Management Control Systems, Results-Oriented Culture, and Performance: Empirical Evidence on New Public Management

Abstract

New Public Management (NPM) has been guiding public sector reform for about 25 years now. Its position on the design of effective management control structures rests on three key ideas: (1) performance improvement requires a results-oriented culture that emphasizes outcomes rather than inputs or processes, (2) public sector organizations need to introduce performance management based on targets, monitoring, and incentives, and (3) public sector organizations should decentralize decision rights and reduce the reliance on rules and procedures. We examine the validity of these ideas, addressing the full set of instruments that NPM calls upon to establish effective control. We also take into account NPM’s contention that the effects of management control choices on performance may be indirect, operating through their impact on results-oriented culture. We conclude that NPM’s reform programme should be reconsidered. Although the evidence indicates that a results-oriented culture is positively associated with performance, we find little support for the assumed benefits of NPM-type performance contracting. In addition, the results suggest that both the effects of decentralization and the reliance on rules and procedures are opposite to NPM’s expectations.

Keywords: New Public Management, Management Control, Performance Measurement Systems

JEL Classification: M4