What makes a modern and entrepreneurial regulator?

Kia ora and thank you for joining this first session of the 2020 G-REG conference.

The G-REG community has asked me to tell all about what it means to be a modern and entrepreneurial regulator over the next half hour, or so. That is no easy task, but I have happily accepted it.

Being a modern regulator

I will talk mostly about the second half of that question – the entrepreneurial part. But it makes sense to ask ourselves the question: is being a modern regulator a requirement for being an entrepreneurial regulator?

Around the world, we have witnessed a suite of regulatory reforms since the 1980s. Many of our old ideas on regulation have shifted rapidly. We have seen deregulation being replaced by re-regulation. We have seen a tendency towards less-intrusive regulatory tools being replaced by a tendency towards behavioural insights informed regulatory tools. We have seen performance-based regulation being replaced by risk-based regulation. And finally, regulators are no longer warned for being captured by vested interested but warned for not listening enough to their stakeholders.

Being a modern regulator is then often seen as knowing how to allocate limited regulatory resources well, and reduce societal, political, and reputational risks with great prudence. Being a modern regulator is seen as knowing when to speak softly to achieve compliance, and to guide rather than to rule. Being a modern regulator is seen as understanding the possible perils of disruptive technology, yet not be too precautionary and disrupt that technology’s progress. Being a modern regulator is seen as being transparent, accountable, inclusive, collaborative, and keep consulting and deliberating with regulatory targets and stakeholders.

On top of all that—and I quote former President Barack Obama because it sums up the rhetoric of the last ten years so well—a modern regulator is expected to ‘identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends’ (Obama, 2011).

Being an entrepreneurial regulator

So, there we have our bridge between the modern regulator and the entrepreneurial regulator. The modern regulator makes use of the latest insights. But the goalpost of what it means to be a modern regulator keeps shifting because of the “discovery” of even better, even more innovative, and even less burdensome regulatory tools, strategies, and systems.

And who is making these discoveries? Well, entrepreneurial regulators–or, if you wish, regulatory entrepreneurs.

The idea of an entrepreneurial regulator obviously brings together two concepts—that of entrepreneurialism and that of regulation. Let us have a quick look at both independently before we bring them together again.

What is entrepreneurialism?

The Merriam-Webster dictionary definition for entrepreneurialism is “having to do with the creation and development of economic ventures”. Likewise, the Cambridge dictionary definition for entrepreneurialism is “the ability to start new businesses, especially when this involves seeing new opportunities to make money.”

Both dictionaries are, however, quick to explain that in its day-to-day use the term entrepreneurialism carries a much broader connotation of far-sightedness and innovation. Thus, we can say that people who seek change in the long term have an ‘entrepreneurial spirit’.

In sum, the term entrepreneurialism describes the ‘mechanism’ of taking a risk now to get some return later, and the ‘virtue’ of visionary creativity.

What is regulation?

We do not have to look at the dictionaries to realize that regulation can be defined in a variety of manners.

Yet, there is a broad consensus that regulation seeks to influence the behaviour of individuals and collectives to make social interaction and transactions predictable and to reduce uncertainties by setting expectations and codifying consequences.

Keep in mind, influencing behaviour here means anything from affecting the types and products and services that people and firms produce, sell, and use, as well as affecting how they use such products and services, how they interact with each other, and so on.

Thus, an entrepreneurial regulator is…

If we bring these two broad definitions together, we roughly get to what it means to be an entrepreneurial regulator.

An entrepreneurial regulator is a regulator that has the vision to change the regulatory interventions, processes and systems that it uses to achieve behavioural change in individuals and collectives and is willing to take a risk and implement that vision, whilst acknowledging that nothing may come from it.

An entrepreneurial regulator can be an individual within a regulatory agency and the agency as a whole.

But is anyone with a vision and the desire to implement it an entrepreneurial regulator? Well, not really. It takes a little more than that.

What has academia to say about all this?

The phenomenon of the entrepreneurial regulator has not really landed in the academic literature yet. However, a related phenomenon has, the policy entrepreneur.

Scholars of public policy and public administration have for long been interested in those individuals within the public bureaucracy who seek to change how things are done, even when this is not their mandated or allocated task.

Why would these bureaucrats do this? Those working in the public sector are typically not considered entrepreneurial by society at large. Isn’t the idea of a policy entrepreneur or an entrepreneurial regulator an oxymoron?

More importantly, not only are scholars interested in why some individuals and groups within the public bureaucracy seek such change. They are also interested in how successful they are and why. If we get a better understanding of the conditions that are related to the success of policy entrepreneurs and entrepreneurial regulators, we can help others to be more successful too.

What is a (successful) policy entrepreneur?

