Theories of NGOs 2015

CHAPTER TWO: THEORIES OF NGOS

Stakeholder theory

The traditional definition of a stakeholder is “any group or individual who can affect or is
affected by the achievement of the organization’s objectives” (Freeman 1984). The general idea
of the Stakeholder concept is a redefinition of the organization. In general the concept is about
what the organization should be and how it should be conceptualized. Friedman (2006) states
that the organization itself should be thought of as grouping of stakeholders and the purpose of
the organization should be to manage their interests, needs and viewpoints. This stakeholder
management is thought to be fulfilled by the managers of a firm. The managers should on the
one hand manage the corporation for the benefit of its stakeholders in order to ensure their rights
and the participation in decision making and on the other hand the management must act as the
stockholder’s agent to ensure the survival of the firm to safeguard the long term stakes of each
group.
Who are Stakeholders?
A very common way of differentiating the different kinds of stakeholders is to consider groups
of people who have classifiable relationships with the organization. Friedman (2006) means that
there is a clear relationship between definitions of what stakeholders and identification of who
are the stakeholders. The main groups of stakeholders are:
• Customers
• Employees
• Local communities
• Suppliers and distributors
• Shareholders
In addition other groups and individuals are considered to be stakeholders in the literature of
Friedman (2006):
The media
• The public in general
• Business partners
• Future generations
• Past generations (founders of organizations)

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• Academics
• Competitors
• NGOs or activists – considered individually, stakeholder representatives
• Stakeholder representatives such as trade unions or trade associations of suppliers or
distributors
• Financiers other than stockholders (dept holders, bondholders, creditors)
• Competitors
• Government, regulators, policymakers

History of the Stakeholder Theory

In the mid-1980 a stakeholder approach to strategy came up. One focal point in this movement
was the publication of Richard Edward Freeman. He is generally credited with popularizing the
stakeholder concept. The title of the work is – Strategic Management and only the subtitle is A
Stakeholder Approach and came out in 1984. Doing this he indicated that his view of the
stakeholder concept was done from the perspective of the company. He built on the process work
of Ian Mitroff, Richard Mason and James Emshoff. Actually the use of the word stakeholder
came from the pioneering work done at Stanford Research Institute (SRI) in the 1960s. They
further were heavily influenced by several concepts that were developed in the planning
department of the Lockheed Company and these ideas were developed from the researching done
by Igor Ansoff and Robert Steward. Ansoff was around 1960s working for the SRI in association
with Lockheed (Friedman 2006). It is also clear that business leaders were thinking and
expressing the stakeholder concept long before the early 1960s. Dodd (1932) states that already
GEC was identifying four main groups which whom they had to deal with. Those four groups
were defined as shareholders, employees, customers, and the general public. Further, Preston and
Sapieca (1990) mentioned that Johnson & Johnson identified customers, employees, managers,
and the general public in 1947. The company Sears named „four parties to any business in the
order of their importance“ as “customers, employees, community and stockholders“ in the year
1950. Schilling (2000) that the start of thinking about the stakeholder concept was the work of
Follet in 1918. The purpose of stakeholder management was to create methods to manage the
different groups and relationships that resulted in a strategic fashion. Further Freeman (1984)
thinks that the idea of stakeholders, or stakeholder management, or a stakeholder approach to
strategic management, suggests that managers must formulate and implement processes which

