From New Public Management to Public Value:

Paradigmatic Change and Managerial Implications

Janine O'Flynn
First published: 27 August 2007

https://doi.org/10.1111/j.1467-8500.2007.00545.x

Cited by: 291

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Abstract
Both practitioners and scholars are increasingly interested in the idea of public value as a
way of understanding government activity, informing policy‐making and constructing service
delivery. In part this represents a response to the concerns about ‘new public management’,
but it also provides an interesting way of viewing what public sector organisations and
public managers actually do. The purpose of this article is to examine this emerging
approach by reviewing new public management and contrasting this with a public value
paradigm. This provides the basis for a conceptual discussion of differences in approach, but
also for pointing to some practical implications for both public sector management and
public sector managers.

Public sector reform has been a common experience across the world despite its different
forms and foci (Pollitt and Bouckaert 2004). Commonly as scholars and practitioners we
refer to the reforms of the last few decades as ‘new public management’ (NPM) which,
for Hood (1991), represented a paradigmatic break from the traditional model of public
administration. During this era several countries became exemplars of NPM, in particular
New Zealand and Australia which undertook significant public sector change to break from
the bureaucratic paradigm of public administration.1 More recently, however, cracks have
appeared and the search for a new way of thinking about, and enacting public management
practice has begun, in part to address the supposed weaknesses of NPM. This is unlikely to
underpin a return to the bureaucratic model, but rather spark a paradigmatic change which
attempts to redefine how we think about the state, its purpose and thus, ways of functioning,
operating and managing.

Within this search for meaning and direction a ‘public value’ approach is attracting
considerable interest, both in practitioner and academic circles (Alford 2002; Bovaird
 2004; Bozeman 2002; Carmeli and Kemmet 2006; Hartley 2005; Hefetz and Warner
2004; Horner and Hazel 2005; Kelly, Mulgan and Muers 2002; Moore 1994,
1995; Moore and Braga 2004; Pinnock 2006; Smith 2004; Smith Anderson and Teicher
2004; Stoker 2006). This approach, first articulated by Moore (1994; 1995) represents a way
of thinking which is both post‐bureaucratic and post‐competitive allowing us to move beyond
the narrow market versus government failure approaches which were so dominant in the
NPM era (Hefetz and Warner 2004). From here, it is argued, a new paradigm for thinking
about government activity, policy‐making and service delivery may emerge bringing with it
important implications for public managers.

The purpose of this article is to articulate this new paradigm and to consider the implications
for public managers in practice. In order to do this the article is organised into three key
sections. The first section sets out the principles, practices and premises of NPM and this is
followed by a discussion of public value. The final section contrasts these models and sets out
important implications for public sector managers.

The New Public Management Paradigm:

Principles, Practices, and Premises2
At the end of the 20th century, a post‐bureaucratic paradigm of public management was firmly
embedded in many countries reflecting the outcome of the suite of reforms intended to enact
a break from the traditional model of public administration underpinned by Weber's
(1946) bureaucracy, Wilson's (1887) policy‐administration divide, and Taylor's
(1911) scientific management model of work organisation. In part at least, NPM was a
reaction to perceived weaknesses of the traditional bureaucratic paradigm of public
administration (O'Flynn 2005a; Stoker 2006), and it encompassed a ‘critique of
monopolistic forms of service provision and an argument for a wider range of service
providers and a more market‐oriented approach to management’ (Stoker 2006:45). In
articulating this NPM paradigm in the early 1990s, Hood set out its key doctrinal components
(1991:4–5):

 1

Hands‐on professional management;

 2

Explicit standards and measures of performance;

 3
 Greater emphasis on output controls;

 4

Disaggregation of units in the public sector;

 5

Greater competition in the public sector;

 6

Private sector styles of management practice; and

 7

Greater discipline and parsimony in resource use.