The idea of the policy entrepreneur was popularized in the early 1980s by the American Professor John Kingdon. In his work, Kingdon explains that policy entrepreneurs can ‘be in or out of government, in elected or appointed positions, in interest groups or research organizations.’ Their defining characteristic, Kingdon argues, ‘much as in the case of a business entrepreneur, is their willingness to invest their resources – time, energy, reputation, and sometimes money – in the hope of a future return’ (Kingdon, 1984, 122).

This early work of John Kingdon has kick-started a whole body of research into what explains the success of policy entrepreneurs. Kingdon himself was sort of an entrepreneurial academic.

Now, let us fast-forward four decades and see what we have learned from the research on policy entrepreneurs, and particularly look at lessons that are equally applicable to the entrepreneurial regulator.

Attributes, Skills, Strategies

It goes without saying that I will not be able to talk you through over 40 years of research on policy entrepreneurs in great detail in the remaining time of this webinar. This also because I am very keen to link these insights to what, I feel, is required to be a successful regulatory entrepreneur.

Fortunately, my international colleagues have done a great job in summing up the research. Here is an overview of what they found:

Figure 1: Successful policy entrepreneurialism requires a combination of

Source: Michael Mintrom (2019), So you want to be a policy entrepreneur? Policy Design and Practice, 4(2), 307-323.

Over forty years of research has indicated that successful policy entrepreneurialism is an interplay of a range of factors, including attributes, skills, and strategies. Many of them necessary, but none of them sufficient.

Attributes

The attributes of successful policy entrepreneurs are qualities and characteristics such as ambition, credibility, sociability, the ability and inclination to perceive the psychological state of others (social acuity), and determination (tenacity).

These attributes are present, to more or less extent, in most people. But people may not always find themselves able to use these attributes. Here it is up to the regulatory environment—may it be a Regulatory Agency or a regulatory community such as G-REG—to nurture these attributes in people.

There are many ways to nurture such attributes in individuals and even groups. For example, regulatory agencies may wish to institutionalize processes that challenge their staff to share what they perceive as visons for better regulatory governance and practice. For example, last year, I was invited by WorkSafe to join a session of a cross-functional team that was designing a set of operational products for WorkSafe’s Operations Team.

The team was deliberately hosted outside of WorkSafe’s central office. No doubt, this gave them some distance from the day-to-day challenges of WorkSafe and think outside the box. The team was following a formal and fast-paced approach to developing and testing novel forms of regulatory interventions and alternatives to traditional interventions – the Agile Scrum methodology.

This specific structure results in much credibility for the ideas and solutions that the team comes up with, and at the same time nurtures their social and other qualities. Unfortunately, due to the current COVID situation, the process is put on hold.

Skills

Where attributes require a combination of qualities and characteristics that can be nurtured, skills are more about the expertise and competence of individuals and even groups

Skills can be learned. For example, how to think strategically and systematically is a skill that can be trained. How to build a team as well. Likewise, aspects such as data collection and analysis, making sound arguments, presenting findings, and negotiation and networking can all be learned. It may take some time to master these skills, but they are not impossible to achieve.

The G-REG initiative is an exemplary illustration of how skills can be strengthened—mainly through the Qualifications Framework and Continuing Education Workshops it is providing.

The strength of this set of learning programs, I feel, is that it is provided across the whole of New Zealand regulators. This, ultimately, cements base-level skills throughout the sector and allows those interested to learn more and improve their skills even further.

Strategies

Finally, the strategies discussed in the literature are, basically, about the required processes of successful policy entrepreneurialism. These strategies include how to frame the policy problem well, how to work with stakeholders and beneficiaries, and how to lead by example.

These strategies translate particularly well to a regulatory context. For example, to reduce tax fraud by households in the Netherlands, the responsible regulator has long shied away from harsh and highly visible persecutions of non-compliant households. Instead, for close to 25 years, they have used the slogan “Tax? We can’t make it any more fun, but we can make it easier”.

This is a typical example of strategic thinking about how to frame, and perhaps reframe, a policy or regulatory problem. In the early 1990s, the Dutch tax agency realized that much noncompliance by households is not so much the result of the amoral calculation on the side of those households, but often simply related to the complexities of filling out tax forms. Thus, the ultimate regulatory problem—noncompliance with tax regulation—was caused by another problem: people not understanding how to comply.

This insight helped the tax agency to think differently about how to improve compliance, and it used that insight not only to strengthen its regulatory interventions but also as a very successful branding campaign.

Where from here?

So far, so good for the academic literature. I hope that prospective regulatory entrepreneurs agree with me that we can learn a lot from studies on policy entrepreneurs and apply its lessons to entrepreneurial regulation. For those who are interested in reading more, I can strongly recommend reading the very accessible article by Michael Mintrom from which I have borrowed the figure. I will share it later with you.

