ABACUS, Vol. 45, No. 1, 2009 doi: 10.1111/j.1467-6281.2009.00275.

IRVINE LAPSLEY
ORIGINAL
ABACUS
©
1467-6281
0001-3072
Abacus
ABAC
XXX
NPM:
2009CRUELLEST
Accounting
Blackwell
Melbourne, ARTICLE
Foundation,
Publishing
AustraliaINVENTION
Asia Unviersity
OF THE HUMAN
of SydneySPIRIT?

New Public Management: The Cruellest

Invention of the Human Spirit?1

This article examines one of the most significant phenomena of the late
twentieth and early twenty-first centuries—the emergence of New Public
Management (NPM). NPM has been widely adopted, internationally.
However, its adoption is based on governments having faith in its
deployment to transform their public sectors using private sector per-
formance criteria. In this article, the case is advanced that the widespread
use of NPM is often a cruel disappointment for governments. This is
demonstrated by focusing on four key elements of NPM, as practised in
the early twenty-first century—the role of management consultants, the
development of e-government, the emergence of the ‘audit society’ and
the increasing importance of risk management.
Key words: Audit society; E-government; Management consultants; NPM;
Policy failures; Risk management.

The New Public Management (NPM) is an influential set of management tech-

niques drawing on private sector performance criteria and practices. It has been
widely deployed by governments seeking to modernize and transform their public
sectors, and has achieved global significance. The ideas of NPM have proved to be
irresistible to governments in debates on current and future developments in the
public sector of advanced economies, and increasingly so in developing countries.
This article seeks to examine the impact of NPM and assess its effectiveness.
The study of NPM is complicated by its unstable nature, with changes in NPM
over time and in different settings (Pollitt and Bouckaert, 2000). Therefore, the
major focus of this article is restricted to the U.K. experience, with a particular
focus on the early twenty-first century. The U.K. has been regarded as a pacesetter,
along with countries such as Australia and New Zealand, in the adoption of
NPM from the outset (Hood, 1991, 1995). This article advances the case that all

1
This article is based on a lecture in honour of Ray Chambers. Its title is inspired by that of
Chambers’ 1983 lecture at the University of Edinburgh, ‘Accounting—“One of the Finest Inven-
tions of the Human Spirit”’.

Irvine Lapsley (Irvine.Lapsley@ed.ac.uk) is a Professor in the Business School, University of Edinburgh.

An earlier version of this article was presented as the R. J. Chambers Memorial Research Lecture at
the University of Sydney on 2 August 2007, at a seminar at LSE on 12 December 2007 and at the
European Accounting Association Annual Congress, Rotterdam, April 2008. The author is grateful
for the comments made by participants at these presentations and for comments made on earlier
drafts of this article by David Cooper (Alberta), Graeme Dean (Sydney) and Michael Power (LSE)
and the anonymous reviewers.

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governments are under pressure to ‘modernize’ their public sectors. The agenda
of modernization (Lapsley, 1999, 2001a, 2001b; Lapsley and Pong, 2000; English
and Skaerbek, 2007; Broadbent and Guthrie, 2008) is a shorthand for the NPM
doctrine which draws, inter alia, on private sector-derived accounting and man-
agement technologies in the pursuit of public sector efficiency. This is a challenging
agenda. Given the pressures for change, it is suggested here that governments
intent on reform are tempted by the allure of the NPM solutions, as provided by
the NPM toolkit. However, in terms of outcomes, the failure, generally, of NPM
makes it a cruel disappointment for policymakers and users.
This cruelty is based on a comprehensive assessment of what NPM seemed to
be at the outset, what it purports to be and what it has become. In the 1990s the
initial focus of NPM was on management styles and structures, as discussed
below. This article examines the phenomenon of NPM in the early parts of the
twenty-first century and depicts four key elements of NPM in action at this stage of
its trajectory: (a) the continued reliance on, and debatable impact of, manage-
ment consultants in public sector transformation, (b) the digital revolution and
e-government as devices of modernization, (c) the entrenchment of the ‘audit
society’, in which compliance has primacy, and most recently, (d) the significance
of risk management in the public sector, which mitigates against social entrepre-
neurship. Of these elements, the first three are most embedded in NPM initiatives.
The final element—risk management—is an emergent factor in NPM implemen-
tation, as is also discussed below. It is suggested that the pressures for NPM will
not abate. Rather, the evolution of NPM will continue to be severely contested
(Lapsley, 2008).

ANTECEDENTS OF NEW PUBLIC MANAGEMENT

The U.K. government adoption of NPM can be seen as an outcome of conviction

by politicians with strong beliefs in the merits of the private sector business model
of management for all organizations (Thatcher, 1993) and senior civil servants who
willingly engage with NPM policy options. Initially, this policy was demonstrated
by the appointment in 1980 of the leading U.S. industrialist, Sir Ian MacGregor,
to transform the U.K.’s nationalized steel and coal industries. The impact of this
perspective on how to deal with the public sector can be seen from the referral of
the problem of NHS management to the then deputy chairman and managing
director of the Sainsbury grocery chain, Roy Griffiths. Arguably, the Griffiths
Report (1983) is the forerunner of NPM thinking in U.K. public services manage-
ment. As was a contemporaneous report on the management of British universities
(Jarratt Report, 1985) of similar ilk (led by Alex Jarratt, who was at that time
chancellor of Birmingham University). Jarratt, however, also had had considerable
industrial experience in banking and publishing. These studies are indicative of
the influence of big business mimicry on reforming the management of U.K. public
sector organizations in the years shortly before Hood coined the term NPM.
The influence of the global economy on the actions of governments in the latter
part of the twentieth century and the early twenty-first century has also led many

