Networked Governance:
Changing the shape of government

by Bill Eggers

The shape of government is changing. Over the past six months I’ve spent time with hundreds of Canadian public officials, from deputy premiers, to federal executives, to mid managers at all three levels of government. These visits have convinced me that hierarchical government bureaucracy, the principal organizational model used to deliver public services for a century or more, is giving way to a fundamentally different approach.

Although the traditional model isn’t dead, it is being eclipsed by a new one, ‘governing by network’, in which executives redefine their core responsibilities from managing people to coordinating resources for producing public value. We see the manifestations of this trend in British Columbia, where 20% of all new infrastructure is now designed, built and operated by the private sector; in New Brunswick where provincial parks such as Mt. Carleton have been revived through public-private partnerships; and at the federal Ministry of Emergency Preparedness where success or failure in countering terrorism is highly dependent on how the agency leverages the capabilities of other organizations – both public and private.

In fact, most major public policy issues – reviving urban communities, better education, promoting economic development – require activating, nurturing and managing networks of federal, provincial and local governments, and private businesses, contractors and non-profits.

The movement from vertical to horizontal governance is a global development driven by growing citizen demands for more personalized and connected services, the plummeting costs of collaboration (thanks to the Internet and other new technologies), the rise in outsourcing, and a new attitude towards networking.

Canadians who routinely benefit from highly individualized responses in the commercial world are less tolerant of governments that insist on delivering uniform and disjointed services. Technological advances have enabled governments and businesses to coordinate activities with internal and outside partners to a degree simply not possible just 15 years ago. “Canadians are telling us, ‘Don’t treat me as five different people. Don’t ask me to repeat all my information many times’,” explains Carol McDonald, vice president of corporate services for Service New Brunswick, which has merged dozens of government transactions into common repositories for individuals and businesses.

Around the world, complex public-private, network-to-network collaboration models now operate, with varying degrees of success, in nearly every area of public policy. Private contractors, not public employees, now operate 95% of the welfare-to-work programs in Australia. In New Zealand, all highway infrastructure is designed, built and repaired by private firms. Dozens of United Kingdom school authorities have contracted with the private sector to not only build and modernize their schools, but also to operate them.

Meanwhile, many US federal agencies (including NASA and the Department of Energy) have become de-facto contract management agencies, spending upwards of 80% of their budgets on contracts. Demographic trends – the aging of the public sector workforce and the shrinking pool of younger, qualified workers – mean this development will almost surely accelerate.

INCREASING REACH AND INNOVATION
Driving the networked governance trend is the growing recognition that the traditional, hierarchical model of government simply doesn’t meet the demands of this complex, rapidly changing age. Rigid bureaucratic systems that operate with command-and-control procedures, narrow work restrictions, and inward-looking cultures are particularly ill-suited to addressing problems that often transcend organizational boundaries.

Bureaucratic approaches are also deficient in producing innovation. A host of lateral constraints restrict the interaction necessary to germinate good ideas, while vertical barriers prevent the developed ideas from sprouting and bearing fruit. Networks, in contrast, enable government to explore a wider range of alternatives involving a diversity of individuals and providers, thereby encouraging the kind of experimentation so critical to the innovation process.

Alberta’s Ministry of Education is using an open source network model to develop e-learning programs for schools. Teachers, parents and providers will all have the opportunity to contribute to and improve upon online learning modules.

Network approaches also enable government agencies to better reach their different customer groups in a way befitting their unique characteristics and interests – without incurring huge capital costs. The US Internal Revenue Service enlists software companies like Intuit and tax preparation firms like H&R Block and Jackson Hewitt as channel partners in its effort to get more Americans to file their taxes online.

The massive advertising campaigns from these IRS partners played a major role in convincing more than half of all American taxpayers to file their taxes online in 2005. Industry Canada officials are negotiating agreements with both the Canadian Federation of Independent Business and the
Canadian Manufacturers and Exporters Association to host public-sector government-to-business transactions and content on their websites. This would leave Canada’s Business Gateway portal as just one channel – instead of the channel – for such information.

“We’re trying to extend our reach and ability to get information and services out to key places where businesses go,” explains Industry Canada manager Dan Battista. Making it more convenient for businesses to conduct online transactions should result in greater business compliance with regulations and significant cost savings to government via reduced processing costs, Battista predicts.

