Building the right organisations: a neglected policy tool?

Posted in: Culture and policy

Stephen Muers is Head of Strategy and Market Development at Big Society Capital. This blog post is based on his time as one of IPR's Visiting Policy Fellows while in his previous role as Director of Criminal Justice Policy at the Ministry of Justice.

My previous post on this blog discussed the importance of culture and values in determining policy outcomes, and posed the question of how policymakers can promote a culture of learning and innovation. This post picks up that challenge and looks at one way in which it can be done: building organisations that embody the desired values.

Culture comes from organisations

It is commonplace for managers in any organisation to say that culture change is hard. All the unwritten rules and practices of any institution reinforce one another and can act like the immune system in a living organism, rejecting new ideas and preventing unwelcome change. This is essentially the point I made in the previous post about how culture trumps policy tools, but at the organisational rather than system level: leadership tools are defeated by organisational culture in the same way that macro policy tools are defeated by the culture of a whole delivery system.

Organisation building as a policy tool

If culture is vital to policy success, and organisations embody culture, then surely creating new organisations is an important tool for the policymaker. However, it not always considered as a primary option. Government often starts with the classic option set of regulation, expenditure (or taxation) or exhortation. There are good reasons for this: they fit around the main levers that governments have and can be universal in their application, promising national-scale results that the development of new organisations is unlikely to achieve.

However the previous analysis on the impact of culture shows that the promised rapid national impact of these traditional tools may be a mirage. Regulation can be complied with to the letter and not the spirit, or ignored entirely. Expenditure can be misused and the tax system gamed by those with more detailed knowledge than the policymaker and different incentives. Exhortation can easily be ignored entirely if it doesn’t resonate with someone’s underlying value set. An example that illustrates the value of organisational culture compared to regulation is the experience of the UK financial services system around the 2008 financial crash. There was plenty of regulation in place that should, in theory, have prevented reckless lending. Northern Rock, Bradford and Bingley and RBS all had compliance departments, audits and copious paper trails demonstrating how they had followed the rules. The internal incentives and cultures that they had developed, however, made those controls operate as an afterthought and an inconvenience to be worked around. In contrast, some building societies that had remained driven by a value-system that focused on safe lending to their local communities came out of the crisis largely unscathed. The potential policy question in this example is therefore: should the response to the financial crisis have considered actively promoting the growth of financial institutions that are driven by positive social values, as well as looking at regulation of the market as a whole?

Organisation building is not, of course, mutually exclusive to the other policy tools. The recent experience with addressing low wages in the UK is a good example. The National Minimum Wage is a very successful piece of classic national regulation[1] – but its success goes well beyond the existence of the legislation and the fact that compliance is widespread (in fact, as recent press investigations have shown, even this simple and popular piece of regulation, largely going with the grain of prevailing culture, is sometimes being avoided). Progress beyond the minimum wage to an increasingly successful national movement for a Living Wage has in part been driven by employers (both private sector and not-for-profit) who see creating a better deal for their employees as a central part of their value system and therefore are willing to voluntarily go beyond the national minimum. They then act as role-models for other organisations, exemplifying what is possible and making it easier for others to follow suit.

How can policy build organisations?

The simplest way for policymakers to build new organisations is to do so directly: create a new statutory agency, design its governance and choose the leadership so as to maximise the chance of it successfully embodying the desired values. This can work fine when a single national organisation is what is required. A good example is the move in several countries to create anti-corruption bureaus to tackle perceived endemic problems in existing public sector institutions. The Hong Kong ICAC is often seen as a very successful effort in this direction, copied more recently in several of the Eastern European states as part of their preparation for EU membership and also in African countries including Sierra Leone, Ghana and Malawi among others.[2]

In other cases, however, the new organisation (or organisations) may need to be more dispersed and further from government control. Also, the more closely an organisation’s creation is controlled by and associated with a particular government, the greater the risk that a change of political control will end up undermining it before any impact on the culture system overall has a chance to take effect. One route to adopting a more dispersed model is for government to establish the outline of a form for new organisations to use, and some supportive funding and regulation, but allow others to build the individual examples. The academy school programme supported by successive UK governments exemplifies the benefits of such an approach: academies are a new organisational form with a strong bias towards both independence from government and collaboration between chains of schools. The details of the particular culture and philosophy of education developed by each chain is left to them, rather than designed by the centre – but the net effect at a system level has been a significant impact on the overall culture of education in England.[3]

