Developments

From Old Public Administration to

New Public Management
Patrick Dunleavy and Christopher Hood
This article starts by boking at the now familiar idea of 'New Public Management' in
the light ofprevious efforts at managerial reform, arguing that NPM has proved a
fairly durable and consistent agenda. Then the major criticisms of NPM within and
outside the public service are reviewed, demonstrating the tensions and contradictions
arrumg the major criticisms. To endure, NPM must be capable of accommodaling
diff erent poles of criticism by modifying its agenda, attempting to identify the areas
where drawbacks in NPM methods are mnst salient Finally, some future challenges for
NPM are discussed: the prospect of outcomes outside the conventional distinction of
traditional and modem public management styles; the risk of inappropriate cloning;
and quasi-constitutional issues about the core competencies ofpublic sector agencies.
The term 'new public management' (NPM) is agencies or between public agencies, firms and Patrick Dunleavy is
controversial. It is used mainly as a handy shorthand, not-for-profit bodies. Professor of
a summary description of a way of reorganizing • Deconcentrating provider roles to the minimum Govemment at the
public sector bodies to bring their management, feasible sized agency, allowing users more scope London of School of
reporting, and accounting approaches closer to (a to 'exit' from one provider to another, rather Economics. Christopher
particular perception of) business methods. than relying on 'voice' options to inOuence how Hood is Professor of
Generally, it involves a shift in the two basic design public service provision affects them. Public Administration
co-ordinates ofpublic sector organization, moving and Public Policy at
it 'down-grid' and 'down-group' in social science We should stress that we are not saying that with the London School of
jargon (Douglas, 1982). Going'down-group' means N PM the volume ofa// rules decreases. For example Economics.
making the public sector less distinctive as a unit with contractorization the specification of expected
from the private sector (in personnel, reward service standards and contract details typically
structure, methodsofdoingbusiness). Going'down- produces a large amount of documentation, and
grid' means reducing the extent to which perhaps more formalized requirements for service
discretionary power (particularly over staff, delivery than existed before. Nonetheless, these
contracts and money) is limited by uniform and detailed case-by-case decisions are quite different
general rules of procedure. By contrast, traditional in character from the across-the-board regulations
public administration of the 'progressive era' was and general administrative conditions associated
built on the idea of a highly distinct public sector with conventional public administration methods.
'group' and ofa dense 'grid' of general procedural Past experience of administrative reform
rules governing the conduct of business. Figure 1 suggests at least two possible modes in which a
summarizes the direction of change. More movement such as NPM can be infiuential (Polsby,
specifically, this shift consists of: 1984). One is an 'incubated' mode , in which
reform ideas do not come into full effect until long
•Reworking budgets to be transparent in after their original introduction, when they establish
accounting terms, with costs attributed to outputs a new long-term orthodoxy. A clear example of
not inputs, and outputs measured by quantitative that pattern is the 1854 Northcote-Trevelyan Report
performance indicators. on the civil service. Originally, that famous report
•Viewing organizations as a chain of low-trust was widely dismissed as a far-fetched 'Ghinese
principal/agent relationships (rather than scheme' and seen as completely at odds with the
fiduciary or trustee-beneficiary ones), a network way that real-life administration actually worked in
of contracts linking incentives to performance. the mid 19th century. But by the end of the
•Disaggregating separable functions into quasi- century, the Northcote-Trevelyan agenda, albeit
contractual or quasi-market forms, particularly somewhat modified, had become the conventional
by introducing purchaser/provider distinctions, wisdom.
replacing previously unified functional planning- An alternative mode for a reform movement to
and-provision structures. operate is an 'acute' innovation pattern, in which
• Opening up provider roles to competition between reform programmes peak early and then break up

©CIPFA. 1994 PUBLIC MONEY & MANACEMENTJULY-SEPTEMBER 1 9 9 4

Published by Blackwell Publishers. 108 Cowley Road. Oxford OX4 IJF and
2S8 Main Street. Cambridge. MA 02142. USA.
 10
Figure 1. From traditional or progressive public
administration to new public management.
High;
PROGRESSIVE
PUBLIC
Density of rules
limitingfreedomof ADMINISTRATION (PPA)
public officials in
handling money, staff,
contracts etc.
NEW PUBLIC
MANAGEMENT (NPM)
Low
Degree to which public sector is
High
insulated' from the private
sector in personnel, structure,
business methods
quickly. A classic illustration is the short life of
'corporate planning' in local government during
the mid-1970s. In the acute pattern early evangelism
produces general 'cloning'. Cloning is followed by
disillusion as shock effects from the introduction of
new and unfamiliar practices wear off, leading to
the break-up of the blanket/foUow-the-manual
approach, often in response to a withdrawal of
political support or the reassertion of other values.
