New Public Management (NPM) is an approach to running public service organizations that is used in government and public service institutions and agencies, at both sub-national and national levels. The term was first introduced by academics in the UK and Australia  to describe approaches that were developed during the 1980s as part of an effort to make the public service more "businesslike" and to improve its efficiency by using private sector management models. As with the private sector, which focuses on "customer service", NPM reforms often focused on the "...centrality of citizens who were the recipient of the services or customers to the public sector."  NPM reformers experimented with using decentralized service delivery models, to give local agencies more freedom in how they delivered programs or services. In some cases, NPM reforms that used e-government consolidated a program or service to a central location to reduce costs. Some governments tried using quasi-market structures, so that the public sector would have to compete against the private sector (notably in the UK, in health care). Key themes in NPM were "...financial control, value for money, increasing efficiency...,identifying and setting targets and continuance monitoring of performance, handing over.. power to the senior management" executives. Performance was assessed with audits, benchmarks and performance evaluations. Some NPM reforms used private sector companies to deliver what were formerly public services.
NPM advocates in some countries worked to remove "...collective agreements [in favour of]...individual rewards packages at senior levels combined with short term contracts" and introduce private sector-style corporate governance, including using a Board of Directors approach to strategic guidance for public organizations. While NPM approaches have been used in many in countries around the world, NPM is particularly associated with the most industrialized OECD nations such as the United Kingdom, Australia and the United States of America. NPM advocates focus on using approaches from the private sector-the corporate or business world-which can be successfully applied in the public sector and in a public administration context. NPM approaches have been used to reform the public sector, its policies and its programs. NPM advocates claim that it is a more efficient and effective means of attaining the same outcome.
In NPM, citizens are viewed as "customers" and public servants are viewed as public managers. NPM tries to realign the relationship between public service managers and their political superiors by making a parallel relationship between the two. Under NPM, public managers have incentive-based motivation such as pay-for-performance, and clear performance targets are often set, which are assessed by using performance evaluations. As well, managers in an NPM paradigm may have greater discretion and freedom as to how they go about achieving the goals set for them. This NPM approach is contrasted with the traditional public administration model, in which institutional decision-making, policy-making and public service delivery is guided by regulations, legislation and administrative procedures.
NPM reforms use approaches such as disaggregation, customer satisfaction initiatives, customer service efforts, applying an entrepreneurial spirit to public service, and introducing innovations. The NPM system allows "the expert manager to have a greater discretion." "Public Managers under the New Public Management reforms can provide a range of choices from which customers can choose, including the right to opt out of the service delivery system completely".
The first practices of New Public Management emerged in the United Kingdom under the leadership of Prime Minister Margaret Thatcher. Thatcher played the functional role of "policy entrepreneur" and the official role of prime minister. Thatcher drove changes in public management policy in such areas as organizational methods, civil service, labor relations, expenditure planning, financial management, audit, evaluation, and procurement. Thatcher's successor, John Major, kept public management policy on the agenda of the Conservative government, leading to the implementation of the Next Steps Initiative. Major also launched the programs of the Citizens Charter Initiative, Competing for Quality, Resource Accounting and Budgeting, and the Private Finance Initiative.
A term was coined in the late 1980s to denote a new (or renewed) focus on the importance of management and 'production engineering' in public service delivery, which often linked to doctrines of economic rationalism (Hood 1989, Pollitt 1993). During this timeframe public management became an active area of policy-making in numerous other countries, notably in New Zealand, Australia, and Sweden. At the same time, Organization for Economic Cooperation and Development (OECD) established its Public Management Committee and Secretariat (PUMA), conferring to public management the status normally accorded more conventional domains of policy. In the 1990s, public management was a major item on President Clinton's agenda. Early policy actions of the Clinton administration included launching the National Partnership and signing into law the Government Performance and Results Act. Currently there are few indications that public management issues will vanish from governmental policy agendas. A recent study showed that in Italy, municipal directors are aware of a public administration now being oriented toward new public management where they are assessed according to the results they produce.
The term New Public Management (NPM) expresses the idea that the cumulative flow of policy decisions over the past twenty years has amounted to a substantial shift in the governance and management of the "state sector" in the United Kingdom, New Zealand, Australia, Scandinavia, and North America. A benign interpretation is that these decisions have been a defensible, if imperfect, response to policy problems. Those problems as well as their solutions were formulated within the policy-making process. The agenda-setting process has been heavily influenced by electoral commitments to improve macro- economic performance and to contain growth in the public sector, as well as by a growing perception of public bureaucracies as being inefficient. The alternative-generation process has been heavily influenced by ideas coming from economics and from various quarters within the field of management.
Although the origins of NPM came from Westernized countries it expanded to a variety of other countries in the 1990s. Before the 1990s, NPM was largely associated to an idea utilized by developed countries that are particularly Anglo-Saxon. However the 1990s have seen countries in Africa, Asia and other countries looking into using this method. In Africa, downsizing and decrease of user fees have been widely introduced. These autonomous agencies within the public sectors have been established in these areas. Performance contracting became a common policy in crisis states worldwide. Contracting out of this magnitude can be used to do things such as waste management, cleaning, laundry, catering and road maintenance.