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to adopt NPM practices. The liberalization of the former Eastern Bloc, the emer-
gence of China and India as major producers and markets, the global presences of
brands (e.g., Coca-Cola, MacDonald’s) and the emergence of major corporations
(Ford, Toyota, Microsoft, IBM) with annual budgets dwarfing GDPs of smaller
countries means that there has been an attenuation of the ‘strong nation state’ of
the early twentieth century (Gamble and Lapsley, 2008). Instead, the emergence
of global patterns of consumerism fosters the concept of the world as a single
entity, which changes the role of the sovereign nation state (Waters, 2001). From a
national perspective, the management of economies is weakened by globalization.
For policy makers, the key levers to power are perceived to rest with making
the public sector more efficient, economical and effective (Lapsley, 2008). This
circumstance makes NPM ideas attractive to policymakers across the world.

NEW PUBLIC MANAGEMENT

The belief that management can transform public sector organizations rather than
alternative policy options, such as more traditional forms of public administration
or merely increasing expenditure on public services, is encapsulated in the NPM
approach. NPM components, as articulated by Hood (1991, 1995) in two of the most
widely cited articles in the public sector literature, identify seven key elements:
1. Unbundling public sector into corporatized units organized by product.
2. More contract-based competitive provision, with internal markets and term
contracts.
3. Stress on private sector management styles.
4. More stress on discipline and frugality in resource use.
5. Visible hands-on top management.
6. Explicit formal measurable standards and measurement of performance and
success.
7. Greater emphasis on output controls.
The 1991 article by Hood was neither a normative model nor template for
change. Rather it can be seen as a reflection on what had been happening in the
1980s in the U.K. It is not possible to say exactly when NPM began, it preceded
the authorship of Hood’s 1991 article and can be seen as a product of the 1980s.
The 1995 article by Hood positions NPM in an international context. This article
identifies the U.K. as a pacesetter in the adoption, implementation and promulgation
of NPM ideas.
There have been subsequent attempts to revise, to finesse or to build on the
basic elements of NPM outlined by Hood. Consider Osborne and Gaebler (1992),
where a refined role for government is advocated as a catalyst for enterprise
(expressed as revenue earning, not just spending) and as steering state services to
respond effectively to changes. More elaborate models include those by Peters
(1996) and by Ferlie et al. (1996). Peters (1996) identifies four forms of govern-
ment: market, participative, flexible and deregulated. The Ferlie et al. contribution
devised four models of public service organizations undergoing change: the efficiency

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drive, downsizing and decentralization, in search of excellence and public service

orientation. Within both the Peters and the Ferlie et al. contributions, there is
some scepticism over the efficacy of the market in public services and greater
emphasis on phenomena such as strategic alliances or partnership working. But
despite these (and other) various attempts at refinement, Hood’s 1991 descriptor
endures. In part, this essential simplicity of the basic Hood ‘model’ must have
considerable appeal to policymakers as something to which they can readily relate
in framing agendas for change in public services.

THEORETICAL PERSPECTIVE

The NPM project is ambitious, it is immense. This is true of its aims and its
ramifications. Given the scale and complexity of the NPM project, it has been
suggested that a combined or multi-paradigm approach is necessary to investigate
this phenomenon (Christensen et al., 2007; Lapsley, 2008). This approach is
adopted here.
NPM may be viewed as an instrumental approach to management and, as such,
there is merit in examining it, at least in part, from this perspective. However,
Christensen et al. (2007) support the study of NPM from a cultural perspective.
Hood (2000, p. 1) has also advocated the use of a cultural lens in the investigation
of NPM, which he depicts as much a movement as an area of study. Also, the
related paradigm of social construction, with its numerous strands of thinking,
offers useful insights in any evaluation of NPM. Therefore, this article combines
issues of translation (Latour, 1987), of legitimation (Meyer and Rowan, 1977;
Brunsson, 1989) and of processes of reform, including the continuous process of
reform (Brunsson, 1992; Brunsson and Olsen, 1993), the complexity of reform
(Scott, 1998), and rationalization of what Brunsson calls mechanisms of hope
(Brunsson, 2006).
Within the enactors of NPM, the modernizers or reformers can be seen as
agents of change who have significant influence in shaping and interpreting the
implementation of reforms. Latour expressed this phenomenon in the following
terms: ‘the interpretation given by the fact builders of their interests and that of
the people they enrol’ (1987, p. 108). Moreover, the output, results-oriented focus
of NPM can be made more complex by legitimation strategies in which the act of
‘making decisions’ can be regarded as decoupled from the need for action
(Brunsson, 1989). Fundamentally, purposive action by reform agents may yield
the outcome of unintended consequences (Merton, 1936). Also, most importantly,
the context of reforms is important in shaping the intensity of modernization. As
Brunsson (1992, p. 42) expresses it:

Reforms tend to become common, indeed so common that they virtually become routine.
One further explanation of the frequency of reform is that reforms tend to generate
new reforms. Reforms often result from previous reforms, and the outcome of reforms is
often new reforms, reforms tend to be self-referential. The reason for this is that reforms
tend to increase the supply of solutions, problems and forgetfulness (of previous
reforms).

