About Nesta
Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society. Nesta is based in the UK and supported by a financial endowment. We work with partners around the globe to bring bold ideas to life to change the world for good.
nesta.org.uk
About Collaborate
Collaborate CIC is a social consultancy that helps public services collaborate to tackle social challenges. We are values-led, not for profit and driven by a belief in the power of collaborative services, organisations and systems as a force for social and economic progress. We create partnerships that get beyond traditional silos to deliver credible change on the ground, working with partners and places across the UK. Our clients and partners span local government, the NHS, civil society and the private sector. Get in touch if we can help you via collaboratecic.com
Published September 2020
nesta.org.uk/new-operating-models-handbook
Design: Joana Pereira
Editor: Emily Reynolds
Nesta is a registered charity in England and Wales with company number 7706036 and charity number 1144091. Registered as a charity in Scotland number SCO42833. Registered office: 58 Victoria Embankment, London, EC4Y 0DS.
Authors
Ellen Care (Collaborate), Hannah Anderson (Collaborate) & Jenni Lloyd (Nesta) on behalf of the Risk & Innovation Workgroup.
Contributors
Anna Randle (Collaborate), Carrie Deacon (Nesta).
Thanks to Vicki Sellick for her input and help with reviewing and editing this paper, and to Katherine Zscharnagk for all her support.
About the New Operating Models Handbook
'Reframing Risk' is part of the New Operating Models Handbook, a set of learning products which explore the new operating models emerging in local government – how they work, what they look like and the key features needed to promote success elsewhere. It draws on the experience of the twenty pioneering Local Authorities participating in the Upstream Collaborative, which was led by Nesta in partnership with Collaborate from 2019 to 2020. The Handbook is made up of six parts:
Introducing New Operating Models for Local Government
From the Margins to the Mainstream: How to create the conditions for new operating models to thrive
Reframing Risk: How to adopt new mindsets around risk that enable innovation
Asset-Based Community Development for Local Authorities: How to rebuild relationships with communities through asset-based approaches
Meaningful Measurement: How a new mindset around measurement can support a culture of continual learning – notes from the field
A Catalyst for Change: What COVID-19 has taught us about the future of local government
What are new operating models?
New operating models describe a new way of working for local authorities that acknowledges the complexity and interconnectedness of social issues and the people and organisations that aim to tackle them. The work of the local authorities participating in the Upstream Collaborative, and the experiences of the communities they serve, has informed the development of a framework that characterises what new operating models look like in practice. The framework incorporates the often 'hidden' qualities which underpin this work, such as mindset, values and behaviours, alongside new practical capabilities and enabling infrastructure.
Find out more in 'Introducing New Operating Models for Local Government', part one of this Handbook.
If you'd like this publication in an alternative format such as Braille or large print, please contact us at: [email protected]
00. Introduction
Risk: the possibility of something bad happening
The idea of risk avoidance and aversion has become a dominant and crucial feature in the way public services are designed, managed and reviewed. Public servants are often tasked with managing the possibility of something bad happening, and services are designed to respond to and mitigate against these negative risks.
The problem is that too often, negative or 'downside' risks (children being abused in foster care, for example) are managed in ways that limit the opportunities for positive outcomes or 'upside risks' (children helping to co-design the type of care they receive), obstructing collective problem solving, mutual accountability, the ability of frontline staff to respond to the root causes of people's needs and the sharing of power with citizens.
This approach to understanding and managing risk in public services limits opportunities for innovation for two key reasons: it focuses on managing downside risks rather than enabling upside possibilities, and on organisational rather than societal risks – the risk of fraud, or abuse or neglect of vulnerable individuals, for example – rather than looking at the wider conditions that create disadvantage.
This paper, based on the insight and practical experiences of members of Nesta's Upstream Collaborative, explores how local authorities can reframe risk to enable innovation by widening the lens and expanding the space for downside and upside possibilities. This active learning network supported local government innovators to share, accelerate and assess new operating models that work upstream of social problems to help create the conditions that enable citizens' needs to be met in empowering and inclusive ways.
