The Effect of Management Practices Under the Label of NPM on Public Sector Workers

Introduction This essay addresses the topic of the effect of the implementation of management practices that are traditionally associated with the private sector under the label of NPM on public service workers. This essay aims to analyse the effect of NPM to the size of the structure of government in several countries.  The essay is structured into four sections. The first section is introduction. It briefly explains the aim and the structure of the essay. The second section is concept. It compares the concept of private-sector and public sector. This section also discusses the adoption of private sector management under the label of NPM on government activities. The fourth section is the analysis. This section analyses the effect of the implementation of NPM to the public-sector workers. This section focuses on outsourcing and downsizing as the effort to gain efficiency and effectiveness. The last section is the conclusion. The essay concludes that the implementation of NPM reduces the number of civil servants that exercise direct interaction to the public. It is caused by the trend that the government tend to appoint service providers in delivering public service. On the other hand, NPM also gives pressure to the remain civil servants, because they are expected to give the best performance in doing their jobs. Concept Private Sector and Public Sector There are several differences between private and public sector. The main difference is the ownership (Rainey, et al., 1976, in Boyne, 2002, p98). Private companies are owned by shareholders or entrepreneurs. As the owners are few, the policy of private companies is easier to set. On the other hand, the owner of public organisations is members of political communities. The policy formulation in the public organisations is rather difficult as there are many different interests among the stakeholders (Jackson, 2003, p28; Boyne, 2002, p98). In addition, ownership in public-sector tends to create inefficiency (Clarkson, 1972, taken from Boyne, 2002, p99). The main aim of private sector is to gain profit. It sells goods and services to their customers and maximises their effort to develop the company. The existence of the company, therefore, depends on the desire of the customers to pay the goods or services (Boyne, 2002, p98). On the other hand, public-sector organisations aim to provide public services. Compared to private sector, public sector organisations do not sell the services. They provide the services using funds that is largely collected through tax mechanisms (Bandy, 2015, p11; Boyne, 2002, p98). In private sector organisation, the owners have a superiority over the managers and employees through their capital strength. The managers in private sectors, therefore, need to show excellent performance and progress in doing their jobs to get better financial incomes or incentives (Boyne, 2002, p98). Managers in public-sector organisations, on the other hand, tend to prioritise the political power. They give more focus on satisfying the stakeholders than the public. It causes the service delivery becomes unresponsive to the public demands (Boyne, 2002, p98). The Adoption of Private Managerialism in NPM The old public administration is identic with hierarchy, bureaucracy and control. It shows how a government has central authority to formulate and deliver service to the public (Denhart and Denhart, 2000, p550). Although this paradigm has significant contributions, the old public administration has various disadvantages (Robinson, 2015, p7). One of the effort to prevent the disadvantages is the adoption of private managerial practices under NPM paradigm (Puspawati, 2016, p54). Under NPM, the government becomes the public agency, and the public becomes the user. The relationship between them is based on self-interest that involves transaction as in market mechanism (Denhart and Denhart, 2000, p550). Related to the provision of public services, the old public administration stresses on the role of the government in delivering direct services. The structure of the organisation, therefore, need to be more centralised (Denhart and Denhart, 2000, p551). On the one hand, it creates the uniformity of the service provision. On the other hand, the direct service limits the opportunity of the lower units to make discretion. The limitation of discretion can cause inefficiency because the lower units only have limited authority to modify the service provision. In order to improve the provision of the public services, many countries began adopting NPM. One of the characters of NPM is the stress on ‘private sector styles of management’ (Denhart and Denhart, 2000, p550). Here, the government adopts private company management as the reference. The adoption of private techniques in the public-sector organisation is not to maximise profit. The adoption is intended to improve the public service provision. Also, NPM emphasises on the principle of competitiveness (Robinson, 2015, p7). The government adopts market mechanisms to make the service providers or units involved in the competition to gain efficiency in public service provision. By adopting private sector managerialism model, public agencies are expected to increase productivity in delivering services. They are also expected to understand the demands of the public as the service users. Here, the public agencies need to find innovation in delivering service to meet the expectation of the service users (Denhart and Denhart, 2000, p550). The innovation is intended to promote accountability and improve the performance in providing services. In order to initiate the improvement, public agencies need to ‘redefine organisational goals’, ‘reshape bureaucratic structures’, ‘ease bureaucratic process’, and ‘decentralise decision making’ (Denhart and Denhart, 2000, p550). Outsourcing The government can decrease the number of employees by implementing outsourcing. According to Minicucci and Donahue (2004, p492), outsourcing in public sector is the delivery of public service by agents. Here, the government contracts services from nongovernment providers (Alonso, Clifton and Diaz-Fuentes, 2015, p656). The government in this concept still retains its right to control the provision of the services (Christensen, 2009, p295). One of the reasons for the implementation of contracting out is: the government can be able to ‘do more with less’ and ‘improve productivity’ (Cheung, 2009, p329). Also, by separating the tasks, the government