The Entrepreneurial Government
by Zachary First

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Amidst an apparently global pandemic of governmental chaos, gridlock and ineptitude, talk of the public sector’s role in “the entrepreneurial society” can sound ill advised, if not downright nutty.

Tell that to Peter Drucker.

A generation ago, forecasting the turbulent times in which we now live, Drucker identified building entrepreneurial management into the public sector as our “foremost political task.”

Today’s rapid pace of change—social, technological and economic—is, he wrote, both an existential threat to our public institutions and a tremendous opening for entrepreneurial initiative. For entrepreneurs are, in Drucker’s view, defined by their constant search for value in change. They “look out every window. And ask: ‘Could this be an opportunity?’”

Consider, for example, the changing nature of work. A recent major study of “alternative work arrangements”—temps, independent contractors, freelancers and the like—by Harvard’s Lawrence Katz and Princeton’s Alan Krueger revealed this shocking conclusion: All of the net employment growth in the United States between 2005 and 2015 is attributable to alternative work.

Since the 1950s, however, the safety net of health and retirement benefits in America has been built largely around the idea that someone would enjoy “lifetime employment” at a single company. The swift fading away of this old system for the burgeoning alternative-work population presents government with a profound challenge.

As it happens, this is a textbook case of what calls for government entrepreneurship. “Most innovations in public-service institutions are imposed on them either by outsiders or by catastrophe,” Drucker wrote. Basic innovations in military structure or strategy, for example, always follow “ignominious malfunction or crushing defeat.” America’s New Deal of 1936—which Drucker called “the greatest innovative thinking in recent political history”—was triggered by a Depression so severe that it threatened to tear apart the country’s basic social fabric.

The trick to making government entrepreneurship effective is to address the constraints that Drucker identified as unique to the sector:

  1. Public-service institutions are structured to focus more on budgets than results. Greater effort by a government agency typically brings the agency greater resources—and resources are often the measure of an agency’s value. Rare is the highly-regarded government agency that acknowledges failure and sloughs off yesterday’s cherished-but-ineffective programs in order to do more with less.
  1. The subordination of results to effort leaves public sector institutions without the clarifying “primary customer” of a business or nonprofit. Instead, government grapples with a multitude of constituents, each with their own veto power over any move that might diminish the programs that serve them. With government, no “customer” can ever really be turned away.
  1. When society entrusts public sector institutions with missions that are moral more than economic, governments respond by maximizing rather than optimizing their efforts. Pity, for instance, the official who brags of their agency’s efficient allocation of food to mitigate the effects of poverty on local children; the public would much rather hear that the agency will not stop working until every child in the community has been lifted out of poverty entirely.

The changing nature of work presents all three constraints: Society is, for the most part, uncertain what constitutes “results” in government programs aimed at helping people in alternative work arrangements; what is appropriate for an office temp struggling to make ends meet, moreover, may not be effective for a well-compensated app designer who likes being self-employed. Government’s ability to take an entrepreneurial approach to the employment safety net is hampered by the many constituencies currently served by established programs that were designed for a bygone economic era. And ultimately, we as a society are not at all settled on whether government’s role in responding to the rise of alternative work should be primarily moral or economic.

Addressing these constraints, Drucker writes, demands that government:

  1. Define the mission in terms of objectives, not programs or projects.
  2. Make objectives realistic—“genuinely attainable”—so that, eventually, the job can be declared finished. In some cases, of course, Drucker notes that this isn’t possible. For example, “administering justice” is not an attainable objective in human society; it is an eternal task. But such objectives should be the exceptions in the public sector, not the rule.
  3. Abandon an objective that has repeatedly defied achievement. The usual impulse, Drucker laments, is to throw more effort at an elusive objective instead of questioning the objective’s validity.
  4. Embrace change as an opportunity, not a threat. This demands building into policies and practices the constant search for innovative opportunity.

So, what could this look like in practice? One example to consider is the Aspen Institute’s bipartisan Future of Work Initiative, which recently issued a resource guide for policymakers. It is designed to show public officials the concrete steps that they can take to provide portable benefits and protections for independent workers.

Its approach is right in line with Drucker’s playbook:

  1. Instead of focusing on existing programs or projects, Aspen frames its mission in terms of objectives: reduce inequality, help workers get ahead, and facilitate access to training, benefits and protections to secure workers’ futures.
  2. Its primary objective so far is genuinely attainable: support and inspire local or state governments to work with “on-demand economy” companies to create portable benefits programs.
  3. It has chosen not to work on an objective at which others have repeatedly failed: stuffing people in the alternative workforce into the box of the existing employer-based benefits system.
  4. And it has embraced workforce changes not as a threat, but as an opportunity—to help people increase their employment flexibility and use on-demand work to supplement their income, without sacrificing their basic financial security.

These are just a few promising ideas for tackling one of today’s major social challenges. But they help demonstrate that entrepreneurship is just as vital for government as it is for corporations and nonprofits.

When you hear mention of public-sector entrepreneurship, don’t dismiss it as crazy talk. And just as importantly, don’t let government settle for superficial gestures, like publicly backed venture funds or tax policy tweaks, that lack clear and attainable objectives.

A healthy society needs an entrepreneurial government—one that looks out every window and asks: “Could this be an opportunity?”


About the author:

Zachary First is the Executive Director of the Drucker Institute. Follow him @DrZfirst.

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