Innovative Capacity and Participatory Policymaking in Armenia

Government strategies and public sector reform agendas are reported as drivers of public sector innovation in Armenia (see Figure ‎3.1). These strategies, such as the PAR strategy, Government Programme for 2021-2026 and Digitalisation Strategy for 2021-2025 provide a strong impetus for innovation. However a lack of resources and capacity to implement these strategies (particularly in areas such as policy coordination, monitoring and evaluation and innovative methods) limits their potential impact. This gap between strategy intent and implementation capacity could explain why strategies appear to be a strong driver of innovation according to survey results, yet no significant causal relationship exists between strategies and public sector innovation. Weak linkages between government strategies and innovation indicate a potentially negative relationship between the two (OECD, 2024[1])1.

“Innovation: ie. Dissemination of innovative approaches in the field of development and implementation of public policy, is a priority, the use of the best available solutions and advanced technological capabilities is a paramount principle in the field of service provision, and the state is a creator, bearer and spreader of innovation.”- Public Administration Reform Strategy (Government of Armenia, 2023[2])

The PAR agenda is an ambitious reform programme which has the potential to make the public sector environment more conducive to innovation. The strategy offers systems-wide reforms that could better equip the public sector to innovate, including human resource reforms to help improve the recruitment and retention of talented experts. On a tactical level, the strategy supports several process and service delivery innovations including administrative burden reduction, life event approaches and sludge audits which provide strong demonstration cases of innovation. The strategy also introduces public governance reforms including a new strategic governance system and better policy design. These changes can embed innovative and participatory principles to improve systems-wide uptake of innovative and participatory approaches across many phases of the policy cycle. These reforms could also enable more cohesive sectoral strategies with links to transformation and reform goals. Table ‎3.1 maps prioritised strategic goals in the 2023 PAR Action Plan to potential opportunities to support public sector innovation (Government of Armenia, 2023[2]).

The 2021-2026 Government Programme and 2021-2025 Digitalisation Strategy set strategic directions that encourage public sector innovation and participation. The 2021-2026 Government Programme emphasises the importance of public administration reform, particularly in the face of crises and shocks such as COVID-19 and security issues (Government of Armenia, 2021[8]). It emphasises the need for increased capacity for strategic planning, policy development, outcome evaluation, data interoperability, and better cross-governmental coordination - all key elements to creating a strong enabling environment for innovation (Government of Armenia, 2021[8]). The Government Programme also makes clear the need for human resource reforms, notably on renumeration to attract the best talent to the public sector and performance management. The Digitalisation Strategy includes establishing innovative digital service standards, a digitalisation guide and principles (Box ‎3.14) embedding innovative approaches such as user-centred design, agile working methods and continuous improvement (MoHTI, 2023[9]).

The Armenian Centre of Government (CoG) plays an important role in coordinating public administration reform and changes to the strategic governance system. The Deputy Prime Ministers’ Offices supports the uptake of innovative and participatory methods by acting as the open government focal point, introducing HR reforms that aim to help equip the public sector to be innovative and spreading the use of innovative approaches such as sludge audits and life events. The PMO is working through PAR to build participatory government mechanisms and methodologies and a strategic communication function while simultaneously serving as the coordinator of the open government partnership agenda. However, CoG’s capacity to steer innovative initiatives remains limited due to few staff members with specialised competencies (e.g. foresight and network convening) and competing priorities.

CoG is working diligently to reform the strategic governance system to ensure top level strategies and cascading strategies, operational plans and programmes are fit-for-purpose, coherent, coordinated, implementable and evaluated. While strategies in Armenia appear to drive innovation, there is a lack of guidance and capacity to develop strategies and cascading efforts at the organisational and sectoral level (e.g. operational plans and programmes), particularly strategies which leverage participatory approaches (OECD, 2019[10]; Bertelsmann Stiftung, 2024[11]). This limits opportunities for coherence, interoperability and quality control. As a result, cascading efforts are often fragmented and lack important synergies and connections across sectors, resulting in siloed approaches (Bertelsmann Stiftung, 2024[11]; Davies and Vági, 2023[12]). Moreover, there is limited capacity for evaluation of strategies to understand if they are driving innovation and leading to improved outcomes. Many key strategies lack an associated evaluation framework to measure impact (OECD, 2019[10]).

The proposed changes to the strategic governance system provide an opportunity to better support innovation throughout the planning cycle and address some of the key challenges in strategy design, implementation and measurement. (Government of Armenia, 2024[13]). The PAR strategy acknowledges and initiates key actions to enhance capacity to design, implement and evaluate strategies. Together with the OECD SIGMA team, USAID, and other development partners, efforts are advancing to enhance this capacity. For example, the forthcoming strategic governance system will enable a more coordinated approach to strategic planning, budgeting, monitoring and evaluation (including a digital monitoring and evaluation tool) to ensure that all strategies are supported by budgets and implementation plans and that operational plans and programmes are achievable and linked to strategic priorities (OECD, 2024[14]). A number of best practice examples are already emerging, including the new outcome framework for the PAR strategy which demonstrates how the strategy will be evaluated, and the participatory approach that was leveraged in the design of the anti-corruption strategy, which included conducting stakeholder consultations and public outreach (USAID, 2022[15]).

“Every day at the highest level we hear about the need for the innovation, I believe it is really a sincere desire and wish of the political leadership. However this message is not always properly communicated to everyone to grasp and have a proper understanding of how this can be done.” – Research participant

Through the changes in the strategic governance system, CoG, notably the Department for Programmes Expertise (DPE) within the PMO, stands to play an active role in ensuring innovative approaches are consistently leveraged in strategies, programmes and operational plans. The Department for Programmes Expertise, serves as a centralised hub, contact point and resource for strategic planning. Through these responsibilities, DPE could create, disseminate and support teams in implementing innovative approaches in strategic planning such as a) co-creation of strategies, b) leveraging strategic foresight methods such as visioning, backcasting, horizon scanning and stress testing to strengthen the quality of strategies and operational plans. These practices in foresight, stakeholder consultation and co-creation in strategic planning, programme and operational plan development can be embedded into guidance, training and centralised support provided by DPE (see Box ‎3.1 and Box ‎3.11). For the team to serve this function, capacity building and additional staffing will be needed. Efforts to incorporate the use of design and strategic foresight are already ongoing with the support of USAID (OECD, 2024[14]).

