A recent report by leading global consultancy McKinsey, dealt with the difficult question of why many public policy implementations struggled to deliver on their promises.
The McKinsey Center for Government (MCG) is a global hub for research, collaboration, and innovation in government productivity and performance. MCG is part of McKinsey’s Public and Social Sector Practice, whose work spans economic development, education, health care, information technology, infrastructure, organisation, operations and delivery, public finance, strategy, and defence and security.
The centre recently published an extensive research report on how public bodies could better deliver services and implement policies for citizens. The report found that governments, worldwide, are facing unprecedented challenges. They summarise them as:
- ageing populations that are putting huge pressure on health and social services
- high levels of inequality
- the changing shape of cities that is creating new demands on infrastructure
In this environment, many governments have come to realise that they must not just reform but transform – they must fundamentally change the way they operate to improve their performance.
McKinsey’s research has found that only 20% of large-scale, transformational government change efforts fully succeed in meeting their objectives. So, they feel that the problem is not the lack of vision by government but rather how to translate those visions into reality.
The report sets out five disciplines that they state can more than triple the chances of transformation success. They also look ahead, drawing inspiration from technology-enabled transformations in the most advanced organisations in both the public and private sectors.
They state that the potential prize is huge: by learning lessons from their most improved peers, governments globally could save $3.5 trillion by 2021 while maintaining today’s levels of service quality. Alternatively, they could substantially improve the outcomes that citizens most care about while keeping expenditure constant. And, with improved citizen experiences, they could start seeing increasing levels of trust in public-sector institutions around the world.
The report considers a number of different aspects:
- Why governments must transform not just reform
- Why most government transformations fail – and how to triple the likelihood of success
- The next Horizon: Citizen experience, design thinking, and agile practices
“Only 20% of large-scale, transformational government change efforts fully succeed in meeting their objectives.”
Why governments must transform not just reform
Government expenditure has grown to unprecedented levels – in 2016 it equated to 33 % of global GDP. Yet a series of long-term trends will put further pressure on public-sector budgets in the coming years, while creating complex new demands on governments from the national to the local level. McKinsey considers three trends that stand out:
- Profound demographic shifts – the proportion of the world’s population aged over 65 is expected to double over the next 35 years, from 8 % in 2015 to 16 % in 2050. As a result, many governments will be faced with ever-greater dependency ratios as working age populations decline and the number of retirees increases. At the same time, 75 million young people worldwide are unemployed, and automation could worsen this problem. In response, governments must transform the education-to-employment journey.
- High levels of inequality – in advanced economies, two-thirds of all households saw their income stall or fall between 2005 and 2014. And while government transfers and tax policy mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall in that decade. At the same time, gender inequality has remained persistently high in many countries: the McKinsey Global Institute (MGI) found that 40 out of 95 countries assessed have high or extremely high levels of gender inequality on the majority of indicators. Automation’s impact on wages could result in further income polarisation, displacing up to 30 % of work by 2030.
- The changing shape of cities – the proportion of the world’s population living in urban areas is projected to rise from 54 % in 2014 to 66 % by 2050. Cities in the developing world will experience the greatest growth – Africa alone will be home to 190 million more urban residents over the next decade. At the same time, some cities in developed economies, ranging from Pittsburgh in the United States to Genoa in Italy, are declining in size. These cities will need to design strategies to compete with other urban areas to maintain their vibrancy and retain and attract citizens and businesses.
Why most government transformations fail – and how to triple the likelihood of success
McKinsey examined the experience of almost 3,000 officials, ranging from senior leaders to frontline staff, who had been involved in government transformations over the past five years. They reviewed more than 80 public-sector transformation efforts and interviewed more than 30 senior leaders, who have spearheaded major change efforts in government.