These local authorities represent some of the bright spots of public service activity, demonstrating more human and collaborative ways of addressing complex challenges. During the programme participants formed workgroups, collaborating around a challenge or opportunity relevant to their work and sharing perspectives and stories to amplify and improve practice.
This paper is written by Collaborate on behalf of the six local authorities and their partners who participated in the Risk and Innovation Workgroup: Cambridgeshire County Council, Cambridgeshire Community Services NHS Trust, ClwydAlyn Housing Association, Denbighshire County Council, Derbyshire County Council, London Borough of Newham, Staffordshire County Council, Surrey County Council.
01. The perception and management of risk
There is often a gap between the support that citizens need from public services and the support public services provide – a gap that sometimes results in services failing to produce the outcomes they set out to achieve. Some are unable to address the root causes of issues, serve organisations rather than people, or fail to respond to the complexity of the challenges people face.
One of the foundational principles of public policy is to 'do no harm'. It can seem almost inconceivable for risk to be allowed in an operating environment where public money is being spent, public scrutiny takes place and services are working with some of society's most vulnerable people. But in some instances it may be that failing to try new things or doing nothing at all is a risk in itself.
Rigour and attention to organisational risk is clearly required to ensure well-functioning institutions and accountability – but a bias towards financial and reputational risks can come at the expense of considering societal risks such as an increase in inequality and disadvantage or a disempowerment in people's experiences of public services. This organisational focus can preclude the opportunity to explore, experiment and reframe, and ultimately produce better social outcomes. As the introductory paper to this Handbook sets out, innovation is all too often inhibited and impeded by legacy mindsets, infrastructure and capabilities, and the focus that some organisations and managers place on preventing harm can impede opportunities for positive impact.
Illustration of two people working on laptops, possibly collaborating.
Figure 1: How the current approach to risk inhibits innovation, Collaborate, 2020
A diagram illustrating a cyclical process where:
* Public services fail to adapt and evolve to the current context
* Public services focus on managing downside risk and bias towards financial and reputational risk
* Limits the opportunity to see opportunities
* Limits space for innovation in pursuit of better social outcomes
This cycle then returns to public services failing to adapt.
Reframing risk
The Upstream Collaborative drew together local authorities who are designing solutions based on upside possibilities. The models of public service these places are exploring are relational, holistic, complexity-aware, bespoke and about sharing power with partners and citizens. These approaches rely on experimentation and learning through practice, and are ultimately better attuned to the complexity of many of the challenges public services need to address. To achieve this, a different understanding of 'risk' is required, often at odds with those typically managed in public services.
The Risk and Innovation Workgroup has redefined 'managing risk' as balancing a series of judgements in dialogue. These judgements involve seeking a new relationship between downside and upside risks and organisational (or systemic) and societal risks. Public services need to become more cognisant of which risk is being attended to (outcome risks or organisational risks, for example), how risk is managed (trust-based or metrics) and when risk is managed (proactive or reactive).
Illustration of two people discussing a chart on a screen.
02. What do we mean by 'reframing risk', and is it possible in the public sector?
Reframing risk requires us to reflect on how risk is conceived of, managed and measured. While this shift can be reflected in technical approaches to defining and managing risk in practice, the workgroup believes that the ‘reframing of risk' is predominantly a mindset and cultural shift – it is people's thoughts and beliefs that underpin how they act, and individual attitudes to risk can be deeply ingrained. Mindset is therefore one of the 'hidden' or implicit qualities of an organisation which can only be changed by understanding current perceptions of risk and working consciously to build new capabilities.
This does not mean encouraging recklessness, neglecting or rejecting the need to manage risk, or that organisational or service level risk are unimportant and should be ignored. Instead, a state of 'risk maturity' can help explore such risks in balance with societal risks. This creates space for 'upside possibility' – the potential for gains through innovation and experimentation, learning and adaptation while also holding the ability to manage the potential for loss.
