New Public Management Integrity

							       New Public Management

                         Anwar Shah,
Program Leader, Public Sector Governance, World Bank Institute
                   ashah@worldbank.org
     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 new-
    institutional 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
                Incentives
• 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
               Flexibility
• From rule based to results based
  accountability
• How: employee empowerment, market
  based incentives
• Goal: free employees to do what they know
  is right.
                   Results
• 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                     Inputs               Intermediate inputs

Improve quantity,         Educational spending by           Enrollments, student-
quality, and access to    age, sex, urban/rural;            teacher ratio, class size
education services        spending by level; teachers,
                          staff, facilities, tools, books




Outputs                  Outcomes               Impact               Reach

Achievement        Literacy rates,           Informed             Winners and
scores, graduation supply of skilled         citizenry, civic     losers from
rates, drop-out    professionals             engagement,          government
rates                                        enhanced             programs
                                             international
                                             competitiveness
  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         The entire
                                                        tool          process driven
                                                                       by a citizen
                                                                          focus:
Contract information— what is the final             Performance-
product we must produce and what do we              based budget
receive to produce such product?
How do we know how we are doing in terms of         Benchmarking     All these tools
the contract, and in terms of other producers                        are connected to
from whom we can learn?                                              Total Quality
How much does it cost to produce such product       Activity-Based   Management
(the complete cost)? How can we produce the         Costing (and     and such devices
product better so we can be sure of meeting and     others)          used to create a
exceeding our contract obligation and receiving                      results and
rewards?                                                             participation
How do we report our results?                       Full reporting   culture, and
                                                    using accrual    work effectively
                                                    accounting       where roles
                                                                     emphasize
How do we manage the new reporting,                 Balanced
production, and contract obligations we have,       Scorecard        results.
as well as run a citizen friendly administration?
  Civil service paradigm under resulted
          oriented management
Current culture              NPM
• Rigid rules                • Managerial flexibility
• Input controls             • Results matter
• Top-down accountability    • Bottom-up accountability
• Low wages and high perks   • Competitive wages but
• Life-long and rotating       little else
  appointments               • Contractual and task
• Intolerance for              specialization
  risk/innovation            • 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
        Test                           Service Shedding
  Yes             No      Abandon
                         Abandon       Privatization - divestiture -
      Role of                            regulated
    Government                         Employee Takeover

        Test
  Yes
   Jurisdictional    No                Public Partnership -
    Alignment             Realign
                          Realign
                                       devolution - shared services
                                       Contracting Out - franchising -
        Test                             licensing
  Yes               Yes
     External                          Government Owned/Contractor
                           Partner        Operated
    Partnership           Partner      Private, Not-for-profit Agency -
        Test                             self-help - volunteers
 No                                    Public/Private Partnership
     Business            Restructure
                        Restructure   Crown Corporation -
     Principles       Yes               departmental corporation
        Test              Improve
                                      Special Operating Agency
 No                          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
   The State Under Contract - The
        New Zealand Model
• 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
     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
     A ROAD MAP FOR CITIZEN-CENTERED
              GOVERNANCE
 Program/       Inputs         Activities         Outputs       Reach        Outcomes          Impacts
  project                                                                                       (goals)


                  2. Administration concerned with outputs.
Clear roles
   in the
government                                      2. Output                     2. Executive
production                                       contract                   concerned with
  process,                                                                       outcomes
 1.Bottom-
     up,
 2.Focused                                                                            Legislature
     on                                           3. Internal              2.
 managing                                        and external           Outcome
for results,                                     Results and            contract
    and                                            process                                     1. Citizens
3.Evaluated                                      Evaluations
in terms of
   those
  results.
                                                                                         3.Citizen
               3. E   V    A     L     U    A     T    I    O     N     S               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                •   Federal / confederal
•   Centralized            •   Globalized & localized
•   Center manages         •   Center leads
•   Bureaucratic           •   Participatory
•   Command and control    •   Responsive and Accountable
•   Internally dependent   •   Competitive
•   Closed and slow        •   Open and quick
•   Intolerance of risk    •   Freedom to fail/ succeed
              Implications
• 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.