Within this new paradigm, the doctrinal components sat alongside four reinforcing
megatrends: slowing down or reversing government growth; privatisation and quasi‐
privatisation; automation in the production and distribution of public services; and, an
international agenda in public sector reforms (Hood 1991:3–4). Fifteen years after Hood
(1991), Hughes (2006) in his paper on the ‘new pragmatism’ articulated four grand themes
which characterised NPM: management (i.e. results and managerial responsibility) is a higher
order function than administration (i.e. following instructions); economic principles (i.e.
drawn from public choice theory, principal‐agent theory, contracting, competition, and the
theory of the firm) can assist public management; modern management theory and practices
(i.e. flexibility in staffing and organisation) can improve public management; and service
delivery is important to citizens. As Stoker (2006:46) noted, NPM sought

… to dismantle the bureaucratic pillar of the Weberian model of traditional public

administration. Out with the large, multipurpose hierarchical bureaucracies, [NPM]
proclaims, and in with the lean, flat, autonomous organizations drawn from the public and
private spheres and steered by a tight central leadership corps.
Such characterisations provide a good starting point for considering the NPM paradigm,
however, there has been a tendency toward conflating shorter reform phases into a NPM
catchall. In the Australian context, for example, there were two quite clear phases in the move
away from traditional administration, based on distinct theoretical and philosophical
underpinnings (Considine and Painter 1997). In the Australian experience, the 1980s was
characterised by a post‐bureaucratic model of NPM and this was heavily focused on internal
reforms and corporate management (Alford 1998; Yeatman 1997). Commonly adopted
practices included: corporate planning based on central goals; comprehensive program
budgeting; management improvement programs; contract employment for managers; central
auditing; and performance monitoring of individuals. The key aims were to empower public
servants and increase managerial quality. Following on from this, Australia experienced a
marketisation phase in the 1990s which emerged alongside the dominance of economic
rationalist discourse (Pusey 1991). This marketisation phase represented an overt challenge
to the efficacy of the traditional approach with its monopoly over the production and delivery
of public services as it was focused on developing market solutions to government failure.

By the time of the marketisation phase it was clear that a new paradigm of public
management was becoming dominant and it was during this time that NPM came into its
own. In the Australian experience, the marketisation phase rested on the creation of markets
in the public sector and the use of contracts to define and govern relationships. For some,
such moves signalled the emergence of a new contractualism (Hughes 2003), while for
others contracts and competition became the basis for changing the fundamental nature of the
public sector (Walsh 1995). Chalmers and Davis argued that, ‘contracting has been
established as a standard form of policy delivery – indeed as an instrument with few limits,
preferable in most circumstances to traditional public bureaucracy’ (2001:76). Such beliefs
were also acknowledged by Deakin and Michie: ‘If there is a single strand that runs through
the changes wrought by the neoliberal revolution … it is the revival of contract as the
foremost organizing mechanism of economic activity’ (1997:1). During this era, where
notions of competition and contracts were so important, the NPM paradigm became
dominant.

As we know, this did not occur without resistance and NPM has been subject to ongoing and
fierce debate in the academic literature because it challenged conventional thinking and
brought together a range of practices, policies and theories rather than proposing some
coherent theory. Notwithstanding this point there has been some agreement on critical
theoretical perspectives informing policy makers and underpinning thinking in the NPM
paradigm including: public choice theory, principal‐agent theory, transaction cost economics
and competition theory (Kaboolian 1998; O'Flynn 2005a).

Public choice theory was extremely influential with Boyne arguing, ‘… seldom has the major
practical implication of an abstract model of bureaucracy been so widely implemented’
(1998a:474). NPM encompassed the public choice belief that governments were
unresponsive, inefficient, monopolistic, and unable to reach formal goals. In the main this
reflected the inherent failures of government: (i) politicians are captured by interest groups
and will act in their own self‐interest rather than the public interest; (ii) the bureaucracy does
not necessarily carry out political directions because of the self‐interest of bureaucrats and
(iii) bureaucrats act in pursuit of self‐interest rather than efficiency (Walsh 1995). Following
this line of argument, bureaucracy leads to resource wastage and budget maximisation in the
pursuit of power, status, income, ideology, patronage, discretionary power and ease of
management, producing allocative inefficiency and oversupply (Boyne 1998a; Niskanen
1971; Rowley 1995; Walsh 1995). The aim of public choice advocates then was to persuade
policy‐makers to adopt policies and practices which would import incentive structures based
on principal‐agent theory and property rights in order to increase efficiency and downsize the
state (de Laine 1997; Mascarenhas 1993). Despite sustained critique (see for
example Boyne 1998a, 1998b; Boyne et al. 2003; Tregillis 1990; Walsh 1995), public
choice theory has been critical in underpinning key features of NPM including: separation
and fragmentation (Boyne et al. 2003; Self 1993; Streeton and Orchard 1994); competitive
markets for public services (Boyne et al. 2003); and preference for private sector provision
governed by contracts (Hodge 2000).

