PROCESS RESTRUCTURE

THROUGH NPM AND

GOVERNANCE IN
PUBLIC ENTITIES
Group members :
Archana Sami : s11057429
Nivedita Sami :s11058408
Krishneel Reddy : s11058534
 AIM

Examine and understand how the administrative processes were restructured through the adoption of New
Public Management and Governance in public entities in Vanuatu, South Africa, Sweden, Italy, Norway, Egypt
and Fiji.
Article 1 :
Exporting New Public Management: Performance
Agreements in a Pacific Microstate
By : Michael O’ Donnell & Mark Turner
The performance management devices which commit officials to achieving certain goals and targets are
widely used in the original NPM countries but have rarely been transferred to Pacific microstates. Thus this
article examines the introduction of a performance agreement system, which is one aspect of performance
management, in Vanuatu (O'Donnell & Turner, 2005).

Key Findings:
• Public administration reform in Vanuatu,
• Performance agreements and NPM,
• Performance agreements in Vanuatu,
• Implementation Issues.
 Public Administration Reform in Vanuatu
• The country’s economic growth had been poor, GDP per capita showing negative annual growth between 1990
and 2002 and had been classified as a country of “medium human development” by UNDP (2004).
• Efforts to raise welfare was hindered by cyclones, law adult literacy, poor infrastructure, vulnerability to world
commodity process, geographical remoteness, political instability and low levels of jobs creation.
• During this time, the public sector had played a prominent role in the Vanuatu economy in terms of formal
employment and share of GDP.
• In the early 1990s, government expenditure accounted for approximately 50% of GDP but public administration
has been described as inefficient and weak.
• By the mid 1990s, donor agency reports were listing a range of public administration problems such as weakness
in policy development, coordination and monitoring, lack of prioritization in the policy process, absence of
performance criteria, declining executive accountability and changing ministerial jurisdictions and mandates.

(O'Donnell & Turner, 2005)

 Public Administration Reform in Vanuatu
•The Institutional fragility characterized public administration and led to joint action by Vanuatu government and
donors in the form of a Comprehensive Reform Program (CRP) which was endorsed in June, 1997.
•Its objectives sought major improvements in the service delivery, economic and public sector management as
well as economic growth. Public sector reform and good governance were awarded high priority and the Vanuatu
government sought donor assistance to develop and implement policies.
•Some initiatives carried out were:
Downsizing (retrenchment of 10-15% of the public sector workforce),
Reduction in the number of ministries from 28 to 9 accompanied by some internal restructuring,
Decentralization of some personnel functions from PSC to ministries,
Revised Public Service Staff manual,
New Guidelines for Corporate Plans and Annual Reports,
Development of a training program and training capacity.

(O'Donnell & Turner, 2005)

 Performance Agreements and NPM
• Performance management systems are widely used in the public sectors of developed countries such as Australia,
New Zealand, UK and Canada to develop an organizational culture focused on results.
• The main component of such systems is the negotiation of a performance agreement that aims to foster a clear line of
sight between the performance of individual public servants and the achievement of organizational goals.
• These agreements begin with the most senior management and are then cascaded down through to the various layers
of the public service hierarchy.
• Commonly used approach to developing performance agreements is of goal – setting. Advocate of goal settings also
encourage a participative approach to the negotiation of performance agreements.
• A strong commitment to provide employees with performance feedback is also required for an effective performance
management system.

(O'Donnell & Turner, 2005)

 Performance Agreements in Vanuatu
• Performance agreements was introduced into the Vanuatu public service in 2002 for Director Generals (DGs) and
Directors (two top ranks of public servants).

Minister PSC Chairman

Director
General
PSC Chairman

Director

• Progress in completing the performance agreements was slow. By March 2004, (one and half years later) after the
introduction of performance agreement, there were only 5 / 9 DGs and 11 /35 Directors with performance agreements.
(O'Donnell & Turner, 2005)
 Implementation Issues

• Suspicion and Hostility

• Incentives
• Technical Considerations
 The performance agreement template
 The review period
 Sufficient documentations and plans (corporate plans and annual reports )
• The influence of donors

(O'Donnell & Turner, 2005)

