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Managing in the Public Sector

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Managing in the Public Sector and how the strategic management within the Public Sector

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Managing in the Public Sector

  1. 1. B00185272 1 Managing in the Public Sector New Public Management Authors: (B00185272) Module: Managing in the Public Sector Module Code: BUSN09021-9289 Date of Submission: 01/07/2015 Word Count: 2,200
  2. 2. B00185272 2 The late 1980s public administration has evolved to demonstrate a businesslike approach that is known as NPM (New Public Management). The author of this paper will explain a brief history and the introduction of Christopher Hood’s seven tenets of NPM and discuss the assertion that NPM has made managing in the public sector similar as managing in the private sector. By demonstrating tools that’s used in the private sector but also used in public sector with an end result. The author will assess a strategy which involves a scorecard and examples of Renfrewshire Council services, including service improvements within the community with an overview of other public sector companies and a description of the private companies finishing with a conclusion. (Hood, 1991) labeled NPM as an abbreviated name for a set of generally similar administrative doctrines that controlled the bureaucratic reform agenda in many Organization for Economic Cooperation and Development (OECD) countries from the late 70s early 80s and procedures of the public sector in order to make it competitive and efficient in resource and service delivery (Hood 1996, p271) Figure 1 provides seven doctrinal elements of NPM with a meaning and a justification.
  3. 3. B00185272 3 Figure 1: (Hood, 1991)
  4. 4. B00185272 4 It’s worth noting that such seven elements of NPM don’t occur in every situation meaning if one element is absent from the list, it does not compromise the NPM strategy. (Pollitt 1995,p133) states that such list of elements is a ‘shopping basket’ for whom, who wish to reform the public sector however internationalization NPM has significant variations from country to country as they don’t have a single intellectual provenance but do support common themes. In the past, most Organisation’s for Economic Cooperation and Development (OECD) countries; Australia, New Zealand and Sweden amongst others have experienced exposure to the seven doctrines (Hood, 1995). Although OCED countries have experienced exposure, over the period of the twentieth century, numerous countries have witnessed changes in the public service that’s being provided (Pollitt, 2003, p.19) These changes in reforms (Pollitt 2003,p.19) suggests that it impacts the connections between the public and private sectors in a range of ways which still continue to change and develop in today’s world, for example;  “In many OECD countries ‘public-private partnerships’ (PPPs) have become very fashionable, especially in the area of urban regeneration, transportation and other infrastructure”  “Many other public services have been ‘contracted out’. This means that the public authorities still retain responsibility for seeing that the service is provided, and still pay for it and set the standards and requirements for it, but the actual work of delivering the service is undertaken, on contract, by some other organisation” (Pollitt, 2003, p.19)
  5. 5. B00185272 5 The New Public Management (NPM) concept emerged in the United Kingdom (UK) and many developed countries in the 1980s (Hood, 1995). According to (Hood, 1995, p.48) the description of The New Public Management is the term used to describe a change in public management since the change of power from the election in 1979. At this time, Britain’s first female swept to power at the doors of NO 10 Downing Street on 4 May 1979. As newly elected Prime Minister, Margaret Thatcher (Conservatives) served three consecutive terms in office (BBC, 2015). During this period of time, the concerns were on the development of new mechanisms for the accountabilities within the public sector. (Oliver and Drewry 1996, p.1) discuss “the years since 1975 when Margaret Thatcher became the Prime Minister have particularly associated with radical programs to reform public services, both substantively, in terms of the nature and range of services provided by the state and institutionally, in terms of the way in which service provisions is organized and funded”. Albeit the state dominated and organized public services, it was not achieving to deliver quality services efficiently or effectively to society before the rise of NPM in the early 1980s. Before the Thatcherism era, (Mackie 2005,p.5) discusses that the Plowden Committee (1961-1963) was a key influence on the relevance of management in the public sector, controlling the Public Expenditure which recommended a series of reforms in planning and control and economic management. (Keeling 1973) supports that such decisions by the Plowden Committee were essential to allow any significant improvements in management within public service.
