Impact of Political Liberalism on Public Sector Organizations: A Case Study of NADRA, Lahore.
Keywords: Political Liberalism, New Public Management, Contractual Employment, Efficiency
Public sectors were considered responsible for the delivery of public goods and services to the citizens. But, the motive of the public sector started to change few decades ago, which administrations were being blamed for non-accountability, ineffectiveness and inefficiency (Haque, 2004). After the emergence of political and administrative reforms since 1970's under the umbrella of political liberalism and New Public Management (NPM), public sectors were pushed to increase the efficiency, profitability and productivity (Cole and Jones, 2005). At the same period of time, best practices of business sector were being promoted (David and Ted, 1992). These private sector practices include contractual employment (CE), outsourcing, privatization, deregulation, marketization and many others (Lan and Rosenbloom, 1992).
According to Lan and Rosenbloom (1992) and Hood (1991), CE is an important component of NPM and Political Liberalism. In fact, these political reforms and changes have been introduced in the name of efficiency (Salleh, 1996).
In the mid-1970s, due to increase in global competition and political liberalism there was pressure on employers and organizations to increase profit and efficiency which forced them to become flexible in terms of employment, which led them to the practice of contractual employment rather than permanent employment (Bennett, Dunne, and Carre, 2000). Due to these political and administrative reforms, the public sectors haven't only adopted the practice of contractual employment in order to improve the efficiency, profitability and productivity but also changed the structure, culture and values of public sectors (Haque, 2001).
In Pakistan, the use of contractual employees in public sectors is on increase as the competition is increased. It has spread across industries from manufacturing to services and also in other occupations i.e. information technologists, bankers, construction workers etc. For example, a large number of doctors and employees are being hired on a contract in hospitals of Pakistan (Saleem, Saeed, Ahmad, and Ch, 2013). Similarly, NADRA (which is public sector of Pakistan) has adopted the practice of contractual employment (CE) in order to enhance the efficiency, profitability and productivity. From an evolutionary viewpoint, the practice of CE is considered best as a governance mechanism, which creates ways for the organization to manage the long-term economic risks by hiring the employees on a contract (Hall etal., 2003).
The growth in CE from the mid-1980's up to now has gained wide attention in literature and research agenda. It is appalling that there is not enough study has been done on the topic of 'influence of political liberalism on efficiency of public sectors' especially in context of Pakistan. In Pakistan, there is a basic need to address the issues related to CE and its influence on efficiency of public sectors. NADRA is selected for the purpose of data collection. NADRA is a National Database and Registration Authority. It is the one public sector of Pakistan which started to hire employees on contract since early 1990's. After 2012, not a single worker has been hired on permanent basis because there are restrictions from government. In this organization, a huge variety of programs have been introduced in which mostly employees are working on a contract. The study is done in this sector because it was accordingly to the nature of study.
In Pakistan, it is very blistering and missing topic of CE from research agenda. It would be helpful to suggest the government that there is a great need in Pakistan to make an effective policy and reforms which will support and help the contractual employees to do their work effectively for the motive to improve the efficiency of public sectors.
This research is planned to study the influence of political liberalism on efficiency of public sectors at management level in NADRA. Hence, a basic research question and sub-questions were established to guide and direct the research process.
1. How do political and administrative reforms under the umbrella of political liberalism influence the efficiency of public sector?
* What are the major issues for introducing the practice of contractual employment in public sector?
* What are the different challenges faced by public sector regarding contractual employees?
2. Literature Review
2.1 Political Liberalism
Political liberalism is a 'complex of doctrines' that was originated from the ideas of equality and liberty (Alexander, 2015), a disapproval of authority and power (Dunn, 1979). It also involves 'the idea of limited government, the sacrosanctity of private property, freely made contracts, the maintenance of the rule of law, the responsibility of individuals for their own fates, and the avoidance of discretionary power', complicated by 'democracy, state involvement in the economy, moral and cultural progress and welfare policies' (Alexander, 2015). Key motive of political liberalism was to protect the rights and freedom of individuals (Rawls, 2005). It was emerged during the period of Enlightenment. This political change not only includes the liberty of individuals but also includes the practices of contractual employment (CE), outsourcing, privatization, deregulation and marketization (Djamin, 1991; Haque, 1996).
The major objective of these political reforms under political liberalism is to overcome the inefficiency, increase the profitability and competitiveness, reduce monopoly, increase customer's satisfaction and encourage foreign investment (Gregory, 1999). In general, these political and administrative reforms have been introduced in the name of efficiency and innovation (Salleh, 1996). Public values like publicness and public interest have been challenged by this new shift of economic liberalism and public management (De Vries and Kim, 2011).