NPM seems to have elements of both styles.
While individual initiatives may have followed the
acute/rapid break-up pattern, the movement as a
whole looks more like a case of the lagged-effect
incubated pattern. Many NPM innovations seem
to be a delayed response to ideas originally
developed in the 1960s (for example in local
government, public enterprise control and the
Fulton Report) but not applied to the mainline civil
service at that time. And NPM has accommodated
changing agendas over a long period. While
retaining a general direction down-group and
down-grid (as described above), it has taken
variegated forms according to context, without any
single boom period or master manual. It has spread
from one area ofthe public sector to another, and
from simple to more developed models, with first
steps being succeeded by more far-reaching ones.
An example in the UK is the move from
'agencification' to 'market-testing', or in New
Zealand the shift from output budgeting to generic
accounting practices in public sector organizations.
Moreover, NPM has become identified with
the international 'march of history', especially
following the role played by Osborne and Gaebler's
Reinventing Govemment in Bill Clinton's 1992
Presidential campaign. (Contrary cases, such as
Germany or Switzerland, are conveniently ignored
when these claims are made.) And, finally, the
political opposition to NPM has generally receded
rather than grown, with initial left-wing hostility to
privatization, and to some forms of decentralization
and performance indicators quickly mitigated when
reforms are put into practice.
Indeed, it may be that NPM is now so
PUBLIC MONEY & MANAGEMENTJULY-SEPTEMBER 1 9 9 4
omnipresent in public sector organizations that it
hardly amounts to a distinctive reform programme
at all any more. If NPM is now everything, maybe
it is nothing—certainly not a distinctive way of
managing organizations. When Max Weber first
oudined his famous 'ideal type' of bureaucracy in
1911, the features he identified—such as the
separation of positions from persons, hierarchical
organization, the reliance on files and written
records, a stress on disinterested administration—
were all distinctive characteristics, not shared by all
organizations. Eighty years on, the Weberian type
has largely lost its cutting edge, becoming just
another synonym for 'organization'. Perhaps the
same is coming to be true of NPM, and in a much
shorter time? Perhaps non-NPM forms have
become as anachronistic as the traditional collegial
type of organization against which Weber argued?
Perhaps when we now say 'organization' in any
sector ofsociety, the concept automatically includes
output budgeting, performance indicators,
separation ofroles, and a contract-network imagery.
If this suggestion has any force, it has two
implications. First, it might imply that those who
see NPM changes as a reform programme in itself
are only kidding themselves, and mistaking a normal
level of organizational flux (given changing
background conditions, like IT changes) for a
substantive reform project. And second, it suggests
that all the interesting questions about NPM now
relate to the differences in its various strains and the
different ways in which the new organizational
tool-kit can be used.
Critiques of NPM: Costs and Problems
Like all management systems, NPM attracts a
mixture of praise and blame. Since the praise is
fairly well known, this article concentrates on the
criticisms. In general, they fall into four groups:
fatalist; individualist; hierarchist; and egalitarian.
These labels are from cultural theory, where they
are used to capture a wide range of people's
attitudes—for example, their underlying view of
nature or attitudes to risk (Schwarz and Thompson,
1990). The cultural theory categories partly cross-
cut the more commonplace left/right dichotomy, a
useful feature when looking at administrative
reforms. Though the four broad criticisms of NPM
are contradictory, we can learn something from
each of them. They are summarized in figure 2.
The Fatalist Critique
In cultural theory, people who hold a fatalist view
do not believe in the controllability of nature or of
human interactions with it. Applied to public
administration reform, a fatalist position holds that
the basic problems ofpublic sector management—
notably human error, system failures, misdirected
programmes, fraud or corruption, and bad
intentions—are omnipresent. No system of
management, whether it be NPM, conventional
public administration or anything else, can eliminate
these problems. From this viewpoint, there is no
©CIPFA, 1994

Figure 2. Critiques of New Public Management.
Fatalist critique
NPM cannot alter basic dilemmas ofpublic
administration or provide a free lunch
Remedy
None: but over-sell ofmanagement systems
will be vulnerable to fatalist attack
Individualist critique
NPM risks becoming a poor substitute for
fully individualized contract rights
Remedy
More 'real' contracts rather than quasi-contracts,
more privatization rather than corporatization
hubris v/ithoutnemesis, no free lunches or quick fixes
to solve the underlying problems of public
administration. Fatalists are particularly vigilant
for evidence that little is changing underneath the
raft of new acronyms and control frameworks
promoted by NPM, and quick to proclaim the
collapse or failure of much-hyped systems.