NPM was accepted as the "gold standard for administrative reform" in the 1990s. The idea for using this method for government reform was that if the government guided private-sector principles were used rather than rigid hierarchical bureaucracy, it would work more efficiently. NPM promotes a shift from bureaucratic administration to business-like professional management. NPM was cited as the solution for management ills in various organizational context and policy making in education and health care reform.
The basic principles of NPM is can best be described when split into seven different aspects elaborated by Christopher Hood in 1991. Hood also invented the term NPM itself.  They are the following:
Because of its belief in the importance and strength of privatizing government, it is critical to have an emphasis on management by engaging in hands-on methods. This theory allows leaders the freedom to manage freely and open up discretion.
Its important to maintain explicit standards and measures of performance in a workforce. Using this method promotes clarification of goals/intent, targets, and indicators for progression.
The third point acknowledges the "shift from the use of input controls and bureaucratic procedures to rules relying on output controls measured by quantitive performance indicators". This aspect requires using performance based assessments when looking to outsource work to private companies/groups.
NPM advocates often shifted from a unified management system to a decentralized system in which managers gain flexibility and are not limited to agency restrictions.
This characteristic focuses on how NPM can promote competition in the public sector which could in turn lower cost, eliminate debate and possibly achieve a higher quality of progress/work through the term contacts. Competition can also be found when the government offers contracts to the private sectors and the contract is given in terms of the ability to deliver the service effectively, quality of the goods provided, hence this will increase competition because the other private sector which did not get the contract will make strides to improve the quality and ability thereby facilitating competition.
This aspect focuses on the necessity to establish short-term labor contracts, develop corporate plans or business plans, performance agreements and mission statements. It also focuses on establishing a workplace in which public employees or contractors are aware of the goals and intention that agencies are trying to reach.
The most effective one which has led to its ascent into global popularity, focuses on keeping cost low and efficiency high. "Doing more with less"  moreover cost reduction stimulates efficiency and is one way which makes it different from the traditional approach of management
New Public Management draws practices from the private sector and uses them in the public sector of management. NPM reforms use market forces to hold the public sector accountable and the satisfaction of preferences as the measures of accountability. In order for this system to proceed, certain conditions, such as the existence of competition, must exist and information about choices must be available. Reforms that promise to reinvent government by way of focusing on results and customer satisfaction as opposed to administrative and political processes fail to account for legislative self-interest. Institutions other than federal government, the changes being trumpeted as reinvention would not even be announced, except perhaps on hallway bulletin boards.
There are blurred lines between policymaking and providing services in the New Public Management system. Questions have been raised about the potential politicization of the public service, when executives are hired on contract under pay-for-performance systems. There are concerns that public managers may move away from trying to meet citizens' needs. NPM brings to question integrity and compliance when dealing with incentives for public managers. Questions such as managers being more or less faithful arise. The public interest is at risk and could undermine the trust in government. Accountability can be a big issue.
Although NPM had a dramatic impact in the 1990s on managing and policymaking, many scholars believe that NPM has hit its prime. Scholars like Frank Dunleavy believe New Public Management is phasing out because of disconnect with "customers" and their institutions. Scholars cite the Digital Era and the new importance of technology that kills the necessity of NPM. In countries that are less industrialized the NPM concept is still growing and spreading. This trend has much to do with a country's ability or inability to get their public sector in tune with the Digital Era. New Public Management was created in the Public Sector to create change based on: disaggregation, competition, and incentives. Using incentives to produce the maximum services from an organization is largely stalled in many countries and being reversed because of increased complexity.
Post-NPM, many countries explored digital era governance (DEG). Dunleavy believes this new way of governance should be heavily centered upon information and technology. Technology will help re-integrate with digitalization changes. Digital Era Governance provides a unique opportunity for self- sustainability however, there are various factors that will determine whether or not DEG can be implemented successfully. When countries have proper technology, NPM simply can't compete very well with DEG. DEG does an excellent job of making services more accurate, prompt and remove most barriers and conflicts. DEG also can improve the service quality and provide local access to outsourcers.
New Public Management is often mistakingly compared to New Public Administration. The 'New Public Administration' movement was one established in the USA during the late 1960s and early 1970s. Though there may be some common features, the central themes of the two movements are different. The main thrust of the New Public Administration movement was to bring academic public administration into line with a radical egalitarian agenda that was influential in US university campuses. By contrast, the emphasis of the New Public Management movement a decade or so later was firmly managerial in the sense that it stressed the difference that management could and should make the quality and efficiency of public services. It focuses on public service production functions and operational issues contrasted with the focus on public accountability, 'model employer' public service values, 'due process,' and what happens inside public organizations in conventional public administration. That meant New Public Management doctrines tended to be opposed to egalitarian ideas of managing without managers, juridical doctrines of rigidly rule-bound administration and doctrines of self-government by public-service professionals like teachers and doctors.
The table below gives a side-by-side comparison of the two systems core aspects/characteristics
|New Public Management||New Public Administration|
|Hands on approach||Hierarchy and rules|
|Explicit standards||Apolitical, non-partisan civil service|
|Emphasis on output control||Internal regulations|
|Disconnection of units||Equality (Equity?)|
|Importance of the private sector||Importance of public sector|
|Greater usage of money|