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Indeed, Scott (1998) has observed in a number of international settings that

‘transformational’ policies often fail because centrally managed plans do not
capture the subtleties of interactions. There are often complex interactions within
and between the local and the central. This is aggravated by a willingness of the
state to impose authoritarian solutions, and a failure on the part of the state to
understand the limitations of its ability to impose an administrative ordering of
nature and society. Further, the actions and reactions of both modernizers and
those subject to NPM reform programmes are important. The interplays between
these actors are elements of the socially constructed view of what constitutes
‘implementation’. For Brunsson (2006), the construction of mechanisms of hope
as a support for the denial of project failure is an example of this, which he
describes in the following terms:
[when] obstacles to information are in place, people find no reason to change their
assumption that the action is possible and suitable, just as they assumed before the attempt
that it would function, they can now presume that the attempt has worked. They have no
reason to question the principle behind the action, consequently, on the contrary, they
have the ‘experience’ of a ‘successful’ attempt, which helps to reinforce their hope. They
have avoided learning and have succeeded in preserving their faith in a principle. (p. 157)
The act of moving from the apparently straightforward elements of Hood’s basic
NPM model is fraught with potential difficulties of interpretation. The implemen-
tation of NPM ideas may encounter resistance within organizations, or even at a
societal level, with a kind of passive resistance. This resistance may take complex
forms rather than outright confrontation. As the following discussion demonstrates,
there are severe measurement problems which may render ideas of results-oriented
management cultures untenable. There are also difficulties of unintended con-
sequences where policies, practices and outcomes differ from those predicted or
expected by NPM.

EVIDENCE: NPM AS A CRUEL DISAPPOINTMENT

As noted above, the precursors of the expression ‘NPM’ were taking place in the
U.K. in the early 1980s. After two decades of the NPM project, there is no sign of
the project abating. However, in the twenty-first century, the NPM has evolved.
This evolution has continuities with earlier aspects of NPM, but it also reflects
wider changes in society as it seeks to enact what may be regarded as an overt
managerialist agenda as the state’s central transformational mechanism, rather than
traditional, procedural, bureaucratic machines. In examining the implementation
of NPM in the U.K. in the twenty-first century, this article focuses on the four
dimensions identified above as key elements of the government’s transformation
agenda for public services: (a) the continuing reliance on, and the debatable impact
of, management consultants in public sector transformation; (b) technological
change and e-government as devices of modernization; (c) the entrenchment of
the audit society in which compliance has primacy; and (d) the increased emphasis
on risk management in public sector organizations. At this stage in the U.K.
trajectory of NPM these facets of government policy represent key cornerstones

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Table 1

EXPENDITURE ON MANAGEMENT CONSULTANCY BY U.K. CENTRAL

GOVERNMENT DEPARTMENTS, 1993–2006

1993 2006
£m £m

Defence 55.64 256.3

Environment 7.34 163.0
Health 4.66 125.0
Home office 3.81 125.0
International developments 0.2 256.2

Note: All expenditure amounts are at 2006 prices.

Sources: 1993: Efficiency Unit, Cabinet Office (1994); 2006: National Audit Office (2006a).

of its implementation, with risk management becoming the most recent strand of
NPM thinking.

Management Consultants
Management consultants have a longstanding and continuing role as tools of
governments seeking to modernize or transform the public sector. The presence
of management consulting activity predates the arrival of NPM, but it can be
argued that NPM has given a fresh impetus to management consulting activities.
An indication of the growing significance of management consulting in U.K. central
government can be seen from Tables 1 and 2.
Table 1 shows a significant and continuing increase in expenditure on management
consultants. This expenditure is for the U.K. central government departments
with the highest expenditure on management consultancy. These statistics are
drawn from different sources and must therefore be interpreted with a degree of
caution. However, the trend of significantly increased expenditure on manage-
ment consultants by central government departments is evident. While Table 1
reveals the Department of International Developments has the largest increased
spend on management consultants, there is also an average annual increase of
27.7 per cent on management consultancy in defence expenditure, with average
annual increases in expenditure on management consultancy per annum for
Environment, Health and Home Office, respectively, of 163 per cent, 198 per cent
and 245 per cent, over the period 1993–2006. However, Table 2 gives a different
angle on this expenditure. In particular, it shows a substantial expenditure on the
services of management consultants from companies which have expertise in IT
and high technology, an issue which we take up further in our discussion of e-
government initiatives, below.
These figures do not provide an indication of how the activities of management
consulting firms actually impact on the organizations which they advise, or the citizens
who use public services. There is an active debate on the contribution which

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Table 2

TOP TEN PUBLIC SECTOR MANAGEMENT CONSULTANCY FIRMS (2006)

IBM £275m

LogicaCMG 175
Accenture 130
PA Consulting 102
Capgemini 85
Matt MacDonald 77
PwC 65
Atos 59
KPMG 57
Deloitte 50

Source: National Audit Office (2006a).

management consultants make to the transformation of organizations. Sorge and

van Witteloostuijn (2004, 2007) are sceptical of the capacity of management con-
sultants as change agents. However, Armbruster (2006), and Armbruster and
Gluckler (2008) depict management consultants as principled change agents with
expertise which adds value to their clients.
However, the above contributions are based on limited empirical evidence.
Indeed, there is a paucity of evidence available on the activities of management
consultants, generally. Therefore the impact of management consultants in the
NPM project is assessed in two ways (a) from a scrutiny of presently available
studies of management consulting in the public sector, and (b) from an examina-
tion of public reports which evaluate management consulting activities in U.K.
public services.
The Christensen et al. (2007) framework identifies three elements to under-
standing public sector changes: (a) instrumentality, (b) social construction and
(c) cultural influences. All of these elements are evident within the literature on
management consultants. One example of the instrumental nature of management
consulting activities is the substitution effect noted by Lapsley and Oldfield
(2001). This research discovered that many public sector organizations had to
shed staff to make cost reductions and efficiency gains. However, new initia-
tives and projects kept coming. As a result, the public sector organizations used
management consultants to undertake this work as the consultants did not appear
as staff on the payroll and these organizations evaded recruitment restrictions.
Another dimension of instrumentality is the motivation of management consultants.
There is a longstanding literature which attributes naked financial gain as their
primary motivation (see Williams, 1972; Czarniawska-Joerges, 1990; Craig,
2006). For example, Williams (1972) described management consultants as
travelling merchants or salesmen: ‘In the booming business of management

