WINNING WITH RISK

There are many important routes to heighten the likelihood of developing successful programs and policies in the public sector. But over the years, in dozens of conversations, we’ve had one factor that comes up repeatedly: It’s critical to be willing to take risks.

Naturally we’re not talking about gambling with the public dollars without ample consideration, study and the search for evidence. Instead, we’re thinking about a truly calculated approach to entering new territory.  

This isn’t a new phenomenon, but we’d argue that risk-taking has grown ever more important in a fast-moving world in which new problems and opportunities seem to be cropping up on a regular basis. The mantra that “we’re doing it this way, because that’s the way we’ve always done it,” is not just outmoded, but probably a path that’s destined to result in missed opportunities.

We asked Don Kettl, professor emeritus at the University of Maryland and a close colleague of ours for years, what he thought. Here’s what he had to say: “With inescapable demands and an enormously turbulent environment, state and local officials need to learn how to take risks—to experiment with new strategies for solving problems, to explore how best to connect with citizens, and to learn—fast—about how to adapt to unpredictable changes. It’s a hugely exciting time but one full of enormous challenges, and it’s a time where business-as-usual leaders are doomed to fail.”

We also turned to William Hatcher, professor and chair of social sciences at Augusta University, and he added that “In our environment of political uncertainties and democratic backsliding, it is even more important for us in public administration to work toward solutions for the problems plaguing our communities. However, this will require state and local governments to take risks in solving public problems. But these risks need to be informed. Public administration can contribute through sharing expertise in helping policy makers devise evidence-based solutions and then implement those solutions in an effective, efficient, democratic, and fair manner.”

Added Brooks Williams, the city manager of Ferris, Texas, “Real progress in state and local government does not come from preserving every existing process or waiting for perfect certainty. It comes from leaders who are willing to take informed risks in pursuit of better outcomes for the people and places they serve. That may mean redesigning outdated systems, challenging assumptions that no longer hold, or trying a different way of delivering services when the old way is no longer enough. Too often, government treats inaction as the safe choice, when in reality doing nothing carries its own consequences, costs, and failures.”

Why do some city, county or state leaders avoid taking risks? One big part of the answer is pretty obvious. Every risk has a chance of resulting in a failure. And in a day when many election campaigns are focused on pointing out the mistakes made by a previous administration, elected officials can be pilloried during a campaign for potentially sensible risks that simply didn’t pan out as planned. Some years ago, we came across a quote that summed things up rather nicely: “The more society becomes focused on success the more failure gets stigmatized.”

Of course, fears of risk are the natural state of affairs for many human beings whether in the public sector or elsewhere. Tim Maniccia, chief fiscal officer and treasurer at the Hudson River-Black River Regulating District, pointed us to the work done by Daniel Kahneman and Amos Tversky, arguably the founders of behavioral economics. They theorized in their 1979 ground-breaking work Prospect Theory: An Analysis of Decision Under Risk, that humans fear losing what they have more than they value gaining what they do not have.

Williams adds a cautionary note: “Risk in government should never be confused with recklessness. Responsible public leadership means being transparent about tradeoffs, grounded in evidence, and accountable for results, while still having the courage to move before every variable is settled. The strongest institutions are not the ones that avoid risk altogether. They are the ones that build the capacity to take smart risks deliberately, learn from them, and adapt without losing sight of mission, stewardship, and service."

 So, how do we take risks while continuing to be good fiscal stewards? Haley Kadish, policy and budget director for Bernalillo County, NM suggests that “we must ensure that risk is productive. By this I mean we need to invest in measuring whether the risk we took worked. Having that answer builds credibility with both elected leaders and constituents so that we can take the risks necessary to be nimble enough to meet our communities’ changing needs while also remaining good fiscal stewards.”

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