In the experience of the workgroup, this needs to be done in partnership and dialogue with a range of stakeholders. The Joint Decision Making model adopted by Cambridgeshire Constabulary and partners, for example, helps them to review and respond to risk in line with their individual core missions and values, collectively navigating the tension between downside risk and upside possibility. The partnership sees responding to risk as an active, ongoing process that needs to be understood alongside a wider purpose about what these partners are there to do.
This collaborative approach involves drawing on a range of information and intelligence, assessing risk and developing a working strategy, considering powers, policies and procedures, identifying options and contingencies, taking action and reviewing what happens. Importantly, it supports partners to take active decisions – including electing to 'do nothing' in specific circumstances where this is in the wider interest of the community (e.g. facilitating a peaceful protest).
Risk-reduction
By exploring and re-weighting the upside possibility, public services may find that innovation can be a risk-reducing activity. For example, new approaches that prioritise bespoke support may reduce demand on other parts of the system, addressing the root cause of an issue and creating a better outcome, alongside a reduction of demand.
This was the hypothesis tested by Gateshead Metropolitan Borough Council through a public service reform prototype in which council tax debt was taken as a signal to explore the context of the debt. By shifting the focus from organisational risk to upside possibility, they learned that offering help rather than focusing on recovering the debt reduces potential demand into more acute, expensive services. This involved reorganising complex management processes to just four simple rules for how to work with people: interventions must be legal, necessary, proportional and auditable. Within this scope, frontline staff were empowered and supported to act in whatever way they deemed necessary to support people to thrive.
By freeing staff to create a different relationship with citizens, it was confirmed that council tax arrears can successfully provide a signal that people need help. By creating the permission to address people's real needs, the profile of demand on the system changed and outcomes were improved.
Managing downside risks while creating space for innovation is a key challenge for the embedding of new operating models in local government. It is through experimentation, innovation and learning that we will begin to make greater gains in improving social, economic, and environmental outcomes, ultimately reducing the greatest risks society faces.
Figure 2: The opportunity for a reframing of risk which enables innovation, Collaborate, 2020
A diagram illustrating a cyclical process where:
* Public services evolve and focus on the outcomes of that market
* Public services manage downside risk while seeing upside possibility
* Encourages and creates space for innovation
* The risk profile changes because we have refined new approaches
This cycle then returns to public services evolving.
The COVID-19 crisis has offered public services an opportunity to see that the framing of risk is not fixed, but can be altered to respond to changing circumstances. The primary focus and interpretation of risk was about keeping people safe, and all responses were designed to enable this – a clear example of how to reframe risk away from the organisational to societal, and one that should not be limited to a crisis response. The rapid adaptations that took place in public services in response to COVID-19 show that taking a flexible approach to risk can enable greater innovation and improvement.
Spotlight on: London Borough of Newham's COVID-19 response
The urgency and clarity of purpose provided by COVID-19 created opportunities to take a different approach to risk in the London Borough of Newham, directly translating into new ways of working. Rather than designing 'the solution', the focus has been on prototyping – starting somewhere and acknowledging that things might not be perfect but can be quickly changed and improved. For example, partners across the borough rapidly mobilised to protect rough sleepers, uncovering opportunities and solutions that were not previously possible when partners felt bound or restricted by traditional risk calculations.
This response required a reframing of attitudes towards the idea of 'failure' and 'risk': rather than expecting to manage and mitigate all risks through extensive planning, the focus was on iterative improvement. This framing was helpful for senior leaders, who are now taking learning from the crisis response and considering the wider implications for the way the council works.
As the COVID-19 paper within this Handbook sets out, research with Upstream Collaborative members throughout the initial months of the crisis offered insights into how public services rapidly changed how they judged and responded to risk. While the level of risk, particularly in terms of health vulnerabilities, increased dramatically during COVID-19, the response was largely to increase the space for innovation.
