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Public Policy Forum

October 6, 1998
Ottawa, Ontario

Context for the Roundtable on Innovation and Risk-taking in the Federal Government

In July, 1998, the Office of the Auditor General (OAG) and the Public Policy Forum agreed to collaborate in conceptualizing and undertaking an inquiry on innovation and risk-taking in the federal government. Specifically, the objectives were to identify some of the factors which encourage or discourage public servants from being innovative and from taking necessary risks, and to identify some actionable steps which could promote more innovation and sensible risk-taking.

The tasks were three-fold:

1. to prepare a background document which would outline some of the major constraints on innovation and risk-taking in the federal government as reflected in recent literature;
2. to organize and hold a roundtable for some 40 participants to discuss these constraints, and to suggest actionable steps which might be taken by the federal government to encourage more innovation and sensible risk-taking as well as to identify the persons or organizations which might promote these actionable steps. To help enlarge the discussions and to bring more points of view to bear, invitations were made to participants from sectors other than the federal government, including provincial governments, labour and the private sector;
3. to prepare a report on the results of the program.

In addition to the background document prepared by the Public Policy Forum, both the OAG and Industry Canada provided documents outlining their respective points of view on the subject as pre-reading material for the participants at the roundtable.

The following is a summary of the discussions at the roundtable which was held in Ottawa on October 6, 1998.

Opening Remarks

The host for the session, Mr. Desautels, welcomed the participants and explained the reasons that his Office decided to sponsor the inquiry into constraints on innovation. Both the Auditor General (AG) and the Public Policy Forum had heard some Deputy Ministers and others express the opinion that the reports of the OAG had an inhibiting influence on innovation and risk-taking among public servants. The AG stated his belief that his Office was just one player in a complex environment and that many other factors should be considered as potentially contributing as much or more to risk aversion in the public service.

Mr. Desautels expected that by bringing together leaders from several different sectors and from outside Ottawa, factors which might promote innovation as well as those which encourage risk aversion would be discussed. He also hoped that the participants would identify concrete suggestions for action, as well as how these actions could be undertaken and who might be recommended to take responsibility.

The AG promised to do his part to disseminate the results of the discussions and to encourage action on forthcoming suggestions.

Setting the Context for Presentations and Discussions

Dr. David Zussman, President of the Public Policy Forum, and Chair for the Roundtable

Dr. Zussman set the context for ensuing presentations and discussions by reminding the participants that the focus for the session was the factors that affected the attitudes of public servants, positively or negatively, towards innovative action and risk-taking.

Dr. Zussman briefly synthesized some of the major constraints to innovation in the federal government as they had been identified in the pre-reading material: the problem of defining areas and degrees of bureaucratic accountability and the effects of unnecessarily harsh criticism and blame by various interests when public servants made mistakes; the need to find the right balance between rules and empowerment; the challenges of integrating new approaches to innovation and sensible risk-taking into the public service culture; and, the impact of cuts in budgets and personnel over the last decade on capacity for innovation.

He reiterated the hope that the participants would identify concrete actions that could be recommended to the federal government as potentially enhancing innovation among public servants.

Presentations on Innovation and Risk-taking from Various Stakeholder Points of View

Alex Himelfarb, Associate Secretary, Treasury Board of Canada Secretariat

Mr. Himelfarb began by pointing out to the participants that innovation is and has always been pervasive in government. He gave as examples some of the policy changes that had occurred post Second World War, such as the development of the social safety net in the 50s, the equality revolution and related program development in the 60s and 70s, and the shift to managerialism, and a focus on productivity and cost cutting in the 80s.

He also reminded the participants that, although they brought about important and beneficial changes, each of these phases also demanded different kinds of roles. Mr. Himelfarb stated his belief that the current phase of innovation was focusing on both policy and services, and discussed the creative potential of new technologies in both areas. He indicated that concerns about risk-taking were not so much a result of scrutiny by the AG and the public as that of the usual lack of clarity at the beginning of any new phase in government role and activity.

