Enacting major change in large, matrixed government organizations is always a challenge, with the COVID-19 pandemic adding another layer of complexity. Although just 20 percent of public-sector transformations meet their objectives, an equal focus on improving both performance and organizational health improves the odds of success by as much as 79 percent.
Maintaining a dual focus on performance and organizational health (see sidebar, “Defining performance and organizational health”) is even more important during periods of immense change. Leaders in high-pressure situations and rapidly changing environments may find themselves focusing on performance and neglecting organizational health. The leadership team may not understand the full value of investing in organizational health, the right resources may not be allocated to it, or leaders may simply lack the capabilities and experience needed to address it. But when leaders fail to address organizational health, they fail to help their agencies reach their full potential for performance.
This article draws on the experiences of the authors, who have navigated large-scale transformations in both the private and public sectors. It also draws on McKinsey’s work with government transformations, as well as academic literature—including Beyond Performance 2.0: A Proven Approach to Leading Large-Scale Change (John Wiley & Sons, July 2019) by McKinsey senior partners Scott Keller and Bill Schaninger, whose underpinning research is based on more than five million data points drawn from 2,000 companies globally over a 15-year period.1
Our experience in guiding public-sector organizations through successful and sustainable change efforts shows that leaders are most successful when they tackle both performance and organizational health. We will walk government leaders through how they can drive a bold performance agenda by setting aspirational goals and a balanced initiative portfolio, all while keeping a rigorous focus on the organization’s overall health and providing ways to embed it throughout the organization.
We will also explore two successful recent large-scale government transformations, at the US Department of Veterans Affairs (VA) in 20142 and at the US Federal Bureau of Investigation (FBI) post–September 11.3
The authors have direct experiences with these two case studies through their previous roles in the US government.
Define and implement a bold performance agenda
Government leaders are under intense pressure to rapidly deliver better performance for their constituents at a low cost—all within a high-stakes, often opaque environment of unprecedented change. Our experience indicates that the most successful transformations include the following four elements.
Aspirational goals. When leaders set goals that are aspirational—those that seek to achieve an organization’s full potential—performance gains are higher. Bold goals set using internal and external performance benchmarks force organizations to think differently and inspirationally and to move beyond the normal incrementalism that marks yearly budget planning or strategy setting. Once set, these aspirational goals can be shared widely and transparently across the organization—at employee town-hall meetings, in senior-leadership meetings, and on message boards and computer screens throughout the office—to increase buy-in and translate to clear and measurable benchmarks for all staff. Top leaders should also genuinely commit themselves and their organizations to achieving the targets.
Balanced portfolio of pragmatic initiatives. Aspirational goals will guide the changes to come. The best transformations provide opportunities for hundreds of people across the organization to identify and implement concrete performance improvements. Initiatives will help achieve the aspirational goals and can be filtered based on priority—What should we accomplish this quarter? What can we push to next quarter to ensure our focus remains on the top priorities?—and then tied to initiative owners who will drive them to completion. Senior leaders can then commit to supporting initiative owners as sponsors who remove roadblocks and coaches who expedite decision making.
Execution ‘engine.’ Leaders can set a series of regularly scheduled meetings, weekly or monthly, to focus on reviewing performance and results, taking care to go beyond progress on activities. This engine provides a regular and open channel for teams to elevate key issues, get to the heart of problems, and build a forum for low-stakes dialogue. The most successful organizations have a regular rhythm to these meetings and focus on reviewing whether teams are achieving results, what can be done to move faster and work more effectively, and what barriers need to be removed.
Transformation office or team. Government leaders can appoint a chief transformation officer and establish a transformation office to drive accountability and ensure that initiative owners are meeting their deliverable milestones, achieving their specific targets, and getting the support they need. A transformation team, with direct reporting lines to leadership, could create accountability and decrease the organizational hurdles leaders may otherwise face. Transformation officers have historically been pulled into a separate function with a direct line to senior leadership. The chief transformation officer challenges the organization to reach its full potential and provides the support and expedited decision making needed to achieve the aspirational goals. Without a transformation office and team, the transformation could be underresourced, a common pitfall among transformations that fail.
Performance-agenda case study: US Department of Veterans Affairs, post-2014 veteran-access crisis
VA leadership centered its team’s performance agenda around the VA’s core objective, veteran trust, with a clear, aspirational goal: an interim target of 70 percent of veterans saying they trust the VA, with an ultimate goal of 90 percent.
The VA set up a transformation office called the MyVA Task Force. This central team of ten staff members coordinated priority efforts across the department, driving accountability, monitoring progress, identifying roadblocks, and problem solving alongside department leadership.
The task force launched 12 breakthrough priorities, each for a specific area of progress, that would work toward achieving the overall aspirational goal. Each priority had a lead owner tasked with defining specific, measurable, short-term goals and initiatives. The lead owners met with either the secretary or deputy secretary every other week to drive toward the priority goals.