  6. 6. B00185272 6 (Mackie, 2005, p.2) continues, “In 1968, the Fulton report (1968) gave a further description of ‘management’ which was wider than any given previously and that was much more consistent with the use of the word business. Management in the public sector are more engaged which passes through to senior level, allowing them to participate in operational and management strategy with a more ‘hands-on approach’ requiring a clear responsibility for action (Hood, 1991). An example of this, is the government outlining their own expectations for the organisation in the public sector to achieve results, however the public sector (organisation) will draft up its own strategic goals to submit for authorization to implement such goals (Mackie, 1995). These goals could include but not exhaustive, standard of performance, explicit and specific targets, performance indicators and reporting. While considering Strategic planning, it’s also worth taking into account of performance and value for money? Governments can enhance performance by creating competition in service, using a Compulsory Competitive Tendering (CCT) process, which was introduced in the early 80s in the United Kingdom (UK) that allows the ‘best’ contractor to win over the public sector organisation that it can provide the best value for money. The government can then ensure that performance monitoring and reviews take place, this allows such government to determine costing for a particular service which can lead to term contracts and other agreements. By being competitive, this may result in rivalry as this would lead to reducing costs and better service standards (Hood, 1991). An example of the tendering process is the Local Government Planning and Land Act 1980 that formed a set of rules to tender for building and civil engineering work which
  7. 7. B00185272 7 was extended in 1988-1992 to other areas, to street and building cleaning, catering and financial services amongst other sectors which allowed the winning contractor to use their own employees and by doing such activity, the main objective is to reduce the overall costs without impacting service and quality. By changing the pattern of the workforce .i.e. reducing workforce or introducing younger employees for better productivity which would lead to a competitive environment with the expectancy of higher efficiency (Flynn, 1996. P58). NPM suggests that decentralisation has a role to play within the public sector. (Flynn, 1996) suggest that pushing bureaucracy into characteristics of public life shifting power from government into elected councils and public service will create an environment for sustainable growth, better public services and a stronger society. This is supported by (Falconer, ND) “It is more efficient because smaller units of activity are better able to establish objectives and work towards achieving them more quickly and more directly. It is more accountable, because the new public management replaces the ‘faceless bureaucrat’ with visible, responsible managers who directly accountable to the public”. Does this mean that managing in the public sector is the same as managing in the private sector? (Hood, 1991) explains that the public sector can move away from a military style to allow greater flexibility in recruitment and rewards, such move would allow private sector management tools to be used which would have already been established. (Falconer, ND) explains, it’s important within public management is that such public sector should look to seek and behave in a business like environment with business principles being applied, offering a reward structure for its employees like the private
  8. 8. B00185272 8 sector, offering performance pay and flexible working to run parallel with members of the private sector. On the back of such structure, resource management must be aware of such labour disciplines. The foundations of NPM will assist in introducing such disciplines reducing direct costs financially and labour costs. In such activity, public sector needs to consider public demands with an attitude of lean thinking, resulting in reducing costs, reducing waste, while sustaining high quality and customer satisfaction by using a methodology Six Sigma (Mackie, 2005). Managers in the public sector must evaluate financial performance, customer knowledge and internal processes and growth. Such measures are found in The Balance Scorecard, originally designed by Kaplan and Norton, (Mackie, 2005) The Balance Scorecard was designed for the private sector which has the company’s strategy in mind, providing objectives. Managers can establish what’s to be delivered and sustain the company’s strategy and monitor its development in four key dimensions as demonstrated in figure 2. Figure 2: (Mackie, 2005)
  9. 9. B00185272 9 The success for the public sector is not measured by profit (unlike private sector) but how efficiently and effectively the public sector can achieve the necessities of its stakeholders with an end result of customer satisfaction (Mackie, 2005). Ultimately, customer satisfaction can be influenced by state power (Government) and its reforms, by such movement, the behaviors of public management have to be pro- active to new policy wishes being introduced by the state. In turn, any decision made can effect society resulting in public management being challenged from both sides and politicians need to depend on public managers to achieve their goals set-out (Pollitt, 2003, p83). The challenges from society can be based on the outcome of poor elections turnouts, poor communication or general weakness of accountability. (Joyce, 1999) explains “On the other hand, there are concerns about the ‘democratic deficit’, meaning that there are problems about assuming that every direction set by politicians, every priority or policy they establish, is completely in line with the genuine wishes of the public”. The public sector has to consider a range of service strategy’s, includes pressure-group lobbying, political bargaining and legislative mandates and budgeting (expenditure) which can impact local authorities. In Scotland local authorities can use annual capital “allocations” which is provided by the Scottish Executive, which can be used on education, social work, roads and transport and general services. Reviewing the ongoing commitment of Renfrewshire Council, they are undertaking actions to manage the impacts of the UK Government’s Welfare Reforms which include the establishing the ‘Council Tenant Assistance Fund’ to assist those affected under the occupancy rules. The council will also deliver a £138Million investment
