Limits of public sector innovation

By Vishal Beri

June 15, 2015

Public sector managers are under pressure to be innovative. Soon it may be de rigueur to be a creator, and career limiting if you’re not. Like when wearing cardigans to work became unfashionable.

Public administration literature dedicates more text to why and how bureaucrats should inhale and exhale the innovation infection. Ministers with the bug demand responses they haven’t seen before. The Australian government’s Innovation Guidelines 101 normalise the virus by advising on getting it.

When I worked in the public sector over a decade ago, innovation was generally about finding fresh ways to decisively tell ministers their ideas were stupid.

Today innovation in government involves searching for an illuminating process to discover a novel solution that can attach to confounding problems.

Processes include prototyping or piloting approaches; reaching out to a diaspora of opinions in physical and virtual mind labs; and adjusting procurement to source ideas and journey partners.

However the problems needing solving are the same age old ones. Ministers want to spend less, but can’t ask communities to lower their expectations. Regulation petrifies those in need of it. Individuals make poor life choices they expect government to fix. Emerging economies displace our industries. The inequality of opportunity for some gets worse the richer we become.

Except one unique challenge comes with the modern technology revolution. Generations of consumers will now be asking — where’s my app with that?

Proponents of innovation often recommend it as an end in itself. They argue there is equal need for it in the public and private sectors. But this is not supported by reality.

 ” … a lot of deadweight in our economy resides in market comfortable corporations and subsidy dependent NGOs. If you’re looking for risk taking reform, they’re the last places you’ll find it.”

In business, small enterprises like the ones I own have to constantly readapt themselves to earn a living. We have to invent new services or products, or create smarter ways of supplying the things we do to remain competitive and responsive to customers.

Without this continuous reapplication we lose market share to new entrants and existing larger competitors who have deep pockets of scale and can afford to loss lead to purchase clients.

Economists explain this need for organisational change in terms of technical, allocative or dynamic efficiency. In other words organisations are encouraged to ask themselves three fundamental questions. Are we doing the best with the least resources? Are we allocating our resources to activities that have the highest value for us? Are we embracing new ways of doing things to meet future needs?

The fundamental thing for the public sector to understand is that asking these questions is not a natural demand in all of the private market. I’ve seen enough to know that a lot of deadweight in our economy resides in market comfortable corporations and subsidy dependent NGOs. If you’re looking for risk taking reform, they’re the last places you’ll find it.

So bureaucrats shouldn’t be fooled into judging themselves against a creativity test that doesn’t apply universally in commerce.

The next critical issue for public servants to remember is that the conditions that may make regular change a necessity in some businesses, don’t exist for government.

First, the fundamental purpose of government agencies is opposite to competing in a market. Whether central, line, policy or service delivery — they exist to meet whole of community need usually by providing a public good for which there is no market.

Second, the traditional and correct purpose of the public sector, particularly in well-functioning liberal democracies, is to be a risk averse gatekeeper. This is because in society it is the only institution that has a consistent stable view on the long game of what is, and what is not, unwelcome precedent for everyone.

Third, unlike any other institution in a democratic society, the public sector has to balance protecting the interests of its long term employers – the public; with those of its temporary managers — elected governments. Getting this balance wrong can have serious consequences for the public and politicians.

Thus any pursuit of innovation must be initially limited by this proper and unique role of the public sector.

Once this boundary is identified, agencies need to ask themselves why they need to innovate.

“The public sector can be particularly vulnerable to change preachers because it lacks confidence in its purpose and capacity.”

In my experience a common answer is because they lack confidence to find solutions within themselves and their corporate knowledge. This is the wrong reason.

Management improvement fads regularly arrive from universities and consultants. One used to be time and motion studies. Innovation obsession is no exception.

The public sector can be particularly vulnerable to change preachers because it lacks confidence in its purpose and capacity. Downsizing, loss of corporate knowledge, process politicisation, and outsourcing have made government agencies unsure they have the right stuff to fix big problems.

Being on edge makes bureaucrats look outside for ideas. Even though history tells us that the public sector has singlehandedly found the compelling answers to the defining problems facing each generation. These include pension security, universal health care, welfare safety nets, universal education, key infrastructure investment, national security, and equal opportunity employment.

The Centre for Policy Development released a robust analysis in 2014, False economies: unpacking public sector efficiency, which explains how external pressure from politicians and business continuously reinforces a view that the public sector is an inherently inefficient apparatus in need of unending reform. Even though the facts strongly tell an opposite story.

A powerful anecdote that illustrates how under confident the public sector can be in doing its day job comes from one of my experiences a few years ago.

I was asked by the NSW Premier’s Department to help assess spending priorities in the rail capital program. The rail authority had also requested a well-known management consultancy to recommend ways it could improve its customer focus.

The CEO committee overseeing the capital review received a briefing on the customer engagement report. We read the multi-million dollar slide pack as the rail authority official explained that it didn’t recommend anything the authority didn’t know. But the report would help the authority articulate its role to the Minister. A much better investment would have been for one of their officials to learn marketing, and how to make power points.

On the other hand, a good reason for the public sector to be innovative is when it’s a clear means to a defined end that keeps on giving, including to their confidence. This often requires cultural change.

In my experience the most successful entrepreneurial organisations naturally incorporate the questions about technical, allocative and dynamic efficiency into daily decision making on spending and revenue. They know that embedding these questions in their culture, and training their employees to ask them, avoids future problems and the need for specific innovation projects to find solutions.

” … This might sound absurd. But my friend swears it has delivered far better results in decision making.”

Sometimes obtaining this culture is dead easy.

One of my good friends holds a very senior post in Her Majesty’s Treasury in the United Kingdom.

He is a firm believer in the traditions and primacy of the civil service. He rejects that there is any value in the public sector with its whole of community agenda, mirroring the private one which has only sectional and transactional interests.

So I was deeply surprised when he told me recently that he enjoyed a new initiative by the Chancellor, George Osborne, to make everyone stand in meetings with him. That’s right. To ensure that meetings achieve the maximum technical efficiency, officials are given no more than 5 minutes to make their particular contribution to an issue, and must stand while doing so.

This might sound absurd. But my friend swears it has delivered far better results in decision making. He says it has forced officials to be fully across their brief, deliver a compelling view quickly, and only spend time discussing issues critical to outcomes. The lack of chairs reduces any appetite for lengthy yes minister obfuscation.

A simple piece of real innovation that will keep on giving to the community, government and public sector.

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