Eventually, this role could be expanded through the creation of a dedicated strategic foresight unit in CoG dedicated to building capacity for strategic foresight, host a risk anticipation and centralised strategic foresight function, and/or host a signals bank for strategic foresight (Davies and Vági, 2023[12]; Monteiro and Dal Borgo, 2023[16]; OECD, 2018[17]). Examples of this include Singapore’s Centre for Strategic Futures is based in the Prime Minister’s office which coordinate cross-government foresight studies, monitoring shifts in Singapore’s operating environment and exploring trends and paradigm shifts (OECD, 2021[18]), and the Germany Chancellery’s Strategic Foresight Team which is a hub and facilitator of foresight learning, knowledge exchange and mega-trend analysis (OECD, 2021[18]). This function could also focus on risk detection and improving resilience, similar to the work of the UK Cabinet Office Civil Contingencies Secretariat which produces an annual risk register / resilience framework by leveraging strategic foresight techniques and other methods to understand and classify potential threats to resilience.

Through changes and refinements to the Armenian Transformation Strategy 2050 and coordination of future cross-cutting strategies, CoG could play a central role in promoting the use of cross-cutting and collaborative approaches to tackling structural policy challenges (Davies and Vági, 2023[12])). The Prime Minister’s office is responsible for the refinement of the Armenian Transformation Strategy which aims to steer the country and administration towards a bright future. This process of refining the transformation strategy could demonstrate a) how co-creation, strategic foresight and participatory approaches to strategy development can enhance their effectiveness, and b) can set key strategic pillars under which portfolios of innovation projects can be developed. Examples of transformation strategies such as Estonia 2035 and Lithuania 2050 showcase how governments have used cross-cutting strategies to define priority areas under which to stimulate innovative activities (see Box ‎3.2).

Public sector innovation is a clear priority on the political and leadership agenda in Armenia, but political volatility threatens continuity of initiatives (UNECE, 2023[20]). The majority of public sector innovations referenced in the OECD assessment survey (66%) were based on the idea of senior managers (OECD, 2024[1]). Moreover, intentional efforts, such as the establishment of the Ministry of High-Tech Industry, the revamping of the PAR strategy (introducing an action plan and evaluation) and investments in cross sectoral partnerships, particularly with tech and defence companies, have demonstrated this commitment (UNECE, 2023[20]; MoHTI, n.d.[21]). However, it should be noted that fragmentation and volatility in the political landscape and the need to find consensus amongst many political parties raise risks for the continuity of innovative initiatives (Bertelsmann Stiftung, 2024[11]).

In the context of political volatility, establishing stable innovation functions is crucial to supporting continuity of transformative innovation initiatives. Innovation supports could include a dedicated team with a mandate to support innovation (such as in Finland, South Africa’s Centre for Public Sector Innovation or Denmark’s Centre for Public-Private Innovation ), an innovation lab that manages dedicated innovation processes (see bottom of Table 1.2 for examples Chile, Portugal, Romania, Latvia and beyond) or bottom-up mechanisms (see examples in Table 2.2).

Collaboration functions in Armenia may be making innovation more difficult rather than supporting innovation2. Internal collaboration, collaboration with other public sector organisations, and collaboration with stakeholders outside the public sector were all raised as major challenges by innovators (81%, 77% and 71% respectively) (OECD, 2024[1]). Cross-government collaboration showed a negative association with public sector innovation (-30%) indicating the mechanisms for cross-government collaboration may actually be hindering innovation (OECD, 2024[1]). Research participants noted that many of the existing formalised mechanisms (e.g., councils, working groups, committees) are structured to enable senior participation and top-down organisation rather than stimulating grassroots technical level collaboration. Moreover, these mechanisms are perceived to consume significant time and effort while producing minimal results.

Mechanisms that enable technical level collaboration on innovation projects such as innovation ecosystems, mission-oriented approaches and innovation networks, are largely absent in Armenia (UNECE, 2023[20]). This results in lost opportunities to capture strengths across sectors, including the information and communication technology sector in Armenia which performs very strongly, as well as the Armenian diaspora which has high levels of educational attainment (UNECE, 2023[20]). Overall, constructive dialogue between the public and private sector is lacking, making it difficult to come together to innovate (Bertelsmann Stiftung, 2024[11]). Research has also found that academic and subject matter experts are not regularly consulted or engaged in policymaking (Bertelsmann Stiftung, 2024[11]). In particular, survey results showed that stakeholders are rarely consulted in implementing, monitoring and evaluating public policies and services. To better engage actors across sectors, many countries leverage mission-oriented approach to complex challenges, this approach could be considered in the Armenian context (see Box ‎3.3).

A public sector innovation network could also play an important role in stimulating collaboration and spreading of innovation (see Box ‎3.4). Innovation networks, typically hosted in CoG, are explicit forums to convene professionals with an interest in innovation to spread ideas and learnings, build capacity and enable collaboration on innovative initiatives. For this to be effective, public servants will need to be allocated dedicated time to participate and the network should offer capacity building activities or an innovation process that brings value to participants across sectors. Otherwise, it risks becoming an additional formalistic and time-consuming collaboration mechanism. The purpose and thematic priorities of the network should be closely aligned to the strategic priorities of the government (e.g. PAR priorities or future priorities of the Armenian Transformation Strategy). Network membership can expand beyond national level public servants to include actors from civil society, academia or the private sector as well as municipal level public servants as municipalities are often at the forefront of innovation projects (OECD, Forthcoming[28]).

The network could consider taking up the following functions:

• Host a train-the-trainer programme on applied innovation skills;

• Facilitate collaborative innovation processes, linked to the priorities of the government;

• Provide a space for collaboration and idea sharing across levels of government and sectors;

• Promote a collaborative and coordinated culture around innovation; and

• Share and spread innovative solutions.

