grants funds

· Core public sector: culture shift from input controls to output accountability · The new contractualism: examples - central bank governor, minister of finance · Separation of policy and implementation; separation of financing/purchasing/provision · Decentralized management with budgetary flexibility and autonomy · Commercialization or privatization · Responsible fiscal management

The State Under Contract - The New Zealand Model

Accountability for Results Malaysian Approach

· Customer orientation through Client's Charter (1993): transparency, service standards, measurement, feedback, redress · Managerial flexibility with output accountability (1990) · Decentralized management · Partnership approach to service delivery; contestable policy advice · comparative evaluation of service providers · Deregulation, commercialization, privatization and partnership

Output Orientation under the Malaysian and NZ Models

· Program agreements monitored for achievement in outputs and impacts · Output budgeting · Activity based costing · capital charging · Accrual accounting · Monitoring government's net worth

Has NPM worked?

· Big positive impact on government operations in New Zealand, Malaysia and Canada · Modest positive impact on government operations in UK and Australia · Little impact in the USA

The Kiwi (NZ) Experience To Date

· Remarkable results in performance improvement: Deficit, Debt, Net worth · The New Contractualism at Local level: Astonishing turnaround in Papakura · Some difficulties in social services · Political responsibility for bureaucratic incompetence: The Tragedy at Cave Creek

The Canadian Experience To Date

· Deficit cut from 7.5% of GDP in 1993 to zero in 1998 and sustained surpluses thereafter. · Number of departments reduced from 38 to 25 · Civil service size reduced from 220K to 187K · Increase in spending on social services, justice, and science and technology · Improvement in service delivery and citizen satisfaction

Improving on NPM

· Citizen-centered Governance

Genesis of Citizen-centered Governance Athenian Oath: "We will strive increasingly to quicken the public sense of public duty; That thus... we will transmit this city not only not less, but greater, better and more beautiful than it was transmitted to us".

Key Elements of Citizen Centered Governance Reforms

· Citizens charter ­ Service standards ­ Requirements for citizens voice and choice · Subsidiarity · Citizen oriented output budgeting ­ Service delivery outputs and costs ­ Citizens report card on service delivery performance for the previous year · Public sector as a purchaser through performance contracts but not necessarily provider of services · Alternate Service Delivery Framework · Benchmarking


Program/ project Inputs Activities Outputs Reach Outcomes Impacts (goals)

2. Administration concerned with outputs. Clear roles in the government production process, 1.Bottomup, 2.Focused on managing for results, and 3.Evaluated in terms of those results. 2. Output contract 2. Executive concerned with outcomes Legislature

3. Internal and external Results and process Evaluations

2. Outcome contract

1. Citizens

3. E











3.Citizen evaluations

Citizen-centered governance: An Example - Switzerland

· Direct democracy provisions · Subsidiarity

CCG- Road Map to Wrecks and Ruins

· · · · Underdeveloped bureaucracy argument Input control systems not well developed Corporatization and fragmentation - PMUs Managerial discretion - opportunities for abuse of public office for private gain · Fine for production and process tasks but what about craft and coping organizations?

· Weak potential for contract enforcement · Weaker top-down accountability · Weak legislative accountability under separation of executive and legislative branches · Moral hazard in social services provision · Political responsibility for bureaucratic incompetence. The Tragedy at Cave Creek · Moral: look before you leapfrog?

CCG: towards a better tomorrow?

· Improved norms of conduct (Malaysia, UK) · Cultural shift from input controls to output and accountability (New Zealand, Malaysia) · Encouragement of partnership, competition and risk taking (Malaysia and Canada Alternative Service Delivery Framework) · Greater bottom-up accountability · Design of incentives critical · In LDCs strong potential for improving public sector performance · Moral: Leapfrog or meet a slow death

CCG - Road Map to Wrecks and Ruins or to a Better Tomorrow?

Leapfrog or Meet a Slow Death? · Bottoms up accountability is the key · Design of incentives critical · In LDCs strong potential for improving public sector performance

Governance Structure: 20th Versus 21st Century

· · · · · · · · Unitary Centralized Center manages Bureaucratic Command and control Internally dependent Closed and slow Intolerance of risk · · · · · · · · Federal / confederal Globalized & localized Center leads Participatory Responsive and Accountable Competitive Open and quick Freedom to fail/ succeed


· We keep trying because reform is eternal and

­ We never fully succeed ­ We can't stop trying.

ROME - Road Map to Wrecks and Ruins ?

·Dilbert's perspectives This fad will also pass away.


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