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consultancy, there is no shortage of glossily packaged analytical techniques of

varying degrees of power and reliability being peddled to ill-informed clients by
pushful salesmen’. However, there is evidence that management consultants are
motivated by the desire to make a difference to public services and by the belief
that they have the expertise to make the public sector more efficient (Lapsley and
Oldfield, 2001).
There are also examples of a social constructionist interpretation of management
consultants at work. A classic example is Clark and Salaman’s (1996) depiction of
‘mystery’, resembling that of a witchdoctor in the performances of these manage-
ment gurus. This observation points to the symbolic use of this expertise within
organizations. Other facets of this are the ways organizations are packaged to
present themselves as more ‘complete’ organizations with all the trappings of their
private sector counterparts, whether this has functional value or not (Brunsson and
Sahlin-Anderson, 2000). A further example of this is Brunsson’s (2006) study of
management consultants in action, in which their role was to afford hope to
management and staff of the organization which sought their business expertise,
rather than serve some instrumental purpose. Yet another example of the symbolic
value (Meyer and Rowan, 1977) of management consultants is given by Lapsley
and Oldfield (2001). They report on public sector organizations which purchase
management consultants’ services in the knowledge that the consultants’ reports
would not be acted on. The symbolic value appears in a report which substantiates
the prior beliefs of management rather than producing any novel insight into the
challenges facing the organization.
The most far-reaching impact of management consultants on public sector
organizations is, however, a cultural consideration. Saint-Martin (1998) has observed
how management consultants have occupied a special, influential place in the
upper echelons of U.K. government and public services:
[British] management consultants have been involved in the construction of the state’s
management capacities in the last 30 years. Through their participation in these
institution-building processes, they established networks of expertise with the state and
acquired the experience of work in government . . . This created opportunities for
consultants to make their voices heard in the inner circles of decision-making and made
possible the exercise of influence. (p. 322)
Given the above mix of influences on the deployment of management consultants
to improve management of public services, what kind of impact have these con-
sultants had? There are three substantive government reports from different parts
of government, broadly described. They are extremely critical, casting doubt on
the contribution which management consultants have made in transforming
public services in the U.K. The first, a report by the Efficiency Unit of the Cabinet
Office (1994), reported poor use of management consultancy across government
and identified a need for substantial improvements in the process of consultancy
use if the full benefits were to be secured from management consultants. In other
words, ‘could do better’. Secondly, a report by the National Audit Office (2006a)
noted that some progress had been made in the use of management consultants
but there remained a lot to be done. In particular this report made the interesting

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comment that public bodies had to be ‘smarter in understanding how consulting

firms operate’. In other words, ‘could still do better’.
Finally, in 2007 the Committee of Public Accounts of the House of Commons
(CPA, 2007) reported on its investigation of the use of management consultants
by public sector services. This report did suggest that management consultants
could add value to public sector bodies, identifying the procurement practices of the
Ministry of Defence as a specific example of this. However, its major conclusion was
that the use of management consultants by the public sector generally represented
‘poor value for money’. This report, which estimated that close to 18 per cent of
the annual spend on management consultants by government bodies was wasteful
(p. 3), confirms the Lapsley and Oldfield (2001) finding of management consultants
substituting for core staff. Interestingly, this report also identified the symbolic
use of management consultants by public sector bodies. CPA (p. 6) reported that
40 per cent of organizations used management consultants when they were not
necessary. In this context, the CPA saw the use of management consultants by
government agencies as a kind of defensive shield if their project underperformed.2
The above examples are clear evidence of the disappointment from resorting to
management consultants as the first tool of choice for NPM modernizers.

Technological Change and E-Government

It has been observed that technology, and particularly information technology, is
often said to be a ‘central force’ in the transformation of contemporary society
(Hood, 2000, p. 17). This phenomenon is explored, here. There are two elements
to this article’s examination of the use of technological change in the implementation
of the NPM: (a) public policy on e-government as technological change to achieve
public sector transformation, and (b) the reality of e-government in practice.
These findings underline the disappointing nature of many initiatives of this
nature in the pursuit of public sector transformation.

Public Policy on E-Government

There is increasing international interest in e-government. West (2006) reported
29 per cent of government agencies around the world offered online services,
compared to 19 per cent in 2005. As part of this drive, governments have elaborated
strategic visions entailing the use of technology to transform government.3 In this
regard the U.K. government has placed the use of new technology as a central
plank of public services reform in a major policy review; as the policy on technology
(Cabinet Office, 2005, 2006) observes:
21st century government is enabled by technology, policy is inspired by the business
changes delivered by it, customer and corporate services are dependent on it.

2
The phenomenon of the explosion in management consultants active in government is becoming
mirrored in the quasi-consulting behaviour of government auditors in their pursuit of NPM
(Gendron et al., 2007).
3
See, for example, the Australian government’s vision of an IT enhanced transformed public sector
(Australian Government, 2006).

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Governments with serious transformational intent see technology as a strategic asset and
not just a tactical tool. Technology alone does not transform government, but
government cannot transform to meet modern citizens’ expectations without it.