From 2015 to 2017, the VA worked toward successfully implementing its breakthrough priorities, which included same-day service at all 170 VA hospitals, a dramatically improved online experience for veterans, and faster telephone response times. In 2017, veteran trust rose to 67 percent.6
The VA has since continued its work to make substantive improvements, and veteran trust scores hit 80 percent in 2020.7
Performance-agenda case study: FBI, post–September 11
One of the best-known examples8 of rapid and rigorous action in the public sector is the transformation of the FBI after the September 11 attacks, when FBI leadership set a new and clear national-security outcome: the direct prevention of terrorist attacks in the United States. In May 2002, FBI leadership directed all FBI field offices to give all necessary resources to that aspirational goal and to prioritize it over other, lower priorities.
The FBI launched a nearly 90-person strategic execution team that regularly visited field offices, as well as identified best practices and codified them in a core document. To review the field offices’ intelligence and operational performance, the team conducted strategy performance sessions (SPS), which required team members to have regular videoconference check-ins to review, standardize, and upgrade field offices’ intelligence processes. Every office reported its impact using a standardized template to enable consistency across all offices in the SPS meetings.
During the SPS meetings, the FBI executive team provided feedback by sharing best practices from other offices, recommending collaboration points between offices, reinforcing the aspirational goal, and coaching offices toward a sole focus on the highest priorities. The team spent time getting to the core of key issues and invited a broad swath of colleagues across tenures and roles to break down silos and give voice to those closest to each office’s challenges. This standardized yet flexible model was personalized with careful attention and supported all offices in enacting priorities, giving teams a renewed sense of ownership and empowerment.
In 2015, Congress released a report noting the FBI’s “measurable progress” and “strides” in “accelerating the pace of reforms and transformation of its culture.”9
On the performance side, transformations can fail for many reasons besides a lack of good ideas or resources. Successful transformation teams can go beyond simply tracking progress at a rapid cadence and adopt a new mindset of action—one that is willing to challenge the status quo, fully commit to aspirational targets, and hold people at all levels of the organization accountable to achieving results.
Successful transformation teams can go beyond simply tracking progress at a rapid cadence and adopt a new mindset of action—one that is willing to challenge the status quo.
Focus rigorously on organizational health
Organizational challenges within government are, much like performance challenges, both many and varied, especially in large agencies with regulatory environments. Leadership turnover is more frequent due to political cycles. Civil servants often fear that they are more likely to be penalized for failure than rewarded for innovation and, as a result, the culture in public agencies can be risk averse. Attracting and retaining top talent can be onerous, with a lengthy process that’s time consuming for both applicants and those hiring them, application systems can be clunky and difficult to navigate, and the public sector may not seem as attractive to potential applicants. Furthermore, leaders often work with the team to which they are assigned rather than overhauling or building their team from scratch. As a result, making structural changes to drive cultural change can feel close to impossible.
That’s why tackling organizational challenges from the beginning is so crucial. Our Organizational Health Index (OHI) research10 has shown that private-sector companies with top-quartile scores on organizational health create total returns to shareholders that are, on average, three times greater than those of their peers.11 Organizational health also matters in the public sector, albeit not with respect to financial returns. Our OHI surveys indicate that more than 82 percent of public-sector organizations have below-average organizational health when compared with all organizations (both public and private sectors) and show particular challenges in the areas of culture, coordination, and capabilities (Exhibit 1).12
Healthier government agencies are better able to adapt quickly to citizens’ needs and therefore provide services in a more timely and efficient manner.13 A rigorous focus on an organization’s overall health can be embedded through several key actions by senior leadership, the transformation team, and transformation leaders. Together, the following series of actions can help embed a continuous transformation mindset into the culture and mobilize leaders toward a quest for a healthier organization.
- Establish a baseline. Leaders can measure and track progress using an organizational-health baseline to define the organization’s current state. A baseline might typically include the dimensions such as direction, accountability, leadership, motivation, capabilities, culture, and innovation, which leaders can track throughout the year to monitor progress. Leaders who do not measure against the baseline may believe their organization has progressed simply because they have implemented certain initiatives, but they will not know if the initiatives had a positive effect on the organization. A new recruiting program that does not increase the number of people recruited, for example, cannot be considered successful simply due to the fact of its existence.
- Communicate a genuine commitment from senior leadership. Senior leadership can address how the organization is tackling organizational health and recognize that doing so is an essential aspect of improving performance. Leaders can use a variety of methods to communicate the aspirational goal and their level of commitment to it, such as town halls, employee emails, message boards and computer screens, and postings in breakrooms and cafes. All messages should be brief and to the point, reinforcing a set of shared common messages developed by leadership but communicated by senior leaders. Senior leaders can also talk about their personal connection to these goals to demonstrate their commitment. For example: “As a prior frontline manager, it is important for me to measure our baseline and test how motivated our frontline supervisors are feeling, since they’re the core of our organization, and then enact ways to improve on that baseline” or “I remember feeling that leadership never listened to me, so I am making a personal commitment to listen to our front line.” These personal connections will not only demonstrate the leader’s commitment to the transformation but also inspire the employees to believe in it.