Mr. Himelfarb talked about the need for balance between empowerment and clear frameworks in which authorities are exercised. This means changes in the role of central agencies. He gave as an example the need to redefine Treasury Board Secretariat’s role as the developer of frameworks, common directions and tools rather than as the provider of rules and coordination. TBS is committed to developing a strategic approach to innovation that focuses on proven results, but the frameworks are not yet in place or well established.

He concluded by stating that innovation always carries an element of risk for failure. He advised that the best means of ensuring that innovation occurs in spite of the potential for failure is to maximize clarity on values in public policy direction and priorities.

Kevin Lynch, Deputy Minister, Industry Canada

Mr. Lynch presented the point of view of a line department that has undertaken to develop a culture which supports innovative thinking among its managers and staff. He stated that innovation is dictated by many external factors, such as globalization, evolving technology, and the still increasing customer demands, and internal government changes including Program Review, La Relève, new reporting requirements for Parliament, and the Portfolio approach to managing.

For Mr. Lynch, the need for innovation raises two important questions – 1) how to find new ways of managing risks, and 2) how to ensure that the rules of the game for public servants in innovation are consistent.

Mr. Lynch described some of the concerns among his managers and staff surrounding attempts at innovation:

• the lack of systems to accommodate the degree of innovation asked for, including assessment/review systems which demand that all risk be eliminated;
• the difference in approaches to the assessment of results between the public and private sectors. For example, if a company produces ten different products, and most of them have positive results, success is declared. However, in government, it is expected that all products will be successful, and the failure of one is deemed overall failure;
• the additional "evaluation systems" such as Parliament, the media and citizens, which have very little tolerance for failure;
• the increase of horizontal activity across departments, levels of government and sectors which requires that innovation take into consideration issues of diverse or diffused accountability.

Mr. Lynch concluded that he believed that the public service is keen to innovate, but that a major cultural shift is needed to ensure that incentives and rewards were in line with the rhetoric.

Denis Desautels, Auditor General for Canada

Mr. Desautels began by reassuring the participants that his Office encourages responsible innovation in the public service and that its reports, as well as fulfilling the OAG’s mandate of identifying shortcomings in government expenditures, also try to champion successful reform initiatives such as improved reporting to Parliament as part of the changes to the Expenditure Management System. He explained that the role played by the OAG is a balancing act in service to many constituents with different and sometimes contradictory expectations.

The AG recognized that his mandate was essentially negative, but that the OAG has the freedom to select audit issues and determine the reporting process. Audit issues are selected based on a systematic planning process that not only ensures reasonable audit coverage but contributes to best practices in government operations. Audits continue to evolve as government evolves. They try to avoid "horror stories" and focus instead on systemic problems and on results. Departments are given an opportunity to discuss reports and undertake corrective action before the reports are tabled.

Rapid changes in the public service environment demands greater flexibility and a stronger focus on results. The audits have correspondingly shifted to a greater emphasis on results, a "best-practices" approach, and collaborating on and championing improved accountability concepts and practices.

The AG recognized that taking risks provides opportunities to benefit. He insisted that the parliamentary control framework provides substantial scope for innovation and sensible risk-taking, on condition that risks are identified and managed, rather than ignored. He stated that if the framework of parliamentary control did not allow for needed innovations, it should be changed. In the meantime, more effort should be made to identify, communicate and manage risks so as to minimize uncertainty and maximize opportunities.

He concluded by encouraging parliamentarians, public servants, legislative auditors and the public to work together to break down traditional views and old habits, while recognizing that significant time, energy and commitment will be required to effect significant changes in attitudes and practices among the first three groups. Good communication of risks, a persistent push for change, many champions and celebrating successes will be also be needed.

General Discussion

The participants were invited to question the speakers on their views, and to raise other issues that came to mind. Following is a summary of the points raised in discussion.

Some discussion was held on the nature of the subject of innovation and risk-taking itself.

