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Better governance and an operations overhaul transform a European labor agency

A performance-transformation program turned a labor agency into one of the country’s best governed, most effective, and most efficient public institutions.


A labor department in Europe was 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. Its tens of thousands of employees operated within a highly complex and poorly defined organizational structure, and had few clear goals against which to measure their success.

As part of a larger campaign to tackle the high unemployment rate, the government asked McKinsey to help improve the labor agency’s performance. Specifically, the McKinsey team was asked to support the reform of the agency’s governance and operational model, as well as an overhaul of its IT systems.


The comprehensive performance transformation began with an in-depth diagnostic in which we worked with the client to identify improvement levers. We then helped implement improvements in six specific ways:

Sharpening the mission statement

Because the agency manages unemployment insurance benefits while also acting as a social-support organization, its mission had become cloudy. We helped the client articulate goals based on efficient and effective insurance-benefit distribution, while also incorporating its imperative to fulfill specific social-support tasks as needed.

Introducing new performance indicators

The agency had been measuring its success according to outcomes over which it did not have complete control (for example, the number of people in the country who were unemployed at the end of each month). We helped the client create a new set of key performance indicators—such as the share of individuals who were registered as unemployed and were subsequently placed in a new job—that more directly measure its impact and performance.

Facilitating a performance culture

We helped the client identify the data, reporting formats, and regular dialogues that would be necessary to embed a performance culture into the organization. We also worked with the agency to better distribute management responsibilities and to clarify objectives.

Developing a new labor-market segmentation

We helped the client develop a customer segmentation that, instead of using demographic criteria such as age or gender, focused on assessing an unemployed individual’s “market readiness” and the types of support he or she needs in order to gain employment.

Implementing a new delivery model

The agency offered limited desk hours for walk-in appointments, and customers seeking services often faced long wait times. We helped redesign the operational setup of both the head office and the regional locations so that processes were streamlined, coordinated, and customer focused. We helped the client separate simple administrative tasks from more complicated, appointment-only services such as job counseling. We also helped establish call centers and worked with the client to improve its online service systems.

Using information as a strategic enabler

The agency had been using IT systems primarily for operational processes such as benefits calculations, and was not mining its vast reserves of data for deeper insights that could help evaluate the effectiveness of specific employment supports and interventions. We worked with the client to overhaul its IT strategy, enabling the agency to provide systematic, differentiated counseling of job seekers and a more efficient allocation of program spending. We also helped train an extensive network of “change agents” to implement improved processes and new tools at the regional and local levels.


Since the transformation effort, the agency’s reputation has improved dramatically, and its leadership has been lauded by the mainstream press. Regular 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 increasing the number of counseling staff. 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.

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