Framing Performance Management of Acute‐Care Hospitals by Interlacing NPM and Institutional Perspectives: A New Theoretical Framework

• DOI: http://doi.org/10.1111/faam.12047
• Published date: 01 February 2015
• Date: 01 February 2015
• Author: Rosemarie Kelly,Gerardine Doyle,Sheila O'Donohoe

Financial Accountability & Management, 31(1), February 2015, 0267-4424

Framing Performance Management

of Acute-Care Hospitals

by Interlacing NPM and Institutional

Perspectives: A New Theoretical

Framework

ROSEMARIE KELLY,GERARDINE DOYLE AND SHEILA O’DONOHOE*

Abstract: This paper develops a theoretical framework which combines ideas

underlying new public management (NPM) with new institutional sociology (NIS) to

explore the development of performance management during a period of healthcare

reform. The framework distinguishes three categories of explanatory variables; NPM

antecedents, the institutional environment and institutional elements within a three

tier level of analysis; economic/political, organisational field and organisational unit

level. Evidence to support the relevance and appropriateness of this framework is

gathered within the Irish health service using in-depth interviews, a questionnaire

and documentary data. The application of the framework highlights that all

antecedents of NPM can be influential and that all institutional elements can play a

role at the three different levels of analysis.

Keywords: theoretical framework, performance management, NPM, institutional

theory, hospitals

INTRODUCTION

This paper presents a new theoretical framework, designed to explain the devel-

opment of performance management within a healthcare system experiencing

continuous reform.

*The first author is Lecturer in Finance, School of Business, Waterford Institute of

Technology. The second author is Senior Lecturer in Accounting, UCD School of Business,

University College, Dublin. The third author is Senior Lecturer in Finance, School of Business,

Waterford Institute of Technology.

Address for correspondence: Dr Rosemarie Kelly, Department of Accounting and

Economics, Waterford Institute of Technology, Cork Road, Waterford, Ireland.

e-mail: rkelly@wit.ie

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70 KELLY, DOYLE AND O’DONOHOE

While performance management has a long tradition in the public sector

(Johnsen, 2005) its development appears more pronounced in the private sector

(Kaplan and Norton, 1992; Lynch and Cross, 1992; Simons, 1995; Kaplan

and Norton, 1996; Otley, 1999; Neely et al., 2002; and Ferreira and Otley,

(2005)). New public management (NPM) reform ideas have diffused throughout

public sector arenas notably in healthcare settings, of which hospitals are the

predominant organisational form. Hospitals serve many purposes one of which

is patient care (Kanter and Summers, 1987). Our study is motivated by the fact

that despite receiving a substantial proportion of the national health budget,

performance management in Irish acute-care hospitals is at an early stage

of development. The allocation to the acute-care hospitals amounted to 47%

of the national health budget when the study commenced in 2004. In 2013

this allocation, while still significant, had fallen to 31% of the health budget.

Arising from an exploratory study of hospital performance management, a novel

framework has been devised to facilitate the collection of data surrounding the

development of hospital performance management. Evidence has been gathered

over a six year period (2005 to 2010) to demonstrate the appropriateness of

this framework. A new theoretical framework is the primary contribution of

this paper. By integrating two existing theories, NPM and new institutional

sociology (NIS), we propose that this new integrated framework offers a broader

lens with which to examine and understand the evolution of new performance

management practices. We advocate that this framework may be applied

to explore the development of performance management in international

healthcare and other public sector settings.

During the 1980s a novel paradigm called, ‘new public management’, (Hood,

1991, p. 3) emerged proposing a means of transforming a country’s public service

organisations to resemble private sector entities and so generate efficiencies

and savings. At that time Ireland was one of a number of OECD countries that

was showing ‘marked shifts in the direction of NPM’ (Hood, 1995, p. 99). A

country that has experienced poor macroeconomic performance in the past may

employ NPM to bring improvement in subsequent years (Hood, 1995; and Pollitt,

2000). Ireland’s poor macroeconomic performance during the 1980s suggests a

possible motive for turning towards NPM and while there is some evidence

of limited reform during that time (Murray, 2001), it is likely that a greater

interest in NPM emerged in the mid 1990s as a response to previous poor

economic performance. Yet from 1995 onwards the Irish economy witnessed

an unprecedented period of strong macroeconomic growth which facilitated

greater spending on public services. This coincided with an increasing interest

in NPM, following the publication of a series of government reports namely,

the Strategic Management Initiative in 1994 and Delivering Better Government in 1996,

which provided recommendations to improve Irish public services. The Public

Services Management Act (1997) provided a legal basis for the adoption of new

management practices and this was supported by the Freedom of Information

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