Public Service Management - Essay Example

Convergence between public and private modes in public services management Introduction Significant amount of controversy exists regarding functionality and relevance of the term new public management (NPM) in context to public services management (Nijkamp, Van der Burch and Vidigni, 2002). Miller (2000) pointed out that functionality of NPM should not be restricted to ways in which public sector bodies reorganize their activities such as, accounting approaches, reporting and management, in order to resemble private level business activities. Rather, convergence of public and private mode of organizing in public services management should be included in NPM literature (Hagen, 2002). Consideration of research works of Nijkamp, Van der Burch and Vidigni (2002) and Broadbent and Laughlin (2003) reveals the fact that extent of convergence between public and private modes of organising in public services management differs significantly with change in nature of public sector. Zouggari (2003) projected serious doubts over sustainability in convergence of public and private modes of organising. According to Zouggari (2003), these two modes of organizing are different in terms of their inherent characterises; therefore, collision may arise during the time of convergence between these two modes of organising in public services management. On the other hand, Spackman (2002) and Sussex (2003) found that extent of convergence between public and private modes of organising can enhance with proper control mechanism. It is evident from the mentioned theoretical arguments that controversy and doubt exists among scholars regarding extent of convergence between public and private modes of organising in context to public services management. Such level of perplexity and confusion regarding extent of convergence has influenced this study to shed light on the topic and analyse validity of arguments presented by previous scholars. Discussion While defining importance of convergence between public and private modes in public services management, Wettenhall (2003, pp. 77) used the statement, “The term partnership is now a dominant slogan in the rhetoric of public sector reform, arguably capturing that status from privatization which held similar dominance through the 1980s and 1990s.” According to Wettenhall (2003), concepts of new public management (NPM) and public-private partnerships (PPP) can be used in order to realize characteristics of convergence between public and private modes of organizing. However, Johnston and Gudergan (2007) had stressed more on public-private partnerships (PPP) as potential mechanism to achieve the desired convergence. While defining the importance of PPP, Johnston and Gudergan (2007, p. 570) stated that “public-private partnerships, especially in the area of infrastructure development, now represent a relatively new but increasingly ubiquitous organizational arrangement with international acceptance.” Widdus (2001) and Greve and Hodge (2010) argued that application of PPP provides three types of benefits to public services management, such as, 1- public sector gets revamped in terms of new public management (NPM) without losing resource capability, 2- the enterprise can function in a more objective driven manner and 3- bureaucratic decision making dilemma of public sector gets reduced with corporate intervention. On the other hand, Klijn and Teisman (2003) emphasized on NPM as a useful medium for achieving convergence between public modes and private modes of organizing. Osborne (2010) and Hammerschmid and Angerer (2005) suggested that NPM and PPP are complementary to each other and should not be confused as inherently different. According to Hammerschmid and Angerer (2005), Public Private Partnerships (PPPs) are basically derivative of NPM. Koppenjan (2005) and Ysa (2007) also argued that NPM is composed of elements, like, market mechanism, privatisation and contestability, in public service delivery. Surprisingly, mentioned elements are also indispensible ingredient for successful execution of PPP. Lane (2000) and Teisman and Klijn (2002) identified four principles of NPM, such as, 1- reducing public sector expenditure, 2- delegating responsibilities to private enterprises, 3- encouraging voluntary or non-voluntary engagement of private sector and 4- achieving better service delivery to public. These four principles also act as a foundation for establishment of PPP and new way to improve efficiency of public sector management. Consideration of research works of Flynn (2012) reveals the fact that NPM is a dynamic concept that has sufficient flexibility to adopt PPP model in order to ensure convergence between public and private modes of organizing in public services management. It is evident from the above discussion that PPP and NPM are mutually dependent concept and collaborative framework of these two concepts is needed for measuring the extent of convergence between private and public mode of organizing (Flynn, 2012). In such context, characteristics of both NPM and PPP need to be defined so as to understand functionality of the concerned collaborative framework. Public-Private Partnerships (PPP) While defining PPP, Klijn and Teismans (2004) highlighted long-term cooperative relationships between public and private sector. According to these scholars, general idea of PPP is clear to common people and the concept is plagued by its relative functionality in different public sectors. So, it is very difficult to establish a specific definition of PPP. Even so, significant amount of confusion exists regarding characteristics of PPP. According to Anderson-Wallace (2005), organizational structures decide efficiency and communication flow within enterprises. Similarly, in case of public enterprises, organizational structure play vital role in strategic decision making. While integrating a PPP model, public enterprises in the field of social care, health, police services, education, public utilities and local government may need to change their existing organizational structures (Bardach, 2001). From new public management perspective, PPP can be considered as a combination of two verticals such as, 1- collaborative management technique and 2- development strategy (Peters, 2004, Reeves, et al., 2002; Yamamoto, 2003). According to Carnwell and Carson (2004), collaboration between public and private enterprises is done in order to meet certain objectives or lower public expenditure or infuse control over operational activities of public enterprises. Under collaborative management techniques, PPP is viewed as outsourcing of certain public sector activities to private partners or financial arrangement between private and public enterprises. In case of financial arrangement, financial risks are shared by partners in order to earn financial benefits. According