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satisfy all and only those groups who have a stake in the business. The main task in this process
is to manage and integrate the relationships and interests of shareholders, employees, customers,
suppliers, communities and other groups in a way that guarantees the long-term success of the
firm. A stakeholder approach is very much concerned about active management of the business
environment, relationships and the promotion of shared interests in order to develop business
strategies. But due to the fact that a lot of different stakeholder concepts are around in literature
in order to get a better overview the next chapter will go in more detail in the contribution to the
literature done by Donaldson and Preston (1995) who distinguish between normative and
strategic or analytical stakeholder theory. Freeman’s work “Strategic Management: A
stakeholder Approach” (1984) offers a managerial and practical scope and does not really
constitute a theory. But it has constituted a base for the development of the stakeholder theory,
which has been widely developed since the 1980’s. Stakeholder concept gave rise to heterogenic
theoretical developments which have been summarized in Donaldson and Preston Article “The
Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications” (1995). They
suggested that the stockholder theory literature can be seen as three branches:
Descriptive: The aim is to understand how managers deal with Stakeholders and how they
represent their interests. The corporation is viewed as a constellation of interests, some time
competitive and some time cooperative. The analytic theory will show how the MNC can deal
with these divergent interests of stakeholders.
Instrumental Approach: Study the organizational consequences of taking into account
stakeholders in management examining the connections between the practice of stakeholder
management and the achievement of various corporate governance goals.
Normative: Identification of moral or philosophical guidelines linked to the activities or the
management of corporations. Donaldson and Preston argue that if these three approaches are
combined without acknowledgement it would result to confusion. First we will study the
normative approaches of the stakeholder theory which are considered by many as the core of the
theory, then we will study the Instrumental and descriptive theory (analytic), and we will finally
try to find common concepts of the stakeholder theories.

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Normative theory
The objective of the normative theory is to answer the following questions,
“What are the responsibilities of the company in respect of stakeholders?” and “why companies
should take care of other interests than shareholders interests?”. The normative theory is linked
to moral, values and philosophic purposed. For Donaldson and Preston (1995) the normative
theory is the core of the stakeholder theory. For them stakeholders have a legitimate interest in
MNC's and their interests have intrinsic value. But Freeman think that the idea of Donaldson and
Preston suppose a separation between economics and ethics spheres. For Freeman every
organization theory incorporates a moral dimension, even if it is most of the time implicit. For
many authors relationships between the firm and stakeholders are based on moral commitments.
Not only to optimize profit managing stakeholders relationships in an optimal way. The relations
between firms and its stakeholder can be valuable for the company as a reflection of it values and
principles. Each company should define fundamental moral principles, and use these principles
as a basis for decision making.

Types of stakeholders

a. Active or passive
Actives are the one who affect or determine a decision or action in the system.
Passive are that are affected by decision and actions of others.
b. Primary or secondary
Primary are the intended beneficiary or the one that have direct relationship with the
system of organization.
Secondary are the one who performing as intermediaries or that have indirect relationship
with the system.
c. Stakeholders or key stakeholders
Stakeholders any group who are affected and affect the organization operation.
Key stakeholders are actors who are considered to have significant influence on the
organization.

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d. Important or influential
Important are those whose needs are important to the organization process. Example the
existence of rural women farmer association is important for the operation of women
affairs bureau.
Influential are that have the power to control the decision of an organization
The concept of stakeholder analysis

Stakeholder analysis is a way of understanding a system through its stakeholders. It looks at their
interest, objectives, power and relationships of stakeholders. It also shows the pattern of
interaction with the stakeholders.

Stakeholder analysis was first used in management science for identifying and addressing the
interest of different stakeholders in business but now a day it is used for input for policy
formulation, project formulation and implementation and evaluation purpose.

Law of Unintended Consequences

In the social sciences, unintended consequences (sometimes unanticipated consequences or

unforeseen consequences) are outcomes that are not the ones intended by a purposeful action.
The term was popularized in the 20th century by American sociologist Robert K. Merton.

The idea of unintended consequences dates back at least to John Locke who discussed the
unintended consequences of interest rate regulation in his letter to Sir John Somers, Member of
Parliament. The idea was also discussed by Adam Smith, the Scottish Enlightenment, and
consequentialism (judging by results). However, it was the sociologist Robert K. Merton who
popularized this concept in the twentieth century.

In his 1936 paper, "The Unanticipated Consequences of Purposive Social Action", Merton tried
to apply a systematic analysis to the problem of unintended consequences of deliberate acts
intended to cause social change. He emphasized that his term "purposive action... [is exclusively]
concerned with 'conduct' as distinct from 'behavior.' That is, with action that involves motives
and consequently a choice between various alternatives". Merton also stated that "no blanket

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statement categorically affirming or denying the practical feasibility of all social planning is
warranted."