Principal‐agent theory focuses on the relationship between principals and agents and the
issues that arise when we assume their interests diverge (Walsh 1995). It provides a means of
conceptualising both human behaviour in the agency relationship and the development of
organisational forms based on assumptions of self‐interest, opportunism, incomplete
information, and goal divergence (Althaus 1997). These assumptions predict the emergence
of agency issues when contracts are formed and where the actions of the agent have
implications for the welfare of both parties (Petersen 1995a). The critical challenge for the
principal becomes how to choose an agent and construct incentive structures to align goals in
an environment of uncertainty, information asymmetry, and high cost monitoring; and where
incentives exist for agents to shirk (Foss 1995). Such structures, which aim to produce
optimal outcomes and combat adverse selection and moral hazard, are termed agency costs
(Althaus 1997). Hence, at the core of this perspective is the notion that contracts formally
setting out requirements, monitoring, reward and incentive systems provide the legitimate
connection between principal and the agent (de Laine 1997; Muetzelfeldt 1994). Principal‐
agent theory played an important part in the NPM paradigm and it underpinned many
practical reforms including the structural separation of purchasers and providers to establish
contractual and quasi‐contractual relationships (O'Flynn 2005a).3 In total, this laid the
foundation for a process whereby it was expected that,

… the government manager clearly articulates the policy, sets the performance standards, and
chooses in a competitive market an agent who will faithfully act in the government's behalf to
deliver the goods and services so that the outcome sought will be attained (Kelly 1998:205).
There has been a continued critique of the appropriateness of agency theory in the public
sector. Doubts have been raised, for example, about the ability of purchasers and providers to
separate, the efficacy of decoupling policy from delivery, and the ability of purchasers to
clearly articulate their preferences in a competitive environment (O'Flynn and Alford
2005; Stewart 1996). Regardless of such critiques, however, key characteristics of NPM
were built around ideas from principal‐agent theory.

Transaction cost economics has also played an important role in the NPM era. Coase
(1937)set out the crucial role of transaction costs, hypothesising that an assessment of these
costs determined whether transactions were internalised or not.4Coase's (1937) theory of the
firm and the associated make‐buy decisions is translated as the public sector procurement
decision – whether public agencies produce themselves (i.e. make) or contract out (i.e. buy)
(Williamson 1999). Williamson (1979) extended Coase's (1937) ideas through the
development of a schema setting out his propositions for the most efficient matching of
transactions and governance structures. This ranged from market governance based on
classical contracting and formally prescribed relationships and remedies to unified
governance (i.e. hierarchy) whereby relationship norms and customs govern behaviour rather
than formally written contracts. The most efficient structure is that which best matches
specific transaction characteristics (i.e. the levels of frequency and asset specificity) with
governance structures allowing for economising on the costs associated with bounded
rationality, opportunism, and asset specificity; and an overall reduction in the cost of
transacting.

Transaction cost economics was important to NPM as it set out options for governments
including markets, hybrids, and hierarchy (Petersen 1995b). However, it might be argued
that the dominance of public choice theory resulted in a blinkered view of this approach as
governments tended toward market governance models. Practice also tended to ignore key
writers in the field including Williamson who argued that, ‘[r]ecourse to public bureaucracy
for those transactions for which it is comparatively well‐suited is properly regarded as an
efficient result’ (1999:24). In the literature there has been some critique of the application of
traditional contracting notions to the public sector, and the underlying assumptions about
human behaviour encompassed in such theories (Vincent‐Jones 1997; Walsh et al. 1997).