• Not all participants agreed that there was a real problem with innovation and risk-taking in the federal government. Some participants pointed out that many changes had been made over the last decade to government’s role and activities. Another participant stated that many public servants felt that they were taking risks in their decision-making every day – particularly in the area of health and safety.
• One participant felt that the problem was not risk aversion but rather "a bias towards inaction" on the part of public servants. The source of this bias is the lack of trust in government by the public and in public servants by the government. The result has been that some public servants now have low self-esteem and little willingness to act.
• Another participant thought that the problem is not an unwillingness to take risks but a lack of knowledge and tools to determine what are "reasonable" risks.
• A participant pleaded for a focus on innovation rather than on risk. It was felt that innovation implied creativity, and that too strong a focus on managing risks would have a negative effect on the development of the culture needed to nurture creativity.

Another issue which received some debate was that of ethics and values and their value in supporting innovation and risk-taking.

• It was suggested that values and ethics, if well defined, communicated and understood, would reduce the need for micro-rules to ensure correct public sector behaviour.
• It was also pointed out, however, that the values and ethics that were communicated needed to be consistent with public sector culture in order to be effective guides for choice of behaviour. For example, the tendency towards private sector approaches in government activities was not always consistent with democratic values and the public interest.

A third subject was discussed from many different points of view – that of criticism and blame directed at public servants.

• It was suggested that the "gotcha mentality" – as it was termed – that has been prevalent in the last decade or more was one of the major factors contributing to risk aversion in the public sector. Included in the proponents of this attitude are politicians, public auditors, bureaucratic leaders, the press and media, and the public.
• On the question of how to change this "gotcha mentality", several suggestions were made.

1. The public should be educated about the cost of trying to have a risk-free government, including the costs of the lack of progress and loss of opportunity for Canadians.
2. There should be a public debate on defining "reasonable" risks as well as on common goals and objectives so that there will be agreement on tolerance for failure and consequently less negative reaction when mistakes occur. This debate, of course, should not be held immediately after serious or tragic consequences have occurred.
3. In this vein, it was pointed out that the Canadian Food Inspection Agency must, according to its legislation, report annually on its performance, much of which relates to how it has dealt with risk. This was given as an example of how information might be provided to the public.
4. Another suggestion was made that organizations that failed in some task admit candidly but humbly that a mistake had been made, that the department/agency shared the public’s concern about the problem, and that the opportunity would be seized to learn from this mistake. It was also strongly suggested that government and its agents not try to project perfection.
5. Another participant stated that the main problem with the "gotcha mentality" is the tendency to focus on the individual who made the mistake rather than on the organization.

• Other participants did not agree that criticism was a serious negative factor.

1. Some participants expressed support for the role of "watchdogs" as defenders of the public trust.
2. Other participants suggested that criticism should be interpreted as an opportunity to make improvements, as did Elections Canada when criticized a few years ago by the AG for their lack of progress in technology.
3. Not all participants agreed that the public sector was more of a target for criticism than the private sector. Another participant added that the problem was more that of an over-reaction on the part of public servants who found themselves on the front page of the Globe and Mail than the criticism itself.
4. Another participant said that the issue was that of the mind-set regarding criticism rather than criticism in itself. A difference should be made by public auditors between mistakes occurring because of carelessness or lack of integrity, and failures happening in spite of reasoned judgement.

Workshops

For purposes of discussion, the various factors identified as having an impact on attitudes towards innovation and risk-taking in the federal government were regrouped under five main themes. One theme was assigned to each workshop group, along with the task of discussing issues and answering the three questions given below as related to their assigned themes.

Questions:

1. How do you believe these factors currently impact (negatively or positively) on attitudes towards innovation and risk-taking in the public service?
2. What actionable steps should be taken by the federal government to reduce the negative factors or enhance the positive factors?
3. Which person(s) or organization(s) should take the lead in promoting these actionable steps?

A summary of the discussions in each workshop is given below, followed by recommendations by each group on action steps.