The fatalist critique is undeniably negative in
the sense that it is directed towards cracking the
pretensions of new managerial systems rather than
advocating a clear alternative programme. NPM
proponents are likely to be most vulnerable to the
fatalist critique if they oversell the prospective
benefits of new organizational systems—and that is
indeed a common fate ofpast administrative reform
efforts. But even then, fatalists have nothing to put
in the place of NPM, beyond a sceptical debunking
of all reform hype.
The Individualist Critique
In cultural theory, individualist attitudes are
associated with very optimistic readings of human/
nature interactions; for example a cornucopian
view of the possibilities of expanding available
natural resources. Individualists believe in the
primacy of entrepreneurial activity in response to
market signals in regulating social development.
The individualist critique holds that NPM is an
unsatisfactory half-way-house between the
traditional structure ofpublic administration and a
system which is Rally based on enforceable contracts
and individual legal rights. Hence individualists
will be sharply critical of the managed aspects of
NPM markets, and of arrangements which are only
quasi-contracts rather than contracts fully
enforceable at law by citizens. Individualists will
dismiss corporatization measures which stop
anywhere short of full-blooded privatization, and
any aspects of the administrative system which
remain in the traditional high-group/high-grid
mode (such as permanent tenure for civil servants
or departmental heads).
©CIPFA. 1994
11
Hierarchist critique
NPM risks eroding system-wide cohesion,
and putting the public sector out of control
Remedy
Strengthened central steering capacity,
more obligations to consult, OCR not ACR
contracts
Egalitarian critique
NPM risks encouragingcorruption, may suit
personal interests of top officials, weaken
accountability
Remedy
More citizen empowerment, more anti-
corruption machinery, extension of model
employer role, stricter contract blacklists
For individualists, the remedy for such failings
is to replace quasi-contracts by justiciable contracts
(for example in the NHS or the framework
documents of Next Steps Agencies), to allow final
users sufficient standing to litigate in respect of
purchaser-provider contracts, to privatize rather
than corporatize, to pay everyone on performance
and abandon career tenure. In that sense, the
individualist critique, unlike that ofthe fatalists, is
capable of generating a distinct reform agenda for
NPM—an agenda built around markets and
contracts.
The Hierarchist Critique
In cultural theory, the hierarchist label stands for a
cluster ofviews associated with central management,
planning systems, professionalization or
technocracy. The hierarchist view believes in human
capacities to manage nature, as long as that
management remains tighdy defined and human/
nature systems do not swing radically off limits
(when catastrophic results may follow). Applied to
NPM, an hierarchist view holds that NPM reformers
must be careful not to let the process of change get
out of hand, irreversibly damaging the overall
manageability ofthe public service. For hierarchists,
destabilization is the main fear. So stress is laid on
the need for reforms to be carefully 'guided' to
prevent disorder and anarchy, for example in the
public service pay system or in the rules for the
conduct of business.
Hierarchists worry about the way that NPM
develops management skills and de-emphasizes
strategic design or synoptic skills. NPM could absorb
senior policy-makers' attention that could be given
to other issues offar greater quantitative significance.
From this perspective, NPM efficiency gains risk
being offset or overshadowed by large policy fiascoes.
The offsetting factors derive from the erosion of
central government's long-look or planning
capability, and a failure of the proper balance of
political guidance, administrative advice and outside
PUBLIC MONEV 8: MANAGEMENTJULY-SEPTEMBER 1 9 9 4
 12
expertise. Likewise, where NPM systems put more
pressure on meeting a narrow range of performance
targets, hierarchists worry that the effects may be
perverse, in encouraging managers to court disaster
by pushing through cost-minimizing changes
despite objections, warnings or contrary advice
(Hood and Jackson, 1991). They fear that the
outcome may be major policy fiascos, such as the
London Ambulance computerization disaster of
1992.
Hierarchists also worry about the risk oferosion
of traditional public service ethics as a result of
NPM changes, stripping away the public service
career concept and redesigning public sector
organizations on principal/agent lines. By public
service ethic is perhaps meant, in modern
institutional-economics parlance, a network ofhigh-
trust contract relationships across the public sector
(reflected in low transaction costs of negotiations
between different public agencies).
