Public organizations do not have a true grasp of the risk of innovation in public services. That’s why it’s critical to establish a transparent risk governance model that can actively engage all stakeholders.
The context
More and more often, governments require their public administrations to achieve a level of innovation that guarantees more efficient and effective services for their citizens. However, innovating is risky business – and this is true in the private sector as well. The outcomes of innovation and uncertain and/or unknown, and failure is lurking right around the corner.
In light of this, in the context of PA, risk management as it relates to innovation is a pressing issue, one which neither managers nor administrators seem to be fully aware of. This lack of awareness not only impacts the level of security and the quality of the services in question; it can also compromise the very benefits that innovations were implemented to achieve. What’s more, among citizens and PA staff alike there may be strong resistance to using these innovations. Careful governance serves to minimize the likelihood that this happens, limiting the various kinds of risks (financial and reputational) that unfocused innovation management could trigger.
The research
In a recent study we ran using a qualitative approach, we were able to collect 657 questionnaires, which contained a mix of open and closed questions. Our respondents were managers and political decision-makers, from Italy, the Netherlands, Slovakia and the UK. We analyzed the different approaches adopted by public administrations to risk management in innovation. Our sample counted four countries representing different state/public service configurations: Italy was chosen as a model of the unitary state with a high level of legalism and complex decentralization processes. The Netherlands represent an example of a decentralized unitary state, with local regions that are relatively strong and autonomous. In contrast, Slovakia has a centralized government structure with relatively weak local administrations, and the UK is a model of a decentralized, quasi-federal state, with a local government structure which is weaker compared to the other three nations.
Our study focused on two different areas: mental health (to include for example family counselling services and psychiatric hospitals), and environmental sustainability (encompassing bioenergy providers and organizations responsible for natural habitat restoration, for example). Within these two areas we analyzed two different types of innovation: soft - based on relational/communicative approaches, and hard – often very capital-intensive and more technocratic/legalistic.
One of our main research objectives was to clarify the current approaches to risk management in the different public contexts and the main consequences of these approaches. We also explored the degree of stakeholder involvement in decision-making processes and mechanisms for translating these questions linked to innovative processes into governance models. Lastly, we attempted to identify the applicable principles for effective risk governance in the PA.
Our study demonstrates that in all four countries there is a low perception of risk with regard to the innovation process. What’s more, where this perception was present, relational approaches to risk governance were not apparent, as by nature they are more intensive and expensive.
Risk management, instead, follows three different approaches: a passive, non-response attitude to the problem; a top-down orientation by management dominated by regulations; or bottom-up, dominated by external experts but applied in a discontinuous way, and only in certain circumstances. In very few cases did governments resort to stakeholders to adopt successful practices, onboarding public service staff as well. According to the research data, these public employees have little understanding of the nature of the risk and its role as an essential component of innovation. In addition, only certain mature organizations offer adequate training for their staff. However, generally speaking there are only a small number of initiatives for building learning loops dealing with risk management issues in public administration.
Conclusions and implications
As of today, risk in service innovation is not clearly understood in public organizations. At most this risk is interpreted as a bureaucratic question or security management issue.
Politicians and managers in the public sector should consider risk as an intrinsic element in innovation processes, which by definition have uncertain outcomes. This makes it essential to develop a transparent risk governance model that can actively engage all stakeholders (politicians, managers, citizens and local communities). What’s imperative above all is accepting the fact that failure is one possible outcome of innovation.
Mature organizations should offer adequate levels of internal training with regard to risk management in innovation. This would represent an effective governance tool which would acknowledge the complexity of all the innovation processes that are necessary for implementing public service reforms.