These visionary images have contributed to a debate about whether the use of e-
government is a threat to the continuation of new public management. Specifically,
the use of e-government is seen as a mechanism for greater outreach to citizens,
with greater direct contact and less reliance on management. Those who subscribe
to this thesis see the world of e-government as instrumental in creating a ‘post-NPM’
world, which enhances citizens’ capacity for solving social problems (Dunleavy et
al., 2005). Strikingly, the reality of these claims is not substantiated by available
evidence, as discussed below.

The Reality of E-Government

Brown (2001) describes e-government in the U.K. as a process of permanent failure.
Brown justifies this descriptor of permanent failure on three grounds: (a) software
development problems, (b) project management problems, and (c) procurement
problems.
The following projects have been identified as problematic (Committee of Public
Accounts, 2001) and all exhibit Brown’s three implementation problems:
• Wessex Regional Health Authority Regional Information Systems Plan,
• The Immigration and Nationality Directorate Casework Programme,
• The Benefits Agency and Post Office Counters Ltd,
• Benefit payment card project,
• Ministry of Defence Intelligence Gathering Systems, and
• The Benefits Agency National Insurance Recording System.
The above cases represent classic failures. However, there are more recent
problematic cases. An illustration of this is U.K. Online for Business which was
launched in 2000 to make Britain the best place in the world for e-commerce.
By 2003, it was expected to result in one million business trades on the internet.
This target was never achieved and U.K. Online for Business was wound up in
April 2004, after £25 million was spent on it (Judge, 2004). Another example is
the National Offender Management Service (NOMS), which was scrapped
within three years of its launch as costs estimated at £2.6 billion had failed to
yield an operational IT system to supervise the management of offenders from
conviction through prison sentence to supervision by the probation service on
their release (Ford, 2007). Within the NHS, a computerized manpower planning
system, the Medical Training Application Service (MTAS), was abandoned in
favour of conventional interviews for junior hospital doctors’ posts in the face
of the inability of MTAS to allocate junior hospital doctors to hospitals
(Hawkes, 2007).
The above examples are relatively inexpensive failures (with cost estimates
from £25 million to £2.6 billion), when compared to the most ambitious, albeit
flawed IT project, Connecting for Health (CFH), which has a projected cost of
£12.5 billion. CFH was expected to deliver

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• NHS care records service,

• Electronic booking for GPs,
• Electronic transmission of prescriptions,
• National network—IT infrastructure,
• Digital archive to replace film-based images, and
• Data collection and management system.
However, Hawkes (2007a, 2007b, 2007c) reveals that there are numerous cases
of the CFH project failing to deliver. For example, the patient administration
system (PAS) at Milton Keynes was reported as ‘not working’. Elsewhere, twenty
years of accurate immunization records were lost because of faulty software
introduced in 2005 (Hawkes et al., 2007).
There are also issues around the expertise available. Connecting for Health had
four consulting firms: CSC (Computer Services Corporation), BT, Fujitsi and
Accenture. However, in September 2006, Accenture withdrew from the project
(Judge and Bolger, 2006). Furthermore, in February 2007 Fujitsi’s Head of
Healthcare Consultancy stated: ‘What we are trying to do is run an enormous
programme with the techniques that we are absolutely familiar with for running
small projects, and it isn’t working. And it isn’t going to work’ (Rose, 2007).
The former chief executive of the CFH project was reported as being ‘ashamed’
of the quality of the IT systems being implemented in hospitals, which he had
described as appalling (Weekly Telegraph, 2007). Although all hospitals in England
and Wales were expected to have patient record systems installed by the end of
2006, only thirty-four out of 169 received these systems and, of these, twenty-one
received an older, outdated system (Dorward, 2008).
Why do these major IT projects repeatedly fail? The U.K.’s National Audit
Office (2006b) identifies twenty-four successful IT projects. However, these are all
smaller scale projects. The NAO report pinpointed project management skills as
key. Montanes (2007) also identifies project implementation as a critical factor in
success/failure. In particular, a closer integration of IT and other reforms and a
strategic approach are necessary to achieve successful implementation. Here is
another example of cruel disappointment for NPM modernizers.

The Audit Society

Power (1994, 1997, 2003) has advanced the thesis that, in the U.K., we live in an
audit society. This has two major implications: (a) the universality of ‘audit’ as a
technology, and (b) the resultant compliance (or ‘tick box’) society. One facet of
this is the existence of an ‘audit explosion’ (Power, 1994, 1997). Power describes
the general situation of the spread of audit as an ‘audit explosion’:
Regulation of private company accounting by financial audit . . . Environmental
audit . . . Value for money audit . . . Management audit . . . Forensic audit . . . Data audit . . .
Intellectual property audit . . . Medical audit . . . Teaching audit . . . Technology audit . . .
Further examples of this audit explosion have occurred since. These include the
advocacy of a gender audit by the Equalities Commission to address continuing
disparities in pay between female and male employees (Prosser, 2005); police