More recently, the law of unintended consequences has come to be used as an adage or idiomatic
warning that an intervention in a complex system tends to create unanticipated and often
undesirable outcomes. Akin to Murphy's law, it is commonly used as a wry or humorous warning
against the hubristic belief that humans can fully control the world around them.

Unintended consequences can be roughly grouped into three types:

 Unexpected benefit: A positive, unexpected benefit (usually referred to as luck,

serendipity or a windfall). The medieval policy of setting up large hunting reserves for
the nobility has preserved green space, often as parks, throughout England and other
places in Europe. Likewise the creation of "no-man's lands" during the Cold War, in
places such as the border between Eastern and Western Europe, and the Korean
Demilitarized Zone, has led to large natural habitats.
 The sinking of ships in shallow waters during wartime has created many artificial coral
reefs, which can be scientifically valuable and have become an attraction for recreational
divers.
 In medicine, most drugs have unintended consequences ('side effects') associated with
their use. However, some are beneficial. For instance, aspirin, a pain reliever, is also an
anticoagulant that can help prevent heart attacks and reduce the severity and damage
from thrombotic strokes. The existence of beneficial side effects also leads to off-label
use—prescription or use of a drug for an unlicensed purpose.

 Unexpected drawback: A negative, unexpected detriment occurring in addition to the

desired effect of the policy (e.g., while irrigation schemes provide people with water for
agriculture, they can increase waterborne diseases that have devastating health effects,
such as schistosomiasis). The implementation of a profanity filter by AOL in 1996 had
the unintended consequence of blocking residents of Skuthorpe, North Lincolnshire,
England from creating accounts due to a false positive. The accidental censorship of

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innocent language, known as the Skuthorpe problem, has been repeated and widely
documented.
 In 1990, the Australian state of Victoria made safety helmets mandatory for all bicycle
riders. While there was a reduction in the number of head injuries, there was also an
unintended reduction in the number of juvenile cyclists—fewer cyclists obviously leads
to fewer injuries, assuming all else being equal. The risk of death and serious injury per
cyclist seems to have increased, possibly due to risk compensation. Research by Vulcan,
et al. found that the reduction in juvenile cyclists was because the youths considered
wearing a bicycle helmet unfashionable. A health benefit model developed at Macquarie
University in Sydney suggests that, while helmet use reduces "the risk of head or brain
injury by approximately two-thirds or more", the decrease in exercise caused by reduced
cycling as a result of helmets laws is counterproductive in terms of net health.
 Prohibition in the 1920s United States, originally enacted to suppress the alcohol trade,
drove many small-time alcohol suppliers out of business and consolidated the hold of
large-scale organized crime over the illegal alcohol industry. Since alcohol was still
popular, criminal organizations producing alcohol were well-funded and hence also
increased their other activities. Similarly, the War on Drugs, intended to suppress the
illegal drug trade, instead increased the power and profitability of drug cartels that
became the primary source of the products. The state's claims that drug prohibition
improves the lives of addicts and prevents overdose deaths caused by dangerous drugs
are also contested, because overdose deaths are primarily due to inaccurate dosage
labeling, the fluctuation of drug concentrations seen in erratic and shifting black market
drug supplies, and poor education about the effects of drug-mixing, all of which are
caused by "drug prohibition" not informed drug use. In addition to the prior causes of
heroin overdose, when addicts are treated as criminals police know that methods of
overdose can lead them to potential arrestees, so the availability of opiate antidotes
(Naloxone) are restricted below natural market distribution. One aspect of this is
awareness that police can monitor Narcan supplies in search of addicts, as they market
indoor-growing supply stores in suspicion of those buying supplies necessary to grow
marijuana(Cannabis indica, Cannabis sativa), coca plants(Erythroxylum coca), opium
poppies (Papaver somniferum), psychedelic cacti (Lophophora williamsii, Trichocereus

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pachanoi), psychedelic mushrooms (Psilocybe cubensis, Psilocybe cyanescens,

Gymnopilus spectabilis, etc.).