The doctrine of competition has been central to the development of NPM. While perfect
competition rarely exists in reality, governments have sought to pursue activity to stimulate
competition rather than replicate pure markets (Townsend 1995). Public choice advocates
have been vocal in calling for the discipline of competition to be imposed on public sector
operations as a means of improving efficiency:

One of the most fundamental determinants of the efficiency of any arrangement is

competition; that is, the degree of competition that an arrangement permits will, to a
significant degree, determine how efficiently that arrangement will supply a service …
market …[and] contract … systems are most conducive to fostering competition and thereby
achieving economic efficiency (Savas 1982:80–1).
Competitive tendering, in particular, has been a popular instrument used by government. The
adoption of such practices ‘carries the belief that planners remain the ultimate arbiters of
resource allocation but that gains in productive efficiency can be achieved by some degree of
competitive regulation’ (Hensher and Beesley 1989:236). Competition between bidders is
intended to spur efficiency gains and cost savings for purchasers, as market forces can drive
out marginal producers (Cubbin, Domberger and Meadowcroft 1987; Domberger, Hall
and Li 1995; Rimmer 1994). Interestingly, it has been argued that the mere threat of
competition can generate efficiency gains and cost savings within the public sector as internal
providers seek to protect themselves from unemployment (Rimmer 1994; Walsh and
O'Flynn 2000). The applicability of the competition doctrine to the public sector has been
questioned in the literature for several reasons including the existence of both demand and
supply side imperfections (Kelly 1998), and the absence of conditions required to generate
efficiency gains (Wilkinson 1995). Despite such critiques, competition theory has clearly
played a critical role in the development of the NPM paradigm.

The NPM paradigm encompassed specific assumptions about human behaviour centred on
individualism, instrumentality and individual rationality and from here came new
performance motivated administration and institutional arrangements, new structural forms,
and new managerial doctrines (Kelly 1998; Lynn 1998). Flowing from these perspectives
were a set of core principles that sustained NPM: (i) economic markets should be the model
for relationships in the public sector; (ii) policy, implementation and delivery functions
should be separated and constructed as a series of contracts; and (iii) a range of new
administrative technologies should be introduced including performance‐based contracting,
competition, market incentives, and deregulation (Kaboolian 1998). Within the NPM
paradigm, the way in which government was viewed, constructed and arranged was firmly
rooted within an economic frame and, from here, policy rhetoric focused on the notion that
small government was superior and that government failure must be addressed in order to
maximise efficiency. This often resulted in prescriptions built around competition and
contracts, with the result being a firmly embedded post‐bureaucratic model, not only in
Australia but also in many countries across the world.

The practical application of NPM, like its bureaucratic predecessor, suffered from a range of
weaknesses which reflected both implementation challenges and fundamental tensions
(O'Flynn and Alford 2005). For example, competitive regimes have been commonly
adopted, but evidence shows that they are usually costly to implement and rarely deliver
genuine competition (Entwistle and Martin 2005). Further, there is evidence that such
approaches have resulted in increased transaction costs due to the high costs of contract
preparation, monitoring and enforcement (Entwistle and Martin 2005; O'Flynn and Alford
2005). Minogue (2000) argues that the extensive literature on privatisation, contracting, and
the use of markets lacks evidence of any real efficiency gains and that the restructuring and
downsizing of civil services (especially in Britain) has produced a decline in
accountability. O'Flynn and Alford (2005) have argued that competitive government models
also lead to fragmentation of relationships which may spur destructive behaviour. A
comprehensive list of problems is presented by Lawton (1998 cited in Minogue 2000) who
claims the fundamental values of public service organisations have been undermined by
competition and the NPM, by limited resources, conflicts between individual demands and
public interest, the erosion of accountability and responsibility due to fragmentation, and
increased risk‐taking. Even the OECD, long a NPM advocate, acknowledged in a 2003 report
that the ‘reforms produced some unexpected negative results’ (OECD 2003:2), echoing
March and Olsen's statement that reform ‘rarely satisfies the prior intention of those who
initiate it’ (1989:65). Partly this reflected the wholesale application of private sector models
and the failure to pay heed to the interconnected and interdependent nature of the public
sector. Perhaps more fundamentally the competitive government model failed ‘to understand
that public management arrangements not only deliver public services, but also enshrine
deeper governance values’ (OECD 2003:3).

The NPM paradigm rested on economic foundations which defined government activity,
policy‐making and service delivery. However, a range of weaknesses have emerged
following almost two decades of experimentation and, consequently, a new discourse of
public management is emerging. The following section discusses the public value approach
which forms the basis for potential paradigmatic change.