2.2 New Public Management
Public sectors were considered responsible for the delivery of public goods and services to the citizens but the motive of the public sector started to change few decades ago, which administrations were being blamed for non-accountability, ineffectiveness and inefficiency. At the same period of time, best practices of business sector were being promoted (David and Ted, 1992). These new business-oriented administrative reforms, known as New Public Management (NPM). In present era, the implementation of NPM principals-increase in efficiency, competitiveness, increase in profitability and productivity-are actually the synonymous of reforms and modernization in public sectors (Lapsley, 2009). After the emergence of NPM, public sectors are pushed to increase the efficiency, profitability and productivity by adopting the private sector practices (Cole and Jones, 2005).
These private practices include contractual employment (CE), outsourcing, privatization, deregulation, marketization and many others (Lan and Rosenbloom, 1992). CE was considered one important component of NPM (Lan and Rosenbloom, 1992). It was thought that by hiring the employees on a contract, efficiency of public sectors can be increased (Allan, 2002).
2.3 Contractual Employment
In the mid-1970s, due to increase in global competition and political liberalism there was pressure on employers and organizations to increase profit and efficiency which forced them to become flexible in terms of employment, which led them to the practice of contractual employment rather than permanent employment (Bennett et al., 2000). CE is an alternative form of employment, such as fixed-term contractual employment, part-time and temporary contractual employment, which is different from the traditional full-time employment (OECD, 2002; Reilly and Hassett, 1998; Sparrow and Cooper, 2014).
CE can be referred as "contingent" (Belous, 1989), "non-standard", "irregular", or"atypical" employment (Bourhis and Wils, 2001). However, these terms are used for contractual employees whose description of job is quite different from permanent employees (Brosnan and Walsh, 1996; Kalleberg, 2000).
2.4 CE and Efficiency
Efficiency describes about the capability of an organization to adopt changes to increase the productivity and efficiency by using its resources effectively and efficiently (Domanski, 2009). Bielski (1996) and his coworker presented seven dimensions of efficiency for its measurement as; (1). Material efficiency, (2). Economic efficiency, (3). System efficiency, (4). Political efficiency, (5). "Political efficiency, (6). Cultural efficiency, (7). Behavioral efficiency. There is mostly used the word of "cost and profit" instead of efficiency. A literature of (Abraham and Taylor, 1996; Autor, 2001; Houseman and Polivka, 1999; Polivka, 1996) argued that most of the organizations hire employees on temporary basis which allow the firms to reduce cost in the form of low wage-rates and save the training and development cost. It is also argued that may be firms find it ideal to only hire employees on a temporary basis when there is involve the component of production (Brown and Sessions, 2005).
In present era, many organizations have hired the employees on contracts for flexibility in employment (Waaijer, Belder, Sonneveld, van Bochove, and van der Weijden, 2017), decrease the number of labors when demand decreases without the costs of redundancy pay (Corvers, Euwals, and de Grip, 2012).
In most of the industrialized countries, it is a major push by employers and government to hire employees on contract in order to become more flexible and to reduce the costs of labor (Golden and Appelbaum, 1992).
Decrease in recruitment cost is the major benefit of CE (Allan, 2002). However, some other scholars argued that costs are failed to rationalize the use of contractual employment (Voudouris, 2004) and it is actually more costly due to an rise in the marginal costs (Kandel and Pearson, 2001). It is especially noted when the contractual employees take time to learn their job, then there is possibility of a reduction in the productivity (Allan, 2002). At the same time, contractual workers are mostly less committed with their organization due to job insecurity. In this case, organization has to bear more cost when the contractual employees leave their jobs and join another organization (Aldrich et al., 2008).
Some authors (De Vries and Kim, 2011; Haque, 2001) argue that the new political and administrative reforms are creating problems for an organization and its employees instead of increasing the efficiency of organization. But there is not enough study has been done in the field of contractual employment and its influence on efficiency of a public sector especially in context of Pakistan. It is planned to answer the research question that either the efficiency of public sector is increased by introducing the practice of CE after political and administrative reforms or not.
The proposed study has used different theories that are supportive to the NPM and liberal reforms. Transaction cost economics, public choice theory and principal agent theory are used to provide the basis for the study.