 Perverse result: A backfire or perverse effect contrary to what was originally intended
(when an intended solution makes a problem worse). This has been dubbed the 'cobra
effect', after an anecdote about how a bounty for killing cobras in British India created a
perverse incentive for people to breed cobras. In 2003, Barbra Streisand unsuccessfully
sued Kenneth Adelman and Pictopia.com for posting a photograph of her home online.
Before the lawsuit had been filed, only 6 people had downloaded the file, two of them
Streisand's attorneys. The lawsuit drew attention to the image, resulting in 420,000
people visiting the site. The Streisand effect was named after this incident, describing
when an attempt to censor or remove a certain piece of information instead draws
attention to the material being suppressed, resulting in the material instead becoming
widely known, reported on, and distributed.
 Passenger-side airbags in motorcars were intended as a safety feature, but led to an
increase in child fatalities in the mid-1990s as small children were being hit by deploying
airbags during collisions. The supposed solution to this problem, moving the child seat to
the back of the vehicle, led to an increase in the number of children forgotten in
unattended vehicles, some of whom died under extreme temperature conditions.
 Risk compensation, or the Peltzman effect, occurs after implementation of safety
measures intended to reduce injury or death (e.g. bike helmets, seatbelts, etc.). People
may feel safer than they really are and take additional risks which they would not have
taken without the safety measures in place. This may result in no change, or even an
increase, in morbidity or mortality, rather than a decrease as intended.
 The obald Mathew's temperance campaign in 19th-century Ireland (in which thousands of
people vowed never to drink alcohol again) led to the consumption of diethyl ether, an
intoxicant much more dangerous due to its high flammability, by those seeking to
become intoxicated without breaking the letter of their pledge.
 It was thought that adding south-facing conservatories to British houses would reduce
energy consumption by providing extra insulation and warmth from the sun. However,

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people tended to use the conservatories as living areas, installing heating and ultimately
increasing overall energy consumption.

 Beginning in the 1940s and continuing into the 1960s, the Federal Canadian government
gave $2.25 per day, per psychiatric patient to the Catholic church in Quebec for their cost
of care, and only $0.70 a day per orphan. The perverse result is that the orphan children
were diagnosed mentally ill so the church could receive the larger amount of money. This
psychiatric misdiagnosis affected up to 20,000 people, the children are known as the
Duplessis Orphans.

Possible causes of unintended consequences include the world's inherent complexity (parts of a
system responding to changes in the environment), perverse incentives, human stupidity, self-
deception, failure to account for human nature or other cognitive or emotional biases. As a sub-
component of complexity (in the scientific sense), the chaotic nature of the universe—and
especially its quality of having small, apparently insignificant changes with far-reaching effects
(e.g., the butterfly effect)—applies.

Robert K. Merton listed five possible causes of unanticipated consequences in 1936:

1. Ignorance, making it impossible to anticipate everything, thereby leading to incomplete

analysis
2. Errors in analysis of the problem or following habits that worked in the past but may not
apply to the current situation
3. Immediate interests overriding long-term interests
4. Basic values which may require or prohibit certain actions even if the long-term result
might be unfavorable (these long-term consequences may eventually cause changes in
basic values)
5. Self-defeating prophecy, or, the fear of some consequence which drives people to find
solutions before the problem occurs, thus the non-occurrence of the problem is not
anticipated prophecy

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New Public Management and NGOs