The Public Value Paradigm: Principles,

Practices, and Premises
Given the problems and challenges of experiments with NPM, especially during the 1990s,
there is increasing interest in what can be termed a public value approach which draws
heavily on the work of Moore (1994; 1995), and signals a shift way from strong ideological
positions of market versus state provision. In part, this may reflect a growing recognition that
‘[t]he social values inherent in public services may not be adequately addressed by the
economic efficiency calculus of markets’ (Hefetz and Warner 2004:174). Further, it may
underpin what has been referred to as the new pragmatism ‘… where [t]he old ideological
debates are largely disappearing’ (Hughes 2006:11). A new ‘post‐competitive’ paradigm
then could signal a shift away from the primary focus on results and efficiency toward the
achievement of the broader governmental goal of public value creation.
Discussing public value has become increasing popular, however, a clear definition remains
elusive. Public value has been described as a multi‐dimensional construct – a reflection of
collectively expressed, politically mediated preferences consumed by the citizenry – created
not just through ‘outcomes’ but also through processes which may generate trust or fairness
(O'Flynn 2005b). Others have defined public value as ‘the value created by government
through services, laws regulation and other actions’ (Kelly et al. 2002:4) and from here it
could be used as a ‘rough yardstick’ against which performance can be gauged, resource
allocation decisions made, and appropriate systems of delivery determined. Stoker describes
public value as ‘more than a summation of individual preferences of the users or producers of
public services …[it] is collectively built through deliberation involving elected and
appointed government officials and key stakeholders’ (2006:42). Horner and
Hazel(2005:34) with perhaps more clarity, define public value as the correlate of private
value or shareholder return:

Think of citizens as shareholders in how their tax is spent. The value may be created through
economic prosperity, social cohesion or cultural development. Ultimately, the value – such as
better services, enhanced trust or social capital, or social problems diminished or avoided – is
decided by the citizen. Citizens do this through the democratic process, not just through the
ballot box, but through taking part in … consultations and surveys, for example.
This links well with some of the points advanced by Moore (1995) who argues that the
creation of public value is the central activity of public managers, just as the creation of
private value is at the core of private sector managers' action. Such a distinction is supported
by Hefetz and Warner who argue that unlike their private sector counterparts, ‘… public
managers do more than steer a market process; they balance technical and political concerns
to secure public value’ (2004:171). The role of the public manager, then, is central to this
approach.

More recently Stoker, drawing heavily on Moore (1995) and Kelly, Mulgan and Muers
(2002), sought to articulate a public value management model, an ‘alternative paradigm’ or
an ‘overarching framework’ for post‐competitive, collaborative network forms of governance
(Stoker 2006:41). In part, he argued, this represented a reaction to the weaknesses of the
NPM approach, but also recognised that new institutional and neo‐classical economic
conceptions of human behaviour clash with the central aims of more collaborative forms of
organising and operating. Horner and Hazel claim that the public value approach has gained
‘considerable currency’ recently ‘as an overarching framework in which questions of
legitimacy, resources allocation and measurement can be made’ (2005:34). Such popularity,
however, has not necessarily developed our understanding of public value.
As with many scholars in public sector management, public value advocates recognise
something fundamentally unique about the public sector which distinguishes it from the
private sector. At the most basic level we can differentiate public and private based on the
types of relationships that exist (e.g. see Alford 2002) or based on the fact that public sector
managers operate in a political marketplace first and foremost. Such factors are encapsulated
in Moore's (1995) strategic triangle notion where he discusses the importance of aligning the
authorising environment, operational and administrative capabilities, and values, goals and
mission to create public value. From this perspective, policy and management strategies must
be substantively valuable to the citizenry, politically legitimate, feasible and sustainable, and
operationally possible and practical. Such differences are explored by Stoker (2006) who, in
the context of service delivery, points to fundamental differences by arguing that public
sector ‘governing is not the same as shopping or more broadly buying and selling goods in a
market economy’ (2006:46). From a contracting perspective, Hefetz and Warner
(2004) argue that in transactions with suppliers, private sector firms' focus on efficiency,
quality, security and reliability while public managers combine these concerns with
accountability and public (i.e. collective) preferences. Such distinctions are important,
especially the recognition that politics is central in a public value paradigm. This is quite
different to the ‘input’ status politics held in both traditional administration and NPM (Stoker
2006).