Report on Workshop I

Theme:
Accountability & Rules

Examples of Factors:

• Political rules (e.g. Parliamentary framework)
• Bureaucratic rules (e.g. TBS directives, etc.)
• Departmental directives

One of the participants proposed that it was the adversarial nature of accountability in the democratic system that impeded innovation because it is the Opposition’s role to find fault. This was contrasted with the competitive nature of accountability in the private sector that has the effect of stimulating innovation and risk-taking in search of results.

Other participants suggested that better guidelines on risk management were needed to help public servants identify risks and be better able to judge which risks were tolerable.

Another participant suggested that risk management would not solve the issue of risk aversion if public servants were still vilified when failure occurred in spite of well-reasoned decisions.

A participant suggested that more public tolerance for risks could be built if citizens’ expectations were set through a public debate on the "right levels" of risk. The example was given of the public’s acceptance of a certain amount of crime – it does not expect a completely crime-free society. It was also recognized, however, that this public debate on tolerance for failure would be very difficult on certain issues, such as the return of criminals to society and the potential for their renewed violence.

Other participants insisted that individual public servants would be less risk averse if they felt that their organizations would support and protect them in cases of honest mistakes. It was felt that the leader of an organization (for example, the Deputy Minister) should never hold a "public pillory" of individuals who made mistakes, but rather recognize mistakes as steps along the path toward progress and opportunities for learning and improving.

It was also suggested that organizations should prepare to explain their occasional failures in the context of track records of success. Organizations should gather the type of information which would set the right context for failures.

The participants concluded by identifying four pre-requisites to innovation: the right tools, the right training, management support, and management capacity to deal with "anarchy" in terms of a reduction in rules.

A participant also suggested that Ministers and Members of Parliament should be educated on how to use the information received from auditors, and on the need to focus on organizations rather than individuals when dealing with mistakes and failures.

Recommendations on Actionable Steps

1. Government leaders (Deputy Ministers or their equivalents), auditors and others need to learn how to deal with mistakes and failures so as not to discourage other public servants from attempting new initiatives.
2. Government should be proactive in gathering information on and propagating their track records on initiatives so that failures and mistakes will be seen in terms of results, not process, and will be set in the context of successes.
3. Government leaders (Deputy Ministers or their equivalents) should take responsibility for mistakes in their organization rather than pillorying individuals.
4. Departments should develop the tools, training, and management support needed to support innovation as well as to deal with failure and with unacceptable behaviour.

Report on Workshop 2

Theme:
Audits & Criticism

Examples of Factors:

• Audit function (e.g. AG report, Parliamentary commissions, etc.)
• Criticisms by politicians
• Media reports
• Polls on public trust
• Access to information

The participants began with a general discussion on the subject of innovation and risk-taking.

• The participants were not clear from the background papers and discussions what type of innovation was missing.
• The participants agreed with Mr. Himelfarb that innovation has evolved in the public sector from building new programs and policies to cutting program spending. The fact that spending was reduced from 20% to 12% of GDP without upheavals should be seen as a spectacular success.

The participants went on to discuss the factors which impact on attitudes towards innovation and risk-taking among public servants.

• One factor is the "gotcha mentality" and the fact that credit is rarely given for positive results.
• The lack of context for criticism is also a factor. The public does not distinguish between a "true wrongdoer" and the individual or organization that has tried its best but failed. As well, decisions are unfairly criticized from the point of view of 20/20 hindsight, and with a failure to recognize the complexity of the issues in some cases.
• It was also recognized that some departments are more sensitive to criticism than others – such as Health, Revenue, etc., because of the nature of their mandate and work, and the perceived consequences in terms of mistakes or wrongdoing.
• There was some discussion and debate on the question of transparency in government as to whether it is an overstated value that does not help to build public confidence.

The participants also raised several issues concerning the OAG.