The SDG Innovation Lab in Armenia has launched a Public Sector Innovation Community aimed at equipping public servants with cutting-edge tools and skills for evidence-based and human-centred policymaking. This network could be enhanced through provision of dedicated capacity building activities (with mentorship and support for implementing new methods and learnings in practice), an increased service offer such as a dedicated innovation process and closer linkage to government priorities and efforts (UNDP, 2024[29]). The network should align its initiatives to key strategic priorities of the government, work to address key skills gaps in the public sector and provide a safe environment for public sector actors to share challenges and opportunities in the innovation space. In the absence of an innovation network hosted by CoG (which is common for most innovation networks such as Romania, Latvia and Bulgaria), chairmanship for the network from within the CoG could help to align the network’s efforts to governmental priorities, build internal buy-in, increase membership and help ensure the network’s operations are part of a systemic approach to improving innovative capacity in the public sector (OECD, 2024[30]) (OECD, 2024[30]).

When implementing horizontal projects, research participants noted lack of trust and unclear allocation of responsibilities as barriers to collaboration. The PAR strategy attempts to dismantle siloed ways of working by instituting horizontal priorities and promoting integrated approaches to service delivery around life events which blend the responsibilities of different institutions (Government of Armenia, 2022[7]) (see Box ‎3.5). The pilot life events selected (birth of a child, paying taxes, loss of a relative, getting a pension) intersect with responsibilities of different ministries, demanding collaboration across ministries to improve user experience for the public.

High levels of resistance to this collaborative approach to life events were encountered, showing the need for culture change to enable innovation and collaboration (see Box ‎3.5) (OECD, 2024[14]). Shifting organisational culture will likely require strong leadership support for collaboration, user-centred communication outlining the importance and impact of efforts, a shift in the incentive structure (e.g. rewarding collaborative efforts through performance management and awards) and adaptive structures that enable collaboration (e.g. IT platforms conducive to collaboration, interoperable data and dedicated initiatives such as the life events approach) (Dong, 2023[32]). These potential enablers of cultural change are explored further in the next sections.

Most innovations in Armenia come from top-down initiatives, and research participants noted that organisational culture is not conducive to bottom-up innovation. In a hierarchical organisational environment, it is unsurprising that 66% of innovations in Armenia were based on the idea of senior managers (see Figure ‎3.4). Moreover, 69% of innovators noted that encouragement was an important factor in providing license to innovate (OECD, 2024[1]). This showcases the importance of having leadership support in driving and creating safe spaces for innovation to occur, particularly since organisational culture was cited by 74% of innovators as a challenge in implementing innovations, especially amongst professional level staff (OECD, 2024[1]). Many noted that the traditional culture in Armenia, paired with a culture of risk aversion and few explicit mechanisms to enable bottom-up innovation, makes it very difficult to propose and implement innovations. In this context, developing leadership capacity to manage innovation and risks and awareness of the value of innovation will be essential to empower leaders to endorse and encourage innovation.

A positive perception of the organisational environment seems to be an important factor in helping innovators feel comfortable and free to innovate. On average, innovators had a 22% more positive perception of their organisation’s support for innovation than non-innovators, including a more positive perception of the organisation’s support for innovation and of their organisation’s respect and value accorded to diversity. (OECD, 2024[1]). This signals the importance of a positive perception of context to create an environment conducive to innovation.

Establishing bottom-up support for innovation could help increase the volume and success of innovative initiatives (Kaur et al., 2022[34]). Research participants noted an absence of bottom-up support for innovation. Limiting the source of innovative ideas to senior stakeholders restricts the pool of ideas and risks missed opportunities to source ideas from technical-level public servants and the public. Mechanisms such as a dedicated innovation process through an innovation accelerator, incubator or design sprints could be particularly useful to Armenia as dedicated experts in guiding these processes could be funded and procured externally. Moreover, an idea contest could be an effective tool to support more participatory approaches to innovation, where public servants or the public can signal issues or propose innovative solutions. These mechanisms are explored in Table ‎3.2.

These mechanisms can create dedicated time and space for innovation: time availability was common issue for innovators, including 78% at the mid-level management (OECD, 2024[1]). They provide an opportunity for public servants to develop, prototype, test and pilot solutions on a small scale using experimental approaches and with the support of dedicated experts.

Many possible formats could work to support bottom-up innovation in Armenia. The selection of a format should take into consideration:

• Type of funding source and amount of funding available;

• Capacity building needs to operate the potential model;

• Administrative authority selected to manage the fund;

• Risk tolerance, and

• Management capacity and time required to administrate the mechanism.

The table below explores some possible formats for explicit bottom-up innovation support.

For these mechanisms to be effective, a minimum level of commitment will be required from participating public servants, executive sponsors and stakeholders across sectors. Moreover, project selection criteria are crucial to help select the most feasible, successful and impactful projects. The selection criteria for design sprints could include (OECD, 2023[46]):

• Is it linked to a government priority?

• Is there senior leadership support?

• Is there ability to fund and implement the potential solution resulting from this project?

• Is the problem you seek to address important to the government or users?

• Is there a project team committed to the project with the required subject matter expertise?

• Are all the organisations involved in the subject area engaged and willing to collaborate?

• Will the team be able to reach the relevant stakeholders and user groups impacted?

• Is there solid understanding, data, research and expertise to build on?

These criteria help ensure that projects have buy-in and backing to increase the probability of success.

“As public servants you have always heard the expression that initiative is punishable. To secure your job and be less exposed to risk, you try to stay within the status quo. from junior level public servants to the highest level.” – Research participant

Few acknowledge how important controlled risk taking is to the public sector innovation process. Of those surveyed, only 26% of respondents acknowledged that their organisation recognises and supports the notion that failure is an important part of innovation (OECD, 2024[1]). There is no risk management framework in Armenia which leaves leaders and public servants vulnerable and unguided when pursuing innovations (OECD, 2023[47]). 78% of innovators surveyed indicated risk management ability as a challenge for innovation (OECD, 2024[1]). At the political level, politicians are often forced to resign in the event of failures, which can disincentivise innovation as it often involves additional risk taking. Moreover, failures can also result in administrative or criminal charges (OECD, 2024[14]). This attitude towards risk permeates across management, professional and administrative areas, where doing something new is often less rewarded than maintaining the status quo.