The report identified five disciplines that clearly distinguish successful transformations with change efforts that effectively address all these requirements are more than three times as likely to succeed than those that do not. The disciplines for successful transformation, called the five Cs, are:
- Committed leadership
- Clear purpose and priorities
- Cadence and coordination in delivery
- Compelling communication
- Capability for change
The five Cs are surprisingly universal: each is a driver of success regardless of the geography, service, trigger, scope, structure of the change effort, or the kind of government running the country. Moreover, the five Cs are common success factors for transformations in both the public and private sectors. Of course, this is easier said than done. Leaders often have limited political capital, particularly in politically sensitive services such as education and health care and in instances where they serve in a minority or coalition government. Governments often have too many priorities: leaders try to reform too much, too quickly. Another challenge is a lack of leadership longevity. For example, a review of ministers of health across 23 countries from 1990 to 2009 found that half of them served for less than two years in office.
- Committed leadership
The successful transformations that McKinsey studied were steered and championed by deeply committed leaders, with each of them devoting considerable time and energy to the effort, taking personal accountability for success or failure, was a visible role model for the change, and had the courage to challenge long-established assumptions and conventions.
Such leaders of transformation live and breathe the journey and stretch their capacity for strategic planning, emotional resilience, and inspiring people-leadership. That means spending a substantial amount of time face to face with the people affected, listening as much as seeking to inspire.
Of course, this is easier said than done. Leaders often have limited political capital, particularly in politically sensitive services such as education and health care and in instances where they serve in a minority or coalition government. Governments often have too many priorities: leaders try to reform too much, too quickly. Another challenge is a lack of leadership longevity. For example, a review of ministers of health across 23 countries from 1990 to 2009 found that half of them served for less than two years in office.
“This must go beyond budgetary allocations or inputs purchased and address the relationship between spending and outcomes delivered.”
- Clear purpose and priorities
Priorities need to be clearly articulated and rigorously pursued. The report proposes three practical steps:
Paint a compelling picture of the destination and commit to reaching it.
Create a common baseline and trajectory. The aspiration must take account of the existing baseline of performance and the trajectory of the organisation (both operational and financial) if action is not taken. Many governments currently use expenditure reviews to establish such a baseline, but this must go beyond budgetary allocations or inputs purchased and address the relationship between spending and outcomes delivered.
Keep targets few, specific, and outcome based.
- Cadence and coordination in delivery
Traditional public-sector approaches to policy development and implementation are characterised by slow and systematic processes and time-honoured rules and hierarchies. The focus is often much more on developing the perfect plan than on implementing it. By contrast, the delivery of transformations requires a fast yet steady pace, a flatter hierarchy with close collaboration between different agencies and functions, and the flexibility to solve problems as they arise.
The starting point is to develop a participative plan that is owned by the organisation and meets citizens’ needs. Such approaches stem from the understanding that most great ideas come from outside the top team and are improved through collaboration. Frontline staff and citizens often know far better than those at the centre how things can be improved. Beyond new ideas, the participation of a wide group of interested parties brings much needed legitimacy to high-level aspirations. Research studies show that when people choose goals for themselves, they are far more committed to the outcome. This survey corroborates this finding: organisations that involved frontline staff in transformation planning were more than 20 % more likely to be successful. They call this “participative planning.”
A “perfect plan” is not required. Indeed, the pursuit of one will likely cause paralysis. Rather, planning should be treated like a sprint, a time-bound process with deliverables and a clear deadline. Officials should not spend months in working groups; plans can be changed and improved once implementation begins. It is also critical to link transformation planning and the budgeting process, to avoid process duplication or delays in disbursement of funds. More than 80 % of the survey respondents said that with hindsight, having allocated more financial and other resources at the start of the transformation would have improved the likelihood of success. Agencies should work with the finance departments to make cost estimates, secure funding, and seek alternative sources of funding such as private donor contributions or “coinvestment” from state-owned enterprises.
