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 politicaleconomic 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.

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,

1999) have pointed to the ideologies and policies of the New Right and New Left as a 2

source for the emergence of New Public Management (NPM) ideas and practices. Pollitts analyses (1990, 1993,2003) noted that in the United States, Reagans 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 peoples 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 1980s. Its goal is to make the public sector more businesslike, focusing mainly on efficiency without regard to the

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 downsizing, 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 resultbased performance measurement. Top-down approaches stress culture change 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 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 Hoods 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

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 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.

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 citizens 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 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 customerorientation involves an increasing emphasis on improving the quality of services, setting standards for quality, and responding to customers 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 limited (Lynn, 1999 ) and that the inherent differences between the private and the public

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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 influence in the decision process. This is now seen by the executive managers and outside policy makers as

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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 run, because they are self-financing, and there is a drive for

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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 universitys 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 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

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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 universitys 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. 95136; McDonough & Fann, p.80).

Conclusion 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

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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 principalagent 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. REFERENCES Alexander, K. (1998). Private Institutions and Public Dollars: An Analysis of the Effects of Federal Direct Student Aid on Public and Private Institutions of Higher Education. Journal of Educational Finance, 23(3). 390-416. Arrow, K.J. (1963). Social Choice and Individual Values, New Haven, CT,Yale University Press.

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