 Conclusion

• For performance agreements to succeed there needs to be a clear understanding of organizational goals and
how individual employees can contribute to the achievement of these goals. This requires regular and
effective communication between supervisors and employees of performance objectives and employee
acceptance of these goals.
• In the case of Vanuatu, there was a basic lack of trust between Ministers, public advisers and senior public
servants. According to the authors, it is unlikely that the introduction of performance agreements will
succeed in facilitating dialogue about organizational goals and individual expectations where there is such
poor communication and lack of trust within the ranks.
Article 2:
Governance, Restructuring and New Public
Management Reform : South African Perspectives
By: Myawo Gumede & Mr. Kenneth B. Dipholo
The paper explores the concept of governance, restructuring and the NPM in the context of South Africa.
Improved efficiency , greater competitiveness , accountability and strengthening anti-corruption mechanisms
and institutions are the overriding aim of public sector reforms in South Africa since 1994 (Gumede &
Dipholo, 2014).

Key Findings :
• Good Governance : The South African Perspective
• The New Public Management (NPM) concept in South Africa
• Restructuring of State owned Enterprises in South Africa
 Good Governance : The South African Perspective
• As per article, South Africa is a middle income country with pockets of first world characteristics, such as the
infrastructure. There are also some extremely wealthy segments of population while majority of the people
constituting more than 85% of the country’s population living in rural areas are extremely poor.
• Through the Reconstruction and Development Programme (RDP), the government had built and distributed many
houses for the poor but the programme met institutional and systemic corruption along with nepotism in the actual
construction and with allocation of the houses.
• When corruption is left unchecked by a country, the result is poor governance and the situation is not likely to
change unless principals of good governance are practiced at all spheres in the government.
• Key elements of Good governance :
• Political Principles,
• Economic Principles
(Gumede & Dipholo, 2014)
The New Public Management (NPM) Concept in South Africa

• In South Africa, bureaucratic red tape, systematic corruption, inefficiency, ineffectiveness, poor accountability and
nepotism has affected most government departments.
• The creation of a single public service after 1994 resulted in the merger of 4 states which lead to government
bureaucracy becoming too large and extra-ordinarily hierarchical and public administration became a source of
poor service delivery.
• Public choice theory - public administration was slow and suffered from lack of greater responsiveness, allocative
efficiency, distributive incapacity and weak re-distribution efficiency in South Africa.
• The principal – agent theory argues that the public (as principals), on whose behalf politicians and bureaucrats (as
agents) are supposed to govern, is unable to hold the latter accountable because of insufficient information
(information asymmetry), incomplete contract of employment and problems of monitoring behavior. The state
officials also pursue their self interests rather than the public interest.
(Gumede & Dipholo, 2014)
The New Public Management (NPM) Concept in South Africa

• Despite facing such issues, the urge to adopt NPM principals at independence was apparent through:
 Adoption of the democratic and transparent constitution of South Africa,
 Decentralized spheres of government were adopted to democratize public administration and give South
Africa a renewed impetus for good governance.
 The new nine basic values and principles governing public administration were incorporated in the new
constitution.
 The Public Finance management Act of 1999, the Preferential Procurement Policy Framework Act of 2000,
the Preferential Procurement Policy Framework regulations of 2001and the Municipal Finance Management
Act of 2003.
 The shift from Reconstruction and Development Program(RDP) to GEAR (Growth Employment and
Redistribution.
(Gumede & Dipholo, 2014)
 Restructuring of State Owned Enterprises in South Africa

• Restructuring of State – Owned Enterprise seeks to enhance greater accountability and transparency which is a
feature of NPM approach.
• Private public infrastructure partnerships in many sectors had already been manifested in the partial privatization
of Telkom, ACSA and South African Airways (SAA).
• Through the restructuring programme, the government aimed at creating a market –driven reform and economic
setting, largely supported by private, public and social capital.
• This process attracts investors locally and internationally and competition forms a central element in
restructuring of State Owned Enterprises.
• In doing so, the aim of the government was to ensure that restructuring leads to greater competition with an
appropriate degree of regulation.

(Gumede & Dipholo, 2014)

 Conclusion

• The government of South Africa has made remarkable strides to embrace the principals of the New Public
Management thus reforming the public sector but many members of the political elite collude to defraud the
government and general public which leads to problems of lack of good governance. Therefore the
challenge needs to be tackled head on in order to promote and sustain good governance in South Africa.
Article 3.
Accountability in the New Public Sector: A
Comparative Case Study
By: Patrizio Monfardini
• The paper analyses the effect of new public management ‐based reforms on public accountability in two
countries, Italy and Sweden, explaining what strategies can be used to enhance accountability toward
citizens.

