Ask a passerby to name an innovative organization and a familiar list soon appears: Apple, 3M, Google, or eBay. If you probe harder, they might even name one or two innovative organizations in the public sector, such as the U.S. Department of Defense’s Defense Advanced Research Projects Agency, which some credit as the inventor of the Internet. Rarely will anyone name an organization that is innovating to tackle social issues.
Innovation is just as important in the social sector, where we need solutions to pressing problems such as obesity, homelessness, drug dependency, crime, and the education and health of our most vulnerable people. Tackling each of these issues is essential for the future success of the nation.
The last issue of The Public Manager explored the barriers to innovation in the social sphere. This piece examines how public sector organizations should go about building an innovation culture to tackle pressing social issues, including five key ingredients that can promote a culture of innovation:
1. Leadership. Senior officials and team managers at all levels must lead by example and make clear the importance of innovation.
2. Dedicated funding. Agencies must explore financing tools that help enable innovation.
3. Permeability. Organizations must create an open and permeable culture that allows truly cross-cutting innovations to take root.
4. Incentives. Organizations need to be responsive to employees and stakeholders and offer appropriate incentives to reward innovative approaches.
5. Strategic Planning. All of these elements must be united within a comprehensive, agency-wide plan for innovation.
Challenge Established Leadership
“Being innovative starts with having the guts to take risks. And whenever you try new things, chances are you are going to fail some of the time.”
— New York Mayor Michael Bloomberg, July 16, 2010
Public-sector leaders like talking about success, not failure—but New York City Mayor Michael Bloomberg is different. He has helped build a culture of innovation across the city’s agencies by encouraging his staff to take calculated risks.
Agency staff can be reluctant to try new approaches. In part, they know that where something novel does not work out, the media will quickly point the finger of blame. Plus, agency leaders who talk about the importance of innovation on a good day often join in the blame game on a bad day.
Leaders therefore need to be highly vocal and visible about the importance of trying out new ways of doing things. In New York, Bloomberg charged the Center for Economic Opportunity with finding transformative ways to reduce poverty. From the very start, the center was designed to promote innovation and experimentation. It scours the globe for innovative strategies that might help reduce poverty and then invests in pilots to see which ones actually work in New York.
For example, Family Rewards is a program modeled on a successful project in Mexico. It offers families cash incentives for health, education, and workforce development. When tested, New York City’s Center for Economic Opportunity found that payments focused on middle school and elementary school attendance and achievement were ineffective, so these tactics were dropped from the program’s second phase. However, the model proved successful at increasing high school achievement, and that outcome is now the focus of a second-generation pilot being rolled out across New York as well as in Memphis.
Leaders also need the courage to challenge established methods that often lead to mediocre outcomes. In New York, where high school graduation results were unacceptably low, Bloomberg has given principals considerably more power over their schools. They now can decide which teachers to hire and what support they want from the education department. In return, schools are more accountable, including having the responsibility for a public report card summarizing test results and how fast they are improving.
The result: a rapid increase in high school graduation rates from around 50 percent a decade ago to almost 70 percent now.
Develop Dedicated Funding
Funding is an essential ingredient for innovation to flourish. All too often, agencies find it easier to continue to fund an old idea, than support a new promising idea.
If an agency is to promote an innovation culture, it needs to think of funding in a different way. There should be small sum of money available for identifying and testing promising ideas and larger sums for proven innovations that merit scaling up. The so-called stage-gate approach ensures the right level of financing is made available to programs at different stages of their evolution. This method was used by the U.S. Department of Education’s Investing in Innovation (i3) Fund. The smallest i3 grants, up to $3 million each, were made available for programs that used an innovative approach to improve education outcomes but lacked sufficient data to merit scale. The largest grants, up to $25 million each, were targeted for innovations that already had proven results and needed support to scale up their efforts and increase their reach.
Second, agencies also should think about where it makes sense for government funds to be supplemented by contributions from private-sector nonprofits—especially for the most experimental ideas. Public money often comes with heavy strings attached—and it can be hard to explain to voters why it is being used for experimental ideas. Because foundations and philanthropists are used to funding innovation, often it can make sense for government to work in partnership with the foundation sector to support the most experimental of social innovations.
New York City has applied this approach with its most untested innovations often backed by funding from foundations and private sources. The Fund for Public Schools, for example, has raised around $150 million over the last five years from the private and philanthropic sectors to support initiatives such as an innovation zone that allows schools to try new approaches. If some of these approaches prove unsuccessful, political leaders are insulated from the claim that public money was wasted.
All too often, government agency leaders feel that they own the policy and program development process—and that outsiders have no real role to play. Truly innovative agencies are permeable when designing policies or programs. They are open to insights, suggestions, and feedback from both inside and outside the organization; they also are open to collaboration across organizations in their field.
Including agency staff is key to fostering a strong innovation culture. The government of the United Kingdom in 2010 launched an initiative called the Spending Challenge to help identify potential budgetary savings nationwide. Public-sector employees and citizens could submit proposals through a website. One proposal that was adopted changed how citizens received their National Insurance numbers, a code similar to a Social Security number. Instead of mailing plastic cards to every person in the United Kingdom, the government began sending a letter containing the number. This simple change will save $1.5 million per year—all because of an idea from an employee.