Individual survey results showed that only 37% of public servants feel comfortable taking risks to pursue new ideas and do things differently (OECD, 2024[1]). Explicit support for innovation is particularly important to create a safe space for innovating where risks are controlled through small-scale trials and individuals are not personally responsible for the results (Table ‎3.2). Innovators demonstrated 8% more willingness to take risk than non-innovators, showing that willingness to take risk could be an important factor in willingness to innovate. Moreover, 51% of executives indicated willingness to take risks, 15% more than the average amongst respondents and more than middle managers and staff (OECD, 2024[1]). Innovation awards can help normalise innovative behaviours and encourage public servants to do things differently, combatting resistance to risk taking and innovation (Box ‎3.6).

Iterative policy and service design approaches enable risk mitigation and management throughout development, implementation and monitoring phases (Northern Ireland Audit Office, 2023[52]). Design sprints, sludge audits and other innovative approaches are designed with risk mitigation and management in mind. Many innovation processes establish explicit mechanisms to test solution plausibility in early stages of the innovation process to abide by the “fail fast” principle – i.e. try to minimise sinking costs into an innovation that is unlikely to deliver results (Box ‎3.7). For example:

• By leveraging user research in the problem definition and prototyping phases, solutions can be developed according to actual user needs rather than assumptions, increasing the likelihood of success.

• Solutions can be prototyped and tested before roll-out and scaling to be sure they work well before investing resources into their implementation.

• Agile and adaptive approaches to policy and service design support real time data gathering to evaluate results, with the possibility to update design features at any point to mitigate risks and unintended consequences and improve solutions to enhance outcomes (OECD, 2022[53]).

A diverse portfolio of innovation projects, with early-stage testing and stage-gated funding can help ensure that while each project demands risk taking, the larger portfolio is still likely to achieve its overarching goals. As innovation projects are typically designed in iterative ways, stewarding a diverse portfolio of innovation projects can require leadership capacity in risk management and training on how to manage a portfolio of innovative activities and processes that enable early-stage testing (OECD, 2024[14]). In these types of processes, a wide range of project proposals are selected, knowing that only some will make it to fruition. Some portfolios include a target fail rate, set in advance. More information about innovation portfolio management is available in the section: Supporting innovation funding and better portfolio management.

“The civil service fails to recruit and retain talent in the system. People who go through all the required procedures often do not match the nature and objectives of the job they have been hired for and vacancies often remain unfilled. On one hand we have standards, whereby personnel are going through a specific procedure to get into a system, however, in terms of innovation and creative thinking, these elements have never been recognised in these recruitment standards.”- Research participant

“We do have some highly qualified professionals in the public sector that are enthusiastic and work for the public sector because they want to produce something really good for their country. But there is a very huge competition for professionals with the private sector, and it is really hard to find such enthusiasts who are willing to be involved in the public sector.” – Research participant

Talent management, including recruitment and retention is one of the most significant barriers to public sector innovation in Armenia. Eighty per cent of innovators surveyed indicated staffing and management stability to be a challenge for innovation (OECD, 2024[1]). Research participants frequently mentioned low public sector salaries make it difficult for the public sector to recruit and retain talent (Government of Armenia, 2023[2]) (OECD, 2019[10]). The government is exploring reforms to the remuneration system however, a multifaceted effort blending improved career development opportunities, mobility, awareness of results and learning opportunities could also improve the public sector’s attractiveness as an employer (Government of Armenia, 2023[2]; OECD, 2023[55]).

“The procedures and functions of staffing and personnel management are in a poor state. We do not have standards for recruitment and promotion of personnel and remuneration in the public sector does not correspond to inflation. This is leading to turnover of staff in the public sector.” – Research participant

Measures in the PAR Strategy aim to improve human resource management (Government of Armenia, 2023[2]):

• A review of staff functions and job descriptions updated to reflect actual job conditions, including innovative factors such as technological development and new challenges;

• Realignment of job classifications;

• A salary review (considered only one important component to make the public service attractive;

• Renumeration and promotions based on excellent performance, including participation in programmes and collaborative work;

• Recruitment based on abilities, skills and potential, not just formal knowledge;

• Improved horizontal mobility to spread best practices and continuous capacity building, and;

• Training enhancements.

These factors reflect the need for a more innovative workforce with innovative skills that reflect modern work environment conditions. Such efforts should help equip the public sector workforce to be more innovative and in line with current workforce needs. To be effective, human resource professionals will need additional training, support and skills to guide this transition to a more coordinated model.

While Armenia develops a more strategic and coordinated human resource system, some mechanisms already exist to recruit specialised staff for the public sector. Ministries can hire up to 5% of their workforce as specialised experts. MoHTI can recruit up to 19% of staff through this mechanism, enabling a higher degree of specialisation. Moreover, the iGorts Program offers an opportunity for Armenians from the diaspora with specialised skill sets to work for the Armenian government for a period of one year. This programme has attracted experts in information systems, public communications, data analysis, and digital service enhancement (Office of the High Commissioner for Diaspora Affairs, 2024[56]). Scaling these programmes or establishing a hiring mechanism dedicated to innovation professionals could help increase innovation skills in the public sector as a stop-gap measure for the systems-wide absence of innovation-related competencies in competency frameworks and recruitment processes (see Box ‎3.8).

Intrinsic motivators help to encourage innovation in the Armenian public sector. Employees benefit and perform better when they are engaged, satisfied, challenged and stimulated in their work. Intrinsic motivation refers to participating in work because of personal motivation, passion, interest and enjoyment (Kotera et al., 2022[60]). In Armenia, important intrinsic factors and identified regulation – performing a behaviour due to the recognition of its value (Langford, 2023[61]) were the strongest motivators for public servants. Studies have shown that intrinsic motivators also tend to lead to long term motivation and positive outcomes, whereas extrinsic motivators tend to have shorter-term effects (Liu et al., 2019[62]; Cho and Perry, 2011[63]). High levels of intrinsic motivation are also important for reducing turnover intention, which is a challenge in Armenia (Cho and Perry, 2011[63]). To maintain these high levels of intrinsic motivation, a number of factors are important (Honig, 2021[64]; Bourini et al., 2019[65]):

• Levels of autonomy given to employees;

• Employee empowerment;

• Supportive management practices; and

• Providing employees with clear objectives and purpose.