Governments also need to bring together a committed team of leaders to drive the change. Whether called a transformation team, a delivery unit, or something else, this group drives the pace of the effort by collaborating with the implementing agencies. The transformation team creates the heartbeat of the transformation. It should have the capability and commitment to solve problems when they arise and quickly escalate issues to the senior leaders in government when their intervention is needed. The transformation team must also establish and oversee a system that rigorously tracks the transformation’s progress, holds people accountable, and makes performance transparent within government and to external stakeholders.
Lastly, effective delivery requires that governments quickly build momentum for the change and then sustain it over time. The research showed that there are two proven actions to move effectively from planning to a sustained cadence of delivery:
- Deliver symbolic or quick wins. Leaders should pick a few relatively easy battles and make sure they can deliver on them. These early wins help unlock the energy required to tackle more difficult tasks and inspire teams to continue.
- Fast-track processes and release bottlenecks. The initial excitement and momentum of a transformation can quickly get pulled down by the deadweight of bureaucracy. Classically, procurement processes can take months, and positions can remain unfilled due to rigid staffing guidelines. Leaders should consider making exceptions to the rules.
“Reliance on business-as-usual capabilities is a major contributor to the high failure rate of government transformations.”
- Compelling communication
The fourth requirement for successful transformations is well-planned, in-depth, genuine two-way communication with all the groups affected by the change – especially the organisation’s own employees. In half of all successful transformations, the senior-management team communicated openly and across the organisation about its progress, but this happened in fewer than 20% of unsuccessful transformations.
- Capability for change
Although civil services are often staffed by highly skilled people, they rarely have deep expertise and experience in change management. Reliance on business-as-usual capabilities is a major contributor to the high failure rate of government transformations. Three sets of skills are particularly important: operational management, or the ability to run complex, large-scale service delivery organisations; project and programme. management; and digital and analytical skills.
For example, project management and operational-management skills were present in more than 50% of successful transformations but in fewer than 40% of unsuccessful ones. Sometimes acquiring the right capabilities means hiring experienced change leaders from outside government and, critically, investing in their onboarding to help them become an integral part of the team. But it also requires a sharp focus on internal capability building, as the survey findings make clear. When McKinsey compared successful and unsuccessful transformations, they found that the former were three times more likely to train initiative leaders in change-leadership skills. They were also twice as likely to offer broader capability building programmes to employees involved in the transformation. Most public-sector organisations, however, have underinvested in the skills required for successful transformations. For one thing, leaders in government agencies are often chosen for their policy expertise and close knowledge of the machinery of government, rather than operational, delivery, or transformation experience. By contrast, senior executives in the private sector are often required to complete a broader range of functional rotations (such as strategy, operations, and marketing and sales) before being promoted.
McKinsey proposes three essential elements in building a successful capability-development programme:
- Tightly link capabilities to programme needs. Delivering good outcomes for citizens requires governments to understand how different capabilities enable performance.
- Ensure programmes are tailored, not one size fits all. Such programmes must start with a rigorous understanding of the current capabilities of the organisation and of the individuals inside it. This understanding informs the design of the capability-building effort – for individuals and the organisation as a whole. Some governments use a “field and forum” approach combining theoretical and project work in highly practical settings. In addition, social learning and online “nudges” are increasingly powerful tools for capability building.
- Shift mindsets to drive change. Research suggests that 70% of change programmes fail because management and employees do not adopt new behaviours. Organisational capability and behaviour are based on the skills, attitudes, and outlooks of a collection of individuals. To sustain change, the surrounding structures (assessment and recognition systems, for example) must be aligned with the culture the organisation wishes to promote. And of course, employees must see people they respect modelling the desired behaviours actively.
“Leaders in government agencies are often chosen for their policy expertise and close knowledge of the machinery of government, rather than operational, delivery, or transformation experience.”