3.1 Transaction Cost Economics
Transaction cost economic theory describes how an organization efficiently converts its input into output at lowest cost (Williamson, 1975). In simple words, it tries to describe that how an organization and its employees choose an arrangement in which they protect their relationship at lowest cost (Shelanski and Klein, 1995). These negotiating or trading costs are actually the transaction costs and contracts or contractual employment as social arrangements tend to decrease these trading costs. This transaction cost is actually the cost of monitoring or controlling and it guides an organization to choose either in-house production or outsource to other party or hire employees on a contract for production. This theory actually describes that organization tries to minimize its costs while providing any good or service.
3.2 Public Choice Theory
Nutter and Buchanan (1959) explain, this approach describes that every individual pursue his/her own aims and perform according to their preferences. This theory explains about the choice of individuals rather than firms or organizations. As the choice and preference of individuals are central to this theory, it provides a benchmark for free individuals in political institutions that either they are willing or agree with their outcome and structure of the organization (Buchanan, 1975; Buchanan and Tullock, 1962). For example, in the case of CE, it depends upon the choice of individuals either they are agreed to do work on a contract or not rather than the choice of firm.
3.3 Principal-Agent Theory
The partnership between contractual employees and organization is a critical aspect in ensuring that either the contractual employment will be successful or not (Gomez- Mejia, Wiseman, and Dykes, 2005). From a principal-agent viewpoint, when the interest or goals of two parties will different then it will create problem (Eisenhardt, 1989). One party, the principal (i.e. who hire the contractual workers) allocate work to other agent (i.e. the contractual worker or the provider). "Contract metaphor" is used to explain this relationship. Thus, McKindra (2005) suggested that there should be maintained a balance point between the interest or goals of organization and contractual employees or agency in order to build strong relationship with them.
However, on the basis of theoretical framework, this study aims to explore the reasons as to why public sectors are continuously adopting the practice of CE, along with an evaluation as to whether the efficiency of public sector is improved. Depending on the dimensions of efficiency mentioned in literature and theoretical framework, the research model for this study is presented as following,
Researchers have used an explanatory design for this study. Explanatory design is used in qualitative approach to explore or explains any phenomenon and reasons behind the current situation (McNabb, 2014). In addition, explanatory research approach is used to provide an insight into the current performance of the case organization supporting the analysis to find answers to research questions.
A purposive sampling was used for qualitative data collection because this kind of sampling is used to collect the data with reference to the questions of the research. Therefore, the in-charge or managers of the zonal were selected instead of directors. Because in-charge or mangers of zonal face the practically difficulties and have in-depth knowledge of CE and its impact on efficiency in day to day activities. For the purpose of data collection, 5 in-charge assistant directors and 5 deputy assistant directors were interviewed from different executive branches of NADRA.
4 Discourse Analysis and Discussion
Private practices in which CE is one of major concern, is implemented at a large scale in NADRA. After 2012, not a single person has been hired on a permanent basis in this organization. It is argued that CE is done to fulfill the man power; overcome the long-term expenditures (pension, house rents and health services); and also, restriction from government side to hire employees on a contract. As a respondent (AD3) said that;
'To hire employees on a contract basis are the legal requirements of government. There are some rules and regulation and we cannot make permanent hiring directly.'
Literature also confirm this result, according to Golden and Appelbaum (1992) it is a major push by governments and employers to make contractual employment to develop more flexible labor markets and to reduce labor cost in context of America.
Results of this study indicate that the efficiency of NADRA is apparently increased only in short run by introducing the practice of CE after political and administrative reforms under political liberalism in following terms;
1). Cutting the cost in production process due to extra number of employees and work is completed more quickly than before,
2). Increasing the profit by increasing the number of services with less time period by overloading the employees on a contract with having no extra expenditures,
3). Reducing the complaints of customers by reducing the delivery time of services through the help of these contractual employees in the organization.
It is also found that by hiring the contractual workers according to their specialization, the chances of human error have been reduced. Also, work is completed in less period of time which results in an increase of number of services and profitability for the organization. But, evolvement of advance technology is a key factor for these improvements. As a respondent (DAD6) clearly revealed about the importance of advance technology in the sector by saying that;
'To some extent we can say that due to the CE the quality is improved because now there are specialist in our sector for each job and the chances of human error are reduced. Overall, the quality of our services is improved due to our advance technology and CE.'