All these factors should be considered in formalised human resource management frameworks, management interactions and nurturing of the team and organisational environment. Creating an enabling environment for innovation where public servants are encouraged to take ownership over their work and gain fulfilment from their efforts is crucial.

Survey results showed that extrinsic motivators are negatively correlated with innovation, indicating potential flaws in Armenia’s incentive structure for innovative behaviour in Armenia. This highlights that factors such as performance management and financial incentives (e.g. promotions) could be encouraging behaviours that are less conducive to innovation (e.g. loyal implementation, consistent delivery) rather than prioritising factors such as creativity, challenging the status quo and proposing new ideas. While on the surface performance management includes some criteria for innovation, and both performance management and leadership recognition were flagged as strong incentives to innovate, there seems to be a gap between those incentives and actual innovative practice.

To better equip public servants with the necessary skills to innovate, performance management could be better linked to learning and development opportunities. On paper, the performance management system in Armenia, consisting of annual performance reviews, which contribute to training needs assessment and incentives, provides incentives for innovation and skills development (OECD, 2019[10]). However, research participants noted that performance indicators relating to submitting reports on time, hours worked etc. are prioritised over a focus on impact, innovative behaviours and implementing new solutions. Finally, research participants noted that performance management approaches are not focused on constructive criticism, learning, curiosity and development as they are not closely linked to learning and development unless a poor performance score is given. Public servants whose performance is considered good are not encouraged in the performance cycle to take up training opportunities to further their development.

The Armenian Government’s Code of Conduct also encourages innovative behaviours, but this is not enough to provide public servants with the space to innovate. The Code of Conduct includes openness to innovative practice, applying international best practices and working collaboratively across sectors and with the public to find solutions to challenges (Corruption Prevention Commission, 2022[66]). However, awareness of the code of conduct is still not widespread, despite efforts to create a blueprint for each agency on how to implement the code as well as accompanying training courses and guidance. This is demonstrated by the fact that many public servants (45%) do not feel they have the autonomy to look for new ways to do thing differently and only 62% see finding new ways to improve the way they work as a responsibility. Survey analysis also shows that improving autonomy and support for innovation may increase the probability of participating in an innovation (see Annex A). In this context, introducing innovative behaviours in the forthcoming competency framework in Armenia as well as including innovation in job descriptions could be important for encouraging and normalising innovation. Competency frameworks, paired with strong workforce planning practices are becoming increasingly important with emerging trends in the labour market such as automation and higher degrees of workforce mobility (OECD, 2023[55]).

Current approaches to learning and development are not grounded in data on workforce skills, gaps and directions. OECD research shows that data is crucial to understanding the learning and development needs of the public sector and to measure and monitor the effectiveness of outcomes from learning and development practices (OECD, 2023[55]). Training needs assessments are not consistently conducted across the public sector workforce, making it difficult to identify knowledge gaps as well as allocate training resources in the most effective way. Furthermore, since human resource management is fragmented across institutions and training often delivered by a wide array of external service providers, it is difficult to understand the outcomes of learning and development efforts. Little is being done to probe potential future skills needs and gaps and understand the future of work in the Armenian public sector. Moreover, post-hoc evaluation to understand the effectiveness of training is not being conducted, including real time monitoring of the process of implementation of skills and knowledge in real work environments. Consequently, it is not clear if training is effectively addressing skills gaps. These issues are planned to be addressed through the PAR strategy.

The learning and development system in the Armenian public sector is fragmented and focused on traditional skills, making it difficult to access specialised training on innovation and plan careers in the public service. There is an absence of a learning culture (where learning is part of the job, expected and modelled by leaders) (OECD, 2023[55]). The issue of skills gaps was the biggest challenge identified by respondents, of whom 85% found the availability of required skills to be a challenge when implementing an innovation (OECD, 2024[1]). Research participants noted that staff with advanced skillsets in innovation often face better career prospects in the private sector, making it difficult to retain staff, even if learning opportunities are provided to staff. Despite the Civil service law naming the participation in training as an obligatory duty of public servants, research participants noted an absence of professional development, upskilling and training opportunities (Government of Armenia, 2021[69]). The PAR strategy envisages the establishment of a virtual learning and training platform as well as introducing a training policy which blends mandatory and voluntary trainings (Government of Armenia, 2023[2]). These trainings will include innovation-related skills including data science (Government of Armenia, 2023[2]).

Innovators showed much higher levels of skills in applied innovation than non-innovators. On average, non-innovators were 15% less likely to self-declare their skill levels as high or very high in applied innovation areas (including change management, social research, systems analysis, prototyping etc.) (OECD, 2024[1]). This signals the importance of equipping all public servants with the skills and competencies needed to innovate. Skills in applied innovation were highest in the health sector and lowest in the public order and environmental policy sectors.

Skills in prototyping, iteration and user centred design were low amongst survey respondents. This presents an opportunity for scaling the use of these approaches across the public sector. Moreover, in terms of sectoral differences, public servants in the environmental policy sector had lower innovative skills than respondents from the health sector. Development of innovative skills could be supported through better linkage between performance management and training and dedicated training programmes in innovation areas. However in Armenia, responsibilities for training and development are largely delegated to ministries and training provision is often procured due to an absence of qualified experts and trainers in the public sector (e.g. in a public administration academy), making it difficult to provide access to specialised training on a larger scale (OECD, 2019[10]). Furthermore, the procurement calls for trainers are rarely attractive to service providers. Building capacity in innovative methods has been included in the PAR strategy, including a mix of mandatory and optional trainings. In the absence of a systemic approach to learning and workforce development to date, initiatives have been incremental.