to Klijn and Teisman (2003), private enterprises are run based on profit maximization; whereas, public enterprises function with the objective of delivering social good to people. Due to difference in objectives, majority of public enterprises do not follow stringent business focused operational activities such as, marketing, performance management, human resource management, accounting, besides scheduling of activities and many others. Due to absence of these business driven operational indices, it becomes difficult for public sector enterprises to address four types of challenges such as, measuring performance of the firm with the help of proper accounting framework, increasing trust in principal-agent relationships, developing quasi-contractual divisions and enhance competitiveness (Dunleavy and Hood, 1994). In order to overcome these challenges, public sector enterprises need to outsource certain operational activities. In such context, outsourcing of critical management functions allow public enterprises to address abovementioned challenges in non-organic manner. Generally, PPP lasts for 10 to 30 years, but duration of the agreement depends on need of the public enterprises. In such context, a real life case will be cited in order to substantiate abovementioned arguments. Case study 1- in Brazil, public railroad network was facing difficulty in expanding railway infrastructure due to lack of professional expertise, access to financial resources and control mechanism to balance increasing raw material cost (World Bank Group, 2014). In order to address these problems, public railroad enterprise of the country has established cooperation with private partners like, Brazilian Development Bank (BNDES) and Inter-American Development Bank (IDB). This collaboration is termed as Private Sector Participation Program or PSP Brazil (World Bank Group, 2014). PSP Brazil has arranged for additional finances on behalf of rail board division of the government and private partners had also provided consulting services throughout the project life cycle of railway infrastructure expansion. Collin and Hansson (2000) pointed out that PPP strengthens financial relationship between public and private enterprises. According to Webb and Pulle (2002), financial burden on government gets reduced by establishing PPP due to two reasons such as, 1- private enterprises provide higher return on investment (ROI) and 2- private finance is arranged by private partners. Webb and Pulle (2002) pointed out that financing is needed for different operational parameters in public projects such as, construction, design and maintenance of operations. Under long-term contract between public and private parties, additional finance is arranged by private partners in a periodic manner. Collin and Hansson (2000) surveyed more than 110 different types of private and public partnerships and found existence of different types of financial arrangements such as, financial risk sharing, joint ownership, investment banking, profit sharing and many others. However, Klijn and Teisman (2003) highlighted the fact that PPP can also be viewed as development strategy for public enterprises. Bovaird (2004) and Broadbent and Leaughlin (2003) found that PPP is employed by several public enterprises for developing resource capability. PPP is done through collaborative activities between public and private parties, which are directed by recognition of strengths or weaknesses of both parties and mutual trust. From development perspective, partnership helps in achieving particular objectives agreed by both public and private enterprises. On the other hand, from congruency perspective, common understanding of objectives is achieved through periodic negotiation and communication between interested parties. After developing a common understanding of strengths and weaknesses of each party and establishing common objective, symbiotic actions are undertaken in order to reduce weakness of both public and private enterprises. Hence, it can be said that congruency between private and public organizing modes is needed so as to help both private and public enterprises overcome their weaknesses. A real life case study will be cited in order to foreground development perspective of PPP. Case study 2- in Russia, local government of Saint Petersburg selected private partners through bidding process in order to execute projects of infrastructure development within the city. For example, through PPP model, local government of Saint Petersburg gathered additional €4 billion for financing infrastructure projects like, airport expansion, road expansion and tunnel development (World Bank Group, 2014). On the other hand, Russian government provided supports like, tax levy, special economic zones (SEZ) and relaxation of legal rules, to private partners such as ,engineering companies and banks (Grimsey and Lewis, 2002). It is evident from the abovementioned case studies that PPP can be considered as a formal mechanism for converging public and private modes of organizing in public services management. Although PPP provides structural explanation of convergence between public and private modes of organizing, it still fails to explain dynamics of collision between private and public organizing mode within organizational context. In such context, new public management (NPM) can be used in order to comprehend internal perspective of convergence between public and private modes of organising in public services management. New Public Management (NPM) Dunleavy and Hood (1994, p. 9) defined NPM as, “a summary description of a way of reorganizing public sector bodies to bring their management, reporting, and accounting approaches closer to (a particular perception of) business methods”. It is evident from the mentioned statement that NPM needs public enterprises to convert or replace some of their core activities in order to adopt privatized mode of operating. According to Dunleavy and Hood (1994), down-grid and down-group design coordinates in public enterprises are needed to be changed while adopting NPM. Down-group- in this approach, differences between public and private sector in terms of reward system, personnel management and method of doing business are reduced (Keating, 1989; Kelleher, 1988). Down-grid- in this approach, discretionary power over staff, money and contracts is lowered. In down-grid approach, general procedural rules or hierarchical codes for performing a particular operation are eradicated. On the contrary, traditional public sector administration is defined by presence of general procedural rules, hierarchical codes and bureaucracy (Bovaird and Löffler, 2001, Cohen and Eimicke, 1998 and Duke, 2002). Dunleavy and Hood (1994) identified five types of shifts that occur when public enterprises adopt NPM. First degree shift- while adopting private mode of