The hierarchist remedies for such ills stress the
need to maintain or enhance a central steering
capacity for the public service. Such capacity might
be maintained in various forms, for example by
creating regulatory bodies to manage markets or
quasi-markets in public services, or by writing
public agency contracts which involve obligations
to consult over policy (re-introduced into chief
executive contracts by New Zealand in 1991). If
contracting becomes the norm, hierarchists insist
on the need to develop patterns of high-trust
'obligational contract relationships' (OCR) rather
than low-trust arms'- length contract relationships
(ACR) within the public service, in order to retain
the capacity to negotiate across organizational
frontiers without massive transaction costs in a
crisis (Sako, 1991). Like the individualists, the
hierarchists are also capable of generating a distinct
reform agenda for NPM—but ofcourse their likely
agenda will be diametrically opposed to that
proposed from the individualist viewpoint.
The Egalitarian Critique
In cultural theory the egalitarian position is the
most pessimistic about human/nature interactions.
It holds that large-scale miscalculations can follow
from elitist decision-making and large
concentrations of organizational power. (In this
sense it is also the most 'left' view in the cultural
theory typology, though it is not to be simply
equated with social democratic or socialist views.)
Applied to NPM, an egalitarian critique holds that
large-scale 'marketizing' reforms increase the risks
of corruption in the public service. In the absence
of counter-pressures, they may reflect the personal
interests of senior public servants rather than those
ofservice users down the line. So NPM risks making
government much less comprehensible,
accountable and accessible to its citizens, despite
proclaiming contrary aims and objectives.
Risks of greater corruption, malversation and
the encouragement of'club' effects figure large in
egalitarian critiques of NPM. Egalitarians claim
that such abuses are easier in the decentralized
PUBLIC MONEY & MANACEMENTJULY-SEPTEMBER 1 9 9 4
accountability framework of NPM and in the
extension of areas covered by doctrines of
commercial confidentiality and contract privity.
They fear that an expanded public/private sector
interface will increase the motives and opportunities
for corruption, and that attempts to replace bottom
line, least-cost contracting rules by more
sophisticated multi-criteria assessments could
expand this potential, as in the current extension of
CCT to local authority professional services or civil
service market testing.
Egalitarians also worry that 'bureau-shaping'
senior managers (far from the stereotype of the
budget-maximizing bureaucrat fostered by the
Chicago theory of government) will find it in their
interest to push excessively hard forbudget-cutting,
contracting out or corporatization changes
(Dunleavy, 1991). They claim that even where such
changes reduce overall social welfare, it may be in
the personal interests of senior public servants to
create for themselves small, high-powered strategic
agencies divorced from all the messy problems of
implementing policy on the ground. Like the well-
known tendency of police to practise 'patrol
avoidance' in favour of more congenial work with
colleagues back at police HQ, in spite ofthe official
ideology proclaimed by police chiefs (Jones, 1980),
senior public servants may favour 'management
avoidance' by externalizing responsibility and
blame, unless the incentives are set up carefully.
Hence egalitarians see a risk of inappropriate
(welfare-reducing) privatization or hiving off, simply
because such changes create opportunities to
reshape public sector organizations into the format
which suits the personal interests ofsenior managers
and policy makers. Policy elites gain enhanced
work utilities (and often pecuniary benefits as well)
from reshaping on NPM lines, while the costs of
organizational changes are borne by other less
powerful interests, typically front-line staffor hard-
to-serve clients, or both. Such tendencies may be
encouraged rather than checked by accounting
frameworks which focus on a narrow range of costs
that are readily captured byfinancialindices, while
ignoring more diffuse costs or changes in service
quality which cannot be so easily quantified.
Third, egalitarians worry about the cumulative
effect on public policy of fragmenting government
at central and local levels, substituting small single-
issue bodies in place of multi-issue authorities with
a capacity to handle complex problems internally
and to amass strategic resources. Fragmentation
creates narrowly focused agencies, often even single-
facility bodies. It multiplies inter-organizational
relations and may create other problems—of
decreasing accountability as service provision moves
from publicly accountable public service units to
contractors or the 'new magistracy' (Stewart et al.,
1992); ofdecreasing policy co-ordination as services
move from politically co-ordinated to hands'-off
administration under the control of managers or
users; of falling political responsiveness as the
possibility of using the bureaucracy as a direct
instrument of social change (through equal
© CIPFA. 1994

opportunity or model employer behaviour) recedes
under the pressure of competition; and of growing
risks of failure and breakdown as services move
from large-scale organizations with strategic
resources and a robust capacity in the face of key
personnel failures, towards relatively more simple
organizations with slender resource bases and highly
vulnerable to leadership failures.
