‘Hope is not a strategy’: how to change how civil servants think about risk

By on 20/03/2024 | Updated on 27/03/2024
Sarah Munby, the permanent secretary at the Department for Science, Innovation and Technology, speaking at Innovation 2024.
Sarah Munby, the permanent secretary at the Department for Science, Innovation and Technology, speaking at Innovation 2024. Photo: Rob Greig

For individual civil servants, it’s entirely rational to minimise risk-taking, permanent secretary Sarah Munby told Innovation 2024 – but organisations must innovate and experiment if they are to succeed. How can this awkward circle be squared?

“We are right to be risk-averse about a huge amount of what we do,” said Sarah Munby, permanent secretary of the UK’s Department for Science, Innovation & Technology. This is not currently the acceptable public stance on risk, she told the audience at Global Government Forum’s Innovation 2024 conference. When leaders talk about promoting innovation and a more entrepreneurial, experimental culture, she said, the approved “lines on risk are obvious: ‘The greatest risk for government is that we don’t innovate; that we fail to make the change that will enable us to answer the really big questions… How can you be so risk-averse?’.”

Yet in Munby’s view, risk-aversion is entirely rational in the government context. “We should not be self-critical that we find ourselves operating in cultures that are risk-averse. It’s not because we missed a trick or are doing something wrong or are a bit dim; it’s deep and structural in what we do,” she said. “And when you have a challenge like that, hope is definitely not a strategy. You need to do things to change the way people think about risk.”

The risks of risk-taking

Speaking in the session on Accepting and Embracing Risk in Government, the permanent secretary first outlined the dynamics that underpin the civil service’s risk-averse culture. For individuals, she explained, there are plenty of downsides to promoting an experiment – even if the experiment succeeds. “There’s a risk that people might not think it’s a good idea. There’s a risk that you do it and it doesn’t work, and that looks bad,” she said. There’s also “a risk that you do it, you scale it up, but you find that your colleagues have had their jobs, career structures and lives completely changed by it – and that feels pretty worrying as well.”

These calculations are skewed by the natural human tendency to value a possession lost much more than an opportunity foregone. “People aren’t just risk averse, but particularly loss averse,” Munby explained. “They like the things that they have, they don’t want to lose them; and we know that innovation often means change and taking away some of what you hold today.”

“When you start putting people into large organisations, the attitude towards risk is not helped,” she continued. For the organisation, it might make good economic sense to take a large number of moderate risks; enough will come off to more than compensate for those which don’t. But for the people holding those individual risks, the calculation is different: a single big failure will form a black mark on their career – so it’s sensible at the individual level for everybody to play safe. “When you put lots and lots of risks into a big organisation, even if everybody is acting rationally and sensibly,” said Munby, “people take fewer risks because the structure of the organisation doesn’t reward them.”

Those disincentives are stronger still in the public sector, she added: “We are literally dealing with people’s lives and people’s livelihoods, and we need to take care of that.” The outcome is a particularly risk-averse culture – and cultures are immensely powerful; they can be altered by reformed incentives, but not by warm words. The Treasury’s “Orange Book tells us about how we should think about our risk appetite: tells us we should define areas where we have a low-risk appetite; areas where we should have a high-risk appetite,” she said. “I don’t think that is good enough.”

Read more: Innovation 2024 as it happened – day 2

Risks and rewards

Within a risk-averse culture, Munby argued, it is not sufficient to simply designate a field within which people are permitted to take greater risks: “You need to really give them an enabling space that lets them do things that are different.” This can involve the use of ‘sandboxes’: secure testing environments where people can conduct experiments safely. “If you are a manager or leader, you are in some ways a bit like a regulator,” said Munby. “You help make the rules, and everyone who finds themself in a rulemaking role – be that formal or informal – should be asking themselves the question: where is my sandbox?”

Leaders can also address the discrepancy between organisational and individual rewards for risk-taking by working to “build portfolios of innovation,” she suggested. “When it comes to being an innovator, there really is safety in numbers.” Bringing together innovation projects “in the way that we examine them, structure them, and talk about them” can “give people the protection that comes from being part of a bigger picture,” she explained.

It’s obvious, Munby continued, that civil service leaders should both praise innovative people or teams, and increase the rewards for innovation by seizing on and scaling up successful experiments. More counter-intuitively, they should also celebrate failures. “The first car is always worse than a horse. The first time we try something new, it doesn’t usually out-compete the old solution,” she said. “It’s only through iteration and change that, over time, we get to a better answer.” So leaders must ensure that the lessons are learned from failed projects, and valuable elements taken forward – ensuring that “innovators see a bigger reward for success, but a bigger reward from failure as well.”

There’s a tendency, Munby argued, to portray businesses as nimble and innovative, and government as staid and risk-averse. But the inclination to “risk aversion and loss aversion that can make innovation difficult on the ground isn’t just an attribute of the public sector,” she said. “It’s an attribute of all of us as people. This is not a public sector problem; this is a human problem.”

That makes it particularly difficult to address, said Munby – but while the huge scale and human impact of the issues managed by government may contribute to civil servants’ risk-aversive behaviour, they also provide strong reasons to innovate in the pursuit of public policy goals. “How do we think about climate change? Changing technology? Challenges in public finance? Innovation is necessary to solve all of those problems,” she concluded. “We have to really work at dealing with this quite deep, serious, structural, legitimate and rational risk aversion.”

People at the centre

Munby’s thoughts chimed with those of Rohan Malik, UK&I managing partner for government and infrastructure at Innovation’s platinum global knowledge partner EY. Discussing the enablers of innovation in government, he argued that “the future of digital is human” – meaning that organisations’ ability to realise the potential of digital technologies is utterly dependent on the skills, behaviours and engagement of their workforces.

Fifty years ago, said Malik, 80% of the Fortune 500 companies’ assets existed in the form of “fixed assets: inventory, stocks, buildings.” Nowadays, though, half of their contemporary counterparts’ value lies in “intangibles. It’s intellectual property; it’s trust in brands; and it’s data.”

So in the modern world, organisations must focus on strengthening, upskilling and empowering their workforces if they wish to succeed; and they should think about how they can use technology to benefit both the public, and their own staff. “Think through, when you are embarking on the AI journey, what impact it can have to benefit not just citizens, but also employees,” said Malik.

Innovation 2024 was held on 19 and 20 March 2024. The event was supported by platinum global knowledge partner EY, and gold knowledge partners Appian, Capgemini, Defence and Security Accelerator, Google Cloud, IBM, Nortal, PA Consulting, VISA Government Solutions, Workday, and WT.

About Matt Ross

Matt is Global Government Forum's Contributing Editor, providing direction and support on topics, products and audience interests across GGF’s editorial, events and research operations. He has been a journalist and editor since 1995, beginning in motoring and travel journalism – and combining the two in a 30-month, 30-country 4x4 expedition funded by magazine photo-journalism. Between 2002 and 2008 he was Features Editor of Haymarket news magazine Regeneration & Renewal, covering urban regeneration, economic growth and community development; and from 2008 to 2014 he was the Editor of UK magazine and website Civil Service World, then Editorial Director for Public Sector – both at political publishing house Dods. He has also worked as Director of Communications at think tank the Institute for Government.

Leave a Reply

Your email address will not be published. Required fields are marked *