The common perception is that, as a group, federal managers tend to be risk averse. However, new research based on data from the Office of Personnel Management’s annual federal employee viewpoint survey suggests that’s not exactly the case: Managers in both high-performing and low-performing organizations tend to be risk takers. They probably feel they have little to lose by trying something new. In contrast, it’s managers in stable, middle-of-the-road organizations who tend to be risk averse.
These insights are based on research by Sean and Jill Nicholson-Crotty and Sergio Fernandez in an article appearing in the current issue of Public Administration Review. To reach their conclusions, they applied a “relative risk” model to analyze survey response data from 2011 and 2013. They looked at survey data related to “managerial decisions regarding the encouragement of innovation, empowerment practices, and delegation of decisionmaking authority” to determine the extent to which these practices were used in different organizations across the federal government. The authors judge these management practices as “risky” since the end results cannot be known at the time they are undertaken.
The annual federal employee viewpoint survey generates data on about 28,000 workplaces across the government. The nonprofit Partnership for Public Service compiles the survey’s summary results in its “Best Places to Work” report. Detailed data are available to federal managers via a gated federal website, UnlockTalent.gov. But for the most part, the data are relatively unexplored by researchers. Parsing data like this—often called “People Analytics” in the private sector—is a serious endeavor and can be used to make important management decisions.
Why is this relevant now? The Office of Management and Budget released a preliminary management agenda in March 2017, promising to develop a comprehensive plan for the entire government by early 2018. In this agenda, it noted that “The Administration will . . . let managers manage.” This implies some OMB support for innovation, delegation and empowerment.
OMB notes that “the Administration will use available data to develop targeted solutions to problems federal managers face and begin fixing them directly by sharing and adopting leading practices from the private and public sectors.” The Crotty-Nicholson-Fernandez study is a good start in using available data.
Learning From the Data
According to the authors, “a relative risk model can help us understand the relationship between performance and managerial decisions under conditions of risk,” where relative risk is the probability of similar decisions being made by someone else, or in comparison to a level of performance by other organizations or your own organization in the past.
They go on to explain that they: “use a relative risk model from the private management literature in order to understand how several major types of decisions made by public managers are influenced by the performance of their organizations.”
And what do the trio of researchers mean by risk? “Risky choice is typically defined as behavior requiring investment or imposing potential costs when outcomes are uncertain,” they said, noting that “innovating is risk taking because it involves a novel way of doing something that may or may not work.” And this uncertainty holds true when delegating authority to employees as well as the use of collaboration and networks.
Why Managers Take Risks
Based on findings in the business management literature, the three researchers crafted hypotheses for similar behaviors by federal managers that, in sum, ask: Will federal managers promote more innovative activity or empower their employees with greater discretion when they believe their organizations are failing to meet, or are exceeding performance goals, relative to when they are just meeting those goals?
Their premise is that “the probability of major organizational change decreases as performance increases” and that managers will be less likely to undertake innovation, networking, and collaboration when they are just meeting goals relative to expected performance.
To test these hunches, the researchers analyzed employee perceptions of whether they worked in an organization that supported innovation and employee empowerment, based on 2013 survey data. They then arrayed these results statistically against the survey responses of how managers in those same units rated their organizational level of performance and mission accomplishment in the 2011 survey.
The results strongly supported the expectation that managers become more risk averse when they are just accomplishing their goals. Conversely, federal managers in organizations that are far exceeding or falling short of their performance goals tend to be more willing to take risks.
Implications for Policy
For policy makers, the research suggests that the success of efforts to incentivize innovation and entrepreneurial behavior, such as performance pay and employee empowerment, will likely depend on the existing level of organizational performance.
And at the agency level, when agency leaders want to find and encourage risk-takers, they should start by identifying their high- and low-performing organizational components. According to the research, federal managers at both extremes of organizational performance are more likely to be open to innovating, empowering their employees, and involving them in decisions. In contrast, managers in the mid-performing organizations may need to be pushed out of their comfort zones.
So while the conventional wisdom has been that managers in low-performing organizations will be more likely to impose greater controls, greater centralization, and less collaborative behavior within their operations, that’s not the case. Instead, managers in low-performing organizations may be more likely to innovate and empower the workforce. That’s an insight worth acting on.