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A new focus on productivity for the McKinsey Center for Government

From left to right at the spring meeting of the International Monetary Fund and World Bank in Washington DC: moderator Raj Kumar, editor-in-chief of Devex; William Morneau, minister of finance of Canada; Bjarne Corydon, director of McKinsey Center for Government and former minister of finance of Denmark; Elaine Kamarck, founding director of Center for Effective Public Management, Brookings Institution; Luis Alberto Moreno, president of Inter-American Development Bank; Jim Brumby, director of Public Service and Performance of The World Bank.

– This weekend, thousands of government officials, economic experts, and policy makers from all across the world gathered in Washington DC for the annual spring meeting of the International Monetary Fund and World Bank. Economic development, effective aid, security, and innovation were on the agenda. As part of the event, we hosted a panel discussion with participants representing Denmark, Canada, the US, Latin America, and developing nations to introduce our new report Government productivity: Unlocking the $3.5 trillion opportunity.

Government delivery as a topic has gained significant traction in recent years. “As citizens have grown accustomed to the private sector’s rapid pace of innovation, they expect similar efficiencies and types of service experiences from the public sector. Governments are struggling to keep up,” explains Andrea Berchowitz, an associate partner in the Public Sector Practice and codirector of the report. Having worked extensively in economic development in South Africa, Ethiopia, and Kenya, Andrea brought a unique emerging-markets perspective to the development of the research.

“The private sector benefits from two important aspects that the public sector does not—the diffusion of best practices by multinational corporations and the forces of competition,” says Richard Dobbs, senior partner at the McKinsey Center for Government. “As such, there has been no easy mechanism for governments to see what great—or not so great—looks like.” Prior to his role within the Center for Government, Richard led the McKinsey Global Institute (MGI) for 7 years—McKinsey’s business and economics research arm, which has focused on productivity as a topic since the early 1990s. “I spent years studying long-term growth and became increasingly worried about how governments can keep up with growing citizen demands,” adds Richard.

Given this need for greater transparency across countries, the McKinsey Center for Government—a hub for research and collaboration within the Public Sector Practice—has been relaunched, with a new focus on government productivity. “It’s time to raise government productivity on the agenda, as we see governments struggling more to work against social trends like an aging population and economic inequality,” adds Richard. “They face big challenges, and part of that is due to their tenuous fiscal position.”

“We felt that we could leverage a lot of our existing knowledge and studies with governments and sectors from all across the world—with a lens on productivity,” recalls Tera Allas, a visiting fellow at MGI, former chief economist in a number of UK government departments, and former associate partner in the McKinsey London office. Research began in 2016, with a cross-sector and cross-geography team of Tera, Andrea, and Bjarne Corydon, director for the McKinsey Center for Government and former minister of finance of Denmark. Bjarne spent nearly 2 decades developing programs to digitize government processes to enhance services, save money, and improve citizens’ quality of life. “You really need the right technical tools in place to see successful reform happen,” says Bjarne. “That’s something the Center for Government is focused on—using technology and digitization, like analytics, to help governments adopt best practices.”

The objective of the report is to inform governments on country-level productivity and show them how to do more with less. It makes use of a benchmarking tool that looks at 42 countries across tax collection, public safety, transport, education, and healthcare to understand what outcomes (for example, healthy life-expectancy and safe streets) governments get for their expenditure and how they compare to peer countries. It also includes best-in-class examples, such as Denmark increasing its healthy life expectancy by a year and a half while keeping spending per person flat, or the United Kingdom saving $300 million in a year from digitizing 25 basic services, such as voter and motor-vehicle registrations.

The methodology for finding all these case studies? “Tons of primary interviews,” shares Andrea. “We spoke to everyone—public-sector consultants within the firm and current and former civil servants outside the firm. We spoke to mayors, ministers, digital officers, and a range of other people willing to share with us. We wanted to understand how more capabilities like digitization and attracting top talent can be brought into the public sector the way they are in the private sector and how to achieve greater ‘bang for the buck.’” The team also spent months hunting down granular, comparable, and reliable data on government expenditure and outcomes, such as healthy life expectancy, student test scores, teaching quality in universities, the public’s confidence in local police, and road quality.

This data have been incorporated into a proprietary Tableau tool that will also be available to consultants and clients, offering a customized view into a country’s productivity to see how it stacks up against other peer countries. “We plan to use this with senior ministers or other government officials as a conversation opener to understand where their gaps lie,” shares Tera. “The goal is to point them to the right questions, and then we can work together to incorporate best practices.”