organizing public services management, public enterprises need to restructure its financial budget in terms of transparent accounting indices. They need to integrate quantitative performance indicators to measure output. Second degree shift- in public mode of organizing activities, enterprise is perceived as a fiduciary arrangement (Dunleavy and Hood, 1994). However, during adaptation of NPM, public enterprises need to believe in low-trust principal-agent relationships characterized with performance based incentives to agents. Third degree shift- public enterprises needs to break down provision structures and unified functional planning arrangements into quasi-contractual divisions. By doing so, public enterprises become able to increase responsibility of different organisational divisions. Fourth degree shift- in this shift, public enterprises become ready to face market competition and take actions in order to compete with other not-for-profit enterprises and public agencies. Fifth degree shift- in this shift; public enterprises stop relying on one particular provider and establish collaboration with multiple providers. As a result, opportunity for public enterprises to access resources rises. While defining convergence between public and private modes of organizing in public services management, Stewart (2002) and Mueller (2003) stressed on inherent characteristics of NPM. According to these scholars, NPM represents logical foundation of a quintessentially modern approach for converging public and private modes of organizing activities. Consideration of research works of Surel (2000) and Nelson and Winter (2002) reveals the fact that convergence of public and private modes can be done in a four-way manner, 1- modernizing governance mechanism in public services management, 2- outsourcing core operational activities, 3- changing hierarchical design of public sector enterprises and 4- making isomorphic change in operational processes. On the other hand, Hood (2000), Johnson (2000) and Kim (2000) pointed out that convergence between private and public modes of organizing can be done through series of change initiatives. During the change process, three types of actions are taken such as, 1- using legal power to retain own structures and characteristics, 2- replicating process employed by private enterprises and 3- developing of shared private enterprise culture by managers. In such context, NPM application of Australian public enterprises can be used in order to understand functionality of convergence in case of public service management. Case Study 3- In Australia, public administration has three layers such as, 1- commonwealth government, 2- territory administrations and 3- local government entities (Davis and Rhodes, 2000). Public enterprises of the country, like, national healthcare services, were facing difficulties regarding increasing cost of operation, limited revenue earning opportunity and loosing competitiveness to private players. Christensen and Laegreid (2003) also identified similar kind of problems for public sector health services. Nevertheless, in order to incorporate private modes of organizing in public sector health services, Australian government used methods like, marketization, corporate management and decentralization. Marketization- market mechanism is deployed in order to improve service delivery. For example, quasi-markets mechanism is employed by Australian government (Davis and Rhodes, 2000; Kiiza, 2000). Corporate management- operations of private hospitals is monitored for 6 months and reports are prepared by government agencies. On the basis of reports, private sector management tools, like, human resource management or performance measurement techniques, are deployed in public sector health services in the country. Decentralisation- public sector health services of Australia decentralized administrative responsibilities to different tiers of authorities (Dollery and Lee, 2004). As a result of such convergence activities, national healthcare services of Australia had become successful in adopting NPM. In case of UK, National Health Service (NHS) also privatized some of its core functions in order to improve competitiveness (Pollock, 2004). Marginson and Considine (2000) and Tolofari (2005) used reforms in public educational sector so as to define characteristics of convergence between public and private modes of organizing. According to Arnott (2000) and Reeves, et al. (2002), public educational sector in UK have converged public and private modes of organizing in order to improve standard of educational services. For example, public schools adopted performance measurements techniques of private educational enterprises like, standard assessment test, school improvement plans, publishing cost of operations, truancy rates and many others (Reeves, et al., 2002). Consideration of research works of Osborne and Peter (1997) and O’Toole, and Meier (2004) pointed out to the fact that extent of organizational bureaucracy can create barrier while using NPM in public service management. In case of health and educational public services, degree of bureaucracy often generates resistance from organizational members towards accepting private modes of operation. On the other hand, Lawson (1998) and Liou (2001) presented doubt over complete convergence between public and private modes of organizing in public services management. According to them, complete convergence might create collision of interest within public sector enterprises as objectives of public and private enterprises differ considerably. Rather, as part of NPM, public enterprises need to be selective while adopting private modes of organizing. Conclusion It is evident from the above discussion that extent of convergence between public and private modes of organizing depends on objectives and adaptability of private enterprises. The study has cited three case studies regarding convergence between private and public modes of organizing in public services management. Even so, there are hundreds of examples where integration of NPM had failed completely. Success of mentioned convergence depends on multitude of factors such as, symmetry in operation between public and private enterprises, flexibility of public enterprises to adopt private modes of operation, negotiation between interested parties, willingness of public enterprises to opt for organizational change and presence of external control mechanism. In the paper, concepts of new public management (NPM) and Public Private Partnerships (PPP) have been discussed in order to measure extent of convergence between public and private modes of organising in public services management. This study has inferred that public enterprises need to select any one of the mentioned concepts in order to achieve desired convergence. 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