  10. 10. B00185272 10 program to date to upgrade council homes with new heating systems and kitchens and bathrooms (Renfrewshire.gov, 2015). The above examples provide an insight the work the local authority is doing and demonstrates that service is a priority within local authority. (Mackie, 2005) supports the expenditure to homes by explaining that council’s own housing stock is ring-fenced within Housing Revenue Account (HRA) which includes income from rent which contributes to reinvestment within local authority. Such investment is allowing Renfrewshire Council to rapidly improve the housing service within, although compared to the Scottish Housing Quality Standard, improvements have still to be made which is demonstrated in Figure 3. Figure 3: http://www.improvementservice.org.uk/benchmarking/tool.html
  11. 11. B00185272 11 Councils have their own each individual targets which is linked to performance and service plans which relates to having a Single Outcome Agreement (North-Ayrshire Council, 2015). All Scottish councils share their performance in delivering services to communities and how satisfied society are with each council’s service which can be used as a benchmark to review their own performance and drive to make improvements to service delivery within the councils community. (improvementservice.org, 2015). It’s not just councils that are public services in the UK. The National or Local Government have Schools, Hospitals, and local parks that provide a service to society that are known as public sector which costs are covered from the taxpayer which are unable to be used inappropriately. In public services, the public does not pay for such facility such as Schools and Hospitals (Gov, 2015). In recent years, public services are now private services, known as private sector, an example of this is Rail Travel in the UK, which was privatised in 1993 (bbc,1993). What are private services? This is a business activity that’s owned and run by individuals which can be large companies or be owned by one person with an end result to make profit. (Gov, 2015) The author of the report has concluded that Margaret Thatcher and the Conservatives have without doubt rightly or wrongly made an impact in the UK and still demonstrate some values that was introduced in the late 70s early 80s. In 1991 saw the introduction of the seven tenets by Christopher Hood, which saw the public sector become more competitive and efficient in resource which appears to have peaked in the 90s. Does such NPM still a valuable concept in an ever changing world today?
  12. 12. B00185272 12 Its theory is still used in today’s environment although times change and adapt. Such concept of NPM can still satisfy management service delivery but should be rebranded to support a new era with the current times. Comparing the two sectors, public and private, it’s clear that the two sectors have a goal to achieve, however its two separate goals with private sectors goal is to produce profit and public sectors goal is service delivery to society, therefore public service will never achieve the same as private sector although its attempted to act like a business.
  13. 13. B00185272 13 BBC News. (2013) Have train fares gone up or down since British Rail? [Online] Available: http://www.bbc.co.uk/news/magazine-21056703 [Accessed 27 June] Falconer, P, Dr. (ND) Public Administration and the New Public Management Lessons from the UK Experience. [Online] Available: http://mh- lectures.co.uk/pa_npm.htm [Accessed: 5 June 2015]. Flynn, N and Sterehl, F (1996). Public sector management in Europe. Great Britian: Simon and Schuster International Group Gov.UK. (2015) set up a private limited company [Online] Available: https://www.gov.uk/limited-company-formation/shareholders [Accessed 27 June] Gov.UK. (2015) Prime minister announces landmark wave of free schools [Online] Available: https://www.gov.uk/government/news/prime-minister-announces- landmark-wave-of-free-schools [Accessed 28 June] Hood, C (1991). A public management for all seasons. 1991 Royal Institute of public administration ISSN 003-3298 Joyce, P (1999). Strategic Management for the Public Services. United Kingdom: P. Joyce Local Government Benchmarking Framework. (2015) Local Government Benchmarking Framework. [Online] Available: http://www.improvementservice.org.uk/benchmarking/index.html [Accessed 24 June] Mackie, R, Dr (2005). The New Public Management of Scotland. Edinburgh: W. Green &Son Ltd North Ayrshire Council. (2015) Single Outcome Agreement (SOA). [Online] Available: http://www.north-ayrshire.gov.uk/council/community-planning- partnership/single-outcome-agreement.aspx [Accessed 29 June] Pollitt, C (2003). The Essential Public Manager. United Kingdom: C. Pollitt Pollitt, C (1995). Justification by works or by faith? [Online] Available: https://ocw.dsv.su.se/pluginfile.php/252/mod_resource/content/1/Evaluation-1995- Pollitt-133-54.pdf [Accessed 7 June] Renfrewshire Council. (2014/2015) Development and Housing Services. [Online] Available: http://www.renfrewshire.gov.uk/wps/wcm/connect/0389f0eb-8141-4612- a47c-12bc67d9a946/dhs-SIP2014-2017.pdf?MOD=AJPERES [Accessed 26 June]
  14. 14. B00185272 14

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