To meet the economic and social challenges of the citizenry today, governments must transform the way they think, organize, and execute. In this video, McKinsey experts explore the imperatives for government reform worldwide and the innovations that can make it successful.
Diana Farrell: There’s no question that many of the challenges that governments face will require policy solutions. They’ll require choices made by society through a political process. But it’s a mistake to think that nothing can get done if those big policy discussions don’t result in outcomes right away.
There is so much that can be done improving government itself—the effectiveness of government, the operations of government. In many economies in the OECD, government is 40 percent of GDP if we include transfers and subsidies. Just improving the effectiveness, the productivity, of that part of the economy, itself can be a major contributor to growth and to prosperity.
Andrew Grant: I think the public sector is even more complex in terms of how do you really shape a world-class organization, given the complexity of challenges that the public sector has to deal with today.
Vivian Riefberg: I do find that people in government are far more open than they’re often given credit for, in terms of really looking for new solutions, new approaches to the challenges that they face. They really do want to hear about the kinds of solutions that are out there.
Those may be global things that are going on. Those may be coming from other agencies in the government. They may be coming from the private sector. They may be coming from the nonprofit sector. But [people in government] really want to learn from all the parties that are out there.
Diana Farrell: Governments face a set of really important structural issues. I think at the top of the list, the question for them is how will they innovate to a level of sustainable government—meaning that they can extract fewer resources from citizens and still deliver core services.
Kito de Boer: There will be a whole cluster of countries which will be facing declining populations. There will be about 35 countries of significant scale which will see population declines of over 20 percent. On the other hand, you have a series of countries where they will be facing massive population increases. By and large, these are countries that are poorer today.
Francois Bouvard: Governments have to deliver more and better for less because, on one side, there is an increasing demand from citizens, an increasing complexity that [governments] have to deal with, with globalization. The “less” is that, given the financial crisis, they have to operate under very tight budgets. And they have to shift the focus from operating in existing administrations to transforming administrations.
Vivian Riefberg: Citizens experience a whole array of interactions in the economy. And, oftentimes, citizens don’t make a distinction between whether they call on the phone or get on the Internet for a set of services. They don't make the distinction between the private sector and the public sector. They’re looking to have an easy, simple, speedy set of experiences.
Diana Farrell: In some senses, governments have overextended themselves to address the financial crisis. That’s probably a wise thing to do, an important thing to do. But it has laid open, for all of us, some of the structural issues that were there even before the crisis and the step-up that governments had to take in terms of incurring debt, in terms of deploying resources. In many ways, this crisis presents an opportunity for governments to embrace those challenges and make the structural reforms that are really necessary.
Francois Bouvard: European governments face a major set of issues, and they now have to deal with trade-offs that are very complicated. On the one hand, they need to reduce public spending and they need to lower the debt that most of the governments have accumulated. On the other hand, they have to make sure that they sustain growth. The third element is that they have to maintain the cohesion between citizens.
Andrew Grant: If you look at the Asian context, there are a number of governments where, to some extent, the operating model has been, “We as government are the elite. We know best. We are very smart people that solve the problem and then we communicate that to citizens.” We’re [now] seeing a lot of governments that are saying, “We actually don’t know best.” And citizens are wanting a voice in a way that they didn’t [formerly]. And therefore we’re actually seeing this whole notion of cocreation—of how do we actually cocreate public goods and services.
Kito de Boer: The challenge facing the leaders in the Middle East, and certainly in North Africa and probably most of Africa, is really what to do with their fast-growing, young populations. These areas have built a demographic group of people who’ve gone through an education system that has failed them, who come out after 12 years of education and can’t find employment. It means that they can’t buy housing. And if they can’t buy housing, they can’t get married. And if they can’t get married, they don’t have respect.
Andres Cadena: Governments in Latin America need to be able to benchmark themselves against each other in the region, but also against the rest of the world, to understand better what good policy making means.
Vivian Riefberg: There’s a big job to be done in government in the United States, whether that’s at the federal level, the state level, or the local level. We need to be able to do more with less. We need to be able to deliver a customer experience that is superb. And we need to address the human-capital challenges, given how many people will be eligible for retirement and given the kinds of capabilities that we need to be able to deliver for our citizenry.