New Public Management (NPM) has been guiding public sector reform for over 25 years. Its position on the design of effective management control 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 their reliance on rules and procedures. Focusing on the particularly influential version of NPM as advocated by the OECD, we examine the validity of these ideas theoretically and empirically. 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.
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