The Next Horizon: Citizen Experience
McKinsey’s research shows that getting the five Cs right will boost the likelihood of success. There is a vast range of technologies that governments can harness to improve performance. They include digital interfaces for citizens, automation of routine tasks such as processing of forms, advanced analytics (with or without big data), and artificial intelligence. However, as they analysed technology-enabled transformations by the most advanced organisations, they came to a counterintuitive conclusion: it is not technology per se that drives their success, but rather the customer-centric and agile approaches that they deploy.
Three new-horizon concepts are particularly relevant to governments and can help them ensure that transformation efforts respond to the most pressing needs of citizens, actively incorporate citizens’ ideas, and are designed genuinely from citizens’ perspectives:
- Citizen experience. Traditionally, both companies and governments have focused on touch points – the individual transactions through which customers or citizens interact with the business or agency. More forward-looking organisations have realized that this approach misses the bigger picture: customers and citizens may be satisfied with individual touch points but still unhappy with the overall experience. These organisations, therefore, consider the user’s end-to-end journey and her or his overall satisfaction with it.
- Design thinking. Design thinking is the approach used to create compelling citizen or customer experiences. Design is no longer singularly associated with how something looks or its functionality: instead, it is increasingly strategic and system oriented. Design thinking is defined as a human-centred and creative approach to solving problems that integrates the needs of people, the possibilities of technology, and the requirements of the organisation providing the service. The result is an experience, product, or service that is physical, digital, or both – and that creates value for the citizen and the provider alike.
- Agile practices. This approach started as a set of principles for developing software but is now being applied in many other areas, including entire organisations. The core ideas of agile are the ability to move quickly and efficiently and a relentless focus on delivering value to customers. Agile practices break the development process into small increments: quickly design, prototype, and test products or services with users and immediately channel the feedback into the next iteration of development. Rather than spending months or years perfecting a product or service before it is launched, agile approaches focus on creating a “minimum viable product,” often in a matter of weeks, constantly testing it with real customers and learning from their experience to iterate and improve it. Some pioneering government agencies are going further and starting to apply agile philosophy beyond individual projects, products, and processes. They combine organisational stability with dynamism – for example, merging a powerful common purpose and standardised ways of working with flexible resource allocation and information transparency.
Arguably, the world needs successful government transformations – to improve health and education outcomes, foster growth and job-creation, make cities more liveable, make constrained public-sector budgets go further, and ultimately restore citizens’ confidence in governments’ ability to deliver. Although the failure rate of such efforts is far too high, the McKinsey’s study suggests that by learning from the 20 % of government transformations that succeed, future leaders can more than triple their chances of success.In many ways, the challenges facing local government are likely to be similar to those expressed in the report. Many local authorities are undertaking their own transformation programmes, often driven by the need to cut costs, and it is unlikely that the success rates of these programmes are any higher than those in the McKinsey survey. So, perhaps the five Cs are just as appropriate for the local government change agenda? The McKinsey report has outlined a list for success and this would provide a useful check for local authorities who are thinking of, or currently undertaking, large scale change. The checklist is as follows:
- Don’t launch a transformation effort if you are not able to use significant political and personal capital to make it successful.
- Don’t rule out radical action if it is necessary, such as changing legislation, setting up new institutions, or removing transformation blockers.
- Show sustained commitment by spending a significant amount of time visibly leading and role-modelling the change.
- Don’t assume you know what citizens or public servants want and need – find out what really matters to them in their day-to-day lives.
- Explicitly choose and commit to a small number of specific outcomes that you are going to focus on in the transformation – and avoid making your goals too broad.
- Anchor the transformation in an agreed baseline, trajectory, and target incomes.
- Avoid planning paralysis: make planning participative and time bound and move to action quickly, in the knowledge that plans will be adapted once implementation starts.
- Link planning and budgeting processes to ensure alignment, demonstrate commitment, and avoid unnecessary delays when ramping up the transformation.
- Appoint a dedicated transformation team to set the pace, solve problems when they arise, coordinate between agencies, track performance, and hold people accountable.