In attempting to define the public value paradigm, Stoker (2006:47–49) develops four key
propositions. The first argues public interventions are defined by the search for public value
which contrasts with market failure justifications commonly advanced by economists. The
second, that a wide range of stakeholders have legitimacy and should be included and
involved in government activity, contrasts starkly with the traditional model and points
toward a more collaborative, consultative approach. The third, adopting a open‐minded
relational approach to procurement, sits well with Hughes' (2006) claims of a new
pragmatism in public sector management, rejecting a one‐size‐fits‐all approach to contracting
and procurement. The final proposition is that an adaptable, learning‐based approach is
required in public service delivery, and this fits well with Stoker's (2006) focus on
networked models, but would surely clash with more market‐based approaches that may be
appropriate in some circumstances.

In their work for the UK Cabinet Office, Kelly, Mulgan and Muers (2002) identified three
key components of public value. They argued that the first component, services, provides the
vehicle for delivering public value through actual service encounters for users or clients and
the distribution of fairness, equity and associated values for citizens. The second component,
outcomes, commonly overlaps with services but, they argued, should be considered
separately as they encompass much higher order aspirations (e.g. national security, poverty
reduction, or public health). For example, garbage collection services may deliver
convenience and aesthetic benefits for users, but deliver broader public health outcomes for
the citizenry (Moore 1995). This reflects the difference between private value (i.e. rubbish is
collected) and public value (i.e. public health is protected) which plays an important role in
distinguishing public and private activity. The third component relates to trust, legitimacy and
confidence in government and the authors argue that these are critical to public value
creation: ‘even if formal service and outcome targets are met, a failure of trust will effectively
destroy public value’ (Kelly, Mulgan and Muers 2002:17). For Kelly, Mulgan and Muers
(2002) these three ‘building blocks’ of public value creation provide the basis for a new way
of thinking about government activity and a means of guiding decision‐makers in considering
the value they create.

An important part of the public value paradigm is the concept of collective preferences which
distinguish it from the individualist focus of the NPM. Public value creation is said to rely on
the politically‐mediated expression of collectively determined preferences, that is, what the
citizenry determines is valuable (Alford 2002; Kelly, Mulgan and Muers 2002; Moore
1995). This directly contrasts with the idea that individual preferences can be aggregated to
reflect what it is that the ‘public’ wants from government, as has been the tendency in the
NPM paradigm. As Moore and Braga (2004) note citizens decide together, via elected
representatives, what they value as a collective and this represents a far more complex,
diffuse and delayed set of exchanges which Alford (2002) likened to social exchange. This is
quite different to the direct economic exchange relationships that take place in the private
sector, so it is possible to argue that public value is something delivered by government
organisations to its citizenry rather than to individuals (Alford 2002).

Encapsulating these points into a new way of thinking forms the basis for major change and,
for Stoker (2006) adopting the public value management model would represent a
paradigmatic shift:

Public value management does offer a new paradigm and a different narrative of reform. Its
strength lies in its redefinitions of how to meet the challenges of efficiency, accountability,
and equity and in its ability to point to a motivational force that does not rely on rules or
incentives to drive public service reform. It rests on a fuller and rounder vision of humanity
than does either traditional public administration or new public management (2006:56).
From this discussion a public value approach would entail considerable change as it provides
a new means of thinking about government activity, policy‐making, and service delivery
which directly challenges the NPM paradigm. The next section highlights key differences
between these approaches to public management and sets out some of the critical
implications for public sector managers.
Discussion and Implications for Public
Managers
The previous sections have pointed to the principles, practices and premises of both NPM and
public value and provide the basis for developing paradigmatic ideal types, making
comparisons and discussing implications for public sector managers. This is especially
important because it is through dominant paradigms that actors, including public managers,
make sense of their activity. In Table 1, the key differences between NPM and public value
are set out.