Moreover, it is cheaper for NADRA to hire employees on a contract because these contractual employees are offered low wage rates. Moreover, they are not entertained with long-term benefits (pension, rent of house, health services, and many others) as compared to permanent employees. These findings are also supported by literature of (Abraham and Taylor, 1996; Autor, 2001; Houseman and Polivka, 1999; Polivka, 1996) who argued that most of the organizations hire employees on temporary basis which allow the firms to reduce cost in the form of low wage-rates and save the training and development cost. In this way, long-term expenditures of the organization are saved and cost is also reduced. As an in-charge assistant director (AD2) discoursed the importance of CE in his interview in these words;
'CE has a positive impact on our profitability because contractual employees are not highly paid. They are paid less salary as compared to the permanent employees. They are also not entertained with the financial and nonfinancial reimbursements as permanent employees are entertained with.'
However, political and NPM reforms emphasis only to improve the efficiency, productivity and profitability which are only beneficial for the organization, while ignoring the needs and desires of employees in public sectors, is a threat to the quality of public sectors (De Vries and Kim, 2011). In short run, an organization may get efficient results by ignoring the interest of individuals and just focusing on to increase the profitability and efficiency of the organization. But, this ignorance of employee's interest may cause major issues for organization in long run which are as following;
1) Delay in services delivery when the contractual employees will not be ready to remain with the organization after finding another desirable, attractive and secure job in another organization,
2) Increase in cost when new hiring of employees on a contract will be done to fulfil those positions that are left by contractual employees due to job insecurity, and they join another organization where they find an desirable and secure job (Aldrich et al., 2008),
3) Decrease in profit when work will not be completed at time due to a smaller number of employees when the contractual employees resign from their job prior to the end date of their contract,
4) Decrease in the level of employee's commitment and loyalty with the organization due to job insecurity, less salary and benefits as compared to the permanent employees in the organization. From literature, almost similar findings of Autor (2001) also suggests that low levels of commitment and limited motivation are the major factors which creates problem of high turnover of contractual employees before the end date of a contract.
From the results of present study, it appears that efficiency and profitability are apparently increased after political and administrative reforms by hiring the employees on a contract. However, at the same time, cost is increased in the case of turnover problem of contractual employees when they find an attractive and desirable job in another organization. This turnover cause a larger costs and include newly hired employees training and learning costs, future separation costs, and acquisition costs of new employees (Mobley, Griffeth, Hand, and Meglino, 1979). This also confirms the findings of Voudouris (2004) who states in his study that it is costly to hire employees on a contract due to an increased in marginal costs which is failed to defend the use of CE.
It is especially noted when the contractual workers take time to learn their job (training) then there is possibility of a reduction in the productivity and profitability (Allan, 2002). As a respondent (DAD6) explained the side effect of CE in his interview in following words;
'Cost is increased after the hiring of contractual employees because there is a fear of job insecurity and we have to hire additional number of employees instead of the exact required number of employees in our sector.'
Another respondent (AD2) further discussed the disadvantages of the CE and said that; 'There are many employees who left our organization. There are many problems associated with turnover i.e. there is proper channel to train our employees. When an employee leaves his job, then we have to start with zero point and we have to bear cost in this case.'
As inferred from analysis and results, there are different challenges for the organization as well as for the contractual employees. These challenges include the following;
* The problem of turnover of contractual employees when they find a secure and attractive job in another organization,
* Security issues of data when the contractual employees are not committed and loyal with organization. They can leak the information to other organization for their personal benefits,
* Training the employees because it is not easy to teach the employees about the system of NADRA. As the system of NADRA is very unique and not easily understandable.
While there are also problems for contractual employees which includes job insecurity (they can be terminated at any time), lack of longer-term incentives (pension, house rents, health services etc.).
In today's society, after political and administrative reforms under political liberalism NADRA is just focusing to increase the efficiency and profitability even if it is at the expense of their employees. Here a question arises, that is, is the discipline just growing towards better understanding of how to make the public sector more efficient, or does it also need to create values for employees and citizens to retain the unique identity of public sectors?
After political liberalism organization may offer its customers a high quality of services in short period of time and in return increase the profitability of organization, but in the end, who has to pay for these improvements? It is the worker who has to bear the burden and it comes in the form of low wages and lack of long-term benefits. It seems cruel to increase the profitability and efficiency of organization by exploiting the rights of employees by offering them a very low wage rate. Although, these workers are the actual people who operate the functions, and profit increase of the organization due to the hard work of these workers. So, they should be given an attractive and reasonable salary and incentives.
