New Public Management and Education
Introduction
This study examines the impact of New Public Management (NPM) on postsecondary
education. The study is organized in two sections. The first section considers the concept
of NPM, attempting to trace its origins, examining its main theories and looking at its key
characteristics. The second part looks at the impact of NPM and its implication on the
structural changes in postsecondary education. In consideration of this, the study will not
limit itself to any one country or region in drawing examples to demonstrate the effect of
NPM. Also, concerning its impact on education, the focus is mainly on postsecondary
education.
Context and Issue
The end of the 1970s to the 1990s have witnessed changes in public governance in both
developed and developing countries with reforms focusing the dominance of a political-
economic imperative in the formulation of state educational policy (accountability,
privatization, market, choice, and decentralization). Some of these reforms have been
inspired by New Public Management (NPM), (initiated by the political apex and fuelled
by New Right ideology) which deliberately alters the structure and policy-development
process in public-sector organizations with the purpose of making them more efficient
and effective (Ferlie et al. 1996, Pollitt & Boeckaert 2000). As with every other sector,
the education service was also reformed.
1
A central question in research on governance is whether the university is an exceptional
institution that has retained its core authority structure over the centuries, or whether it
must be understood in the same way as a modern corporation? Is higher education being
devalued or enhanced by commercial interest and success? Some research stresses
university resilience and suggests current changes are the codification of existing
practices. Others argue that the move to corporate enterprise undermines the claim of
exceptionality and that universities face similar challenges to public service agencies
during the late 20th Century (Berdahl & Schmidtlein, 2005, p. 70-88; Bowen et al., 2005,
pp. 13-94).
Purpose – Given these characteristics, this paper aims to examine the impact of NPM
and its implication for structural changes in colleges and universities. The paper argues
that concerns about equity, accessibility, autonomy or the contribution of higher
education to social transformation, which were prevalent during previous decades, have
been overshadowed by concerns about excellence, efficiency, expenditures and rates of
return. In such a policy context this paper sets out to examine how postsecondary
leadership and organization which has been taken for granted for many decades – is being
seriously challenged by the NPM paradigm of neoliberal agenda that places extreme faith
in the market.
The Origins of the New Public Management
NPM is part and parcel of the neo-liberal strategy in the Western World during the 1980s and
1990s, the basic tenets of NPM are directly derived from neo-liberal economic theory and
public choice models of administration. Hood (1991) and others (Exworthy and Halford,
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1999) have pointed to the ideologies and policies of the New Right and New Left as a
source for the emergence of ‘New Public Management’ (NPM) ideas and practices.
Pollitt’s analyses (1990, 1993,2003) noted that in the United States, Reagan’s election in
1978 provided some impetus for market-oriented reforms in the public sector, which was
already under pressure to reform. In Australia Caiden (1991, p.4) notes that strategies to
cut the size of the public sector were buttressed by an ideological campaign to reverse the
growing reliance on the administrative state and to get government off people’s backs.
Thus, the assertion of New Right ideology, political change and party programs partly
provided impetus for change in public sector management (Marsh and Rhodes, 1992).
NPM reforms have been driven the development of information technology and change
agents. These include large international management consultants, accountancy firms and
international financial institutions, all of which have been instrumental in the increasing
importation of new management techniques from the private into the public sector
(Greer, 1994).
Overview of Theories and Models of NPM
Researchers have developed four NPM models representing different stages and points of
departure (Ferlie et al. 1996). Three of the four are oriented toward a private business
metaphor; the fourth is based on an NPM tradition.
The earliest model- the Efficiency Drive- emerged in the 1980’s. Its goal is to make the
public sector more businesslike, focusing mainly on efficiency without regard to the
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idiosyncratic nature of the public sector. Major themes include increased attention to
financial control, a stronger managerial spine, extension of financial and professional
audits, increased emphasis on provider responsiveness to consumers, deregulation of the
labor market, reduction in self-regulating power of the professions, more entrepreneurial
management, and new forms of corporate governance and board directors (Ferlie et al.