• There was debate on the role of the AG as a potential partner for departments and agencies – a role that auditors in the private sector can play. It was felt by one participant that the AG Act is not intended to make the AG helpful to departments and agencies, and that the AG is mandated to serve Parliament and the Opposition rather than public servants.
• One participant mentioned the perception that some staff in the OAG had obtained promotions based on their "gotcha mentality".
• The AG Act was designed to prevent the AG from going into questions of policy formation, which belong to Parliament. Nevertheless, the Value for Money mandate has the potential for going into policy because it pertains in part to questions of governance.
• It was also felt that sometimes the AG, the Opposition and the media all worked together as external critics – this is a fact of life, and forms a kind of Kabuki theatre.
• It was recognized, however, that the AG’s mandate derives much of its credibility from the judgement of the AG in place, and that the current AG has shown this judgement.

Finally, the participants also discussed the legal frameworks that prevented sensible discussion of policy and the involvement of the public in policy discussion. The example was given of conflict in the case of scientists who are mandated both to undertake scientific inquiries to determine the level of certainty and to make decisions based on their findings. It was suggested that decisions should be made in a separate arena from the science.

1. Government should take the initiative in educating the media and parliamentarians on issues that involve risk; this should be done in the normal course of events, not in the immediate aftermath of tragedy.
2. The OAG should strive for greater balance in their presentation of critiques, including an examination of the process and the weighing of options.
3. Through their reporting, the OAG should try to provide more guidance to departments/agencies in carrying out their tasks.
4. Government should consider changing legislation – such as the Food and Drug Act – that limits public discussion and consultation on risks associated with decisions.

Report on Workshop 3

Theme:
Culture, Communication & Leadership

Examples of Factors:

• Ethics & values in the public service
• Departmental vision, mandates
• Messages vs. actions (walk the talk) by leaders
• Risk management (guidelines)
• Commitment to change

The participants began by discussing the public sector environment and the challenges presented by issues such as the increasingly large number of stakeholders, multi-tasking, the definition of the public good and lack of public trust in government. However, they recognized that these challenges made innovation and sensible risk-taking even more difficult, but also that the public service has no choice about becoming more innovative to respond to citizen demands for more efficiency and effectiveness.

The participants felt that ethics and values had a very important influence on attitudes towards innovation and risk-taking.

• Innovation is not recognized and rewarded in the public service. The question is how to sustain positive attitudes towards innovation in those public servants that display it, and how to persuade other public servants to adopt these attitudes.
• The participants also discussed the challenge of trying to change the attitudes of public servants who have become risk averse after having seen others punished severely for their mistakes.
• They believe that recognition of innovation as a public service value and investments in its promotion should be made an integral part of recruitment, training and on-going education in government human resources systems.
• However, the reality is that with high mobility in government, these investments in human capital may not always appear to pay off.

The participants also discussed the impact of leadership on the attitudes of public servants towards innovation and risk-taking.

• There is no doubt but that consistency between the message and the behaviour in leaders is key to improving attitudes to innovation.
• Furthermore, staff at all levels, not just the leaders, should contribute to defining the values that will be part of the "talk" that will be "walked".

1. Government should develop a system to prepare annual reports on the state of "intellectual capital" in the public service as a means of sustaining innovative thinking.
2. Upward feedback performance evaluation should be instituted systematically in all areas of government, and the results distributed through the system.

Report on Workshop 4

Theme:
Capacity & Systemic Issues

Examples of Factors:

• Lack of personnel
• Budgets cuts
• Timing issues (the time required to get decisions approved, etc.)

The participants discussed some of the elements that are needed to support innovative thinking and sensible risk-taking:

• clear guidelines on which risks are acceptable;
• time to think about and explain decisions;
• interesting challenges;
• adequate resources;
• a more collegial approach to work;
• incentives and rewards for innovative thinking;
• guidelines on balancing accountability with creativity;
• shared vision and clear priorities.

The participants also discussed some of the impediments to innovation:

• the lack of communication on mandates and directions that occurred with the removal of the middle-management layer in government;
• the loss of creativity resulting from the elimination of the pure research function;
• the complexities of managing horizontal issues.

The participants concluded that it was not budget cuts or reduction in personnel per se that had the strongest negative impacts on innovation and risk-taking, because these could also act as stimulants to creative thinking.

