Can you think of an assignment more challenging than taking on a labor department in Europe, widely viewed by the public as bureaucratic, inefficient, and having little impact on the nation’s high unemployment rate?
In addition to its image problem, the agency had major operational challenges. Tens of thousands of employees struggled within a poorly defined organizational structure that bore the double whammy of being wildly complex with few clear goals against which to measure their success.
The McKinsey team was asked help drive a top-to-bottom reform of the agency’s governance and operational model, including its untapped IT systems.
After conducting a thorough diagnostic, we focused on high-impact areas for improvement.
Linking success to responsibility
The agency had been measuring its success (or lack of it) in the wrong way. It calculated its performance based on the total number of unemployed each month, when it had no ability to shape those macroeconomic factors.
McKinsey worked with the government to create new, relevant performance metrics, for example the percentage of those who were registered as unemployed and found work. That measurement reflects an outcome that the labor department can control.
By focusing the department on achievable goals, we were able to improve results and lift morale.
Developing a new labor-market segmentation
We broke out of the conventional limitations of age and gender and worked with the client to create more relevant and actionable segments, such as the “market readiness” of someone who is unemployed. Understanding those characteristics enabled the department to focus on the support and education required to reenter the workforce in a tough jobs environment. Categorizing by need, not demography, was a huge win.
New delivery models ended the long lines
Because there were very few opportunities for scheduling appointments, people who needed help would often face endless lines that lived up to every stereotype of a government agency. McKinsey helped change all that; reengineered operations for the head office and regional locations created streamlined processes that put the customer first, including the establishment of call centers. One way we accomplished that was by helping the client separate basic administrative tasks that didn’t require specialized skills from complex tasks like job counseling, which required an appointment.
Using information as a strategic enabler
The agency had been underleveraging its IT resources. They were being used for benefits calculations and other operational requirements, but not as a data-mining asset that could evaluate the effectiveness of different strategies and interventions for reducing unemployment.
The government was spending money on programs that weren’t being adequately tracked. We worked with them to overhaul their IT strategy, providing visibility into what worked and what didn’t, so that taxpayer money could be allocated for maximum efficiency. And because execution is key to success, we helped train an extensive network of “change agents” to implement this at the local level.
The results were gratifying. Our transformation effort resulted in a dramatic improvement in the labor department’s reputation; its leadership has been lauded by the mainstream press. Surveys show greatly increased satisfaction among employees and customers, wait times for job seekers at local offices have dropped to almost zero minutes, and the agency has doubled the amount of time that counselors spend with job seekers—without hiring more of them. The percentage of unemployed citizens reintegrated into the labor market jumped more than three percentage points in only 2 years, and unemployment-benefit payments declined by 5 percent each year for 2 straight years.
At McKinsey, we don’t accept the argument that governments are too locked in their ways to change. We’ve proved otherwise. We do work that puts people to work, and it doesn’t get more inspiring than that.