CHANGING ROLES FOR PUBLIC EMPLOYEES
While government by network entails vast benefits, it also poses serious challenges that must be overcome. One of the most daunting is the people issue. The way to get ahead has always been through focusing on policy issues or demonstrating a solid ability to manage staff. Systems were designed to support narrow, repetitive tasks, accompanied by lots of supervision and little initiative.

With this shift, employees will be better able to contribute to public value, and will find more satisfaction in their jobs – but only if fundamental human resource changes accompany this transformation.

1. As a start, network management skills should take precedence over job descriptions. In addition to planning, budgeting, staffing, and other traditional skills, networking requires collaboration, negotiating deals and managing third-party service providers. People with these skills must be recruited and valued. Executives need to see through restrictive walls into relationships that might produce value; support managers with sophisticated skills in team-building, project management and risk analysis; and encourage front line employees who can collaborate with outside partners and quickly adapt to rapidly changing environments.

2. Employees need a much greater ability to move from project to project without sacrificing career advancement. Rules must be changed to allow employees to bring broad skills to projects.

FLEXIBILITY AND ACCOUNTABILITY
Balancing the need for accountability against the benefits of flexibility is a major challenge. The most valuable relationships are dynamic, learning relationships. In successful partnerships the goals and outcomes stay sharply in focus, but the inputs and processes change as required. One message I heard time and time again from Canadian civil servants was that managing in a dynamic way while keeping out of the crosshairs of the auditors, inspectors general and legislative committees may be the ultimate challenge of networked government.

The dilemma: retain as much flexibility as possible in the relationship, but do so in a way that keeps the vendor or government partner honest with consistent standards and outcomes. Because the essence of the network is its dynamic, not static, nature, the relationship must be structured to harvest innovative ideas. Even diligent efforts to define performance in a complicated arrangement fail unless they accommodate dynamic change.

“For networks to work, they need to be open to constant redesign, constant project management,” explains Cheryl Doiron, the deputy minister of health for Nova Scotia. As long as oversight agencies define accountability through narrow audit and control mechanisms, government managers will be reluctant to step into a broader role of greater discretion and risk tolerance. What they will need is the permission from control agencies and the political leadership to innovate – and at times even to fail.

John Singleton, Manitoba’s Auditor General, believes that a big part of the problem is the ‘gotcha’ nature of the political process where mid-course changes and corrections tend to be attacked as ‘mistakes’ and ‘failures’ by the party out of power, rather then seen as responding to the situation.

While there is little that can be done to change such political dynamics, government innovators might face fewer problems if they did a better job of educating others about the need for a more dynamic model. “Civil servants first have to be more open and transparent about the fact that changes are likely to occur in the future,” explains Singleton. “And then they need to build in a risk assessment process to ensure that when changes are made the appropriate adjustments are also made to the control and accountability mechanisms.”

A CHANGE OF THINKING
I’ve been traveling to Canada to learn and speak about public sector reform for more than 15 years. One thing I can always count on during these visits: a spirited debate about the efficacy of public versus private service delivery – many on the left still argue that private contractors are often corrupt and that anything resembling privatization equals government abdication; the right argue that the efficiency of the private sector is reason enough to undo government bureaucracies.

While an interesting debate, it has become stale in a world where public/private boundaries are increasingly blurry and governments of all ideological bents across the globe are partnering with private companies and nonprofit organizations.

The question is no longer whether a service should be delivered by a private or a public player, but rather, how the sectors, including nonprofits, should be arrayed and managed to produce the best services.

Whether it’s education, helping welfare recipients move into the workforce or yes, even health care, the issue today isn’t whether government will abdicate its responsibilities to citizens, but how to conceptualize, configure and manage a network of public, private and nonprofit providers in a way that produces more value for citizens for each dollar spent. This is where the debate has been shifting to in the UK, Australia, New Zealand and, to some degree, the US. As democratic governance increasingly means relying on networks to enhance the quality of life for citizens, it’s the discussion that needs to occur in Canada.



William D. Eggers is the global director for Deloitte Research–Public Sector, the research arm of Deloitte. He is the author of two new books on government reform: “Governing by Network: The New Shape of the Public Sector” (Brookings Press, 2004) and “Government 2.0: Using Technology to Improve Education, Cut Red Tape, Reduce Gridlock, and Enhance Democracy” (Rowman and Littlefield, 2005).