1. As a support to innovative thinking, each department that has a significant role in policy development should have a section devoted to the research function.
2. Core public service values should be clearly identified and reaffirmed by the responsible central agencies such as the Privy Council Office and Treasury Board Secretariat to departments and agencies, and by departmental leaders to their staff.
3. Departmental documents, such as business plans, should be made relevant to all staff, and should provide consistent objectives and directions.
4. The "middle manager" layer in the public service should be provided with the resources and tools necessary to communicate governmental and departmental mandates more clearly to staff.
5. To appropriately reformulate TBS directives which have been eliminated, corporate services should be re-engineered so that they have the authority and scope to develop new guidelines for managers and staff.
6. Larger budgets should be dedicated to improving capacity. These budgets should be based on reasoned plans and be auditable for results.
7. Government should develop initiatives which would integrate innovation into the public service culture by stimulating competition in "best practices" in innovation throughout the public service.

Report on Workshop 5

Theme:
Human Resources Systems

Examples of Factors:

• Incentives & rewards
• Performance evaluation, including recognition of innovation as a fundamental skill
• Training for teamwork, empowerment, risk management, etc. – for leaders & for personnel

The participants identified some of the factors that have had or continue to have a dampening effect on public service morale, and therefore on interest in innovation:

• downsizing, wages frozen over many years, general uncertainty about the future;
• a lack of mobility within and across departments, related to downsizing;
• recent Royal Commissions, public inquiries and other such initiatives;
• an unrealistic public demand for "perfection";
• a growing demand for accountability in the form of public blood-letting.

As well, other factors were identified as contributing to risk aversion in the public service:

• a traditional tendency towards conservatism in large organizations;
• a relatively high age profile in the public service which suggests a bias against innovation;
• no clear incentives for risk-taking, other than personal satisfaction with a job well done;
• changing expectations in terms of openness and transparency which conflict to some degree with political requirements;
• mistakes managers sometimes make in delegating work to people who are not qualified, and who therefore choose to avoid risk and play it safe;
• for managers, a lack of control over their work, their staff, etc., as identified in a recent APEX survey.

Several other diverse issues were also raised.

• There was some surprise expressed at the lack of discussion so far at the meeting about the role of politicians in inhibiting innovation.
• There was also some support expressed for the AG’s role as the "conscience" of public servants when contemplating innovation rather than as a disincentive.
• Participants believed that some comfort might be taken from the concept that public servants were cautious about risks for reasons of regard for public interest.
• One participant expressed the opinion that although rewards for success were larger and more immediate in the private sector, there was probably more potential for getting away with mistakes in the public sector.

Finally, the participants once again raised doubts about the reality of a lack of innovation in the federal government. The question was asked, "What is it that is not getting done?"

No specific recommendations were made by Workshop Group 5.

Note on "Champions"

Although the participants were asked to not only make recommendations on actionable steps in the workshops, but also to identify potential "champions" for these steps, none of the workshop groups addressed this task as time did not allow that part of the discussion to take place. However, it might be noted that in certain cases, "champions" are an implicit part of the recommendations (e.g. Deputy Ministers, Treasury Board Secretariat, etc.)

In other cases, as was pointed out in an afterword by a participant, there appears to be "a vital role for the Leadership Network, the Canadian Centre for Management Development, Treasury Board Secretariat and, of necessity, the Privy Council Office". Another participant suggested that champions could be identified in terms of their ability to inspire, their level of influence and authority, their credibility or their ability to devote the requisite time and energy to the cause, and that the weight given to these different factors would affect who or what organization might be chosen to lead the effort for improvements.

Concluding Remarks

A final comment by a participant related to the long-term effects of the type of extreme criticism that has sometimes been directed against individual public servants by public inquiries or Royal Commissions. The criticism affects not only the individuals directly involved, but also their colleagues and all public servants who witness these procedures. In the participant’s opinion, the organization involved can take as many as ten years to recover from this event, and some of the individuals involved never recover.