In addition, the diminishing identity (representation, equality, justice, impartiality and citizenship) of the public sectors would not only decrease the commitment and loyalty of public employees, but it may also adversely affect public trust and confidence in the provision of public services. Because, public sectors progressively resemble the private sector and barely work for the public interest (De Vries and Kim, 2011). Public sectors need to worry about these negative outcomes while practicing the political and administrative reforms under political liberalism and NPM (efficiency, profitability and competitiveness). For example, NADRA is a public sector and it is responsible to give the identity cards to every citizen of Pakistan without any cost.
But after political liberalism and NPM model, NADRA is only focusing to increase the efficiency and profitability instead of serving the citizens of Pakistan which creates the problem for poor people. The poor people are being denied from their identities. As public sector, it is the main aim of the sector to serve the public either they have money or not instead of making profit.
From the results of this study and literature, it is concluded that the political liberalism and principle of NPM-increase in efficiency, profitability and productivity by adopting the private sector practices i.e. contractual employment doesn't appear appropriate for public sectors. The reason behind is that, an overemphasis on competitiveness and efficiency of organization adversely affects the distribution of income, commitment, loyalty and morality of the contractual employees (Haque, 2001). All these factors, would be disadvantageous to the organization in future. In addition, the loss of the central theme, "publicness," leads to more unethical acts, corruption and conflicting interest. CE has eroded the basic values of public sectors (job security, long-term benefits of public employees, pension, health services and many others) rather than solving the problems of organization (increase in efficiency, productivity and profitability) in long run.
There is basic need to recognize and retain the public identity of public sectors to attract those employees who feel pride from being identified with the common public interest rather than unsophisticated business concern and this may also help to build a trust with citizens.
The purpose of this research was to explore the influence of political and administrative reforms under political liberalism on efficiency of public sector. For this purpose, a qualitative approach was used to collect the data from respondents. Results of the study show that after political and administrative reforms under political liberalism and NPM the efficiency is apparently increased through (1) cutting the cost in production process, (2) offering low wage rates and no long-term benefits (pension, rent of house, health services, and many others) to contractual employees as compared to permanent employees, (3) increasing the profit by increasing the number of services with less time period, (4) reducing the delivery time of services, (5) reducing the complaints of customers etc. in the sector.
But at the same time, cost is increased in training and hiring process due to the problem of turnover of contractual employees. Contractual employees are paid less and long-term incentives are also not given to them and these unfair practices adversely effect on the commitment and loyalty of the contractual employees. It is concluded that the efficiency of the organization is apparently increased in short run after political liberalism and NPM. Whereas, this may cause major issues for organization in long run in terms of higher turnover, increase in training costs, decrease in profits due to smaller number of employees when the contractual workers resign from their job before the end date of their contract. Therefore, the practice political and administrative reforms under the political liberalism and NPM model only beneficial for short period of time and will create problems for organization in future.
Data security, increase in hiring and training costs due to turnover of contractual employees are the major challenges for NADRA. While there are also problems for contractual employees which includes job insecurity (they can be terminated at any time), no longer-term incentives (pension, house rents, health services etc.).
However, it is concluded from the results of present study and literature that the ideology of political liberalism doesn't appear appropriate. There is basic need to recognize and retain the public identity of public sectors to attract those employees who feel pride from being identified with the common public interest rather than unsophisticated business concern and this may also help to build a trust with citizens.
On the basis of results and observation of the study, researchers present the following recommendations for NADRA as well as for government that should be kept in mind while practicing the CE as a solution to the ineffectiveness and inefficiency of public sectors:
* NADRA should reduce the hiring and training cost by acquiring a certain years of relevant work experience (for example-a worker is required for data entry must have some years of relevant experience of data entry in an organization) while recruiting the applicants on a contract.
* The problem of turnover should be minimized-for example, by providing adequate support, feedback and incentives on monthly basis to reassure them that their performance matters a lot for their own benefits as well as for organization.
* Organization should provide the opportunities to contractual employees to secure their job or provide some other benefits to them which are provided to the permanent employees i.e. house rent, health services etc. to compensate the lack of job security of contractual employees.
* Although, government regulates the public sectors, but there should be criteria or time limits in public sectors for the promotion of contractual employees to the BPS scale. Because the meaning and arrangements of contractual employment in NADRA doesn't fully represent contractual employment as understood generally.
* Government and organization should hire the new contractual employees after promoting the surviving contractual workers to the BPS scale. In short, to increaser the efficiency of organization this study's findings suggest that the interest of the organization should be aligned with the interest of contractual employees.
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|Author:||Iqra Aslam, Dr. Amir Saeed and Faiza Saeed|
|Publication:||Journal of Political Studies|
|Date:||Dec 14, 2019|
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