New Public Management (NPM)

The term New Public Management (NPM) emerged in the beginning of the 1990s in response to the challenges of   globalization, international competitiveness, and technological change.  It is argued that it represents a paradigm shift from a traditional model of public administration, dominant for most of the 20th century to managerial-ism or what is popularly known as the New Public Management. 

NPM seeks to adopt various techniques and practices used by private sector management. E.g. zero based budgeting (ZBB), Total quality management (TQM), Human Resource Management (HRM), Networking, Human Resource Accounting (HRA), Social Accounting, Operational research technique (OR), Management by objective (MBO) etc. NPM has also common roots and combined the public choice theory and Neo-Taylorism. (Neo-Taylorism introduced the managerial methods and techniques of private sector into the public sector).



The major dysfunctions found in the existing public administration system were:

  1. 1.Politics administration dichotomy is unrealizedirrelevant and unworkable, as the actors on either side frequently change positions and the two activities inter mesh in the practical world of governance.
  2. 2.In public institutional life, there is no such thing as purely rational decision making. Rather it is bounded (limited) rationality (as per SIMON). In real situations, people have certain degree of subjectivity. Moreover, the tendencies towards irrationality are not rare as many actors and forces impinge upon decisions and compete for accommodation.
  3. 3.Top-down policy implementation does not, in actually, work. It is now well accepted that public administration is best looked after by self-steering groups rather than closely supervised group. Hierarchy is essentially power-oriented rather than work oriented.
  4. 4.Successful public administration is rarely rule bound. What matters is goal achievement and effectiveness. In traditional public administration rules became the end rather than means. It encourages a culture of non-performance, and shirking taking initiative.
  5. 5.Centralization leads to rigidity. Hierarchy results in implementation deficit. Free flow of communication is impeded by rigid hierarchy and centralization of power. Public institutions operate efficiently when decentralized, allowing lower level initiative, adjustment, adaptability, flexibility.
  6. 6.Public employees do not have any special type of motivation. In real life, they have often been found to act to maximize self-interests like income, prestige and power, rather than public interest.
  7. 7.Moreover, in traditional public administration there was no motivation for the employee to perform, because the salary structure was not linked to performance.
  8. 8.The principles of traditional public administration are lacking in descriptive accuracy. As organizations differ in complexity and character, one shot enumeration of ‘principles’ in naive and unrealistic.
  9. 9.The classical view point of strict division of labour and specialization has also attacked as being injurious to organizational health and productivity. Organizational productivity does not automatically flow from a grand organizational design, narrow specialization and division’s world. In fact, organizational layout must provide opportunities for employees to work in multiple roles in much more flexible structures.
  10. 10.Traditional public administration viewed government as the protector of the consumer interests. It assumed that the private sector takes care only of its profit-induced interests leaving consumers in the lurch. However, as the private sector has grown over the years, it is showing more and more concern for the private sector and even more than the public sector.

Because of these dysfunctions in the working of traditional public administration during the last decade or so, the simmering dissatisfaction of the people has led to new paradigm of public administration which is termed as NPM.

The term ‘New Public Management’ was coined by Christopher Hood in 1991 in his paper entitled ‘A New Public Management for all seasons’. It is also termed as ‘Managerial-ism’‘Post-Weberian Administration’‘Post-Wilsonian Administration’,‘Market-based Public Administration’, etc.



The Public Choice New Rights Group argued that a decentralized strategy is superior to centralized structure. The questions have been raised why the bureaucratic form of organizations should have the monopoly to provide public goods and services. There are various options available for the delivery of public goods and services, and society may benefit from the many suppliers syndrome. It is not necessary that government should always assume the role of a direct provider of goods and services; instead governments many operate indirectly, allowing non-government agencies to operate directly in a wide range of social activities.

Margret Thatcher (UK) and Reagan (USA) were at the fore-front to bring about a synthesis of the public administration & business management. It takes ‘what’ and ‘why’ from public administration and ‘how’ from private administration. In fact, UK was the first country that initiated the privatization of public enterprises. With their effort, remarkable changes took place in public sector management practices in most advanced countries: Structurally, the change was from rigid, hierarchical and bureaucratic form of public administration to a flexible, market-based form of public management. There was change in the role of government in society, and government-citizenship relationship. These objective conditions created opportunities for the emergence of almost a new paradigm in public sector analysis.


NPM connotes organizing and running public organizations in a more management- oriented way as that of private organizations, so as to achieve more citizen satisfaction and societal welfare. The basic theme of NPM is to allow public managers manage. There is a greater emphasis on:

  1. 1.More effective programme
  2. 2.More efficient operationseconomizing on staff and capital resources and
  3. 3.Improved quality of services and service delivery.