Key Findings:
• Accountability through disclosure and citizen participation

• Case of Sweden and Italy: Legal and Institutional factors

 Accountability Through Disclosure and Citizen
Participation
• Despite the different definitions, disclosure of information is the main way to provide wider and better
accountability to the public and to solve the agency problem which underpins the accountability relationship.
• Information asymmetry can be overcome by producing and providing different sets of information to receivers in
order to fill an existing information gap.
• Sometimes public sector organizations decide to follow another pattern allowing citizens to participate in certain
stages of decision making.
• According to literature one of the main tools to provide accountability in the public sector is accounting and in
particular through the disclosure of information that accounting documents and statements provide.

(Monfardini, 2010)
 Accountability Through Disclosure and Citizen
Participation
• In Italy for example, several Municipalities tried to disclose additional information concerning their social and
environmental performances to the citizens, in order to solve the readability problem afflicting the traditional
financial statements.
• Thus, the quantity of accountability is positively correlated with the number of tools adopted, and channels
used to disclose information.
• Researches emphasise the importance of citizen participation not only in the decision-making phase but also
during performance assessment.
• The proposed assessment model focuses on the observation that the quantity of participation in a selected
context depends on where it is allowed, firstly by the law and then also by the local regulations.

(Monfardini, 2010)
 The Two Case Studies: Legal and Institutional
Factors
Sweden
• The reform of local government which was carried out in 1862 was based on the idea that the Municipalities and the
County Councils should be in charge of their own affairs on condition that the citizens could appeal against the decision
of their local authority.
• During the 70s Sweden faced a period of strong social problem because of the reform of the working life that was set up
by legislation instead of through the usual agreement. The solution of this crisis was again an agreement, showing a kind
of “Swedish style of public life” in which conflicts were minimized by a culture of agreements and social consensus.
• Another characteristic of the Swedish democracy is the strong role of voluntary organizations inside not only the political
debate but also as the cornerstone in the edifice of Swedish society.
• Also the Central Government and the Swedish Association for Local Authorities are committed on the topics of citizen
participation; the former, through recurrent studies, monitors the development of the citizens involvement in
Municipalities and County Councils; the latter, instead, plays an impelling role to facilitate the introduction of those
policies.
(Monfardini, 2010)
 The Two Case Studies: Legal and Institutional
Factors
• According with OECD, Sweden is today a “well performing country with a governance consensus based, and
a collective decision-making underpinned by strong consultation mechanisms and a high level of
transparency”.
• In this sense the season of reforms widened accountability, through the adoption of performance based
indicators in the reporting of public sector organisations and the decentralisation of administrative powers to
LGs and Counties.
• In the end it is possible to affirm that the Swedish main reforms are on one hand, the strength of the local
governments and their traditional autonomy, and on the other, the role of the social movements and of the
different organizations grouping the citizens shared interests in the political decision making processes as well
as the attention given by the Central Government to the profiles of the citizen involvement in the political life.

(Monfardini, 2010)
 The Two Case Studies: Legal and Institutional
Factors
Italy
• The present juridical framework for local governments in Italy comes from a long season of reforms started in the
1990 by the Law. Before this Law, the relationships between the Central State and the Local Governments were
characterised by a strong control by the central level applied through not only the regulation and the laws but also
the financial transfer policies.
• The new system has two main characteristics; firstly a relevant grade of autonomy has been given to the Local
Governments and, secondly, also the internal responsibilities between politicians and public servants have been
clarified.

(Monfardini, 2010)
 The Two Case Studies: Legal and Institutional
Factors
• Firstly, the consideration of the existence of a “gap” between the public administration and the citizen in them of
culture and language.
• This gap was the effect of a season of uncovering scandals and corruptions, involving politicians from every
political party.
• In addition, the changes of the public needs to satisfy and the services demanded by the citizens were not been
fulfilled by the centralised Public Administration, because it was still working in the traditional and “weberian”
way.
• Thirdly, the consideration of the crisis of the public finance, coming from a huge public debt, high interest rates
and the necessity to join the European Community was stressing the importance to provide services in amore
efficient and effective way.