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officers in Scotland were part of a ‘religious audit’ to determine their religions and
the possibility of religious discrimination (Howie, 2006); the Chief Inspector of
Schools in England and Wales called for ‘spot checks’ of schools by school inspec-
tors (Beattie, 2007); and the then Prime Minister, Tony Blair, in an interview
called for an ‘audit’ of all criminal legislation to determine ‘where the gaps are’
(Charter, 2006). A specific case of this audit explosion can be found in the NHS.
The National Health Service has heavy inspection and audit with at least fifty-six
bodies with a right to visit NHS hospitals and trusts. The sheer number of inspection
standards, and volume of information required to demonstrate compliance, make
it difficult to extract value from these processes and use them to improve patient
services, in the view of NHS managers. For example, the Health Commission’s
Light Touch annual health check has an overwhelming impact. It requires 500
separate information topics to be addressed, so voluminous, managers doubted
they could complete them. There is also overlap with other audits and inspections
(NHS Confederation, 2007).
Within this audit explosion in the NHS, there is a preoccupation with target
setting. One example of the ‘tick box’ approach to target setting is the case of
ambulance crews which have a specific target of eight minutes as the time by
which they must respond to emergency calls. The rigid interpretation of this rule
may mean a call made within eight minutes in which the patient dies of heart
failure is regarded as a success, but it is deemed to be a failure if the target of
eight minutes is exceeded, even if the ambulance crew save the life of the patient
who has had a heart attack (Moss, 2007). Another notable example of this is the
specific target that patients should be treated within four hours of admission to
the accident and emergency (A&E) unit of hospitals. This is alleged to have two
dysfunctional effects. The first of these is the admission of patients into the hospital
who are in danger of waiting more than the target time of four hours in A&E,
‘just in case’. Many of the ‘just in case’ patients are discharged, even on the same
day, which suggests they were not needing to be admitted in the first place, other
than to meet their A&E targets (Hawkes, 2007b). Another twist to this specific
target is the way hospitals are alleged to retain patients in ambulances in ‘holding
patterns’. This ‘patient stacking’ may last for up to five hours as it is alleged that
patients with broken limbs or breathing difficulties are parked in ambulances
because hospitals are unwilling to admit patients if they cannot treat them within
four hours of admission (Campbell, 2008). Not surprisingly, the existence of this
practice is, however, contested by the Department of Health (Alberti, 2008).
If the second dimension of this audit society is considered, the police services
provide stark examples of the compliance mentality. A major review of policing
in England and Wales led by Sir Ronnie Flanagan (Flanagan Report, 2007, p. 8)
reported that there was unnecessary bureaucracy in these police forces. This
report observed that, while some of this unnecessary bureaucracy came from
burdens imposed on police officers, there was also a strong element of what the
Flanagan Report (p. 7) called ‘self-created’ burdens as a perceived protection
against future scrutiny. This phenomenon of ‘self-creation’ is a clear example of
legitimating behaviour as part of a compliance or ‘tick box’ culture, as a consequence

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 NPM: CRUELLEST INVENTION OF THE HUMAN SPIRIT?

of the primacy accorded to oversight bodies in an audit society (Power, 1997).

The Flanagan Report (2007, p. 9) went on to observe that there was excessive and
uncoordinated inspection and scrutiny of police forces by a variety of bodies. This
audit explosion (Power, 1994) has been accompanied by a significant increase in
performance management requirements of central government, with the consequence
that (Flanagan Report, p. 10): ‘There is an emphasis on sanction detection levels
that has undoubtedly to a degree produced the unintended effect of officers
spending time investigating crimes with a view to obtaining a detection, even
when that is clearly not in the public interest’.
At the 2007 National Police Conference, there was open discussion of this issue,
with many examples of perverse and dysfunctional behaviour induced by the ‘tick
box’ mentality. For example, Simon Reed (2007) reported on the following
example:
Police spent weeks doing door-to-door investigations to turn a single theft into 542
different cases to bolster crime-fighting targets. The operation began after a child was
accused of keeping £700 raised for Comic Relief through sponsorship. Police officers
were sent to talk to every person who had sponsored the child to bump up their targets.
They spent two weeks on door-to-door enquiries sending community police officers to get
542 crimes. Five hundred is better than one.

At this conference there were other examples cited which revealed a frustration
with the iron cage of the audit society. Two particular cases (Berry, 2007) were:
(a) A Cheshire man was cautioned by police for being ‘found in possession of an egg with
intent to throw’ and
(b) A child in Kent who removed a slice of cucumber from a tuna mayonnaise sandwich
and threw it at another youngster was arrested because the other child’s parents
claimed that it was an assault.

It is not hard to find examples of this ‘tick box’ auditing compliance mentality
beyond this conference. A youth was charged with criminal damage for writing his
name on a wall with a bar of chocolate, although he wrote a letter of apology and
cleaned the wall (Scotsman, 3 November 2007). A man who resisted a cat burglar
was arrested under suspicion of murder because the burglar fell to his death,
although charges were later dropped (Jenkins, 2007). An eighteen-year-old
youth with a mental age of five was charged with racial abuse—a victim of a zero
tolerance policy on racism under which police have to respond to any complaint,
however minor (Reid, 2008). After seven months, the charges against this person
were dropped. There are other examples of this compliance culture, including
serious charges being made against minors for trivial acts,4 of police officers feel-
ing under duress if they do not meet specific targets, whether sensible or not,5 and
of senior police officers focusing on the achievement of performance indicators to

4
A twelve-year-old boy was charged with grievous bodily harm for flicking an elastic band in class
(Hopkirk, 2007).
5
Picken (2008) reported that British Transport Police had specific targets to stop and search under
U.K. anti-terror laws and they faced dismissal if they did not make their targets.