The years of late 1980s and early 1990s witnessed tremendous changes the world over necessitating changes even in the paradigm of public administration. The various factors behind the emergence of NPM are:-

  1. 1.Knowledge revolution
  2. 2.Technological revolution (IT or e-governance) and communication revolution.
  3. 3.Increased competition nationally and internationally in providing goods and services.
  4. 4.Aspirations of the people from government/administration have increased. Now they demand value for their money. Hence quality and cost of services provide by state should be competitive.
  5. 5.Reduced financial resources
  6. 6.International dimension
    1. a)Increasing globalization
    2. b)Increasing hold of WTO over national governments and their policies
    3. c)Emergence of MNCs on the world scene on a huge scale.

Thus, the NPM philosophy was basically triggered by a combination of economic issues and geopolitical changes resulting in reduced financial resources for governments. This demanded efficient utilization of available resources. For coping up with these challenges, traditional bureaucratic administration was highly misfit. Managerial rethink, therefore, became imperative.



  1. 1.Entrepreneurial GovernmentOsborne & Gaebler in their path-setting publication Reinventing Government in 1992 advocated a new model of government, which they termed as Entrepreneurial Government (EG). Osborne summed up “we don’t need more government; we need better government. To be more precise, we need better governance. Government is the instrument we use. The instrument is outdated, and it is time to remake it.”
  2. 2.Public Choice Approach: Another major stream of thought during almost same time emerged in the form of the Public Choice Approach (PCA) to public administration which came into existence in the 1960s. PCA is application of economics to political scienceVincent Ostrom is the chief protagonist of this approach. In his book The Intellectual Crisis in American Public Administration, Ostrom writes “Bureaucratic structures are necessary, but not sufficient structures for a productive and responsive public service economy.” He advocated for replacement of the traditional doctrine of ‘bureaucratic administration’ by the concept of ‘democratic administration’.
  3. 3.Critical Theory: expounded by Jurgen Habermas. The critical approach to public administration advocated humanizationdebureaucratization anddemocratization of administration.
  4. 4.The CAPAM Conference: The conference of the Commonwealth Association for Public Administration and management was held in Charlott town,Canada, in 1994. There was a general consensus that strong environmental forces have been buffering the public sector; and governments all over theworld are being forced to cope with them. Some of the impinging forces are knowledge-based production, the communication revolution and amassive explosion in world trade (especially after WTO). In a multi-polar world, trade negotiations need to be worked out both bilaterally and multilaterally. The information technology revolution has led to shrinkage of distances among partners and facilitated almost instant electronic networking.Globalization has become a reality, setting the stage for professional networking and collaboration in the development and sustenance of new public administration.
  5. 5.NPM has common roots & combines the public choice theory and Neo-Taylorism (New-Taylorism because it introduces managerial methods and techniques of private sector into the public sector).


The core themes for the New Public Management were:

  • A strong focus on financial control, value for money and increasing efficiency
  • A command and control mode of functioning, identifying and setting targets and continuance monitoring of performance, handing over the power to the senior management
  • Introducing audits at both financial and professional levels, using transparent means to review performances, setting benchmarks, using protocols to ameliorate professional behavior
  • Greater customer orientation and responsiveness and increasing the scope of roles played by non public sector providers
  • Deregulating the labor market, replacing collective agreements to individual rewards packages at senior levels combined with short term contracts
  • Discouraging the self regulatory power of the professionals and handing over the power from individuals to management
  • Encouraging more entrepreneurial management than bureaucracy with high retrospective accountability requirements upwards
  • Introducing new forms of corporate governance, introducing a board model of functioning and concentrating the power to the strategic core of the organization

With changing times newer aspects were included in the NPM model mentioned above as well and what the scholars term as NPM model 2 was brought in. The critical aspects of this new model were:

  • Introduction of a more elaborate and evolved quasi-market system
  • Creation of more fragmented or loosely contracted public sector organizations at the local level setting in a change from management of hierarchy to management of contract
  • Distinguishing between the small strategic core and the large organizational periphery, market testing and contracting out the non strategic functions
  • Delayering and downsizing
  • Introduction of new managerial concepts like Management by Influence, creating network for of organizations, creating strategic alliances between the organizations
  • Moving away from standardized service forms to more flexible and varied service forms

Now, as more and more work was done in the areas of Human Resources and Relations and popular texts which stressed on the need of excellence, the importance of organizational culture, values, vision and the concept of Learning Organization introduced by Peter Senge (1990) influenced the new public management as well and therefore suitable changed were also suggested in the theory by the scholars.

  • In a bottom up form of organization- Organizational development and learning was gaining importance. Organizational culture was seen as a glue which holds the organization together, judging the performance by results etc were the new point of views
  • In the top down form of organization- Securing changes in organizational culture was cited as important, clarifying and projecting the vision and leadership from top to down was asked for, private sector emerged as a role model for the neo style public sector, training, corporate logos, communication strategies, assertive HR and all the other aspects that are characteristic jargon of private sector were encouraged to be adopted So, basically the new public management was a radical movement to change not just the way a public sector functions but also the entire perception about it.

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