Seeking input from outside government also can assist with the design of policies and programs. For instance, the new federal Consumer Financial Protection Bureau has been working to replace two mortgage disclosure documents that totaled five pages into one double-sided, user-friendly form written in plain English, and which is actually of value to consumers choosing mortgages. Last summer, the agency field-tested two versions of the revised documents with consumers and with mortgage lenders to get their perspective on what worked best. The agency’s efforts earned plaudits from legislators, the American Bankers Association, and the Consumers Union, among others. Comments from consumers and brokers are being used to revise the forms further before they are approved for use nationwide. As a result, the forms are much more likely to be effective at helping consumers make informed decisions about new mortgages.
Agencies also need to be open to collaboration with external partners across their field. This year, Apps4Africa, a program run by the U.S. Department of State, will bring together local innovators, entrepreneurs, non-governmental organizations, and government officials in 15 African nations to develop local solutions to mitigate the problems caused by climate change. Competitions will be held in East Africa, West and Central Africa, and South Africa. Three winners from each region will receive help from private-sector companies and foundations to implement and scale up their ideas.
“Climate change is an enormously complicated problem; it’s not something that any one group or country is going to solve,” says Jeffrey Fox, an American Association for the Advancement of Science science and technology policy fellow in the State Department, who works on the Apps4Africa project. Fox calls the project “an all-hands-on-deck” approach that relies heavily on private-sector input and engagement with local partners.
Alter Incentives and Rewards
Many government agencies find innovating to address social issues unnatural. As discussed in the previous issue of The Public Manager, incentives in government can discourage rather than promote innovation.
Agencies need to alter incentives if they are to promote an innovation culture. One way is to ensure program funding is linked to carefully defined outcomes such as reduced recidivism or improved literacy, rather than merely funding activities. In the United Kingdom the government’s Work Programme outsources job brokerage and employability support to a small number of providers. Providers are paid almost entirely for outcomes, not activity. In this case the outcome is finding a participant that sustains employment for 26 weeks or more.
Furthermore, incentives are weighted to ensure the providers help those most in need. For example, the payment for helping a recent graduate with good work experience is relatively modest, but a more generous fee is awarded for successfully helping someone who is long-term unemployed and has an addiction problem.
The fee is paid regardless of what the provider actually did to get someone back to work. Structuring incentives in this way frees providers up to use all their knowhow to deliver the most effective programs. If one approach doesn’t work, the provider must change tack or lose out. Consequently, providers rush to copy what is working and drop what isn’t—and innovation flourishes.
In the United States, so-called pay-for-success bonds are likewise linking funding to outcomes. Massachusetts and New York City are developing America’s first pay-for-success projects focused on reducing youth recidivism and homelessness. Here again, payment is based only on social outcomes, not activity, which will allow external organizations considerable freedom in how they work.
Another way to alter incentives is to ensure that performance data is used as the primary basis for funding decisions. In the United Kingdom’s greater Manchester region in 2010, 15 local agencies delivered more than 200 solutions to reduce recidivism. After gathering extensive user feedback and performance data, agency leaders agreed to continue with just the five most effective interventions in 2011, sharing the costs and the savings between them. This is a bold move because Manchester’s agencies, like so many in the public sector, find it difficult to quickly stop poor-performing programs and instead move to trialing potentially more effective solutions.
Washington State’s Priorities of Government initiative uses a similar approach to direct resources to the most effective programs. The state has set 10 goals that encapsulate what government is working to achieve for citizens. Each goal has clear metrics, such as reduction in the rate of tobacco use. For each of these goals, the state identifies which strategies are likely to be successful with the help of the Washington State Institute of Public Policy, which collates information on the cost effectiveness of different approaches. This information is then used to guide funding decisions. As a result, innovative and effective approaches have often received support at the expense of traditional (and often ineffective) approaches.
Plan Strategically and Comprehensively
It sounds simple, but the most innovative agencies need a comprehensive plan to build a culture of innovation. They need to understand their strengths and develop strategies to address their areas for development. This means working across their policy area and thinking about how to promote innovation not just inside their agency but across their partners—such as schools, hospitals, or prisons.
One way to start is to use the Innovation Quiz developed at the Center for American Progress with support from the Rockefeller Foundation and others (available at /www.americanprogress.org/issues/2011/11/ipg_113011.html). The quiz asks 15 questions of agency staff and generates a personalized report on where innovation is most needed in the agency. It will help public managers know where to place most energy when developing a plan for innovation.
All too often, agency leaders think that the key to fostering an innovation culture in their agency is for them to say how important it is to them. That is certainly part of the answer, but on its own is likely to lead to little improvement. If public-sector agencies want to become more innovative, they need to take action across all of the five fronts set out in this article. By doing so, they will be able to transform their innovative capacity and ensure that their agencies are able to better address social issues such as homelessness, crime, climate change, and others that are essential to the future well being of the country.
Jitinder Kohli is a senior fellow at the Center for American Progress. Prior to joining CAP, Kohli was director general of strategy and communications for the British Department for Business, Innovation, and Skills. Contact him at firstname.lastname@example.org.
To read more about social innovation in the public sector, see Doing What Works’ series, Innovation for the Public Good, including the reports, Scaling New Heights and Capital Idea, and the Young Foundation report.