Although much ofthe emphasis of NPM is laid
on 'close to the customer' management,
decentralization ofservice delivery and client choice,
egalitarians stress that on-the-ground co-ordination
ofpublic services matters to citizens. They fear that
such co-ordination may suffer from the effects of
single-mission agencies. The risk is that making
government structures more transparent to
accountants comes at the expense ofcitizens' ability
to understand the distribution of lead agency
responsibilities among a jungle of organizations
handling inter-related problems. The intended
positive effects on problem-solving capacity
represented by NPM may be outweighed by 'drag'
by-products which pull in the opposite direction,
by increasing the complexity of public policy
problems and reducing citizens' ability to
understand them and cope with them on their
own. The risk is that such mediated effects may
weaken social problem-solving capacity, thereby
pardy or wholly offsetting the direct gains in public
sector efficiency which NPM claims to achieve.
Figure 3 indicates the issues.
The egalitarian critique also suggests a distinct
agenda for recasting or developing NPM. For
example egalitarians want more emphasis on
contract blacklisting and on independent anti-
corruption units (perhaps modelled on Hong Kong
Commissions), to make up for the loss ofprocedural
controls in the shift to NPM. One implication of
viewing senior public servants as 'bureau-shapers'
rather than budget-maximizers is the need to have
more carefully-designed accounting systems. The
burden of proof that extensive managerial change
will yield benefits is thrust back on to senior public
servants, who must show that their advocacy of
NPM changes is not simply self-interested.
Review ofthe Four Criticisms
In the current state of knowledge, it is unlikely that
any general consensus could be established about
which of these criticisms has the greatest force.
Most supposedly empirical discussions of the
complex issues involved are dominated either by
N PM evangelists exaggerating the efficiency impacts
of changes on the basis of very preliminary or
selective data; or by detractors basing their
scepticism on dramatic anecdotes or sketchy
arguments from past experience. But it should be
easier to establish some agreement that these are
the main lines of attack on NPM. And though the
critiques are obviously contradictory, they can
help us to pinpoint particular vulnerabilities of
NPM, and to identify the possible remedies or
adjustments appropriate to each form of criticism
as NPM develops. NPM will be robust as a long-
©CIPFA. 1994
13
Figure 3. Assessing the impacts ofpublic sector
management reform.
PUBLIC SECTOR LEVEL OF
MANAGEMENT CITIZENS'
REFORM COMPETENCE
i
COMPLEXITY OF LEVEL OF
PUBLIC POLICY SUCCESSFUL
PROBLEMS PROBLEM-SOLVING
NET EFFECTS
Route 1 e ^ = ®
Route 2 1=^ = 0 and ® = 0
Route 3 ^ = ® and 0 = 0
term basis of organizational design if it can be
accommodated to such different agendass«na/m,
and if those managing the process are able to
keep the various sources of criticism in dynamic
tension, adjusting the basic design to fit the
criticisms of the moment.
Looking to the Future
Looking at the move from progressive public
administration to NPM from the cultural theory
perspective helps us to understand current and
likely future criticisms of NPM, as sketched out
earlier. Those lines of criticism are most unlikely to
die away. Each ofthem is rooted in a valid, internally
consistent and historically recurrent view ofpublic
management. Unless 'history is over', the future
direction ofpublic management reform is likely to
follow a zig-zag course in the cross-fire of
contradictory criticisms. Contrary to Osborne and
Gaebler's (1992) claim that there is an 'inevitable'
and 'global' movement to a single NPM model, we
suggest that plausible futures in this area are
multiple, not single. We also argue that public
management reforms raise issues which go beyond
short-term considerations of cost and quality—
issues which are ultimately constitutional in nature.
There are more possible futures for public
management than are allowed for in the entrenched
orthodox positions of the current debate. Simple
dichotomies between the state and the market or
between traditional and modern styles of public
management have their uses. But they can also be
dangerous, because they obscure other very
important intermediate possibilities. Reverting to
the two basic co-ordinates which we used earlier
(the degree to which there are general system-wide
rules of procedure, and the degree to which the
public sector is separated from the private sector),
the current debate focuses almost exclusively on
PUBLIC MONEY & MANAGEMENTJULY-SEPTEMBER 1 9 9 4
 14
the bottom right and bottom left quadrants of
figure 1, and most commentary implies that the
general direction ofpublic management reform is
inexorably south-westerly in direction. We think
that the possibility of important parts ofthe system
ending up in the other two quadrants merits some
attention. Figure 4 modifies figure 1 to sketch out
four possible futures.
Two of those futures—the bottom left and top
right quadrants—are familiar fi-om the earlier
discussion. The top right model, which we call the
Public Bureaucracy State, implies a distinct public
sector with entrenched core competences and
methods of operation. The bottom right model,
which we call the Minimum Purchasing State, is a
world in which government consists of letting
contracts, and public service provision becomes
dominated by large private corporations in the
same way that has happened to groceries or fast
food, or that happened with colonial companies
like the East India Company in the past. The
technological change which is transforming the
steam-age bureaucracies that Max Weber wrote
about into capital-intensive decentralized IT
processing systems with widespread substitution of
expert systems for middle-management tasks, have
removed what once were public-sector specific
information-handling procedures and moved
public management into areas where international
private sector corporations are dominant.