1996).
The second NPM model- Downsizing and Decentralization- emphasizes flexibility and
unbundling vertically integrated organizations. Large organizations are typically down-
sizing, contracting out, and splitting up internally into more autonomous business units.
This model, which gained rising importance in the 1990s, uses some key indicators;
emphasis on quasi-markets, management by contract, a small strategic core and a large
operational periphery, de-layering and downsizing, split of public and private funding,
management by influence and networks, and service by flexibility and variety (Ferlie et
al. 1996).
The third NPM model- In search of Excellence- is obviously influenced by best-selling
U. S. books on the human-relations school management, with a strong emphasis on
organizational culture (Deal & Kennedy,1981; Peters & Waterman,1982). This model
differentiates between bottom-up and top-down approaches: Bottom-up approaches can
be characterized by organizational development and learning, and organizational culture
and a social “glue,” top-down backing for bottom-up initiatives, and decentralization with
result-based performance measurement. Top-down approaches stress culture change
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through top-down vision, managed culture change, charismatic leaders, private sector
role models, intensive corporate training programs, explicit marketing and
communication strategy, and a more assertive and strategic human resource management
function (Ferlie et al. 1996).
The Fourth and least-developed NPM model- Public service Orientation- represents a
fusion of public and private management ideas: Public sector managers should be
empowered through an emphasis on a public service mission compatible with high-
quality management derived from best practices in the private sector. Indicators of the
NPM model include a major concern for service quality, a reflection of user concerns and
values, a desire to shift power back to local elected bodies, stress on the development of
societal learning, and maintaining a distinct set of public service tasks and values.
Organizational learning and total quality management can still play a latent role, often in
a normative form within public organizations (Ferlie et al. 1996).
In terms of public administration we can posit that NPM has two main sources. Hood
(1991, p.5) describes NPM as originating from a marriage of two different streams of
ideas. One partner is the “New institutional economics” (Downs,1967), built on public
choice theory (Buchanan and Tullock, 1962), principal-agent theory (Arrow, 1963; Moe,
1989), and transaction-cost theory (Foster and Plowden, 1996, p.1). The other partner in
the marriage is “managerialism”, whose ideas concerning public sector reforms emanate
from private sector or business administration (Aucoin, 1990; Politt, 1993). Aucoin
(1990, pp.115-116)- who did not use the term NPM- also argued that administrative
5
reform in public management is based on two fields of discourse or paradigms, known as
“public choice” and “managerialism.” Typical policy instruments of NPM are the
“marketization” or outsourcing of particular services, the market-testing of public
agencies (i.e. public agencies compete with private enterprises), the privatization of state-
owned firms (a rather recent phenomenon), and the further disaggregation of
departmental structures into service agencies, each responsible for a specific product
(Hood 1995, 95, 97).
In short, NPM is the fusion of contractual elements in the field of new institutional
economics- such as the principles of measuring performance and introducing competition
as describes in Hood’s list (1991, p. 4-5). The former is described as “making managers
manage,” and the latter as “letting managers manage” (Hood, 1991, p. 6). Thus NPM
unites the new institutional economics and managerialism from business management
thought; the strategy of NPM should thus be one of a balanced effort involving both the
use of contractual arrangements as a tool of output controls, and managerial freedom
(Yamamoto, 2003, p. 6). NPM is, therefore, an umbrella term (Metcalfe, 1998, p. 1)
which encompases a wide range of meanings, including organization and management
design, the application of new institutional economics and public management, and a
pattern of policy choices (Barzelay, 2002, p.15).
Principles of NPM
6
There have been debate over the precise nature of NPM (Dunleavy & Hood, 1994, p. 9),
but the guiding principles of NPM have been basically agreed among scholars (Manning,
2000; Boston et al, 1996; Ewalt, 2001). According to Yamamoto (2003), the key
characteristics of NPM can be summarized in the following doctrines:
1. An emphasis on hands-on professional management skills for active, visible,
discretionary control of organizations (freedom to manage).