Alternatively, to improve skills specifically in the area of innovation, establishing an innovation lab, unit or network with a dedicated capacity building function could help accelerate the uptake of these types of methods. Innovation Labs typically leverage design sprint methodologies to guide public servants to understand and address a specific public sector problem by developing a user-centred innovation (see Table ‎3.2) and often use train-the-trainer models to expand the uptake of these innovative methods beyond innovation network members and sprint participants.

“We are not good at learning how to learn, if there is a best case in one institution, experience sharing, there is not this learning circle.” – Research participant

Few mechanisms exist to create learning loops in the public sector including innovation networks, collaboration ecosystems or communities of practice. Many best practices in the area of public sector innovation exist in Armenia, including those demonstrated by MoHTI (digitalisation principles), ISAA (digital identities) and municipalities (citizen offices, participatory budgeting approaches, etc.). Moreover, the UNDP SDG Innovation Lab Network has provided a forum for discussion, however, the network is in its early stages and a clear mandate has not yet been defined. As discussed in Box ‎3.4, if leveraged well, innovation networks can serve an important function in creating safe spaces for public servants to discuss best practices, challenges, failures and opportunities to help share learnings, learn from failures and spread good examples (Sørensen, 2017[70]; Cinar et al., 2022[71]). Innovation and failure awards can also help spread learnings around innovation, especially if used as a mechanism to gather and disseminate innovation and learn from failures and best practices (see Box ‎3.6).

One best practice example in Armenia on creating spaces for learning and discussion is the Information Systems Management Board’s meetings where the topic of what not to digitalise is discussed (noting that while digitalisation is often useful, some services are best delivered in paper or in-person format to certain users), and where the feasibility of various digital project ideas is explored. Further expanding these opportunities for open discussion around innovation (including successes, curiosities and failures) could help accelerate the development of impactful innovations and improve the likelihood of success for innovations.

Best practice cases in innovative methods such as user-centred design and administrative sludge audits are emerging and can be spread and scaled. Through the PAR Strategy, an innovative “sludge” methodology is being introduced to improve business processes and user experiences by leveraging user-centred, behaviourally informed approaches to service design (see Box ‎3.14). This method is being applied to twelve key life events including the birth of a child, purchase of a car, importing goods and registering a business. Projects led by the Armenia UN SDG Lab have also leveraged behavioural science approaches to improve tax compliance and cervical cancer testing and reduce plastic consumption (UNDP Armenia, n.d.[73]). Moreover, the Lab has used data innovation to leverage machine learning and natural language processing to improve maternal health, sustainable tourism initiatives, and enhance citizen-government correspondence (UNDP Armenia, n.d.[73]).

The Armenian public sector is introducing more consistent, replicable and innovative approaches to policy and service design. The digital service design principles developed by MoHTI provide an excellent example of service design methodology (see Box ‎3.14). These principles are largely applicable in the design and delivery of in-person services as well, in particular, simple language, the need for multi-skilled teams, the importance of user research, creation of measurable goals, simplifying procedures and forms, ensuring accessibility, working in agile ways and ensuring interoperability. Many countries have established guidance on policy and service design to create more uniform and user-centred approaches in these areas (see Box ‎3.11). Innovative methods of project management are emerging in Armenia, including agile and scrum methods and the uptake of innovative tools like Jira. The digitalisation principles showcase how these methods can be used.

Despite some emerging good practices in user-centred service design, a framework for policy design could be introduced to embed participatory and innovative approaches in this essential component of public governance. A consistent approach to policy design will help ensure that innovative and participatory methods are used systematically improve coherence and coordination on intersecting policy areas, and routinise monitoring and evaluation (see Box ‎3.11).

Administrative burden, including complex regulations, procedures and cumbersome paperwork consumes significant time and effort of the public and public servants in Armenia (OECD, 2024[14]) (OECD, 2024[14]). Reducing administrative burden through innovation could help save time and increase the effectiveness of the public sector. Administrative burden can include compliance costs (providing documents and information often to duplicate demands), learning costs (time taken to understand how to use / access a programme) and psychological costs (frustration, loss of autonomy, unnecessary stress, uncertainty) (Herd and Moynihan, 2018[78]). Numerous countries have introduced innovative approaches to calculating and reducing administrative burden to citizens and businesses. For example, Croatia’s administrative burden reduction efforts calculate the sum of costs over the scope of a lifetime on key life events such as issuing identity cards, passports, driver’s license, health cards etc., and follows the assessment with both vertical (directly related to the service) and horizontal (collaboration and cross cutting) measures that can be used to reduce administrative burden (Government of Croatia, 2024[79]). The sludge methodology shown in Box ‎3.5 demonstrates one approach that can be used to reduce administrative burden on specific services. Given that many public servants reported procedures and paperwork to be overly time consuming, an administrative burden reduction programme could help create space for public servants to dedicated time to more meaningful, fulfilling and impactful efforts.

Capacity to develop terms of reference for procurement of innovation and innovation specialists could be improved to increase access to innovative skills and increase the supply of innovations. 68% of public servants surveyed indicated procurement of specialised services as a challenge, and many other research participants indicated a lack of knowledge around the possibilities for and availability of innovative procurement options (OECD, 2024[1]). The digital service design team of ISAA has started providing informal capacity building on procurement of innovative solutions (providing consultative advice to teams). However guidance and training on how to develop terms of reference and manage the procurement of innovative solutions and skills could help compensate for the skills gaps in the public sector by increasing access to specialised professionals in the private sector.

Introducing specific mechanisms to procure innovation could help compensate for a lack of collaboration mechanisms between sectors and enable the development of solutions for unique problems. Research participants noted concerns around attempting procurement of innovation (which is typically more uncertain) out of fear of potential criminal or administrative penalties in the event of failure (OECD, 2024[14]). Official mechanisms for procurement of innovation can help incentivise companies to bring innovative solutions to the market (procurement of innovative solutions), or fund research and development in areas where solutions are not yet available (e.g. pre-commercial procurement or challenge-based procurement) (European Commission, n.d.[80]). In the second case, governments can build solution design, prototyping, testing and development of minimum viable products into the procurement process (see Box ‎3.12). By having an official mechanism for procurement of innovation, public administrators working in procurement can have a clear path to seeking innovative solutions, without taking personal risk and responsibility for the outcomes.

