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.

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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

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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

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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.

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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

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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

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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

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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

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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

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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.

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