2. explicit standards and measures of performance through clarification of goals, targets,
and indicators of success;
3. a shift from the use of input controls and bureaucratic procedures to rules relying on
output controls measured by quantitative performance indicators.
4. a shift from unified management systems to disaggregation or decentralization of units
in the public sector;
5. an introduction of greater competition in the public sector so as to lower costs and
achievement of higher standards through term contracts, etc.;
6. a stress on private-sector-style management practices, such as the use of short-term
labor contracts, the development of corporate plans, performance agreements, and
mission statements;
7. a stress on cost-cutting, efficiency, parsimony in resource use, and “doing more with
less”
All of these principles are mutually related, relying heavily on the
theory of the private sector and on business philosophy, but aimed at
minimizing the size and scope of governmental activities ( Terry
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2005 ). Examining the NPM principles with regard to management, the first principle
refers to “hands-on management” and the “freedom to manage,” suggesting that visible
top managers should control public organizations more actively by wielding discretionary
power (Hood, 1991, p. 4). The emphasis is moved away from policy skills and personnel
management rules towards active management, and away from relatively anonymous
bureaucrats to visible managers at the top of public sector organizations (Hood, 1995, p.
96-97). Clear assignment of responsibility is required from the point of view of
accountability, rather than diffusion of power (Hood, 1991, p. 4).
In addition, NPM applies proven private sector management tools to the public sector,
with flexibility regarding the hiring of staff and their compensation, as described in the
sixth principle. Just as top executives in private sector organizations, top executives in the
public sector must possess professional management skills and are, ideally, given the
freedom to exercise flexibility in organizational management and in hiring and
compensation of staff. As a counterpart to the discretion and flexibility allowed, the
output-orientation described in the third principle requires organizations and staff to work
to performance targets; this breaks up traditional input controls and rule-governed
process-orientation. Resource allocation and rewards are linked to measured performance
based on pre-determined standards/indicators of achievement (Hood, 1991, p. 4), in order
that transparency and accountability may be strengthened. Performance evaluation of
programs or policies is one public sector reform that is based on this principle.
8
The fourth principle of disaggregation/decentralization breaks up traditional monolithic
bureaucratic units into separately managed corporatized flat units (Hood, 1995, p. 5). The
purposes of decentralization are the creation of manageable units and the delegation of
authority, enabling quick and flexible decision-making which reflects citizens demands.
Peters and Waterman (1982, p. xvi) insisted that excellence came from “small,
competitive bands of pragmatic bureaucracy-beaters”- units that share an intensity about
what they do based on love of their product and a desire to serve the customer. In
addition, decentralization is effective in terms of responding to citizen’s demands and
preferences, which may vary within a country from region to region.
Decentralization, described as “separating the function of providing public services from
that of purchasing them” (Pollitt, 1995, p. 134), is further characterized as separating
functions into “quasi-contractual or quasi-market forms” (Dunleavy & Hood, 1994, p. 9).
The quasi-contractual form represents a tool for defining the relationship between the
purchaser of services (policy-maker) and the provider of them (policy implementation
organization), while the quasi-market form denotes the modified market in which only a
single provider of public services exits.
Introducing greater competition, the fifth principle, refers to increased competition in
provision of services, both between public sector organizations and between public sector
organizations and the private sector. (Hood, 1995: 97). Traditionally organized and
managed public services tend to be monopolies and are indefinitely assigned to particular
service providers. NPM, however, aims to introduce a more competitive style into the
9
public sector and to establish “internal markets” (Walsh, 1995: 26-27), as well as to
loosen the inefficient monopoly franchise through the use of multiple competing
providers and term contracts which set out the performance required of service providers.
As Dunleavy and Hood (1994: 9) demonstrate, opening up competition to multiple
providers allows citizens (as customers or users) more scope to “exit” from one provider
to another, just as in a commercial market, rather than forcing them to rely on “voice”
options as a means of expressing how public service provision affects them. The NPM
principle of customer-orientation involves an increasing emphasis on improving the
quality of services, setting standards for quality, and responding to customer’s priorities.