Armenia would benefit from establishing a mechanism to procure innovation for problems that the public sector is unable to solve and problems where pre-defined, traditional solutions are not fit for purpose. Such approaches are common across the European Union, where guidance and support is provided for (European Commission, n.d.[80]):

• Procurement of research and development.

• Procurement of innovative solutions that do not exist yet on the market.

• Procurement of solutions that are not widely available on the market.

Existing efforts are ongoing to establish digital infrastructure and procurement mechanisms that would enable more interoperable and innovative service delivery. The “Cloud First Policy”, adopted by the Government of Armenia, encourages the adoption of cloud infrastructure, including SaaS based platforms. This simplifies procurement by enabling the government to procure ready-made SaaS solutions rather than procuring platforms from scratch. ISAA is building a common cloud procurement unit to support accelerated procurement procedures and a pilot project is currently underway to migrate government ministry websites to the cloud, in alignment with the digital service design principles (OECD, 2024[14]).

“Leveraging digital tools has not only facilitated the provision of services but has also led to long term positive outcomes. For example, the prevention of corruption in the customs system.” – Research participant

Digital transformation efforts, including data interoperability and digital service design are clear examples of innovation in Armenia and are helping to accelerate the development and delivery of innovations (OECD, 2024[1]). Access to technology demonstrates the strongest positive association with innovation participation in the Armenian public sector, increasing odds of innovating by 57% when technology is accessible (OECD, 2024[1]). Moreover, skills in digital technology were shown to increase the likelihood of innovating by 35% (OECD, 2024[1]).3 This sheds light on the critical role of technological infrastructure in driving innovation. In addition to the digitalisation principles (see Box ‎3.14), the internal electronic documentation system, Yes em e-ID and the forthcoming national service delivery platform portal are not only innovative solutions themselves, but also make innovation simpler through streamlined service delivery, data sharing and management infrastructure, and data interoperability. As 80% of innovators noted technology availability to be a challenge and 77% cited data availability to be an issue, these platforms can be important tools to improve data interoperability and ease access to new or improved services.

To ensure these platforms are as effective and conducive to innovation as possible, strict requirements should be applied to ensure the usability of services (e.g. mandatory user testing), data interoperability (unified data fields, once-only principle) and accessibility requirements. The OECD’s Good Practice Principles for Public Service Design and Delivery in the Digital Age provide guidance on how to ensure services are delivered at scale while remaining accessible, ethical, and equitable by leveraging user research, participation and consistency (OECD, 2022[6]). This could include using innovative approaches like the GOV.UK forms creator to ensure uniform use of data fields (see Box ‎3.13). The Digital Service Design Principles in Armenia are aligned with these requirements (Box ‎3.11).

Numerous efforts under the digitalisation strategy promote the use of innovative approaches, notably through the digitalisation guide and the digital service design principles (see Box ‎3.14) (Government of Armenia, 2021[84]). The entire public should be provided with fair and easy access to services, consequently, public servants should be aware that providing all government services in digital form may not always be the best possible solution for users. The digital service design principles make clear the need to ensure that processes and services are user-centred, effective, accessible and efficient before moving them online. However, awareness of the digital service design guidelines and the digitalisation guide is limited, and capacity to implement the recommendations is even more constrained. Additional capacity supports will be required to ensure the successful roll-out of these guidelines.

Digital transformation and digital service design efforts should be regularly evaluated and measured. Digital transformation is a key political priority on the forefront of the national agenda, consequently public communication and knowledge of results is particularly important. Despite this, the 2021-2025 Digitalisation Strategy, which is the key strategic document guiding this process, does not include an evaluation, measurement or monitoring framework (UNECE, 2023[20]). Similarly, research participants indicated that many digital related projects have not been evaluated to understand their actual impact. Improved monitoring and evaluation can help better understand the impact of digital projects, equipping public servants with the motivation to continue their efforts, communicate results to the public and make improvements where they are needed most.

There is a mix of funding sources for innovation, however in many cases, funding dedicated to innovation within government is not available. 76% of survey respondents indicated funding availability as a challenge for innovation, with 41% of heads of organisations responding that no dedicated funding is available for innovation (OECD, 2024[1]). Moreover, the survey results show that awareness of funding sources was lower amongst heads of organisations who have not implemented innovations in the last two years. Overall, central funding was the largest source of funding for innovation, particularly amongst innovators. Survey responses also indicate a lack of awareness of funding opportunities for innovation, with 53% of non-innovators indicating that “no dedicated funding is available” vs. 33% of innovators (OECD, 2024[1]). Introducing a dedicated mechanism to fund innovation paired with capacity building support connected to make sure teams can use the funding effectively could accelerate bottom-up innovation (see Box ‎3.15).

Another approach to financing and steering innovation is through developing and financing a portfolio of innovation projects. An ‘Innovation Portfolio’ is a diverse collection of different investments in innovative activities and approaches (OECD, 2022[53]). Portfolio management, which is a common approach in the financial sector, is the management of a diverse distribution of resources (investment, time, human capital, etc.) between strategic options (OECD, 2023[45]). Given that innovation typically requires risk-taking, investing in a wide range of innovative initiatives, with varying degrees of risk, goals and complexity, can help ensure that the entire portfolio performs towards strategic goals, rather than depending on one-off innovations which may or may not succeed (see Box ‎3.16).

Development banks and organisations have funded numerous public sector innovation projects through project portfolios. For example, SDC’s South Caucuses portfolio (including Armenia) has included four primary outcomes, with aligned innovation activities (SDC, 2021[92]):

• Portfolio Outcome 1: Stakeholders engage in national policy discourses, decision making, regional knowledge generation, economic development etc. (including projects on consultation mechanisms, supporting independent media and building organisational partnerships);

• Portfolio Outcome 2: Strengthening democracy and public institutions (including projects on fostering active citizenship and non-violent conflict resolution);

• Portfolio Outcome 3: SMEs and producers generate income and jobs and benefit from improved access to skills, diverse markets, financing and services (including projects on building SME capacity, improving value chains and strengthening decision-making capacity); and

• Portfolio Outcome 4: Governments, CSOs, Academia and private sector actors have improved environment-related results (including projects on multi-hazard risk mapping, action research for disaster risk reduction and evidence-based policymaking).