Table 1. Paradigms of Public Management

New Public Management Public Value Management

Characterisation Post‐Bureaucratic, Competitive Government Post‐Competitive

Dominant focus Results Relationships

Managerial Goals Achieve agreed performance targets Multiple goals including responding to citizen/user

preferences, renewing mandate and trust through quality

services, steering network

Definition of the Individual preference are aggregated Collective preferences are expressed

Public Interest

Performance Management of inputs and outputs to ensure Multiple objectives are pursued including service outputs,

Objective economy and responsiveness to consumers satisfaction, outcomes, trust and legitimacy

Dominant Model of Upward accountability via performance Multiple accountability systems including citizens as

Accountability contracts; outwards to customers via market overseers of government, customers as users and taxpayers

mechanisms as funders

Preferred System of Private sector or tightly defined arms‐length Menu of alternatives selected pragmatically
 New Public Management Public Value Management

Delivery public agency

 Adapted from Kelly, Mulgan and Muers (2002), O'Flynn (2005a) and Stoker (2006)

NPM can be characterised as both post‐bureaucratic and competitive with a clear and
dominant focus on results. Public managers in this paradigm had goals built around the
achievement of performance targets. In the public value paradigm, public managers have
multiple goals which, in addition to the achievement of performance targets, are more
broadly concerned with aspects such as steering networks of providers in the quest for public
value creation, creating and maintaining trust, and responding to the collective preferences of
the citizenry in addition to those of clients. Such goals dovetail well into the idea that the
dominant focus for managers shifts from results to relationships in the public value paradigm.
As discussed previously, collective preferences are used to gauge what the public values as
opposed to the notion of adding up individual preferences in the economically focused NPM.
In the NPM paradigm, the critical performance objectives were centred on efficiency and
economy largely reflecting the economic framing of government activity and the
reconstruction of citizens as customers. In the public value paradigm multiple objectives are
pursued by public managers including narrower service objectives, broader outcomes, and the
creation and maintenance of trust and legitimacy. Such changes necessitate a shift in models
of accountability away from narrow performance contracts, for example, toward the use of
more complex systems. The public value paradigm recognises that a more pragmatic
approach to selecting providers to deliver public services would create more space for the
maximisation of public value.

Such radical paradigmatic change has important, and wide‐ranging, implications for public
sector management and public sector managers. In part this reflects the positioning of politics
at the centre of the public value paradigm, as opposed to its construction as an input in
previous models (Stoker 2006). In a public value paradigm, managers negotiate and engage
with different constituencies: they must negotiate up into their authorising environment or the
political realm and out toward clients. Smith argues that this presents public managers with a
profound challenge because they ‘… have to make a case for the value they claim to create’
(2004:70, emphasis added). This requires a radical redefinition of the role of public managers
as they would move beyond the constrained roles they adopted in the traditional
administration paradigm (i.e. as implementers of political grand plans) and the NPM
paradigm (i.e. pursuers of results and efficiency gains), to advocates in the public value
paradigm. Moore's (1995) construction of the public value creating manager essentially
upends previous roles:

Like private sector managers, managers in the public sector must work hard at the task of
defining publicly valuable enterprises as well as producing that value. Moreover they must be
prepared to adapt and reposition their organizations in their political and task environments in
addition to simply ensuring their continuity (Moore 1995:55).
[Public managers] are neither clerks nor martyrs. Instead they are explorers commissioned by
society to search for public value (Moore 1995:299).
Such radical changes will create managerial challenges. This is especially so given the
complexity that the public value paradigm acknowledges and its attempts to overcome the
fracturing and fragmentation that occurred under the NPM as managers were encouraged to
pursue agency specific targets rather than broader goals (Stoker 2006). Within the public
value paradigm it is more readily accepted that government activity is interconnected and
interdependent and, as such, may require more collaborative effort in the pursuit of public
value. Stoker's (2006) work, for example, explicitly attempts to link public value
management with network governance forms. Here he argues that public managers need to be
able to ‘manage through networks, to be open to learning in different ways, and to draw in
resources from a range of sources’ (Stoker 2006:41). Smith (2004) argues this will place
considerable strain and pressure on public officials through increased emphasis on
consultation, communication, deliberation and ultimately defining public value. He then goes
on to question whether governments actually have the policy and managerial capability to
deal with the issues confronting them. This is because, on the ground, it means that,