Despite the strong positive impact of NPM reforms on the public sector
worldwide, some criticism has also been leveled against this doctrine
(Hood 1991; Lynn 1999). For example, studies have mentioned the
potential destructive effect of NPM on the shrinking role of the state in
providing services, the over reliance on business principles in nurturing
non-business services, and the general belief that managerial decisions
are independent of political considerations (Hood 1991). Criticism was
made also of the negative effect of NPM on citizens’ political
participation and involvement (Vigoda, 2002), as well as of the
difficulty of measuring various public services using market-oriented
criteria (Lynn 1999; Pollitt and Bouckaert, 2000). Thus, even though
NPM seems to be making a paradigm shift in conventional public
administration thinking, some scholars still believe that its impact is
10
limited (Lynn, 1999 ) and that the inherent differences between the
private and the public sector prevent the simple implementation of
business doctrine in governmental agencies.
NPM and Education This section briefly examines how NPM has led to structural
changes in postsecondary education.
New methods of devolution and a decline in academic disciplines in governance.
McNay (1995) offers an interesting analysis of shifting organizational cultures to
illustrate movement towards different patterns of internal governance in higher education
and the deeper ideological implications of NPM movement. His four idealized cultures
are the collegial, bureaucracy, corporation and enterprise. He links each to certain key
words and concepts. ‘Collegial’ is associated with freedom from external controls and
academic autonomy. ‘Bureaucracy’ is linked to regulation, consistency of treatment, due
process and standard operating procedures. The ‘coporate’ culture is associated with
power through executive authority with a separation of roles between managers and
‘professionals’. Finally, the key word linked to ‘enterprise’ is ‘client’ with an emphasis
on decision-taking that is located close to the customer. McNay notes that all four
cultures co-exist in institutions, but the balance between cultures differs. He contends that
in the mid-1980s to 1990s, the pre-1992 universities were shifting in structural and
cultural terms from ‘collegial’ towards ‘bureaucracy’ and ‘corporation’ while the post-
1992 universities were moving from ‘bureaucracy’ to ‘corporation’. The author explains
this as the executive character of the university having diminished the collegial culture.
Previously, the decision-making apparatuses were structured so that the disciplines had
11
influence in the decision process. This is now seen by the executive managers and outside
policy makers as a hindrance to managerialism, where decisions have to be made quickly,
in executive style, without having to pass through several remit instances. Though
faculties, schools and departments may have budgetary autonomy, they disburse funds
within the framework of institutional plans and targets ( Gumport & Pusser, 1999, p. 146-
200; McGuinness, 2005, pp. 119-221).
Expanded periphery. According to Currie (Currie, 2003, pp. 4-5), the most common
factors cited in the literature as pushing postsecondary education towards marketization
are: the spread of market discourse and the use of the economic market as a model for
political and administrative relationships; the massification of postsecondary education;
the increasing number of private providers of postsecondary and research; the rise of a
global market for education and research; the rising costs of expanded postsecondary
education systems; the changing balance of private and public funding; pressure for
management efficiency in the face of widened access and reduced resources; the
increasing regulatory and policy pressures. Underlying these orientations is the
ascendance, almost worldwide, of market capitalism and principles of neo-liberal
economics. Elements of the reform agenda such as tuition, which shifts some of
postsecondary education cost burden from taxpayers to students and parents, or more
nearly full cost fees for institutionally-provided room and board, or more nearly market
rates of interest on student loans all rely upon market choices to signal worth and true
trade-offs. The imperative for these structural changes is the pressure to earn higher
levels of non-state incomes. The result is a quasi-student-market, where some courses are
12
run, because they are self-financing, and there is a drive for overseas students mainly
because of the high tuition fees that can be charged (Johnstone, 2005, pp.369-390; Collis,
2002, p. 181-202; Duke, 2002, p. 28).