Equally interesting, however, is the prospect of
parts of the system ending in the bottom right
quadrant rather than the bottom left. We label this
sector as theHeadless Chicken model. In the Headless
Chicken case, public services are both over-managed
and under-managed. They are over-managed at
the level of individual organizations, but under-
managed overall, because there is nosystem guidance.
General rules ofthe road appiyingacross the public
sector are relaxed or abandoned. No-one knows
their place any more. Traditional conventions of
Figure 4. Alternative futures for public management.
Degree of
High 'Gridlock Model' 'Public Bureaucracy
generalized State'
rules Private providers, 'iron Extended public provision
rule book' (juridification). by distinctive public sector
no political mediation organization
Example: 1980s US Example: Traditional German
health care public sector style
Low 'Minimal Purchasing 'Headless Chicken Model'
State'
Maximal corporate Distinctive but turbulent
presence, state as an public sector: 'no-one in
'intelligent consumer'
charge' management
Example: Los Angeles Example: UK higher
govemment education
Low High
Degree of separation ofpublic and private sectors
PUBLIC MONEY & MANACEMENTJULY-SEFIEMBER 1994
behaviour collapse; there is growth, diversity,
innovation and confiasion, but the public sector still
remains distinctfi-omthe private sector in staffing
and organization. The Headless Chicken case
amounts to a structure of'no-one in charge' public
management which is so common in fragmented
jurisdictions in the tJSA (and which many
contemporary public management reforms in
practice often foster, in spite of—or more likely
because of—their aim to narrow accountability).
PubUc service organizations exist, making
individually rational moves on the playing field,
but without payingany regard to collectively rational
public sector strategies, because there are no clear
rules about demarcation of responsibilities or
methods ofoperation. The big risks in the Headless
Chicken model are quality shading and problems
arising from instability and from overlaps and
underlaps of responsibility—circumstances which
have led to reform of metropolitan centres in the
UK and USA in the past.
The Headless Chicken model is not just an
abstract, theoretical possibility. We think
contemporary public management reform in
several areas is tending towards this cell of figure 4
instead of the officially favoured bottom left box,
and that there are many forces pushing it in this
direcdon in practice. For example big differences
in pay levels between the public and private sector
limit the degree to which really capable private
sector managers with a strong track record can be
brought into public bodies. Hence a &/acto public
service corps often remains in place, in spite of a
rhetoric ofopen entry, even in states with aspirations
to radical reform such as New Zealand. Other legal
or capital barriers to market entry can serve to keep
traditional public or semi-public organizations
distinct, as with the case of universities and other
higher education institutions. At the least, public
sector management reform is liable to go through
a Headless Chicken phase if there is a move away
from inclusive and uniform public bureaucracies.
And the continuing development of rival sources of
power in the public sector (for example, with the
development of multiple regulators in the EU or
the raft of authorities which are replacing the
tradition ofuniform and inclusive local government)
may further exacerbate such trends. What is not
clear is whether the Headless Chicken model is a
permanent possible state for public management,
or whether such a style must give way to one ofthe
others. The metaphor itself implies a strictly short-
term transitional state, an unstable phase rather
than a permanent outcome. But ifheadless chickens
really can run about indefinitely, we need a new
metaphor for this style.
Equally interesting—perhaps in the Chinese
sense—is the top left cell of figure 4. We call it the
Gridlock model for public management. In the
Cridlock style, there is no sharp distinction between
public and private sector providers: indeed, many
public services may be provided by corporations.
But at the same time strong and comprehensive
procedural rules have developed (typically under
©CIPFA. 1994

the actuality or threat of litigation, or steadily
growing regulatory pressure), such that service
provision in practice is heavily rule-bound. The US
health care system ofthe 1980s is the most obvious—
and notorious—example of this type of structure,
and many have seen that as the shape of things to
come in public management, with the system
paralysed byjuridification, rather than the protean
world of textbook 'free to manage' managers.
Jacob (1991), for example, has pointed to the
potential for sky-rocketing litigation in the UK
health care reforms, arguing that the internal
market structures ofthe NHS set up five powerful
conditions for high litigiousness (uncertain legal
obligations, high stakes, high disappointment,
current disputes overshadowing the need for the
contending parties to co-operate over future
transactions, and a distinction between the goals of
those who make decisions on whether to litigate
from those ofthe institutions for which they work).