- Deliver quick wins and fast-track decisions to build momentum, while maintaining commitment and focus until the transformation is self-sustaining.
- Don’t try to please everyone—while staff and citizens are core to success, attempting to address all interested parties can dilute and distract.
- Inspire through a compelling change story, with the “why,” “where,” “what,” and “how” – and “what is in it for each individual.”
- Overinvest in frequent face-to-face, frontline communication, and listen as much as you talk.
- Communicate targets publicly to create accountability and communicate progress to celebrate success.
- Take training well beyond the top team – new capabilities are typically needed at all levels of the organisation to deliver and sustain change.
- Make sure delivery and technical experts are fully involved from the start: new capabilities mean little if the experts are not listened to.
- Invest real resources in training for specific capability gaps, which are often in change management, operational, and technical skills.
- Realign recognition systems to align with the transformation goals and remove blockers who might derail or slow down the transformation.
It is worth saying, finally, that there is of course considerable support already available to local government such as the Local Government Association’s range of resources, their library of case studies or iESE’s annual transformation awards that recognise best practice. These show the many examples where local authorities have implemented successful transformation projects. The LGiU in England, Scotland and Ireland showcases good practice throughout local government and provides a library of briefings to support it.
One government that has overcome such challenges is the Colombian city of Medellín, which, until recently, was known as the global center of cocaine trafficking. Its 2.5 million inhabitants were plagued by violence and crime, and the city was notorious for having one of the world’s highest homicide rates. Much has changed over the past two decades. With a decrease in the murder rate of more than 80 percent and a budding economy, Medellín’s story today is one of revitalization. This remarkable transformation was by no means a given; it is thanks in part to the bold vision and deep commitment of a series of mayors of Medellín, as well as governors of the surrounding Antioquia province, and the partnerships they built with the private sector. One of those leaders was Aníbal Gaviria, who served as governor from 2004 to 2007 and mayor from 2012 to 2015. His very election to public office speaks of personal commitment: his immediate predecessor as governor was his brother Guillermo, who was killed by FARC guerrillas in 2003. Gaviria translated his personal commitment into a clear vision for change. “We faced incredulity and people thinking that we were forever condemned to be a failed city,” he said. “The change in mentality—when people begin to see that it is possible to have breakthroughs that benefit everybody—has been the most important gain.”
Transformation requires tough decisions from leaders—and that often involves disrupting established norms. For example, when the US city of Detroit faced bankruptcy in 2013 after a long period of urban decline, Governor of Michigan Rick Snyder appointed an “emergency © DuKai photographer/Getty Images 8 Delivering for citizens: How to triple the success rate of government transformations manager” who temporarily took executive powers from the mayor. The emergency manager restructured the city’s debts and embarked on a $1.4 billion investment programme into essential services such as street lighting; new IT systems for emergency services and city officials; and new police cars, fire engines, and buses. The city has balanced its budget every year since and is experiencing its longest period of sustained growth for half a century. Today Detroit is once again run by its own mayor.
Mexico City, Mexico
Future government transformations are likely to go even further by better understanding the citizen experience and building in design thinking and agile practices. Consider the example of Mexico City, one of the most congested cities in the world. Authorities have expanded the city’s transport infrastructure but have struggled to keep pace with rapid urbanization. That has prompted a number of innovations. One aimed to create a navigable map of Mexico City’s sprawling bus Executive summary 15 network. The network’s 30,000 buses—many traveling unofficial routes—provide 14 million individual rides a day. Part of that solution was Mapatón36, which used crowdsourcing and technology to map the city’s bus routes and gave commuters the opportunity to play a game on their mobile phones while riding a bus. In just two weeks, and with a budget of less than $15,000, the game attracted 4,000 players who between them produced data on 1,500 bus routes covering almost 50,000 kilometers.
Additional information and commentary provided by LGIU England and McKinsey Global Institute.