(Monfardini, 2010)
 The Two Case Studies: Legal and Institutional
Factors
• Italy is considered a late comer in NPM adoption because it started reform processes around ten years after
the Anglo-Saxon countries keeping this delay almost constant through time.
• Accountability and transparency have been increased through a wide reform of public organisations
accounting practices, and the introduction of an Access Right principle for citizens in 1990.
• Nevertheless, reforms are still on going and even more decentralisation, through federalism is apparently
going to be introduced in Italy. Citizen participation is instead rather weak, although stated in the law.

(Monfardini, 2010)
 Conclusion

• In both countries, the enhancement of public accountability is at stake both in the political debate and in the
public policies, but the strategies implemented are path dependent especially in the choice between more
disclosure and more citizen participation.
 Article 4 :
New Public Management and Public Enterprise
Restructuring in Fiji
By: Subhash Appana
• This article analyses critically the NPM model for public sector reforms and outlines the domestic political and
economic framework within which the restructuring of Public Enterprises has taken place in Fiji so far.

Key Findings:
• The New Public Management Model
• Political-Economic Environment for Reforms in Fiji
• Public Enterprise Reforms in Fiji
 The First stage (1989 - 95): The ‘Muddling – Through’ stage
 The Second stage (1996 – 98): Legal and Administrative Framework
 The Third stage (1998 – May 99): Implementation of Reforms
 The Fourth stage (May 99 – May 2000): The Rollback Phase
 The Fifth stage: Reforms Recommence
 The New Public Management Model

• NPM attempts to introduce management structures, practices and principles that are based on the precepts of
freedom to choose and freedom to manage.
• The ‘New Right’ is distinguished from the traditional ‘Right’ in recognition of its attempts to incorporate
normative concerns in what essentially remains the business philosophy of maximizing returns from public funds
spent.
• This new ideology can also be referred to as the ‘Enlightened Left’ in recognition of the fact that it has been
embraced by traditionally left-leaning governments in their attempts to amalgamate the imperatives of both
business and society.
• NPM promises to lead to greater efficiency, effectiveness and economy in management in the public sector.

(Appana, 2003)
 The New Public Management Model

The following ideas and initiatives appear to characterize NPM:

• Use of hands-on professional management
• Managerial autonomy
• Decentralization
• Use of explicit measures of performance that are output based

• Use of finance-based performance contracts and incentive systems

• Emphasis on discipline and parsimony in the use of resource

(Appana, 2003)
Political-Economic Environment for Reforms in Fiji

• The widely used post-colonial model of socio-economic development and nation building, characterised by import
substituting industrialisation policies and heavy reliance on the public sector to generate growth, also found its way
into government policy.
• In1984, the Alliance government imposed a wage freeze without any discussion in the Tripartite Forum. The
announcement, during the presentation of the 1985 national budget in Parliament, shocked the unions, which then
declared that the Tripartite Forum had ceased to exist.
• The wage freeze, a first substantive step in the direction of public sector reforms, was seen to be part of a process
required to improve efficiency and reduce burgeoning costs in the civil service.

(Appana, 2003)
 Political-Economic Environment for Reforms in Fiji
• After the 1987 coup Fiji was forced to take drastic measures to retain and attract much-needed investment. Tax
Free Zones were introduced.
• The period following the May 1987 coup is significant in the context of this paper because it disrupted
government plans towards continuing economic reforms and restructuring in the public sector as visualised by
the government earlier.
• Public accountability and principles of good governance were rapidly compromised as expectations of certain
sections of the community as well as individuals had been raised; the easiest way to meet these expectations
and tastes was through cronyism, nepotism, patronage, etc., which became the norm in the civil service.
• The result was an onslaught of political, economic and financial crisis. The revelations of major corrupt deals
at the state owned National Bank of Fiji (NBF), which had figured prominently in the government’s efforts to
meet and encourage the economic aspirations of certain preferred sections of the community.
(Appana, 2003)
Political-Economic Environment for Reforms in Fiji
• The structural adjustment policies of the SVT government from 1996 to May 1999 centred on private sector
led development. Re-structuring the public sector was given top priority.
• It also dominated the dialogue on economic development and growth. Re-structuring involved corporatising
public enterprises and selected government departments, and then aiming to sell shares in these corporations to
the private sector.
• With the SVT’s defeat in the 1999 elections and subsequent coming of the Peoples’ Coalition Government
under the leadership of former unionist Mahendra Chaudhry, policy focus shifted to quasi-privatisation or
corporatisation.
• A major aim of the Qarase government’s reform is to save $95 million a year from civil servant salaries during
2003-2005. Presumably, some of this savings will accrue from public enterprise restructuring.