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 ABACUS

the detriment of strategic management.6 The impact of this ‘tick box’ mentality
has resulted in a boycott by leading police forces (including Suffolk, Staffordshire,
Leicester and West Midlands) of performance targets which require police officers
to record minor childish behaviour as criminal offences, in a bid to move to what
they call commonsense policing (O’Neill, 2008). Indeed, it is interesting to note
that the Flanagan Report (2007, p. 9) attributed the compliance phenomenon to
wider societal influences rather than simply the working practices of the police
services.
Within local government in England and Wales, concerns have also been
expressed over the volume and scale of oversight bodies. Over 90 per cent of local
authorities in a survey considered that local government had too many inspections
and that inspections should focus more on strategic issues. In fact, in this survey,
nearly two-thirds of local authorities believed that the costs of inspection greatly
outweighed the benefits (Local Government Association, 2004). In Scotland, the
Best Value Audit of local government has not had its intended impact. Arnaboldi
and Lapsley (2008) report on an investigation of the development of the Best
Value Audit regime. This particular manifestation of auditing was devised as a
method of transforming local government by placing auditors as enforcers of a
compliance regime which was intended to achieve a culture change in the manage-
ment of local authority services. The culture change embraced the management
ideas of the NPM with great emphasis on management structures and styles and
with the citizen as consumer. Arnaboldi and Lapsley reported limited culture
change in their case study sites. However, they did present evidence of dysfunctional
outcomes, including the displacement of core activities by the need to comply
with the bureaucracy of the Best Value regime. These examples demonstrate the
disappointment of NPM systems of targeting and auditing which have perverse
outcomes.

Risk Management and Entrepreneurship

The influence of ‘big business’ ideas on how best to manage public sector organ-
izations and their importance in the development of NPM have been noted
above in the discussion of the antecedents of NPM. There it was presumed that
the management practices of ‘big business’ were superior to those of the public
sector. The most recent of these private sector management practices to be
adopted by, and recommended for, public sector organizations is risk manage-
ment. This is a relatively recent phenomenon, but it is located within the NPM
(Power, 2007). However, the adoption of risk management practices in the public
sector can be seen as an outcome of some of the worst abuses of private sector
management in modern times. Hamilton and Micklethwait (2006) chart the
impact of the major corporate disasters of the early twenty-first century: Barings,
WorldCom, Enron, Tyco, Marconi, Royal Ahold, Swissair. Consistent with other

6
Fahy (2007) reported the police performance regime made senior officers focus on performance
indicators at the expense of strategic development of leaders.

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 NPM: CRUELLEST INVENTION OF THE HUMAN SPIRIT?

similar works, like John Argenti (1976), they attribute these failures to a number
of factors, including dominant chief executive officers, weak auditors and weak
internal controls. However, as part of enhanced governance systems to prevent a
recurrence of this corporate mismanagement, Hamilton and Micklethwait endorse
the development and wider adoption of risk management tools. The specific
adoption of risk management as a technology can be seen as part of the raft of
reforms which led to the Sarbanes-Oxley Act in the U.S. and the combined audit
code of practice in the U.K. (Smith, 2003). Clarke and Dean (2007) are very critical
of the role of accountants and accounting practices in major corporate failures,
but they are also sceptical of the above governance procedures put in place as a
consequence of these failures, which they see as directed more at appearances
(i.e., legitimation) than at rectifying underlying problems.
Hamilton and Micklethwait (2006) observe that the above corporate disasters
have been attributed to overzealous entrepreneurial management which neglected
good practice in corporate governance. Within the NPM movement there have
been active proponents of entrepreneurship in public services (notably Osborne
and Gaebler, 1992). The rationale for this advocacy of ‘social entrepreneurship’ is
that public managers should be innovative and released from the ‘iron cage’ of
public sector bureaucracy. However, this advocacy of ‘social entrepreneurship’ has
been criticized as encouraging ‘risky behaviour’, inconsistent with public admin-
istration (Bellone and Goerl, 1992). Indeed, it has been suggested (Courpasson and
Reed, 2004) that the infusion of the enterprise culture in government organiza-
tions has undermined traditional bureaucratic means and mechanisms and posed
challenges for public service managers’ capacity to adapt to this new regime. This
tension fosters an environment in which public sector organizations are receptive
to the introduction of risk management. This context may be seen as more receptive,
given the above evidence of IT failures and weak use of management consultants.
Risk management, in this context, may appear to offer a neutral, impartial
technology to public service managers who seek to balance the desire to be
entrepreneurial with obligations to avoid unnecessary risks. In terms of the ‘cruel
disappointment’ focus of this article, Power’s (2007) critique is pertinent. He
maintains that risk management is not an effective management tool, with serious
unintended consequences and with cruel disappointment for policy makers and,
indeed, managers. The phenomenon of risk management is examined here in two
stages: in practice, and impacts.

Risk Management in Practice

Contrasting with the conventional wisdom in the private sector, the risk of failure
has a disproportionate impact in public services. As Behn (1998) expressed it, it
does not matter if you ‘get it right’ 99 per cent of the time, because all the attention
will be paid to the 1 per cent of the time things went wrong. In his view (p. 149),
the Ten Commandments of Government are: ‘Thou shalt not make a mistake.
Thou shalt not make a mistake . . . Thou shalt not make a mistake.’ In this sense,
public services can be seen as a receptive context for the formality of risk manage-
ment. Indeed, the potential for ‘risky’ behaviour by public managers has been

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 ABACUS

mitigated by the widespread adoption of risk management in public services. The

universality of risk management techniques has been linked to the development
of the audit explosion (Power, 2004a). The dissemination of risk management
knowledge has been attributed to the usual suspects: carriers such as management
consultants (this includes auditors), management scholars and networking events
and agencies (Scheytt et al., 2006). The importance of risk management in the
twenty-first century public sector has been attributed to ‘the state as risk manager’ in
its desire to legitimate its activities and inhibit reputational risk (Power, 2004a).
The wholesale implementation of risk management is not just a matter of the
adoption of new management techniques; effective risk management requires a
‘risk and control’ culture (Esslinger, 2007). The reliance on this ‘risk assurance
industry’ by public managers can also be seen as a defensive response by public
service managers to avoid the blame culture associated with the public sector,
especially the performance management regime (Hood, 2002; Hood and Rothstein,
2001). The process of implementation entails the following action points (Esslinger,
2007): (a) risk avoidance, (b) risk reduction, (c) risk transfer (to a third person)
and (d) risk taking (where low), which, collectively, contribute to a defensive, timid
management, rather than an entrepreneurial one.

