Risk
May 7, 2012

Striking the innovation bargain

Your boss encourages you to be innovative, but there is little support anywhere else in your department. And though risks inside and outside your office seem to be increasing, the tools to support intelligent risk-taking – essentially risk management skills – are scarce and tolerance for risk is low.

If this sounds familiar, you may be an executive caught in the “perfect calm” that surrounds innovation in some of Canada’s governments.

Public sector innovation means assessing risk, and then testing and applying a creative idea to solve a problem or improve a policy, program, product or process. Creativity is about the idea. Innovation is about testing that idea (usually in a project) and, if it works, rolling it out more broadly.

This is roughly what managers are supposed to do: apply resources, deliver for ministers and citizens every day, and find better ways to do these things over time.

For much of 2009, I had the privilege of digging into what stops managers from testing new ideas and, more importantly, what might encourage them to take an occasional risk. I read the literature, held meetings in several Canadian capitals and listened to (or surveyed) hundreds of managers from the middle of the pack to deputies. Here’s what I found:

1. Barriers to innovation are many but three big ones top the list.

Delivery pressures and administrative burdens: a typical manager rates day-to-day pressures, delivering services and navigating through an opaque world of administrative rules as more pressing than innovation, something that is rarely encouraged beyond one’s immediate boss.

Lack of resources: pilot projects to test new ideas require financial, technical and human resources. Few have a surplus of these assets and no one can innovate off the corner of a desk.

Low tolerance for risk: managers see little upside in taking risk. Although a program may perform at an average level, this receives less criticism than an attempt at improvement that fails. Managers associate project failure with career downsides, even if the intent was positive.

2. But the right incentives can counteract these barriers.

Barriers can be overcome when the most important incentives are reinforced to build trust. In this context, three incentives are so fundamental that little can be done without them:

  •  First, an innovative culture depends on tone and support from the top where power, influence and leverage reside. Executive managers should be persistent, confirming that innovation is important, encouraging and recognizing innovators, reducing red tape and allowing time to experiment.
  •  Second, executives must earn trust. Honest mistakes or projects that fail to pan out are normal. Employees must believe that they will be protected from undue sanction in the event of an honest failure. All managers should accept the idea of “failing forward,” knowing that an honest but unsuccessful risk taken should never hamper an employee’s advancement.
  •  Third, organizations should look for ways to empower middle managers. When executives encourage frontline staff – the culture bearers in most ministries – they dispel the unhelpful idea that innovation can only come from headquarters. Good ideas can come from anywhere. And when middle managers are encouraged (and believe that honest mistakes will be tolerated) the opportunities to better serve citizens are multiplied.

Executives aiming to promote innovation should focus on top-level support (communication, alleviating time pressures, accepting risk and providing resources), motivating (empowering, teaching, engaging end-users, building diverse teams and rewarding) and skill development (in risk and project management).

3. Red tape puts the focus on process, not results.

Executives who promote innovation understand the difference between hard and soft controls and aim for a “loose-tight” model, under which a few critical “hard” rules are set and tightly monitored. But within that hard rules framework, employees are given the freedom to identify opportunities and innovate, provided that they apply sound management practices and public service values in their work.

Red tape occurs when rules lose proportion to the risks they aim to mitigate. Red tape has its own pathology and like the common cold, it is difficult to avoid.

Not all Canadian governments are concerned about red tape and that is fine. But every jurisdiction has it and our research indicates that staffing, general human resource management and the administration of contracting and procurement are the best places to start if a government wants to clear out the underbrush.

4. And then, there is the overriding factor – trust.

A trust-based culture requires executives to listen, find innovative thinkers, respect ideas, and intelligently risk resources in projects that may or may not work. Executives who do these things reinforce the idea that innovation is normal and essential.

It would be nice to think that these things occur spontaneously in the public sector but for the most part, they do not. Trust and innovation occur most naturally when an explicit bargain is considered and made so that:

  • Executive managers buy into the need for innovation; they are aware of the innovative project (no surprises), accept its risks, and are able to offer sensible relief from administrative constraint;
  • Project managers demonstrate sound values, control and competence; in other words, they pay serious attention to their work; and
  • All those involved practise an enlightened form of accountability based on the understanding that some innovative projects will not pan out.

Managers, auditors and legislators should collectively accept that some well-controlled projects will fail to deliver hoped-for results. When this happens, the object is not to sanction the project manager but to ensure that learning is widely shared.

Managers must be prepared to account for what was done, for what worked (and did not) and for what was learned. But there should be no contrition for a well-managed innovative project that yielded few, or unexpected, results. On the contrary, executive managers, auditors and elected officials should explain and defend, if necessary, the work that was done.

The clear lesson is that innovation implies risk, and people who take responsible risks should be supported, regardless of the outcome. That is the only way to build trust, break the perfect calm, and innovate in government.

Lee McCormack, a former government executive, is director of research with CCAF-FCVI Inc., a research and educational foundation. For more ideas on the innovation bargain, read CCAF’s Innovation, Risk and Control: A public sector guide to encouraging innovation, understanding control, managing risk, reducing red tape and delivering better results for citizens at www.ccaf-fcvi.com.

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