Moving even further from central government control, it is possible for policymakers to foster the development of desirable organisations that, once established, have little to do with government at all. For example charities and social enterprises have a particular ability to foster value change as they are explicitly value-driven organisations. Social enterprises do behave differently from other businesses in the same industries, with potentially socially advantageous results both directly and as a result of showing others what is possible (although hard evidence for the latter is limited[4]). Clearly government has little control over such independent bodies, which may well be dealing directly with consumers in a market with no government involvement. This doesn’t mean that policymakers can’t still play a role, though – through setting tax and regulatory regimes that benefit value-led organisations, for instance (take the creation of Social Investment Tax Relief). Such an approach is an indirect way of achieving impact, potentially with a long lead-time, and so is less appealing to policymakers under pressure to deliver results. However, if we believe that cultural change is generally essential to delivering social improvement, that such change is usually organic, evolutionary and slow, and that an ecosystem of organisations that adapt and support one another is likely to be needed, then this kind of approach has much to commend it.

Of course, just creating a new institution will not solve the cultural barriers to policy change. If the rest of the system doesn’t respond and seeks to undermine it then a new culturally distinct organisation will struggle. Indeed, many of the anti-corruption bodies have suffered this fate as political opponents seek to undermine them by cutting off resources, attacking the integrity and credibility of their leadership or simply ignoring their conclusions.[5] If a new organisation goes with the grain of other supportive trends in society, however, then it can be an important part of making a difference.

When is organisation building likely to work?

Like any policy tool, building organisations to embody a desired culture change (as opposed to building an organisation simply as a delivery channel for a policy intervention) will only be suitable in certain situations. The following criteria should be considered:

·         Are decisions made at organisation level the important ones to drive change? Some policies are directed at changing the decisions that organisations make, such as how businesses invest or how public bodies commission services. Others are much more closely related to individual choices. The latter are less likely to be amenable to an organisation-building strategy: the crucial cultural values are carried by informal peer networks rather than the sort of institutions that policymakers can build. It  is harder to see how the cultural changes needed to tackle individual choices about whether to drink-drive or abuse drugs, for example, are likely to be developed by new forms of organisation that are fostered by policymakers.

·         Do the key organisations need to be directly democratically accountable? There is a separate debate (which I will not cover here) about which decisions should be taken by directly elected representatives. There is an important link to this debate, however: it will be harder to develop institutions that embody a particular set of values if those institutions need to be directly accountable, as they will then necessarily adapt to the political leadership of the moment and the prevailing majority view in the electorate.  Also, if there is an existing set of elected institutions that monopolises the policy space involved, then there may be no room for new entry. The possible exception to this would be if the policymaker’s intention was to promote a culture of democratic responsiveness, either as an end in itself or as the best way of achieving flexible, innovative policy delivery.

·         What are the existing competitor organisations? No new organisation lands in a vacuum. If it is a threat to existing players in the same space, they may well attempt to damage it or to push its culture into a form with which they are more comfortable. It is important not to overstate this particular risk though: history shows that new values-driven organisations can thrive even in existing competitive markets. Mutual building societies, friendly societies and co-operatives grew in the late 19th and early 20th Centuries despite the presence of large shareholder-return driven financial institutions. Ethical businesses (those following Fair Trade principles, for example) have made serious inroads in large consumer markets such as coffee and chocolate. Heavy competition will make change via institution building a long-term challenge, but need not rule it out entirely.

The value of values

Building new organisations is just like any other approach to policy in that it will not work in all situations, there are different approaches that will suit different challenges and there are trade-offs to make around the timescale for impact and where control, accountability and impetus for innovation sit. I would argue, though, that if we take seriously the need to address culture and values when thinking about policy change – and the claim that effective change comes from experimentation, learning and evolution – then creating the organisations that have such an approach at the heart of their existence has much to commend it.


[1] Institute for Government “The S Factors” 2012
[2]Sousa. Anti-corruption agencies: between empowerment and irrelevance. Crime, Law and Social Change, 2009
[3] Woods, Woods and Gunther “Academy Schools and entrepreneurialism in education” Journal of Education Policy 2007 (Vol 22 issue 2)
[4] Peattie and Morley “Social Enterprises: Diversity and Dynamics, Context and Contributions” ESRC Research Monograph 2008
[5] Doig, Watt and Williams Investigating “success” in Five African Anti-Corruption Commissions U4 report 2005

Posted in: Culture and policy


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