These portfolio areas are supported by a mix of investments and projects, defined in a theory of change (including indicators, assumptions, outcomes) and measured through monitoring framework. By pursuing a portfolio approach, a diversity of innovative and participatory projects can be developed with the aim of achieving strategic goals. The diversity of projects helps diversity investments to ensure that, while results may not always be as expected, a positive outcome is likely to result from some of the projects in each portfolio area (OECD, 2022[53]).

The current portfolio of innovation activities is quite diverse, however anticipatory and adaptive innovation could be better supported (see Figure ‎3.10). To increase adaptive innovation, more data about users of public services would be beneficial to truly understand the evolving needs of users, including implementing a consistent user-centred approach and leveraging agile methods in the design of policies and services to adapt them to evolving user needs and governance contexts. This would require mechanisms like cross-sectoral partnerships, improved evaluation of strategies, policies and services, participatory processes and better data gathering and sharing (OECD, 2022[53]). To increase anticipatory innovation, skills development in strategic foresight across the entire public sector, paired with a dedicated strategic foresight function in the Centre of Government would be useful.

Training is needed to support executive leadership in managing a portfolio of innovative activities. Managing a balanced innovation portfolio requires a number of key elements (OECD OPSI, 2021[93]):

Through training, executives could be better equipped to make decisions on how the portfolio of innovations in their organisations can contribute to concrete strategic and policy objectives.

Overall capacity for policy and service monitoring and evaluation in Armenia is highly limited, making it difficult to identify where it needs innovation and whether innovations are producing positive results. Many research participants in this assessment and previous OECD research have indicated that capacity for monitoring and evaluation – across the strategic, policy, regulatory and service design levels is highly limited in Armenia (OECD, 2019[10]). This evaluation gap exists at the strategy, programme, policy and service levels. However, efforts are ongoing to grow this capacity, including initiatives led by the Ministry of Finance to evaluate outcomes of the budget programme as well as efforts through the PAR Strategic Governance System reform to include monitoring and evaluation in all strategies, with a linked public facing dashboard showing comprehensive monitoring of impact (OECD, 2024[14]). Similarly, some institutions such as the Tax and Customs Authority are leading by example by introducing annual reviews of strategic outcomes. However, as demonstrated in Box 2.8, integrating monitoring and evaluation in the policy cycle will be crucial to ensuring all policies and services are consistently evaluated to see if they are achieving positive impacts and whether innovation is needed.

Armenia should strengthen its capacity to evaluate innovative initiatives, such as re-designed or digitalised services, to measure, demonstrate and communicate the impact of innovations. Of those surveyed, only 64% indicated that their innovations were evaluated, and the findings of evaluations are not widely disseminated (OECD, 2024[1]). Many methods are available to understand the impact of innovations, including (HM Treasury, 2020[94]):

• Process evaluations: Collecting primary data to assess how the intervention or policy was implemented (e.g. measuring the number of people reached through a new service or policy);

• Theory based evaluations: Assessing how or why an intervention or policy has impact. For example, using a theory of change or logic model;

• Quasi experimental evaluations: Comparing outcomes for those who receive the intervention against those who do not. For example, using ‘difference in difference’ evaluation designs, or statistical matching techniques;

• Experimental evaluations: Comparing outcomes across people assigned randomly to either receive the intervention or not receive the intervention. For example, through a randomised controlled trial; and

• Cost-benefit analysis evaluations: Weighing up the costs and benefits of an intervention or policy using monetary values. For example, through a cost effectiveness analysis.

Improving capacity to evaluate innovations can help innovators understand the impact of their efforts, understand how improvements could be made in the future to avoid undesired outcomes and build a business case on the value for money of innovations and the potential for spreading and scaling of solutions. Furthermore, given the importance of identified regulation, discussed in the Section: Including innovation into performance management and incentives, it is important for innovators to understand the value of innovative efforts for them to be motivated to innovate in the future. By improving evaluation, innovators will have a clearer picture of the impact their work, examples of this can be found around the world (see Box ‎3.17).

Armenia has few internal audit functions focused on the performance outcomes of public sector institutions, making it difficult to know were innovation is needed most. Audit functions in Armenia are limited to external audit focusing on financial and legal compliance of public resources. Internal audit, a function which typically enables the identification of innovation opportunities by understanding where improvement is needed in performance, is limited in Armenia (OECD, 2019[10]), despite a legal mandate and efforts to enhance training for internal auditors (OECD, 2019[10]; Government of Armenia, 2014[97]). Amongst those surveyed, audit was named as the weakest driver of innovation and raised by research participants as a capacity gap. Furthermore, audit processes were indicated as a challenge for 57% of innovators. As capacity for internal audit increases in Armenia, opportunities for innovation may be easier to identify. Research participants noted that existing audit mechanisms, particularly external audit, is focused exclusively on financial expenditures and activities rather than outcomes and perceived as punitive. Participants noted that current audit processes are not sympathetic to innovation and contribute to a culture of fear and risk aversion.

Innovative approaches could enhance audit functions and improve integrity standards. Many audit offices around the world have created in-house innovation labs to improve the quality of audits, better leverage technology in auditing and simplify audit efforts (e.g. Norwegian Auditor General Innovation Lab, US Government Accountability Office Innovation Lab and Brazil TCU Colab i-innovation lab). These innovation labs provide innovative tools to enhance audit, such as digital resources (e.g. GAO’s Yellow Book which provides detailed guidance for auditors, including on how to do fieldwork and gather evidence and Brazil’s Roadmap for Risk Management) and offer training curriculum and communities of practice on areas such as public procurement, new language processing and data analysis. By leveraging innovative approaches, audit offices can equip public servants to better mitigate risks, safely leverage new approaches and tools and experiment without fear of punishment.

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