Better and faster: Organizational agility for the public sector

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Agile leadership principles can transform how the public sector works, plans, and delivers to customers and constituents.

The stakes are high. The shocks of the COVID-19 pandemic have underlined the importance of adapting policies, delivering cross-agency programs, and working effectively in teams—doing so better and more quickly, and often with tightening budgets. It is a daunting task, even for dedicated public servants and mission-driven entities.

In such demanding situations, the public sector would ideally be responsive and nimble. Agile methodologies can transform how a government plans, operates, and delivers its products and services. Some government bodies have already made substantial headway. Agile principles and practices should be adapted to each level of the government and to overcome dynamics that can make change difficult.1Implementing agile ways of working in IT to improve citizen experience,” McKinsey, March 13, 2020. Indeed, because each level of a government organization—the central government, its agencies, and their teams—has different roles and priorities, the most effective core principles of agile will differ as well. For public-sector leaders, the rewards of customizing agile ways of working for specific objectives could be higher productivity and better services to citizens.

A significant change from historical public-sector ways of working

Compared with private-sector enterprises, governments can seem monolithic and slow moving. Agile methodologies recently applied in the private sector can help increase both performance and organizational health. Our research found that 70 percent of agile organizations rank in the top quartile of organizational health, which is a strong indicator of total shareholder returns, analogous to engagement and service levels in the public sector.

Despite the promise agile methodologies hold for the public sector, certain characteristics can make government entities a difficult fit for the agile model. Government budgets tend to follow longer time horizons—often annual—than agile cadences; internal competition for funding between agencies for a fixed pool of funding can discourage collaboration across government; and because the returns on investments in change are often dispersed within the government and to the public, it can be difficult to motivate employees to work for an upside they cannot necessarily see or experience. The public sector’s hierarchical structure—and its accompanying culture and ways of working—can also make implementing agile methodologies, such as flat organizations and fast iterations, difficult.

Governments can seem monolithic and slow moving. Agile methodologies can help increase both performance and organizational health.

In other words, a comprehensive agile implementation is a massive undertaking that requires sustained commitments of energy and resources and a focus on the customer’s end-to-end journey. The prospect of such a significant effort could deter many government leaders from making the commitment. These transformations require visionary leaders.

Tailoring agile to different levels of government

In our experience, the application of even some agile tools can have a significant impact on government productivity. In fact, certain agile principles, such as working toward objectives and key results in quarterly reviews, may even seem tailor-made to address the constraints typical in governments (exhibit).

Specific agile principles can be applied at different levels of government.

The trick is to apply the most relevant principles to different levels of the organization.2The five trademarks of agile organizations,” McKinsey, January 22, 2018; Santiago Comella-Dorda, Christopher Handscomb, and Ahmad Zaidi, “Agility to action: Operationalizing a value-driven agile blueprint,” McKinsey, June 16, 2020; and Daniel Brosseau, Sherina Ebrahim, Christopher Handscomb, and Shail Thaker, “The journey to an agile organization,” McKinsey, May 10, 2019. We will focus on the different needs of the central government, agencies, and teams.

Results-driven management for government entities

Agile methodologies can help central governments prioritize strategic projects. Central governments generally allocate resources for strategic goals through the budget process. But because this process is usually annual, the lag between investments in initiatives and impact creates an informational vacuum. Objectives and key results (OKRs) and quarterly business reviews (QBRs), foundational concepts borrowed from enterprise agility, could transform planning and resource allocation for central governments.

Structurally, the annual resource allocation process favors projects that are already in progress over promising new ones. This dynamic can constrain value creation because the process often emphasizes compliance with funding requirements rather than outcomes. Because significant changes are often difficult in the public sector, governments haven’t implemented QBRs at scale. However, initial results have been encouraging.

In addition, governments have traditionally monitored key performance indicators (KPIs) to track progress in program management. A shift to explicitly managing by outcomes through OKRs could help governments translate their strategic priorities into more specific goals for agencies and teams to work toward. For instance, to measure improvements in the ease of doing business in a region, stakeholders could shift from using an annual aggregate KPI, such as an index score, to setting an objective of streamlining the process of starting a business. One key result could be to reduce the number of steps from 20 to 12. Another might be to decrease the average time required to issue a license to ten days.3Planning in an agile organization,” McKinsey, February 19, 2019.

Unlike the KPIs that are usually used in the annual budget allocation process, OKRs are metrics that can be measured over a relatively short period of time—typically three months. More frequent reviews can give agencies flexibility to experiment, test, and adapt different methods to define and achieve OKRs they set for themselves. The central government could use the quarterly review cadence to assess progress toward OKRs and reallocate resources as needed. The review discussion also allows the central government to shift from tracking preplanned milestones to assessing outcomes.

Collaboration for agencies

For agencies (defined as stand-alone government entities with distinct missions), cross-functional collaboration holds great potential. Most agencies are structured around functional or sector expertise, but departments cannot achieve their organizations’ full objectives without collaboration. Consider the advantages of cooperation among leaders in sectors such as healthcare, education, and transit in providing support and services to pregnant citizens. Without this collaboration and cross-pollination, governments often expend additional resources to implement complex communications, processes, and governance structures to ensure engagement.

Agile operating models configure teams based on facilitating outcomes instead of on function and expertise. This orientation can boost productivity and engagement by limiting handoffs between functional silos and focusing a wider array of skills on a shared objective. For example, a public transport agency that sought to boost ridership created a cross-functional team of experts in transport planning, data engineering, operations, customer service, and marketing.

This cross-functional sharing of accountability for performance breaks down silos and encourages leaders to share resources, all while focusing more on managing the workforce than on providing minute technical direction.4Performance management in agile organizations,” McKinsey, April 29, 2019. For instance, the British Army uses agile methodologies to foster better and streamlined decision making, improve productivity, enable more resilience and flexibility, and support a sense of purpose and empowerment.5How the British Field Army headquarters shifted to agile ways of working,” McKinsey, November 30, 2020.

Updated mindsets for teams

At the team level, the most important agility principles are people and mindsets—in other words, culture. Culture can make or break agile transformations. Indeed, organizations that fail to complete an agile transformation cite culture as the primary obstacle. Most government teams currently rely on meetings and escalation to move projects forward. In an agile environment, autonomous cross-functional teams work toward similar objectives. Teams can apply many agile practices, including sprint planning and daily stand-up meetings.

A trademark of agile organizations is a safe environment for experimentation and learning so that mistakes are not automatically met with punishment. Community, entrepreneurial drive—the courage and conviction to take initiative—and role mobility are critical to such an environment.

However, transitions to agile can be particularly difficult for government organizations, which have not traditionally promoted these traits in their workforce. Visionary leaders can exert influence to push for organizational and cultural change.6The four building blocks of change,” McKinsey Quarterly, April 11, 2016. Agile coaches can support that work by using their expertise to help teams emphasize performance over process, build organizational agile capabilities, and accelerate transitions. For instance, some national governments have hired agile coaches to help teams recognize and nurture innovative and promising ideas and work in new ways to test, iteratively refine, and implement these ideas and unleash talent. (For a case study of how one government agency managed an agile transformation, see sidebar, “Paperless government, agile style.”)

Visionary leaders can exert influence to push for organizational and cultural change.

Few government bodies have the capacity and expertise to implement all the elements of a comprehensive agile transformation. However, core principles can be applied and integrated in targeted ways at multiple levels of government to improve performance and productivity and create better experiences for citizens and team members.

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