When it comes to innovation in government, Ted Gaebler literally wrote the book. His 1992 best-seller, Reinventing Government: How the Entrepreneurial Spirit Is Transforming the Public Sector, written with co-author David Osborne, influenced a generation of public policy experts and managers. Gaebler and Osborne argued that governments needed to rethink industrial-era bureaucracies and develop new techniques suited to the Information Age.

Today, Gaebler is city manager for Rancho Cordova, Calif., a young Sacramento-area city that was incorporated in 2003. The National Civic League named the town one of its All American Cities for 2010, an award that’s based on innovation, civic engagement, inclusiveness and civic achievement. Last year, Rancho Cordova was picked as one of the best small workplaces in the nation by Fortune magazine and Great Place to Work, a research and consulting firm.

In this interview, Gaebler offers his thoughts on creating an environment for innovation in the public sector and tapping the talents of government employees.

You coined the term “entrepreneurial government.” What does that mean?

It connotes ownership and presumably owners are more careful with things than employees. They care about the bottom line, and they care about retaining the customer. If our employees think like owners, they will be more careful with resources; they will shut off the lights when they leave and, most important, they will think about ways to make money beyond just raising taxes.

When you go to work for government with your brand-new MBA degree, you usually are asked to leave half your brain at the door because all the government ever asks you to do is to focus on saving money. Entrepreneurial government gets our employees thinking about how they can raise money — so reusing existing resources fits into that, also not doing nonsense that doesn’t pay for itself.

How do you create an environment where it’s OK for employees to take risks?

Public employees are very fearful of doing something out of the norm that might cost them or their colleague their job — or worse, cost an elected official their job. They’re not paid to take risks and the system does not typically reward risk or failure, so what’s the point?

Author Ted Gaebler Defends California Business Climate 

Texas Gov. Rick Perry drew attention in February for a four-day “business recruitment” trip to California where he touted his state’s low taxes and sparse regulations to a select group of employers. A week later, Iowa Gov. Terry Branstad barnstormed the Golden State, calling it a “happy hunting ground” in his effort to lure companies to the Midwest. In this video, Ted Gaebler, city manager of Rancho Cordova, Calif., reacts to criticism of California’s business environment.

Yet, the nation’s 23 million public employees do creative things at their churches on weekends or at their yoga class. They chair committees, they speak in front of people and they raise funds. But we never tap into this wonderful wholeness of who they are. I thought: Why don’t I create an organization where people can bring those outside talents inside?

But if people are going to be creative, they can’t come into an environment that penalizes mavericks. I need to lend them what I call my “cloak of protection” from the City Council or the press if they do something innovative and screw up. I try to find early examples of actually protecting somebody so that they know that I have the capability to do that and the mindset to do that. Somebody who has been around a long time like me has a very long cloak.

Matrix teams seem to be an important concept for the city. What are these teams and why are they significant?

A matrix team is a group of city employees that is brought together to work on a task.. The members are cross departmental, cross function and cross job title. The teams work on issues that they care about. They might be choosing a new city logo, making a technology decision or choosing investments for our benefits package. They’re usually chaired by someone who isn’t a department head, but someone who has a passion to be a champion for that cause.

That has proven to be very successful. It usually results in a better decision — although not always — but it certainly results in a decision that’s understood by the people who will be affected by it. And it’s not imposed from the top.

Does the city have a formal way of surfacing talents of the staff?

I spend a lot of time personally investing in people — asking questions about their background and schooling. We also do a lot of work with DiSC Management style assessments. We have done 20 of them, and so we all sort of know what each other’s personality or management style is.

Another thing we do is bring in people from the academic community or from the media and let them ask questions. We’ve had visitors from Australia, China and Japan. We do a lot of reading of outside things, and we send a lot of people to conferences.

Aren’t travel and training some of the first things to be cut when budgets are tight?

The dumbest thing that governments do by far is cut back on investments in people and their training and skill building — these are the things that cause new ideas to seep in. You should invest in new ideas, new skills and new collaborative agreements during times of crisis.

We’ve had a budget surplus in every year since we started. We have $28 million in the bank now. But we are $10 million down from our high-peak year, so we had to have layoffs and cut backs. But we didn’t have anything that destroyed morale. We gave the people we laid off [enough] severance pay that made them go away happy.

Now I have money that I can invest in anything that comes along, and we haven’t missed a beat on training. And we still get very high approval ratings in our biannual public opinion survey. It is all a matter of choices. We cut back the number of cops, and we changed our pension system. Some people think they can’t change these costs, but governments have to evolve. I think that [our annual budget of] $47 million — with the possible exemption of the rental on City Hall — is all up for grabs and it is all optional.

We also do a lot here with food. We provide snacks in every room, and we provide meals constantly. I’ve been questioned about the cost. I am spending two-tenths of 1 percent of the general fund on food on average. But otherwise people would be leaving the building and getting in their car and driving away and breaking their continuity. Now we have continuity and culture. People are meeting and talking to each other. So food has been an amazingly good addition.

What role does technology play in what you are doing here?

The quickest way to reinvent governments is through technology. It is the least resisted way, and it is among the fastest ways to break down patterns of doing things because people accept it. Technology is the fastest way for me to achieve my objective, which is helping governments get better. So we have tried to embrace it.

I am not sure we’re at the leading edge of technology — I am pretty sure that we are not — but we are interested in where the leading edge is. We’re using virtual desktops and most of us have iPads. There are only four people here who get hard copies of the City Council agenda. We no longer have the big packets that go out and agenda deadlines and running to Kinko’s. We are past all that stuff.

All the council members have VPN access if they choose. Many of us can work at home and do. Our code enforcement folks use wireless iPads to do their stuff. And the cops, of course, all have computers in their cars. So the meat-and-potatoes productivity tools are there.

Photos: Ted Gaebler, city manager, Rancho Cordova., Calif. Photos by Jessica Mulholland

Steve Towns  |  Executive Editor