can focus on providing fund and delegate the service delivery to the non-government organisation or private sector (Larbi, 2003, p3). Some researchers argue that outsourcing is a very effective way to reduce public sector size. It avoids ‘over-supplied services’ and ‘public administration over-staffed’ (Alonso, Clifton and Diaz-Fuentes, 2015, p647). Also, it reduces the chances for politicians or bureaucrats to benefit themselves. Outsourcing is believed to be able to reduce public sector size because it will promote competition among service providers (Minicucci and Donahue, 2004, p489). From the competition, the government can manage efficiencies in both financial and employee numbers (Alonso, Clifton and Diaz-Fuentes, 2015, p647). On the other hand, the government must consider negative consequences of outsourcing. Private organisation motivation that seeks profits might affect the quality of the service provision (Larbi, 2003, p6). The government, therefore, is expected to set and execute appropriate regulation related to the appointment of the provider of the services. Downsizing Private sector promotes efficiency and effectiveness to gain profit. Private sectors, therefore, do not need a big and complicated organisation that might consume more resources. Under the label of NPM, public sector organisation is expected to adopt several private management practices to promote efficiency and effectiveness in delivering public services. One of the practices is downsizing the structure of the public-sector organisation. It is intended to decrease the scope and the structure of the public-sector organisation (Puspawati, 2016, p54). Downsizing, brings consequences to the public-sector workers. The first is survivors that survive from dismissal. They can be labelled as empowered workers. The second group is retirees. They are former workers that lost their jobs. For the retirees, downsizing still can give positive learning as they must struggle to anticipate the same situation in the future (Lee and Strang, 2006, p907). The practices of downsizing must consider several conditions. It can be executed if the size of the organisation is inefficient in delivering public services. In some areas, the government need to expand the size of institutions because they are no longer capable of handling the provision of public services (Lee and Strang, 2006, p907). The government need to analyse the structure of public sector organisation. The analysis also must regard public opinion because the public is the users of the services. Also, the government needs to facilitate the public demands in reducing the size of government and cutting inefficient policies (Denhart and Denhart, 2000, p551). The government, therefore, must consider all factors before executing the downsizing. Analysis NPM is an approach that is believed to correct some problems in public sector practices, such as, inefficiency and complicated structure (Alonso, Clifton and Diaz-Fuentes, p644). As an effort to improve public services, the implementation of NPM brings effects on the public-sector workers. One of the aims of NPM is reducing government size by lessening the numbers of workers. Decreasing or downsizing the size of public sector workers can affect the government expenditure. It can reduce personnel costs by paying fewer staffs (Yamamoto, 2009, p.345). As mentioned in the concept section, outsourcing is an effective way to promote efficiency. Beside promoting competitions, the involvement of external providers will bring a significant effect to the government employees that are no longer needed. However, this claim is refuted by Alonso, Clifton and Diaz-Fuentes (2015, p656). In his article, they argued that the impact of outsourcing on the size of public sector workers is insignificant. To support the claim, he processes an ‘unbalanced panel data set’ of several countries in the European Union in a period from 1983 to 2001. The result of the process shows that the increase in outsourcing trends did not give much effect on reducing government employees. Finally, they affirm that outsourcing does not have strong relationships with the reduction of public sector employment (2015, p656). Alonso, Clifton and Diaz-Fuentes use general data from the countries to draw the conclusion. The conclusion might be different if it is implemented in a specific or more local area. For example, in 2000 Japan employed about 824,000 civil servants. In 2007, the total number decreased to 328,000 or more than a half than that in 2000. The significant decrease was on postal services civil servants as the Japanese government at that time implemented privatisation and agencification (Yamamoto, 2009, p345). From the example, it can be inferred that the implementation of NPM can reduce the number of the civil servant. However, Yamamoto did not explain data or development of public sector employees from postal service. The data is important to compare the total employees in this sector. If the total number of workers rose, NPM, therefore, did not give significant effect on reducing public sector workers. It reduces the number of civil servants but raises public sector workers that work under private companies. Larbi (2003, p5) gave several examples from various countries on how the implementation of NPM reduces the number of government employees. Zimbabwe performs contracting out on several non-clinical services such as catering, laundry, security and cleaning. Ghana has implemented a programme that delegates the private sectors to do various bureaucrats activities. One remarkable example is Brazil that saved 25% over the civil servants by contracting out the private companies on road maintenance (World Bank, 1997, taken from Larbi, 2003, p3). The decrease in the number of public sector workers may benefit the government because they have extra money from the saving. The extra money can be used to provide services to sectors that were not the priority before. In some cases, the implementation of ‘contracting out’ might be inefficient. It can happen if the private sectors are not capable or ill-equipped to provide particular services. In addition, the government usually faces difficulties in controlling the service provision by large varieties of the providers. In this case, the government is supposed to have a good mechanism in mitigating the constraints (Larbi, 2003, p6). The next example is Denmark. Danish government has reduced the total number of public sector employees during the adoption of NPM. Tabel 1. Public Employment and the Structure