A clear, shared purpose across partners and the need to respond quickly led to the bypassing of bureaucratic risk management and governance processes and staff being given the power to iterate and adapt rather than waiting for a perfect solution. Societal risks were prioritised over immediate organisational risks and in some cases were one and the same, the space between them becoming narrower: the risk to organisational reputation was closely connected to whether space was cleared in pursuit of broader societal objectives. In other cases scrutiny was decreased, giving local authorities freedom to act: it wasn't just about how risks were framed, but the nature of the risk itself.
In this instance, increased risk was met with increased innovation and different parts of the system, including communities rapidly developing mutual aid networks, have been freed up to act quickly and effectively in response to a crisis. This experience should now act as a catalyst, providing a platform to build on and revisit old assumptions and habits about the interpretation and management of risk.
Illustration of two people working on laptops, possibly collaborating.
03. Reframing risk: questions of balance
The key to understanding risk maturity is expanding interpretations and responses to risk by exploring:
- Which risks gain attention and where we give focus to them
- How we seek to manage risk, and when conversations about risk and opportunity take place
- Who is involved in those conversations.
Rather than a binary 'either/or' shift that rejects the current approach to risk and replaces it with another entirely, a 'both/and' approach allows for an expansion of how we think about risk, creating more space for innovation.
The answers to these questions exist on a spectrum from the narrow interpretation of risk and narrow lens on how to manage it to a more inclusive interpretation that draws on a broader range of perspectives. By moving towards the latter, there is far more space in which to develop new answers to entrenched challenges.
Figure 3: Reframing risk: widening the lens, Collaborate, 2020
A diagram illustrating how risk interpretations can be widened:
* WHICH & WHERE: From "Organisation or service-level" to "Systems"
* HOW & WHO: From "Oversight" to "Trust & participation"
* WHEN: From "Reactive" to "Proactive & curious"
3.1 Balancing organisational-level response with systemic response
We have already set out the case for an expansion of focus from organisation- or service-level risk to include societal risks. But there are other ways in which a broader lens on a problem can help organisations think differently about risk.
Firstly, using a systemic lens to understand complex societal problems helps us identify issues with a potentially significant impact on people's lives and livelihoods. If we are focused on organisational risk alone, these factors are likely to be overlooked or ignored because they do not neatly fit in a single organisation's sphere of influence. Taking this approach also widens the potential field of collaborators – such as citizens and local partners – who can help tackle a complex problem, creating many more points of leverage and opportunities for innovation.
This systemic approach increases the choices for risk mitigation and makes things that may seem too big or risky for one organisation to pursue alone more palatable by virtue of collaboration and shared accountability. Again, this is not to imply that accountability becomes more diffuse, but that all stakeholders who can help address a problem share responsibility for doing so. There are a number of ways to assist with this sense of collective responsibility – through collaborative commissioning mechanisms such as alliance contracting, creating spaces for learning and collective problem solving, and developing principles for partnership working that promote mutual responsibility, transparency and shared decision-making.
3.2 Balancing oversight with trust and participation
The balance of oversight and trust is essential when exploring new ways of delivering public services. It is the relationship between the two that connects accountability with innovation.
The way risk is currently viewed in local authorities is often process-driven and hierarchical, driven by oversight and control. This can result in misleading interpretations of risk and a kind of 'gaming' of the system to protect the organisation. For example, high levels of risk may be hidden or underplayed to certain audiences (e.g. elected members, senior managers) as reporting them can be seen as a failure of control or management.
Alternatively, the level of risk may be overplayed due to fear of losing control. For example, one local authority described how they had been unable to engage meaningfully in co-production because the risk of 'letting go' without a predictable and predetermined outcome was seen as too great. This desire for tight control limits the space for creativity and innovation, and locks us into the known tried and tested approaches, even when they are believed to be sub-optimal or even damaging.
