2 The New Zealand model
The New Zealand public management system, as we currently know it, was introduced in the late 1980s, with the passing of the State Sector Act 1988 and the Public Finance Act 1989. Based upon theories of new public management prevalent at the time the “New Zealand model” has been studied by a number of commentators and other jurisdictions.
Overall commentators and reviewers have concluded that the New Zealand public management system provides a sound basis for the efficient management of resources, and that the reform process resolved many of the issues identified at the time. As with any change process, however, there are always aspects of reform that are not fully implemented and, over time, other (sometimes related) issues are identified as requiring resolution. In the New Zealand context, these aspects of the State sector reforms are consistently identified as needing to provide an increased focus on outcomes and consideration of capability issues.
2.1 Where have we come from?
The mid to late 1980s in New Zealand can best be described as a period of change – primarily driven by the perceived need to reshape the economy, but also driven by shifts in ideological perceptions about how society should be structured and New Zealand’s role in the world (James, 1992). Similarly, the economic imperatives of the time have been identified as a key driver for change of the public management system. However, a shift in perspectives about the role of Government in the economy and a desire to make the State sector more responsive to Ministerial demands also appear to have been important drivers for change (Schick, 1996; and Scott, 2001).
These latter two points largely mirrored international trends and thinking about the structures and systems of public management – with the development of new public management theories in many “like” countries (for example, the United Kingdom, the United States, Canada and Australia). In essence, new public management theories sought to develop systems that would be more efficient and effective in the way they delivered services for citizens.
Largely based on economics, the theoretical basis for the reforms identified various “challenges” that needed to be addressed in order for public management systems to be efficient and effective. As Boston et al (1996) outline, these theories provided suggestions about ways in which the risks posed by self-maximising behaviour on the part of stakeholders within the system could best be addressed. Possible responses explored in New Zealand included: separation of functions between different agencies; the use of formal “contracts” to govern relationships between different stakeholders; and delegation of managerial responsibilities to those best placed to respond to individual issues.
In New Zealand, underpinning the responses to the challenges posited by institutional economic theories were five key principles first expounded in Government Management (Treasury, 1987) - see Figure 1. The key shifts in the public management system were signalled by the implementation of two Acts: the State Sector Act 1988 and the Public Finance Act 1989. These legislative changes provided for the development and implementation of a system based on performance management (clear specification of objectives, freedom to manage and accountability), supported by institutional design issues focused on the separation of activities.
Figure 1 – Core principles underpinning the New Zealand public management system
- Clarity of objectives – The initial element of a management process must be as clear a specification as possible of the objectives which managers are responsible for achieving. This implies both a clear identification of individual objectives – objective performance targets in areas where that is possible, for example – and the avoidance of multiple, conflicting objectives.
- Freedom to manage – Once objectives are clearly stated, managers must be given the power to make their achievement possible. Managers should, for example, have freedom to make resource allocation decisions on a basis which enables the most efficient attainment of objectives. Controls over inputs are in general likely to prevent such a process.
- Accountability – Freedom to manage is not itself a sufficient precondition for good management. Incentives and sanctions must be in place to modify the behaviour of managers to ensure that they do act to meet established objectives rather than pursuing independent goals of their own. For this to be achieved, managers must be accountable for the decisions they make, and those on whose behalf they act must have the means to make that accountability “stick’.
- Effective assessment of performance – If managers are to be accountable for their performance, those to whom they are accountable must have the means to establish the quality of that performance. How well have managers met stated objectives? Are any deficiencies the result of poor management or of external factors over which the managers concerned had no control?
- Adequate Information Flows – If emphasis is to be placed on performance assessment, a sufficient quantity and quality of information concerning performance will be required. If managers are to be given a goal of efficient resource use, for example, accounting systems must provide the information to enable an adequate assessment of the quality of resource decisions.
More specifically, the new model provided for an emphasis on setting clear, non-conflicting goals; giving authority to managers and boards to manage their businesses; and simplifying accountability arrangements (Scott, 2001). Implementation of the principles expounded provided for: devolution of control over inputs, leading to significant change in the human resource and financial management systems; the introduction of a performance management system designed to hold chief executives and departments accountable for specified activities and behaviours; and structural change to support clear specification of objectives and to allow for competition where appropriate, in most instances this led to the structural division of policy development and operational delivery[2].
Notes
- [2]Commercialisation of some Government services, through the establishment of State Owned Enterprises, had started in the mid-1980s.