He argues: 'Whether desirable or undesirable,
intended or unintended, many of these [intemal
market] changes are likely to prove a fertile ground
for lawyers: they and their allies, particularly in
accountancy, are likely to become significant players
in the administration of medical practice'.
As with the Headless Chicken model, it is not
difficult to identify the forces likely to direct public
management into the Gridlock model. Rising
litigiousness allied with blanket insurance rules,
increasing regulatory pressure from EU or domestic
sources, together with proliferation of government-
sponsored codes and charters might all have the
effect ofremoving in practice the freedom to manage
to which contemporary public management reform
aspires, causing the system to settle instead into the
Gridlock model.
Both the Headless Chicken model and the
Gridlock model have potential strengths and
weaknesses. The obvious strength ofthe Headless
Chicken model is its potential to release pent-up
forces of dynamism and entrepreneurship, deliver
the coup de grace to ossified structures and bring
forward innovation and competition which could
not occur under more orderly approaches to public
management. By contrast, the Gridlock model
may avoid the arbitrariness and caprice that
unbridled managerial power may bring. Equally,
there are clear corresponding weaknesses. The
'no-one in charge' aspects ofthe Headless Chicken
model are likely to involve duplication, expensive
mistakes and possibly Gresham's law processes in
which mediocrity and corner-cutting standards
drive out good practice. The 'iron rule book' aspects
ofthe Gridlock model are likely to involve rigidity,
very high cost and unresolved disputes.
A realistic assessment ofthe dynamics ofpublic
management ought to move away from a
comparison of the theoretical strengths and
weaknesses of markets and hierarchies and to
consider also the less-examined intermediate cases.
Like all roads paved with good intentions, the
route to market-style public management reform
may end in unexpected and distressing places. We
©CIPFA. 1994
15
suggest that it may commonly lead in practice
either to the Headless Chicken model or to the
Gridlock model, or—more likely—first to the one
and then to the other. If so, we ought to be
comparing the costs and benefits of those outcomes
against the strengths and weaknesses ofthe Public
Bureaucracy State model. Much of the current
debate ignores these intermediate possibilities.
Inappropriate Cloning, Core
Competencies and the UK Nation State
We noted earlier that one ofthe perennial problems
of reform in public management is pervasive
pressure for across-the-board obeisance to
fashionable management models, and for non-
market organizations to measure their success or
otherwise by blanket adoption ofthe kinds of ritual
and rhetoric that important people are assumed to
want. If the history ofpublic management reform
tells us anything, it is that much of this cloning and
imprinting will b^e deeply inappropriate to particular
cases. Perhaps policy-makers need more counter-
fashion consultants; at least, they must go beyond
simple mantras ofthe 'four legs good, two legs bad'
variety about alternative models of public
management, and make much more discriminating
effort to identify the circumstarwes in which two legs
are better than four, or vice versa. For example,
where organized crime and corruption pose a
major threat to the integrity ofpublic services, the
potential strengths ofthe Public Bureaucracy State
model ought to be recognized. Given that at least
one EU country has been paralysed by the power
of organized crime over recent decades, plus a
century ofUS experience (for example with attempts
to blacklist organized crime contractors or even to
circumvent them by setting up public enterprises)
and no sign that corruption is a thing ofthe past,
this possibility cannot be dismissed as an abstract or
purely theoretical concern. Where the ordinary
law of contract is inoperative (as in the case of
organized crime power or distortion of public
contracting through corruption), not even the
Gridlock model is likely to be an effective alternative
to the Public Bureaucracy State model. And even
where contract law is not undermined by criminal
power, the Gridlock model will not necessarily be a
lower-cost option (and may well involve higher
costs) than the Public Bureaucracy State model.
Beyond the ever-present problem of
inappropriate cloning lie deeper reasons for unease,
relating to the core competencies appropriate to a
national state in the new era. Many changes in UK
government since 1945 (notably the loss of
autonomous military capacity, the loss of empire,
the loss of policy capacity to EIJ fora, and successive
attacks on local government) have had the effect of
shifting what once were national policy units into
different roles—of looking for new tasks to replace
vanished imperium, of becoming courtiers and
implementors of policies determined elsewhere
rather than policy formulators, or of taking on
services once performed by local authorities. What
is disturbing about this process is the total absence
PUBLIC MONEY & MANAGEMENTJULY-SEPTEMBER 1 9 9 4
 16
ofany careful debate about what core competencies
a national public service ought to retain in these
changing conditions and consequendy ofthe areas
where a revamped form of traditional styles of
public management might continue to be relevant.