For over two decades a wave of public sector management reforms has swept through developed,
transitional and developing countries. The role and institutional character of the state and of the
public sector have been under pressure to be more market-oriented and private sector-oriented,
initially in developed countries and later in some developing countries in the context of
International Monetary Fund/World Bank-supported structural adjustment programmes (SAPs).
This has been a product of a number of factors, including the economic and fiscal crises of the
state that called the post-war consensus on the active role of the state in the economy into serious
question. In developed economies such as the United Kingdom, Canada and Australia, the crisis
in the Keynesian welfare state led to the search for alternative ways of organizing and managing
public services and redefining the role of the state to give more prominence to markets and
competition, and to the private and voluntary sectors. In a similar vein, the economic and fiscal
crisis that engulfed most developing countries in the 1970s and 1980s led to a rethinking of state-
led development which had increased the size, functions and power of the state and its
bureaucracy.
A survey by the Organization for Economic Co-operation and Development concluded that new
management techniques and practices involving market-type mechanisms associated with the
private for-profit sector are being used to bring about changes in the management of public
services in countries that have widely varying governance, economic and institutional
environments (OECD, 1993a). These practices and techniques have conventionally been labeled
the new public management (NPM) or the new managerialism (Hood, 1991; Dunleavy and
Hood, 1994; Pollitt, 1993; Ferlie et al., 1996).
The components of NPM have evolved over the years. However, as Moore et al. (1994:13) point
out, .The central feature of NPM is the attempt to introduce or simulate, within those sections of
the public service that are not privatized, the performance incentives and the disciplines that exist
in a market environment.. The assumption is that there are benefits in terms of efficiency and
effectiveness in exposing public sector activities to market pressures and in using markets to
serve public purposes, and that government can learn from the private sector despite contextual
differences (Metcalfe and Richards, 1990:155). Some observers have argued that there are
convergent trends (Kickert and Beck Jørgensen, 1995:501) or .diffusion of reforms. (Halligan,

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1997) or a globalization of public sector management (Flynn, 1997) as an increasing number of

crisis and non-crisis states in Africa, Asia and Latin America are also embracing elements of the
new public management approach. A noticeable trend in public sector reforms, in the context of
economic crisis and structural adjustment, is that a wider range of administrative functions and
the delivery of public services are being subjected to the approach (Bienefeld, 1990; Mukandala,
1992).

New public management has become convenient shorthand for a set of broadly similar
administrative doctrines which dominated the public administration reform agenda of most
OECD countries from the late 1970s (Hood, 1991; Pollitt, 1993; Ridley, 1996). It captures most
of the structural, organizational and managerial changes taking place in the public services of
these countries. To quote Pollitt, NPM has variously been defined .as a vision, an ideology or
(more prosaically) a bundle of particular management approaches and techniques (many of them
borrowed from the private for-profit sector). (1994:1). NPM is thus seen as a body of managerial
thought (Ferlie et al., 1996:9) or as an ideological thought system based on ideas generated in the
private sector and imported into the public sector (Hood, 1991, 1995).
NPM shifts the emphasis from traditional public administration to public management (Lane,
1994). As the title of Clarke and Newman.s (1997) book, The Managerial State, reflects, NPM
is pushing the state toward managerialism. The traditional model of organization and delivery of
public services, based on the principles of bureaucratic hierarchy, planning, centralization, direct
control and self-sufficiency, is apparently being replaced by a market-based public service
management (Stewart and Walsh, 1992; Walsh, 1995; Flynn, 1993), or .enterprise culture.
(Mascarenhas, 1993).

NEW PUBLIC MANAGEMENT: SELECTED APPLICATIONS

 Decentralizing Management
Decentralizing management, disaggregating and downsizing of public services are strands of
NPM derived from managerialism. (Mellon, 1993; Hood, 1991; Ferlie et al., 1996). The trend
toward decentralized management in public services is part of the effort to debureaucratize. the
public services (Ingraham, 1996:255) as well as .delayer. the hierarchies within them. The key
concern here is .whether managers are free to manage their units in order to achieve the most