(Appana, 2003)
 Public Enterprise Reforms in Fiji
The First Stage (1989–95): The ‘Muddling-Through’ Stage
• The 1989-1995 stage is broken into two components - the 1989-1992 component when a number of public
enterprises were actually restructured; and 1993-1995 when there was no actual restructuring but two
important policy documents were produced by the Ministry of Finance and Public Enterprises.

The Second stage (1996 – 98): Legal and Administrative Framework

• In October 1996, about ten years after the first serious attention by the government at public sector reform, a
Public Enterprise Bill went through the Parliament to become a law.
The Third stage (1998 – May 99): Implementation of Reforms
• A major aim of the reforms, stated by Robin Yarrow was ‘to create a more efficient and effective government
that costs the taxpayer less’. He reiterated that government would have a greater focus on general policy
development and coordination, while reducing its involvement in service provision.
(Appana, 2003)
 Public Enterprise Reforms in Fiji
The Fourth Stage: The Roll Back Phase (May 1999 – May 2000)
• The restructuring process was both halted and turned back when the Fiji Labour Party (FLP) came into power
after the 1999 general elections as the Peoples’ Coalition Government. The main features of this process were
the reinstatement of workers made redundant, re-centralization, and internal restructuring.
The Fifth Stage: Reforms Recommence
• In September 2001, the newly installed SDL government announced that it was recommencing with the
reforms as started by the SVT government. Public sector reform program included reforms in the civil service,
the financial management system and public enterprises.

(Appana, 2003)
 Conclusion
• It is clear that the conceptualisation of the approach to public enterprise reforms in Fiji has been founded on
the New Public Management (NPM) model. This was made possible because of institutional support from
international organisations like the World Bank, the IMF and the Asian Development Bank, all of which
encouraged the government to engage in public enterprise reforms.
• The absence of a conceptual and legal framework was considered to be a central problem prior to the
enactment of the Public Enterprise Act in 1996. Thus NPM’s fundamental objective of creating an
innovative, flexible and more entrepreneurial culture within former public sector organizations remains
largely unrealised in Fiji.
Article 5 :
The Hierarchy of Public Project Governance
Frameworks
By : Gro Holst Volden & Bjorn Andersen
Introducing public project governance frameworks in various ministries and agencies in Norway. The governance
framework was implemented for management of large public projects. Project governance framework to be applied
using the top-down approach [starting from the cabinet down to the project workers] (Volden & Andersen, 2017).

Key Findings:
• Why was there a need for governance framework?
• Reform strategy undertaken by Norwegian was to have project governance framework.
 Why was there a Need for Governance Framework?
• Public investment projects faced a number of challenges such as:
 Projects with cost overruns – resource allocation
 Time delays – time management
 Projects did not meet the expectation of the users and society
 Democratic decision making process (political tug-of-war)
 Stakeholders incentives – manipulation
• Rise in the number of public project failures:
 Weak capacity for designing strategic vision
 Lack of local expertise
 Lack of coordination among ministry and agencies - self interest
 No independent reviews to prevent assurance bias

(Volden & Andersen, 2017)

 Reform Strategy Undertaken by Norwegian was to have
Project Governance Framework

•Project Governance Framework involved:

Critical decision gates
Clear line of decision making (cabinet – agencies) – stage gate approval process
Carrying out appropriate checks and balances at project stages
Ensuring transparency
Accountability reports – quality assurance (QA)
Clearly defining the roles of all the parties involved in the project
Provide ongoing support to project managers in delivering the project objectives

(Volden & Andersen, 2017)

 Reform Strategy Undertaken by Norwegian was to
have Project Governance Framework
•Example
•Type of project – Railway projects
•Name of Government Agency – National Rail Administration
Carries out the quality assurance analysis – budget/time/resources/accountability

Public presentation
•Responsible Ministry- Ministry of Transport
Submits the decision documents to the cabinet for approval.