In order to expand the space for innovation, we need a more participatory approach to risk built on trust and transparency. Instead of a technical activity for professionals to maintain oversight, exploring and understanding risk should be an inclusive dialogue with a range of actors in the system. Each actor can bring their own expertise and insights to create a shared understanding of the challenge and the opportunity to do something differently, and be afforded the permission to be creative and experimental (within collaboratively defined appropriate boundaries) in order to find the best ways to achieve the outcomes we care about. By creating strong foundations of trust, we can create environments and cultures where people are comfortable to share their uncertainties, worries and challenges and work together to resolve them.
This focus on inclusive dialogue and trust building has been at the heart of the Cambridgeshire and Peterborough Best Start in Life model, which supports better outcomes for newborns and families through more integrated, place-based partnership working. To explore this model, partners across the system in Cambridgeshire and Peterborough committed time and space to develop an understanding of the roles of different actors in the system and to build relationships. Using these relationships as the foundation, they then committed to a long-term co-production programme to design the Best Start in Life model.
Spotlight on: Surrey County Council
As part of the COVID-19 response, the Local Resilience Forum (a partnership of organisations working on the pandemic response in Surrey) determined that outbound calls should be made to all residents who were shielding to check on their welfare and ensure they had access to supplies during their period of isolation. The decision that these calls should be made by council staff from across the county, borough and district councils was taken by the senior leadership across the partnership, but the logistics of setting up and running the operation were determined by a small project team.
Surrey County Council staff volunteered for redeployment to the virtual group of callers, which was set up in a very short time period. Basic training in call handling and safeguarding was given, but the team relied much more on creating a culture of trust which empowered the staff to do the job they had volunteered to do and to escalate issues and concerns as they encountered them. One way they built this trust was through a focus on relationship building among staff, with regular check-ins helping to create a culture of transparency and learning. A process by which fast judgements are made when safe to do so, rather than referring to a risk matrix for every decision, was also introduced. Peer support and opportunities to address both the practical and emotional aspects of the role were key to keeping the staff members, and the vulnerable people they were supporting, safe and confident in their ability to deliver.
Trusting people to innovate, explore and learn from what goes wrong as well as what goes right is enabled by a more mature and nuanced conversation about risk appetite. The appetite for taking risk will necessarily be different in different contexts, with the need to balance downside risk and upside opportunities varying across different service areas and issues.
Too often a blanket approach can stifle much needed innovation and experimentation. The spectrum of appetite for risk will likely correlate with the spectrum from oversight to trust; those areas where there is the least appetite for risk will likely have the highest levels of oversight, whereas areas with a greater risk appetite can work on more of a trust basis. However, it is also important for organisations to test and explore their perceptions of risk in relation to specific issues.
Spotlight on: Denbighshire County Council
In undertaking a risk appetite exercise, Denbighshire County Council recognised that it may be open to some types of risk and be averse to others, depending on the context and the potential losses or gains. However, the council also observed that if the collective appetite for risk were unclear as well not knowing as the reasons why this appetite exists - there could be erratic or inopportune risk-taking based on personal rather than organisational values. Alternatively, it can lead to an overly cautious approach which can stifle improvement and development.
As a response, Denbighshire developed a Risk Appetite Statement based on their Risk Appetite Framework, which distinguishes between different kinds of risk and levels of acceptance. This will be followed by support for managers and members to help them understand the council's position on risk and how to apply this in their decision making.
Figure 4: Risk Appetite Framework (adapted), Denbighshire County Council
|
AVERSEE |
MINIMALIST |
CAUTIOUS |
OPEN |
HUNGRY |
| Risk appetite description |
Avoidance of risk and uncertainty is a key organisational objective. |
Preference for ultra-safe business delivery options that have a low degree of inherent risk and only have a potential for limited reward. |
Preference for safe delivery options that have a low degree of inherent risk and may only have limited potential for reward. |
Willing to consider all potential delivery options and choose the one most likely to result in successful delivery while also providing an acceptable level of reward. |
Eager to be innovative and to choose options offering potentially higher business rewards (despite greater inherent risk). |
High oversight
High trust