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efficient output. (Mellon, 1993:26; see also Hood, 1991:5-6). This aspect of NPM has taken
several forms, which are outlined here.
1. Breaking up monolithic bureaucracies into agencies
There are several related elements of management decentralization which one can distil from the
NPM literature. The first and the key trend is that traditionally huge and monolithic public
bureaucracies are downsizing, contracting out functions and breaking up internally into more
autonomous business units or executive agencies (Pollitt, 1994; Pollitt and Summa, 1997;
Kanter, 1989). This involves a split between a small strategic policy core and large operational
arms of government with increased managerial autonomy (Phippard, 1994; Greer, 1994).
Agencies are then required to conduct their relations with each other and with the central
departments on a contractual basis rather than through the traditional hierarchy, i.e., they relate
on an arms.-length basis. In practice, executive agencies have meant structural changes in the
organization of government. In principle, these agencies have greater managerial flexibility in
allocation of human resources in return for greater accountability for results.

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Among OECD countries, the United Kingdom, Australia and New Zealand provide some of the
best examples of executive agencies. In the United Kingdom, for example, the total number of
civil servants working in agencies amounted to about 66 per cent in 108 agencies (including
executive units of Customs and Excise and of the Inland Revenue) in 1995 and are expected to
increase to about 90 per cent (Priestley, 1996). In New Zealand activities that are considered
economic or commercial are being separated from administrative or regulatory ones in large
multipurpose ministries to form public enterprises (OECD, 1993b). These agencies are headed
by managers on fixed-term contracts with considerable autonomy, including the right to hire and
fire (World Bank, 1997:87). Jamaica has recently selected 11 pilot agencies for conversion into
executive agencies. In Ghana and Uganda, the Customs and Excise, and Internal Revenue
Departments were hived-off from the civil service to form separate agencies in the 1980s. The
rationale, like that of executive agencies elsewhere, was to separate executive functions from
policy making, free them from civil service rules and conditions and offer them better incentives
linked to performance (Larbi, 1995).
A common trend in health sector reforms in a number of developing countries is the
decentralization of service provision to arms. length or semi-autonomous hospitals as in Sri
Lanka (Russell and Attanayake, 1997) and Ghana (Larbi, 1998b, 1998c). Werna (1996) reports
similar trends in Venezuela. The introduction of autonomous hospitals is usually accompanied
by the creation of independent hospital management boards (Bennett et al., 1995; World Bank,
1993). According to Barnum and Kutzin (1993) the principal reasons for targeting large hospitals
for reform are that they consume a high proportion of the national health budget and are often the
inefficient parts of the public health system. More specifically, as McPake (cited in Bennett et
al., 1995) notes, the trend toward autonomous hospitals is driven, inter alia, by the following
policy objectives:
__improve efficiency by separating the purchaser role from the provider role, thereby
freeing the provider from the traditional bureaucratic and hierarchical structures based on
command and control;
__improve responsiveness to users. needs and preferences through market-based incentives
(e.g., user fees) and increasing accountability and participation at middle and lower

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levels, by removing decision making from the central bureaucracy to front-line managers
and by including public representatives on independent management boards;
__reduce the financial and managerial burden of big hospitals, which are expected to
develop alternative sources of finance to reduce the burden they impose on the budget of
the Ministry of Health.
The development of executive agencies has been logically accompanied by delegation of
authority to senior management in public agencies. Giving top management freedom to manage
with clear responsibility and accountability, and reducing the management role of the centre.

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2. Evolving budgets and financial control

