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Systems Approaches to Public Sector Challenges WORKING WITH CHANGE Systems Approaches to Public Sector Challenges WORKING WORKING W ITH CH ITH A NGE Systems Approaches to Public Sector Challenges WORKING WITH CHANGE This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: OECD (2017), Systems Approaches to Public Sector Challenges: Working with Change, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264279865-en ISBN 978-92-64-27985-8 (print) ISBN 978-92-64-27986-5 (PDF) Photo credits: Cover © shutterstock.com/snja. Corrigenda to OECD publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm. © OECD 2017 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgement of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. PREFACE – 3 Preface Complexity is a core feature of most policy issues today; their components are interrelated in multiple, hard-to-define ways. Yet, governments are ill equipped to deal with complex problems. Increasing automation of jobs creates new challenges for both the education and welfare systems. Ensuring a high-quality, active life for an ageing population puts pressure on the labour market, but also requires new ways of providing medical and social care. Climate change, obesity, radicalisation of social behaviours, income inequality and poverty are all challenges where causes and effects are blurred. No single public sector institution – from a solitary city to the central government – can provide adequate answers alone. In a context of complexity and uncertainty, traditional analytical tools and problem- solving methods no longer work. Similarly, traditional approaches to public sector reform have not delivered the expected results, reflecting poor design and weak stakeholder participation, sectoral rather than whole-of-government initiatives, and inadequate evaluation. These disappointing results have prompted government leaders across the world to ask: how do we reform differently? In particular, how do we manage increasing complexity and uncertainty? How do we deliver public services that adapt dynamically to produce viable solutions? Recognition of the “complexity gap” (the gap between the problems faced by institutions and their capacity to tackle them) has led to growing interest in systems thinking and other systems approaches such as design thinking. A “system” in this context can be defined as elements linked together by dynamics that produce an effect, create a whole new system or influence its elements. Changing the dynamics of a well-established and complex system requires not only a new way of examining problems, but also bold decision making that fundamentally challenges public sector institutions. This entails: 1) putting desired outcomes first instead of institutional interests and resource control; 2) promoting value-based decisions (instead of simply regulating) to allow individual organisations to set their own processes to achieve shared goals; and 3) designing functions and organisations around users – not government. Governments are struggling with adapting their policy-making approaches to account for complex system dynamics when tackling public challenges. Traditionally, public policy makers have addressed social problems through discrete interventions layered on top of one the other, building on a “cause and effect” relationship. However, these interventions may shift consequences from one part of the system to another, or simply address symptoms while ignoring causes. Governments are at a crossroads: much of their success in dealing with complex public challenges will rely on how public systems and policies are shaped. By calling for more holistic policy approaches that look at the whole system rather than the separate parts; that value outcomes over processes; and that embrace a variety of voices and inputs instead of self-interest, systems approaches have the potential to fundamentally transform SYSTEMS APPROACHES TO PUBLIC SECTOR CHALLENGES: WORKING WITH CHANGE © OECD 2017 4 – PREFACE the policy-making process, allowing policy makers to focus on areas where change can have the greatest impact. This report produced by the OECD Observatory of Public Sector Innovation (part of the Public Governance Directorate) explores how systems approaches can be used in the public sector to solve complex or “wicked” problems such as child abuse and domestic violence. Through the analysis of case studies, it describes how systems approaches can make public services more effective and resilient. The report contributes to the ongoing work of the OECD on exploring new ways of approaching public policy design and implementation, thus creating the foundations for stronger and more inclusive growth. The report explores the theory and practice behind the use of systems approaches in tackling public challenges. The first chapter addresses the need for systems thinking in the public sector, its theoretical underpinnings and its (rare) use. The second chapter identifies a set of tactics (people and place, dwelling, connecting, framing, designing, prototyping, stewarding and evaluating) that government agencies can deploy either unilaterally or with partners to promote systems change. The third chapter provides an in- depth examination of examples of systemic change in preventing domestic violence (Iceland), protecting children (the Netherlands), regulating the sharing economy (Canada) and designing a policy framework for conducting experiments in government (Finland). This report is an open invitation to policy makers to reflect on the systemic nature of most public sector challenges and consider how systems approaches – such as those based on integrated interventions, stakeholder engagement and reverse process engineering – can help achieve better outcomes for all. Rolf Atler Director for Public Governance, OECD SYSTEMS APPROACHES TO PUBLIC SECTOR CHALLENGES: WORKING WITH CHANGE © OECD 2017 ACKNOWLEDGEMENTS – 5 ACKNOWLEDGEMENTS This report was prepared by the Observatory of Public Sector Innovation in the Public Sector Reform Division of the Governance Directorate of the OECD. The Observatory of Public Sector Innovation collects and analyses examples and shared experiences of public sector innovation to provide practical advice to countries on how to make innovation work. This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 671526. The report has been prepared by Justin W. Cook (Senior Lead for Strategy at the Finnish Innovation Fund, SITRA and Member of Rhode Island School of Design) and Piret Tõnurist (Policy Analyst, Observatory of Public Sector Innovation, OECD) under the coordination of Marco Daglio (Senior Project Manager, Observatory of Public Sector Innovation, OECD). The report resulted from the close cooperation with case owners, whose work was covered in the report. Special thanks to Joeri van den Steenhoven, Idil Burale, Mikko Annala, Alda Hrönn Jóhannsdóttir, Marta Kristín Hreiðarsdóttir and Marc Dinkgreve, who opened their doors to the OECD research team, and to the numerous people who participated in the interviews. The full report benefited from comments provided by Edwin Lau, Marco Daglio, Andrea Erdei, Alex Roberts, Matt Kerlogue, Cezary Gesikowski and Jamie Berryhill. Dan Hill and Marco Steinberg help was essential in distilling key lessons from system change practice during the event. Special thanks to all the experts who sent in their comments. Marie-Claude Gohier, Liv Gaunt and Andrea Uhrhammer helped with the preparation of the final publication. Bettina Huggard and Susan Rantalainen provided administrative support. Rolf Alter, Director of the Public Governance Directorate of the OECD and Luiz De Mello, Deputy Director have been essential in spearheading and disseminating the work in international policy making networks. SYSTEMS APPROACHES TO PUBLIC SECTOR CHALLENGES: WORKING WITH CHANGE © OECD 2017 TABLE OF CONTENTS – 7 Table of contents Executive Summary ............................................................................................................................ 9 Chapter 1. Systems approaches in the public sector: From theory to practice ......................... 11 Introduction ..................................................................................................................................... 12 Managing complexity in the public sector: The case for systems approaches ................................ 14 Challenges of using systems approaches in the public

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