of Danish Public Sector, 1980 - 2006 1980 1995 2006 Central government 214 182 158 Local and regional government 562 599 608 Public enterprise/subsidized institution 112 130 74 Total (N= 1000s) 888 911 840 Percentage of total labour force 34 33 30 Percentage of population 17 17 16 Source: Anderson et al. (2008); and Statistics Denmark in Christensen, 2009, p280. The table shows two different trends regarding public employment. At one point, the government reduced the employees in central government. From 1980 to 1995 and finally to 2006, the number of the employees was reduced. On the other hand, local and regional government experienced a different trend. It reached 608,000 employees in 2006 than that in 1980 that reached 562,000. Although the number of local and regional government employees increased, the total number of public employees in Denmark in 2006 fell significantly than that in 1995, from 911,000 to 840,000. It shows the effort of Danish government in downsizing the number of public sector workers achieved a positive result. In addition, the table also showed the decrease in the percentage of Danish public employees compared total labour force. The number of public sectors compared to the percentage of population decreased slightly. It shows that Danish government is a good example of the implementation of NPM. For the comparison, in a period from 1985 to 2001, Sri Lankan government had a problem related to the number of employees. The civil servants were overstaffed and it was one of the highest staffing rates per capita in the world (Priyantha, 2008, p7). Moreover, compared to the rate of population growth, public employment rate increased almost three times during the period. Overstaffing gave a negative effect on employees that affected well-performed employees and reduced productivity across the organisation. Related to this matter, the development expenditure, maintenance and operational costs were squeezed to pay the wage for the employees and pension for retirements (Priyantha, 2008, p8). In order to implement NPM, the government got several recommendations related to administrative reforms. First, the government might execute rightsizing or downsizing of the civil service by doing retrenchment of the public sector. Secondly, the government can implement electronic governance (e-governance) to manage and deliver public services. Finally, the government is expected to reward employees by using ‘performance-based’ assessment (Jamil, Askvik and Dhakal, 2013, p29). The retrenchment programme has successfully reduced the public-sector employment. The government also implemented a moratorium to postpone civil servant recruitment. To rationalise the structure of the public sector, the government implemented ‘golden hand-shake’ scheme (Jamil, Askvik and Dhakal, 2013, p29). It was applied to persuade civil servants to retire earlier.  The policy to reduce the size of public sector organisation under the implementation of NPM brings several consequences for civil servants. First, as mentioned before, many of them might lost position. The adoption of NPM may lead the government to reduce the number of its workers (Alonso, Clifton and Diaz-Fuentes, 2015, p656). It could happen because their jobs are delegated to the private sectors. The problem related to this matter is how a government manage workers that potentially lose their job. The government can reallocate employees from units that are no longer exists to other units that need more staffs. It might strengthen the organisation that suffers a worker deficit. The government also can transfer the officers to the local or regional government under decentralisation framework. By strengthening local or regional government, the local needs will be accommodated and therefore the services might meet the targets (Christensen, 2009, p2810). To prevent resistances of the officers that potentially lost their job, a government can adopt the civil service reform from Hong Kong. Hong Kong implements civil service framework that is ‘open, flexible, equitable, and structured’ (Cheung, 2003, p324). The framework aims to recruit or discharge civil servant in a more flexible mechanism. By implementing this mechanism, the government have a leeway to hire talented employees or to expel non-performers in their organisation (Cheung, 2003, p324). The flexible mechanism, therefore, might be useful for governments in discharging instead retaining ‘unwanted’ employees. Secondly, the tension of stress or pressure to the government officers tends to rise. NPM proponents argued that downsizing the public sector can promote effectiveness and efficiency. The officers can give their more focus as NPM promotes clear and narrow task division. The small size of the public sector and lesser employees mean that their workload is increasing. Under NPM, the employees have a greater responsibility in doing administration, monitoring and communication (Butterfield, et al., 2005, taken from Diefenbach, 2009, p904). NPM makes the working environment and working situation more challenging (Newton, 2005 taken from Diefenbach, 2009, p904). The increase in the workload and working pressure leads the employees to experience higher levels stress (Kirkpatrick et al. 2005, taken from Diefenbach, 2009, p904). Stake-holders, therefore need to analyse and execute the right decision in downsizing the public-sector structure. Conclusion The adoption of private practices under NPM gradually reduces direct interaction between government and the public. It is because the role of government in some areas is replaced by private or voluntary sectors. The replacement gives effects to the the government. First, it can reduce the size of the government. Secondly, the adoption of NPM also gives effects on the public-sector workers. As their roles are replaced by outsourcing scheme, several positions of civil servants will be no longer needed. As a result, they might be transferred to other units or dismissed. By adopting NPM, a government can have an effective way to downsize the structure of the public-sector. A slim and simple structure organisation might be more efficient in executing policies related to the public services provision. On the other hand, small structure organisation can burden the remaining civil servants. As their size is reduced to meet efficiency and effectiveness, their responsibilities are increasing. If the workload cannot be handled, it might deter the provision of the service and lead to an inefficiency. 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