This is the second element of decentralized management and an important complement to the
creation of executive agencies. This may take the form of creating budget centres or spending
units. Devolving budgets and financial control involves giving managers increased control over
budgets for which they are held responsible (Kaul, 1997; Walsh, 1995). This usually goes with
the setting of explicit targets for decentralized units. For example, according to Flynn
(1993:111), the British public expenditure planning process, in 1993, incorporated 2,500
performance and output measures in addition to the traditional approach of deciding how much
money should be allocated to each function.
Singapore has recently started a process of devolution of financial management as a prelude to
creating autonomous agencies. From 1996, ministries and departments were assigned operating
budgets based on target outputs, where outputs are quantifiable and measurable (Guan, 1997).
Ghana has recently embarked on a public financial management programme that involves
elements of financial decentralization (Larbi, 1998a).
3. Organizational unbundling
This is the third element of management decentralization. It involves delayering of vertically
integrated organizations, i.e., replacing traditional .tall hierarchies. with flatter and more
responsive structures formed around specific processes, such as paying of benefits as in the
United Kingdom (Ferlie et al., 1996; Pollitt, 1994).
4. Downsizing
The fourth element of decentralized management is downsizing, i.e., rationalizing and trimming
the public sector in order to achieve .leaner. (smaller or compact) and .meaner. (cost-effective)
public service. This has taken different forms, such as hiving-off operational arms of government
to form autonomous agencies and sub-contracting government activities to private providers.
However, in crisis states, the most dominant form of downsizing has been retrenchment of staff
in state agencies.
Downsizing arises from the concern for the size and cost of public sector employment. There
was rapid expansion of civil service employment in the period up to the early 1980s in
developing countries (about 10 per cent a year in some African countries). This was a reflection
of the high degree of government intervention in the economy, as well as practices such as
guaranteeing employment to new graduates, and the use of employment for political patronage.

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The consequent overburdening wage bill not only contributed to the growing fiscal crisis and
budget deficits, but also depressed real wages and maintenance and capital budgets.
Like in the private sector, governments around the world have responded to crisis by putting
explicit limits on the size and cost of the public sector. A number of crisis states (e.g., Uganda
and Ghana in Africa, and Thailand and Bangladesh in Asia) have had to retrench surplus
numbers of civil servants over the past decade (Nunberg and Nellis, 1995). In practice, this has
involved drastic reduction in staff size at both higher and lower tiers of public organizations to
make them more affordable and to bring them into line with a new, scaled-down role for
government

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in economic activities. In many crisis states in Africa, retrenchment of staff has been the main
tool for downsizing. Uganda and Ghana, for example, have experienced massive cuts in the size
of their civil services, in the case of the former by almost half, and the latter by almost 40 per
cent since 1987. The Zimbabwe civil service has also been cut by about 12 per cent (23,000 out
of 192,000) since the commencement of its civil service reform in 1991 (Makumbe, 1997:21),
and the size of the Gambia civil service has also been cut (De Merode and Thomas, 1996). Over
30 sub-Saharan African countries have managed to reduce their average nominal wage bill from
over 7 per cent of GDP in 1986 to just under 6 per cent in 1996, following massive downsizing.
Downsizing the public services in crisis states has not, however, led to expected budget savings
which could be used to improve the salary and incentives of those who remain. This was because
of the high cost of compensating those retrenched. It must be added that delays in paying
compensation and the poor management of retraining and redeployment programmes created
enormous hardships for those retrenched, most of whom joined the ranks of the unemployed
(Larbi, 1995). Furthermore, quantitative reductions in employment did not lead to qualitative
improvement in services. This is because the initial wave of reforms did not pay much attention
to staff morale, capacity building and other efficiency and productivity improvement measures.
5. Separating production and provision functions
The fifth dimension of decentralized management is the divorce of provision from production of
public services. This separation of provision from production implies making a clearer
distinction (organizational and financial) between defining the need for and paying for public
services (the indirect provider role) and actually producing those services (the direct provider
role). This is clearly seen in the reform of the United Kingdom National Health Service (NHS)
where autonomous hospitals (NHS Trusts) .produce. services for which the District Health
Authorities provide finance by .purchasing. the services (Lacey, 1997).
New forms of corporate governance and the board of directors model
The sixth and final dimension of management decentralization is the adoption of new forms of
corporate governance and a move to a board of directors model in the public services. This
entails reducing the power of elected representatives and minimizing the influence of labour
unions on management. This has been a noticeable phenomenon in the United Kingdom (Ferlie
et al., 1996) and is being adopted in other countries, such as Ghana.

