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New public management (NPM) is a bundle of management tools and techniques adopted within a public sector organisation, which together are aimed at emulating the ‘best’ practices of big, private-sector business enterprises. In particular, NPM aims to use a configuration of management accounting (MA) practices which assist and maximise benefits from the organisation, coordination and day-to-day management of public sector organisations.

A good paper to read is Hyndman and Lapsley (2016), who state that “[NPM] portrays a set of ideas and practices which modernising reformers actively pursue as a solution to the challenge of making the public sector more economical, efficient and effective” (p.404).

So, how is MA implicated in the roll-out of NPM in many of today’s societies? Here are some examples:

  • NPM introduces market-like structures to public sector organisations; this includes the use of budgets on a resource competitive basis for different units within the organisation. For instance, many UK hospitals are forced to compete with each other for their portion of the Government’s health sector budget and, in turn, there are competitive tendencies within hospitals, across different clinics and departments;
  • It is not unusual to observe numerous MA practices in the public sector which resemble practices that are more common in the private sector. So, for instance, as mentioned above, budgets are commonplace in all kinds of public sector organisations – in particular because the latter are constrained by limited state funding. And there has also been evidence to suggest that some public sector organisations are turning to the balanced scorecard to steer its strategic, planning, decision-making and evaluation processes;
  • It is quite normal to witness a focus on frugality (e.g., a keen eye on control and often cutting costs) in the public sector these days; and a focus on – sometimes an obsession with – performance measurement and results-oriented management controls is equally commonplace in the contemporary world.

Reference: N. Hyndman and I. Lapsley (2016), New public management: the story continues, Financial Accountability and Management, 32(4), 385-408