But where to go from here? What broader lessons emerge from this literature that are helpful for regulatory entrepreneurs and entrepreneurial regulation? I will touch on three in time that remains.

First lesson

Being a successful regulatory entrepreneur and successfully engaging with entrepreneurial regulation asks for much more than having a bright idea and a desire to change the world.

To see that idea come to fruition a rich mix of qualities and characteristics (attributes), skills, and strategies are required. Many things are necessary, but none will be sufficient by itself. This is an essential lesson for individuals who see themselves as regulatory entrepreneurs.

In a nutshell, no individual will have all the attributes, master all the skills, and know all the strategies required for successful entrepreneurial regulation. Being successful in this area requires working with others, sharing ideas, finding a middle-ground. Few entrepreneurs have changed the world all by themselves.

On the flip side, it also means you are not alone in this – even though it may often feel as if you are when you do not see others jumping on the bandwagon of your bright idea.

Second lesson

This immediately gets me to the second lesson, which applies to individuals as well as regulatory agencies.

When we think of entrepreneurs, our minds drift to people like Steve Jobs from Apple, Cher Wang from HTC smartphones, or Elon Musk from Tesla. All these entrepreneurs had a vision and followed it. The same holds for entrepreneurial companies such as 3M, IBM, and an ever-growing list of internet ventures.

Yet, being an entrepreneur in the public sector is different from being an entrepreneur in the private sector. The private sector entrepreneur often has a grand vision about some sort of private good: bringing people better computers, bringing people better vehicles. In the public sector, our grand vision is about improving the public good.

But here is the catch: there is no individual or individual organization that precisely knows what the public good is. Your ideas about the public good, and how to improve it are coloured by your experiences, your biases, and your preferences. And those will be different from others who also want to change the public good.

This reinforces my earlier point that successful regulatory entrepreneurs will likely have to collaborate with others, but so do regulatory agencies. They will have to engage with their beneficiaries, with their targets, with their stakeholders, with their staff, and with other regulatory agencies if they want to be successful in their regulatory entrepreneurialism.

Third lesson

Not surprisingly, that then brings me to the final lesson, which is targeted mainly at regulatory agencies. Being a successful entrepreneurial regulator asks for providing your staff with an environment that nurtures their attributes and strengthens their skills. This asks, sometimes, for giving your team enough freedom and trust to operate within that freedom, as well as providing them with sufficient resources to hone their skills.

But doing so needs to be done with the full understanding and acknowledgement that it may not result in any outcome at all. After all, that is essentially what the entrepreneurial spirit is: you see an opportunity, you respond to it, and you hope for the best. It is a form of risk-taking.

To reduce that risk somewhat, regulatory agencies may wish to diversify their investments. Ideally, such diversification is done by running different ‘entrepreneurial programs’ in parallel. But if that is not an option, at least make sure there is real diversity within those programs. There is little point to bring together a group of people who, in one way or the other, look diversified from the outside but actually think the same. What you need in these programs is a mix of likeminded and different-minded people.

Conclusion

What binds entrepreneurial regulators together is that they all will start off their trajectory with a desire to make the world a better place. Sometimes they will succeed—sometimes they will not (cf., Mintrom, 2019). It is, however, essential to acknowledge and accept at the start of an entrepreneurial trajectory that no outcome or even an undesirable outcome may be the result.

What binds entrepreneurial regulators together also, is that they are not necessarily modern regulators. Very traditional regulators, such as the Dutch tax agency in the early 1990s, can be successful entrepreneurs. Thus, being a modern regulator is not a pre-requisite for being an entrepreneurial regulator.

Finally, not all regulators need to be entrepreneurs—or at least, not all regulators need to be entrepreneurs all the time. It is often good enough to keep an eye out and see what others are doing, what works for them, and what you may take from their innovations to apply in your context.

After all, contrary to the private sector entrepreneur, public sector entrepreneurs are not in the game for personal gain. They don’t patent their innovation or subject it to copyrights. Their creations are in the public domain and available for all to use.

In the G-REG 2020 Conference webinars that follow, some of our most entrepreneurial regulators will give you a glimpse behind the scenes of their innovations. I hope those help and inspire you to become an even more modern regulator.

Thank you.

References

Kingdon, J. W. (1984). Agendas, Alternatives and Public Choices. Boston: Little Brown.

Mintrom, M. (2019). So you want to be a policy entrepreneur? Policy Design and Practice, 4(2), 307-323.

Obama, B. (2011). Executive Order 13563 — Improving Regulation and Regulatory Review [Press release]

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