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The benefits expected and the objectives of management decentralization may vary from one

organizational context to another.6 However, the economic and administrative cases for
management decentralization rest on bringing service delivery closer to consumers, improving
the central government responsiveness to public demands, improving the efficiency and quality
of public services, and empowering lower units to feel more involved and in control (Mahamba,
1991;
Smith, 1985:30-37). It is also meant to reduce overload and congestion at the centre and speed up
operational decision making and implementation by minimizing the bottlenecks associated with
over-centralization of powers and functions at just one or two points in the hierarchy of a public
service organization or ministry. Thus management decentralization seeks to increase the
operational autonomy of line managers and agencies, leaving only broad policy guidelines to be
worked out at the centre. It also entails flatter internal hierarchies.

 Free market (competitive market )

Free market can be enhanced by giving the chance for the private sectors to produce and provide
good and services. Most of the time contracting out public services for the private sector is one
mechanism to promote competitive market and quality good and service provision.

Contracting out refers to out-sourcing service or buying good and service from external source
instead of providing such service at home. Contracting out can be applied in deferent way as
follow.

owner Management Employee

Management contract Public Private Public
Operational contract Public Public Private
Management and Public Private Private
operational contract

 NPM is aimed to increase emphasis on the performance, output and customer satisfaction
in good and service provision. Besides it includes neo liberal ideas such as free market,
liberating entrepreneurial freedom and safeguarding function of the government.

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 Theories of NGOs 2015

New Public Management (NPM) is “shorthand for a group of administrative doctrines” in the
reform agenda of several OECD countries starting in the 1970s. According to the OECD
(Kickert, 1997: 733), “a new paradigm for public management” had emerged, with eight
characteristic “trends” (listed below in modified order, to range from internal to external
concerns):
(1) Strengthening steering functions at the center;
(2) Devolving authority, providing flexibility;
(3) Ensuring performance, control, accountability;
(4) Improving the management of human resources;
(5) Optimizing information technology;
(6) Developing competition and choice;
(7) Improving the quality of regulation; and
(8) Providing responsive service.

Implementation tools of NPM

Currently the main implementation tools of NPM are BPR, BSC, and KAIZEN

BPR – structural adjustment and performance based recruitment

BSC- planning and evaluation tool

Kaizen – proper utilization of resources

NPM in Developing Country

Public expectations of government in developing countries are fundamentally different to those

found in the OECD. Hood notes that the most plausible explanation of the rise of NPM in its
OECD breeding ground concerns the social changes that were observable in the late 1980s.
These were producing a more white-collar and more socially heterogeneous population (Hood,
1991: 7).
These New Public Expectations of citizens towards their government were partly driven by
improving experiences as consumers in other sectors. The epidemic of charters of one sort or
another at that time in European administrations built on the growing experience of citizens as
angry customers.
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 Theories of NGOs 2015

NPM implementation in developing country is on early age and the impacts of NPM
implementation vary from one country to other country as a result of their socio economic
political and cultural context. Therefore NPM implementation in developing country differ from
developed country by many reasons such as
1. Public expectation of government involvement in provision of goods and
services
2. Incapability of private organization to operate public services
3. High involvement of NGOs in Advocacy and operation of social services
4. High level of corruption as a result of fragmented and separate
autonomous agencies
5. Reluctance of the government body to expose themselves to the new
system
6. Administration in many developing countries is highly centralized and this
makes difficult to make corrective action for misconducts.

NPM and NGO

NGOs may involve in providing quality service for the people in which the government is not
capable of or failed to provide public service for the citizens. In this context they are enhancing
quality service provision strand of NPM.
NGOs are most of the times acting as the agent of international donor agencies, they use NGOs
to bypass government whose capacity and integrity they had come to despair. That means NGOs
are serving as an alternative to convince governments and persuade their interest.
NGOs are involved in advocacy of neoliberal ideas such as individual entrepreneurship which is
the main concern of NPM. Besides, they are involved in maintaining quality service delivery
provision and outcome oriented performance evaluation.

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