Instead of funding actions, we need to fund results: an entrepreneurial model for streamlining the public sector
Avi Hasson, former head of the Israel Innovation Authority, proposes a 'Pay for Success' model for the public sector. He argues that the current incentive system focuses on processes rather than real impact.
In a conversation with Dr. Yossi Maaravi, Dean of the Adelson School of Entrepreneurship, and student Maayan Snir, Avi Hasson, the first head of the Israel Innovation Authority and former CEO of Startup Nation Central, brings a unique perspective that combines deep familiarity with three sectors: private, governmental, and philanthropic. Hasson defines the Israeli technological ecosystem as "Impatient Innovation" — breakthrough innovation that does not wait for certainty but moves quickly toward opportunities. However, he identifies a huge gap between this creativity and the way the public sector is managed.
The problem: the government buys actions, the citizen waits for results. "In the public sector, a situation can arise where there is a full budget, no political or professional opposition to a move — and yet it does not happen. This is something that cannot happen in any business company," explains Hasson. The root problem does not stem from a lack of talent among civil servants, but from a distorted incentive system: the government sector is oriented toward and budgets for actions instead of measuring results. The government buys training days, hours of operation, or buildings, but almost never defines clear goals for examining the real impact on the citizen's life.
Lack of risk management ability
The current incentive structure punishes failure and stifles innovation: if a new program fails, the professional factor absorbs public criticism and investigations by the State Comptroller (who usually checks the legality of the process and not the achievement of the result). If the program succeeds, the initiator does not receive a bonus, a quick promotion, or a significant budget addition. The result is that the hardest thing to do in the government is to close an existing program, regardless of its effectiveness.
As an example, Hasson brings the treatment of elderly loneliness: the government transfers huge budgets and measures how many activities were performed and how much money was spent, but no factor actively and scientifically measures whether the level of loneliness of the elderly has actually decreased (for example, through indicators such as a decrease in readmissions or improvement in health indicators).
The solution: a three-sector partnership model and Pay for Success pilots
Hasson's solution does not require increasing budgets, but is based on creating a new structural partnership between three players: the government, the private sector, and modern philanthropy.
Model architecture:
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Defining policy and the goal (the government): the professional echelon in government ministries defines only the desired and measurable national goal. For example: "Reducing the percentage of readmissions of diabetic patients by 30%".
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Risk management and absorption (philanthropy): modern philanthropic factors, which seek long-term impact and are willing to absorb losses, fully fund a focused pilot project.
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Technological and entrepreneurial execution (the private sector and civil society): digital health companies, startups, or specialized non-profits execute the program using the most advanced technological tools.
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Pay-for-Performance: in case of failure, the pilot is stopped. The government did not pay a shekel of tax money, and philanthropy absorbs the loss. In case of success, the government returns the investment money to philanthropy (sometimes with an agreed-upon incentive) and expands the proven program to a national level.
The health system as a starting point
Hasson marks the Ministry of Health as the perfect starting point for implementing the model (at a rate of 2%–3% of its budget in the first stage). The medical system in Israel does not suffer from a lack of resources, but from the way they are allocated. The great advantage of the system is the existence of strong HMOs and digital health infrastructures that are among the leaders in the world, which allow for accurate measurement and data collection capabilities — a necessary threshold condition for the success of the model.
The power of the word "pilot"
Based on his rich government experience, Hasson presents a critical "bureaucratic tactic" for dismantling opposition: "The word 'pilot' is a magic word in the corridors of power in Jerusalem. When a move is presented as a limited pilot, all the system's defense mechanisms go down. The lawyers calm down because there are no broad legal implications, the budget division in the Treasury is not afraid of rigid long-term commitments, and the system allows the experiment to happen".
Risks and challenges for implementation
Hasson points to three main challenges in the model:
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Measurement limitations: the model is not a "silver bullet" and is not suitable for every field. There are complex value or educational elements that cannot be simply quantified.
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Different cultural DNA: sitting around a round table of government people, high-tech entrepreneurs, and philanthropists requires bridging deep gaps in worldview and organizational language.
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The national trust crisis: there is a deep trust problem in the Israeli public system — both between the political echelon and the civil service, and between the various government ministries themselves. To overcome the lack of trust, the strategy is to choose in the first stage not the most burning problem, but the problem with the highest chances of success in the new model. Creating one clear "success story" will change the organizational culture, build mutual trust, and motivate other ministries to adopt the methodology.
A message of resilience and hope
In concluding, Hasson shared his personal feelings about the difficulties of the last few years and the wars in Israel: "It is much easier when we were the ones at the front, and it is many times harder to see your children dealing with this distress. But my hope stems precisely from watching them — they are facing these difficulties with heroism". He concluded with optimism based on a historical and regional view: "When you lift your head and look at the general vector of the country compared to our parents' period, we have built amazing infrastructures and achievements here. In recent years, I have met rulers in countries in our region that I never imagined I would sit across from. The young generation in the Middle East is thirsty to put the disputes of the past behind it and march forward toward innovation and creation. We have the greatest human and value forces to make the necessary correction".