Public officials must engage political authority, collaborate with each other within and across
institutional boundaries, manage efficiently and effectively, engage with communities and
users of services and reflectively develop their own sense of vocation and public duty (Smith
2004:69–70).
Such inter‐agency and cross‐boundary methods of operating place considerable stress on
public managers to develop both boundary‐spanning (Williams 2002) and diplomacy
(Rhodes 1997) skills to navigate the complexities of new arrangements. Redrawing the basis
for government activity through a public value paradigm provides a basis for redefining and
reconstructing public sector activity and efforts, especially to confront complex policy
problems where public value creation or depletion may occur. Such interconnected problems
pose challenges to public managers schooled in the virtues of competition, contracts and
efficiency first and foremost. Again this requires public managers to work across boundaries
and develop new leadership skills (OECD 2001) to better fit with a public value frame. As
Broussine has argued:
In order to solve complex problems, public leaders have to be able to initiate concerted action
not only within their own organisations but among a set of stakeholders with different and
competing interests. This means that traditional models of organisational leadership have
their limitations, as they may help to make public organisations more performance‐ and
customer‐oriented but they are not adequate to address boundary‐spanning public problems in
a context of fragmented authority (Broussine 2003:175).
Such a call to arms fits well with a new role for public managers, one which sharply contrasts
with the neutral, anonymous bureaucrat of the traditional model, but also with the narrow
agency‐focused manager of the competitive model. Luke, for example, argued that in order
‘[t]o create strategic action on urgent public problems, federal, state, and local agencies and
communities [have] to reach out beyond their boundaries and engage a much wider set of
individuals, agencies and stakeholders (1998:xiii). We might interpret such problems or
broader pursuits as the creation of public value.

Broussine (2003) has highlighted a range of leadership skills that modern public managers
require to operate effectively including: tolerance for ambiguity and uncertainty; recognition
of omniscience (i.e. that they can never have full knowledge); maintenance of personal
perspective and self‐knowledge; critical reflection; and distributed leadership (i.e. within and
outside the immediate organisation). These leadership skill requirements link well with
notions of public value, especially when we consider moves toward whole‐of‐government or
joined‐up models of governing and network governance forms. They do, however, represent
a challenge to existing capabilities. This partly reflects, of course, the dominance of NPM
where the pursuit of results and a cost and efficiency focus were rewarded. In collaborative
forms of working, which may better fit with the pursuit of public value, longer‐term
relationship management skills focused on conflict resolution, trust building, information
sharing, and goal clarity, are required (Domberger and Fernandez 1999; Entwistle and
Martin 2005).

Another important managerial implication is the requirement to develop a keen sense of

‘what works’. In part this may reflect Hughes' argument that, ‘[w]hat is actually happening in
public sector management is a new pragmatism. The old ideological debates are largely
disappearing … If a bureaucratic solution is best for a particular task then use it; if a market
solution will work then use it’ (2006:11). More fundamentally it requires an ability to weigh
up, for example, which governance structures will work best in what circumstances, or which
relationship form is most appropriate under what conditions (O'Flynn 2005a). This new
pragmatism therefore might underpin better functional matching, allowing public managers
to select the sector (for example, public, private, or not‐for‐profit) that best undertakes
activities to do so. However, such recognition is not automatic and is often driven by political
factors. Weighing up the options, negotiating the authorising environment, selecting the most
appropriate means of managing relationships, and putting such systems in place presents an
enormous challenge to existing public sector managerial capabilities.

Conclusion
The notion of public value is garnering considerable attention in practitioner and academic
literature. This is especially the case in Australia where some of the most radical experiments
with NPM took place through the 1980s and 1990s. The purpose of this article was to set out
a new public value paradigm and compare and contrast it to NPM. It can be argued that under
NPM, broader notions of public value were marginalised in the quest for efficiency and,
consequently, the adoption of a public value perspective will represent a further paradigmatic
change.

Such change, however, would redefine the role of managers within the public sphere and
present a series of challenges to the existing capabilities which have developed with the NPM
paradigm. Considerable attention will be required to be devoted to the development of new
skills if managers are to effectively navigate the complexities that come with paradigmatic
change.

References
Citing Literature

Volume66, Issue3
September 2007
Pages 353-366