Acts as project sponsor

Critical decision gates

Provide ongoing support to project managers in delivering the project objectives

Implement mechanisms to control principle and agent relationship
•Client/subordinate agency
Contract tenders

Provide project progress reporting

Provide expense summaries / stage
(Volden & Andersen, 2017)
Public Management Institutions 'Alignment: The
Case of Egypt
By : Lobna Mohamed Abdellatif , Baher
Mohamed Atlam and Ola Abdel Moneim El Sayed
Emara
Alignment of the development that took place in public administration and public financial management towards serving
public values to enhance the budgetary outcomes under the existing administrative process (Abdellatif et al., 2018).

• The alignment was demonstrated at three consecutive levels:

 Control and discipline

 Efficiency and effectiveness

 Openness and communication

Key Findings:
• Why was this initiated by the Egypt Government?
• How was this achieved?
 Why was this Initiated by the Egypt Government?

• To have a informed channel of interaction between administrative and budgetary institutions for efficient resource
allocation.

• Ensure informed policy decisions are made to carry out the intended government programs

• Strengthen the fiscal policy implementation

• Introduce fiscal governance to administer public reforms (front-end phase)

• Achieve the targeted fiscal outcomes – execution of the budgetary projects .

(Abdellatif et al., 2018)

 Steps Undertaken by the Government
• Alignment path to development of public administrative and public financial management institutions

 Shifting the focus first on controls and measures

 Establishing accounting, budgeting and financial systems that could frame the budgetary governing rules and
standardize procedures.

• Introduced New Public Management ideology

 Public Administration institutions

• Shifting government performance towards efficiency and effectiveness.

• Result orientated and specialized operations in public organizations

• Better use of public resources with quality service provision

(Abdellatif et al., 2018)

 Steps Undertaken by the Government

Public Financial Management institutions:
•Changes to financial reporting that hold adherence to accrual accounting and the international accounting standards
•Enhancing marketing philosophy that hold market management orientation for prices and service provision –
Government image
•Outsourcing and efficient cash management
•Advocating performance management – PMR review
•Development through the delegation of budgets that required the combination of both financial and cost accounting
systems
•Emphasis was placed for having system of public sector audits – measuring the outcome of public spending.
•Embedding the ladder approach
•Separation of decision making delegation among institutions (budget submission and budget awarded committee/
independent audit committee)
•System transparency was embedded and the power of the legislation in amending the budget was constrained.
(Abdellatif et al., 2018)
 Conclusion

• It is possible to say that through the adaption of project governance frameworks in governments projects and
budgetary systems provides a systematic guideline for a cost mitigated project outcome with proper
accountability of public funds.
 Common Threads
• Civil servant performance is the main point in driving performance management and improvement in managing the
public administration.
• Financial control and discipline is the main point of budget management and budgeting is very essential for any public
sector.
• There needs to be a clear understanding of organizational goals and how individual employees can contribute to the
achievement of these goals.
• There has to be effective communication and trust between all stakeholders involved in carrying out reforms.
• In order to promote and sustain good governance, issues such as bureaucratic red tape, systematic corruption,
inefficiency, ineffectiveness, poor accountability and nepotism has to be tackled head on.
• Presence of a conceptual and legal framework prior to enactment of public sector reforms is essential.
 References
• O'Donnell, M. & Turner, M. (2005). Exporting new public management: performance agreements in a Pacific
microstate. International Journal of Public Sector Management, 18(7), pp.615-628.
• Gumede, N. & Dipholo, K. (2014). Governance, Restructuring and the New Public Management Reform: South African
Perspectives. Journal of Educational and Social Research, 4(6), pp.43-50.
• Monfardini, P. (2010). Accountability in the new public sector: a comparative case study. International Journal of Public
Sector Management, 23(7), pp.632-646.
• Appana, S. (2003). New Public Management and Public Enterprise Restructuring in Fiji. Fijian Studies, 1(1), pp.51-73.
• Volden, G.H. & Andersen, B., 2017. The hierarchy of public project governance frameworks. An empirical study of
principles and practices in Norwegian ministries and agencies, 11(1), pp.174-197.
• Abdellatif, L.M., Atlam, B.M. & Emara, O.A.M.E.S., 2018. Public management institutions' alignment: the case of Egypt.
4(2), pp.90-104.