The effort to conceive the university “as an enterprise” (Zemsky, Wegner & Massy,
2006), points to just how far NPM ideology has pressed into the management of higher
education (Zumeta, 2001, p. 157-158; Zusman, 2005, pp. 115-160). Slaughter and
Rhoades (2004) and Slaughter and Leslie (1997) describe how an “academic capitalist
knowledge and learning regime” has emerged, replacing an ideology of a “public good
knowledge and learning regime” (Slaughter & Rhoades, 2004). Faculty in the new
academic capitalist environment are pressured to develop research that attracts funding,
increasingly in the form of corporate sponsorship, and that generates patents that might
be utilized by the office of technology transfer to be transformed into profitable lines of
business. In line with entrepreneurialism, other expert areas have sprouted in the
university to manage knowledge transfer, intellectual property, relations with industry,
alumni, fundraising and continuing education. (Slaughter & Rhoades, 2005, pp. 486-512;
Callan, 2002, p.9). Furthermore, the goal of decreasing costs so as to increase the
university’s net assets results in universities increasingly seeking to hire part-time or non
tenure track faculty and cutting back wherever possible (Charfauros & Tierney, 1999, p.
141-151; Alexander, 2001, p. 306).
Inclusion and social engineering. Universities must inculcate the concept of widening
access – for minorities, socially and economically disadvantaged groups and the
13
physically challenged. There are also those who are advanced in age taking advantage of
lifelong learning opportunities. The cost of exclusion is an expensive public burden. The
university is expected to be a key participant in this attempt at social engineering for the
improvement of economies (Bowen et al. 2005, pp.161-193).
Changes in delivery methods. The university’s traditional role as an institution of higher
education no longer follows the traditional method of having students on campus. With
the use of new delivery systems, e.g. ICT, distance learning has become a major method
of learning. Universities also give recognition and accreditation to learning achieved
outside the university, including work-based learning, and advanced standing is given for
work done elsewhere. In some cases, curricula are customized to suit students’ needs
(Bastedo, 2005, pp. 464-480; Gumport & Chun, 2005, pp393-421). New types of higher
education institutions, virtual universities, specialized colleges, and for-profit have
greatly increased the competitive environment for universities.
Reputation management. In the same way that private sector companies create and
maintain their public images through professional public relations and publicity,
universities and other educational institutions must create and enhance a reputation that
the institution and its members present to the outside. In the quasi-market environment, a
good reputation, especially for the quality of research and teaching and service to
students, is a major weapon of competition ( Ehrenberg, 2002, p. 145-1660; Bowen et al.,
2005, pp. 95-136; McDonough & Fann, p.80).
Conclusion
14
From the end of the 1970s to the 1990s governments around the world were engaged in
widespread and sustained reforms of their public administration. These reforms started in
the USA and the United Kingdom, where the Republican and Conservative governments
that came to power championed the New Right campaigns for reforms. The reforms
immediately aroused academic interest and research was carried out and theories
developed. Perhaps to facilitate academic discourse, the reforms collectively came to be
called the new public management (NPM). The major driving force behind the reforms
was economic stagnation in many countries. The New Right blamed this economic
stagnation – seen in huge national debts, balance of payment problems, high rates of
unemployment, underperforming industries, etc. – on the excessive scope of
governments’ engagement in business, mediocrity in administrative performance and the
lack of accountability, among other things. In addition, there was also new intellectual
thinking developing on how public services should be organized and delivered. The
administration of public services was now benchmarked against private business – power
should be exercised by those who give the service; the consumer should have choice; the
reason to exist should be determined by how well the organization performs; there should
be measures of performance and public accountability. These characteristics were based
on certain theories: mainly public choice, transaction cost economics and principal–agent
theory. As with every other sector, the education sector was also reformed. In this field,
the major signs of NPM are the management of colleges and universities along
managerial lines, the choice and powers given to parents and governors, and the greater
participation of the neighboring community in the life of a school, while the collegiality
of academia is diminished.
15
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