There is a striking contrast between the stress
laid in the private sector management literature on
accurately identifying and modifying the core
competencies of the firm, and the lack of serious
consideration of analogous issues in contemporary
public management reform. Core competencies in
the business management literature normally refer
to intellectual, managerial, service or market
capabilities which can be continuously developed
and secured against competition. Some business
management analysts are highly critical of radical
outsourcing strategies, arguing that externalizing
apparently quite routine implementation tasks may
mean that the outsourcing firm 'hollows out',
progressively losing its grip on the insights available
from involvement in production, losing sight of
possibilities for new forms of competition, and
possibly losing direct contact with ultimate
customers.
By contrast, current UK public management
reform seems to have an unreflective bias towards
radical outsourcing strategies, with no equivalent
debate between radical outsourcers and core
competence insourcers. As large private
corporations develop in areas formerly the exclusive
preserve of governments (such as criminaljustice
services), they are likely to apply successfully many
of the same techniques of task and behaviour
standardization backed by technological investment
which has proven effective in private service
industries. And just as global corporations have
arisen and created mass markets in previously very
localized and deconcentrated fields (like eating
out), so service companies operating trans-
nationally by the next century may be able to
develop highly focused areas ofexpertise in virtually
all areas currendy handled by public sector delivery
agencies.
This prospect raises interesting issues. For the
Minimum Purchasing State approach to public
management, government's key role should be
that ofintelligent consumer ofservices to be supplied
by a diversity of sub-central or private actors—
agencies, quasi-governments, private corporations,
micro-local agencies, and residualized local
authorities. The state's role is presented as 'steering
rather than rowing', in Osborne and Gaebler's
(1992) famous phrase. If this diversified vision is
fulfilled, new forms ofcomplex policy communities
will form. But if the vision is realized instead in a
non-diversified way, by the development of a few
giant service corporations whose expertise and
market sway dwarfs the public sector capabilities of
small or medium-sized states, the problem of
retaining any real government steering capacity
could be enormously increased. As we noted earlier,
information systems development is already a major
area where maintaining any government policy
PUBLIC MONEY & MANAGEMENT JULYSEPTEMBER 1 9 9 4
competencies has become problematic. Other policy
areas may follow if radical outsourcing and global
corporatization of public services develops in the
future.
The Public Bureaucracy State model remains
relevant for those areas where government (like
private corporations aiming to protect their key
capacities) needs to do more than choose from a
preset menu of goods and services whose origins
and dynamic of development lie elsewhere. Yet to
date the public management reform debate has not
succeeded in what should be its central task:
delineating the essential functions of government.
The danger is that an overall judgement about
government's core competencies may be arrived at
only incrementally, through a residualizing process
of outsourcing solutions being applied piecemeal
to different bodies of work. This method of
proceeding brought disaster for US personal
computer manufacturers who outsourced too
extensively in the 1980s, and lost their grip on the
market. It could easily do the same for national
governments in defaultofacounter-push to identify,
protect, maintain and develop their own core
competencies. So what is at stake in these reforms
are not just bread-and-butter issues of operations,
costs and short-term response. Ultimately, the issues
involved are constitutional, in that they affect the
foundations of political life and capacity. •
Acknowledgements
This paper was originally written for the first LSE/
Cabinet Office seminar funded by the ESRC and
held in London in May 1993. We would like to
thank all the participants. We have borrowed freely
from that discussion in revising the paper. We are
also grateful to Francis Terry for helpful advice and
comment.
References
Douglas, M.{l982),IntheActive Voice. Routledge, London.
Dunleavy, P.J. {1991), Democracy, Bureaucracy and Public
Choice. Harvester Wheatsheaf, Hemel Hempstead.
Hood, C. and Jackson, M. W. (1991), The New Public
Management: a recipe for disaster? In D. Parker and
].Handmer (Eds.), Hazard Management and ETTiergency
Planning. James and James, London.
Jacob, J. (1991), Lawyers go to hospital. Public Law
(Summer), 255-281.
Jones, J. M. (1980), Organizational Aspects of Police
Behaviour. Gower, Farnborough.
Osborne, R. and Gaebler, T. (1992), Reinventing
Govemment. Addison Wesley, Wokingham.
Polsby, N. W. (1984), Political Innovation in America. Yale
University Press, New Haven.
Sako, M. (1991), The role of trust' in Japanese buyer-seller
relationships. Ricerche Economkhe, 45, pp. 449-474.
Schwarz, M. and Thompson, M. (1990), Divided We
Stand. Harvester Wheatsheaf, Hemel Hempstead.
Stewart,J., Lewis, N. and Longley, D. (\992),Accoun'abiliiy
to the Public. European Policy Forum.
©CIPFA. 1994