Risk Management Impacts

In terms of the public sector’s routine adoption of risk management techniques,
Power’s (2004a, 2004b, 2007) critique of risk management goes further than
identifying this as inhibiting entrepreneurial spirit. Power elaborates upon a
number of Merton’s ‘unintended consequences’ of its widespread application.
There is quantitative expansion of risk management, but also important qualita-
tive changes in the alignment of risk management with ‘good governance’. The
state sector has imported and implemented risk management ideas and blueprints
from the private sector. In the public sector, risk management is a ‘reputation
management strategy’. The growth of risk management involves an intensified
focus on process and on auditable trails and documentation. In Power’s view
there is a clear danger of a management transformation, but with very negative
consequences. Power goes further than seeing the emergence of a defensive
management from risk management systems: in his view the wholesale adoption
of these techniques ‘hard wires’ defensiveness in organizations and threatens to
imprison organizational thinking. Ultimately, Power’s thesis is that the risk of risk
management is that it will consume organizational life.
While Power’s thesis on risk management has not gathered the attention and
strength of empirical evidence of his earlier work on the audit explosion and the
audit society, this must surely be a matter of time. For example, in terms of for-
mality and form, the very existence of the U.K.’s Risk and Regulation Advisory
Council as a governmental established body which reflects on and advises on risks
in society is prima facie evidence of the importance of risk management. In the
meantime, the development of risk management in the public sector can clearly be
seen to be an obstacle to the realization of entrepreneurial public service managers
in the manner envisaged by proponents of NPM.

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 NPM: CRUELLEST INVENTION OF THE HUMAN SPIRIT?

CONCLUSION

So is New Public Management the cruellest invention of the human spirit? It is

entirely understandable if governments turn to NPM technologies to transform
their public sector, given the constraints of operating within a global economy and
the burden of electoral hopes for governments to deploy effective economic policies.
It is argued in this article that the natural area for governments to choose to
demonstrate the virtues of their stewardship is that of public sector transformation.
The expectations of policy makers and managers are high as they seek to pursue
efficient systems of management. Given these imperatives, it is highly likely that
governments will turn to NPM as a perceived solution as they seek recipes for
public sector transformation.
However, the technologies available within the NPM toolkit may thwart, rather
than deliver, successful policy outcomes. It has been suggested here that the first
point of reference for reforming governments may be management consultants.
But there are difficulties in effectively harnessing management consultants’ exper-
tise. These are manifested at numerous levels. There is evidence that, while public
sector organizations have a continuing dependence on management consulting
expertise to achieve ‘transformation’, there are doubts over the effectiveness of
management consultants. The U.K.’s Committee of Public Accounts (CPA, 2007)
has estimated close to 18 per cent of all expenditure on management consultants
is wasted. Yet there is also some evidence of creative behaviour: the use of
management consultants for routine behaviour to circumvent core staff cutbacks.
While there is a need for further empirical evidence, there are suggestions of
management consultants’ reports being used for legitimation rather than instru-
mental purposes.
There is the closely related issue of IT and technology as mechanisms of public
sector transformation. In this field there is an increasing reliance on management
consultants in IT to deliver on public sector projects. There is evidence of the
persistent failure of e-government. In part, this is a consequence of a lack of expertise,
often in project management, but it is a symptom of overly ambitious projects
which cannot deliver. These outcomes are indicative of a belief on the part of
government in the transformational properties of technologies, without an awareness
on their part of the limitations of those same technologies.
The increasing reliance on audit technologies has important implications for
policy makers, managers and citizens. Fundamentally, it is tempting for policy
makers to deploy audit as the technology to regulate and control, by substitution
of auditing expertise where the public sector environment does not create the
kinds of yardsticks of performance which markets provide. This is a distinct part
of the NPM armoury. It carries with it dangers—the unintended consequence of
creating Power’s audit society. The outcome of giving primacy to audit in the process
of transforming public services may be the encouragement of a compliance culture,
which is demonstrated by a ‘tick box’ mentality. For public service managers they
may find that their workers become more preoccupied with procedures than with
delivering quality services to citizens. This phenomenon is very important but it also

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occupies a huge canvas, reflecting as it does on the behaviour of society as a whole.

It has been shown above that there is clear evidence of the audit society in the U.K.
The final element of this discussion has focused on risk management as a tech-
nique imported from private sector management into public sector organizations
(Power, 2004a, 2004b). The increased influence of risk management techniques in
the public sector owes much to the NPM policy of mimicry of the private sector—
in this case by the adoption of defensive management techniques in response to
management excesses and inefficiencies. While Power’s critique needs more
empirical investigation, there is the definite prospect of the stultifying effect of
risk management on entrepreneurial arrangements for public services delivery.
So policymakers experience cruel, cruel disappointment, but most likely not the
‘cruellest’ of all human inventions.

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© 2009 The Author
Journal compilation © 2009 Accounting Foundation, The University of Sydney