- Be explicit in the ‘from–to’ changes that the organization is seeking to embed in the culture. For example, leaders can state that the organization will go from being internally to externally focused, from reactive to proactive, or from micromanaging to empowering. Being explicit about the specific behavior changes envisioned helps others to understand, enact, and reinforce the desired behaviors, and also provides terminology to help identify when those behaviors are not happening or when to nudge behavior in the right direction.
- Embed organizational health in performance initiatives. When launching a performance initiative, leaders should consider how to include health aspects within that initiative, as health is often neglected in the drive to execution. For example, if the initiative centers around improving a process, leaders can implement a biweekly survey on team health that asks questions about whether work–life balance is sustainable, whether the team feels motivated, and what improvements could be made to the culture, in addition to performance questions about how to improve the process and efficiency.
- Launch robust capability building across varying levels of staff. Such an approach can build the change-management and execution skills of everyone working on the transformation program and establish new or improved functional capabilities, including digital, customer experience, and procurement. Staff may buy into the aspirational goals but not yet have the skills to drive toward their execution. Various forums, including workshops, online learning, and pilot testing, can help staff learn and practice skills in an open learning environment—as well as provide an opportunity for a new experience, even if it isn’t a successful one—and then apply the lessons learned from that experience.
When launching a performance initiative, leaders should consider how to include health aspects within that initiative, as health is often neglected in the drive to execution.
Organizational-health case study: US Department of Veterans Affairs, post-2014 veteran-access crisis
In 2015, the VA’s leadership knew it needed to meaningfully change its culture in order to regain veterans’ trust. This culture change required a mindset shift—one that explicitly defined the “from–to” behavior that was expected—from an internal focus on doing what was best for the VA to a citizen-focused mindset of doing what was best for veterans.
Leadership reinforced the from–to change by communicating it regularly at forums, both verbally and visually, with an emphasis on flipping the hierarchic pyramid so that veterans and frontline employees were at the top, and the secretary and deputies were at the bottom—a fundamental shift indeed (Exhibit 2).
This culture change was also embedded in 12 MyVA breakthrough priorities.14 Each priority leader was tasked with designing and delivering their priority so that it reinforced the desired culture changes and used language such as “act in ways that are best for veterans rather than best for the VA.” Leaders were also tasked with focusing on principles versus rules, which signaled to managers that they could empower staff to work based on the principles, instead of being rigidly tied to a set of specific rules, some of which may have been out of date or inapplicable to specific situations.
The VA created a Leaders Developing Leaders program to embed the culture change and invest in staff skills.15 To kick off the program, 18 senior-executive team leaders took a two-day intensive facilitated training session on leadership and transformational skills. Those 18 leaders then taught those skills to 500 managers over a three-day period. The 500 managers then went on to teach their own teams. The program included training on leadership development and key topics such as human-centered design, lean management, and strategic partnerships, thus ensuring that these skills became embedded into the organization’s fabric and that the transformation would continue.
Organizational-health case study: FBI, post–September 11
The FBI brought the concepts of organizational health to life during its post–September 11 transformation.16
FBI leadership engaged senior executive management to visit FBI offices and reinforce the agency’s goal, which sent a strong signal about the importance of the transformation. Senior leadership was held accountable for communicating an authentic commitment to change—a responsibility they could not delegate.
The executive team developed a set of presentation slides to use at forums to communicate its aspirational goals, including a visual outlining from–to behavior and a strategy map that illustrated how everyone in the organization contributed to the mission’s success. These messages were also regularly communicated and reinforced in all-hands and office meetings, organizational emails, and directors’ videos.
Culture change was also driven through the SPS program, during which midlevel managers presented their new culture strategies, linking them to performance metrics and illustrating their ties to the FBI’s organizational priorities. Leadership reinforced that real-time changes to the strategy were necessary and encouraged teams to try pilots and proofs of concept in order to buttress and build a testing mindset. Leadership also pushed teams to employ creative tactics and agile principles.
In addition, leadership stood up a 100-person, full-time team to quickly train staff on desired behaviors, skills, and mindsets. The team used a train-the-trainer model to build a cohort of 600 change agents who rolled out training to all 40,000 FBI employees across 56 field offices in nine months. The rollout happened in five waves and delivered two weeks of robust in-person instruction for all personnel and six weeks of on-the-job training for new roles—solidifying long-term impact on the agency’s organizational health.
On the organizational-health side, teams can establish a fact base up front that can be monitored over time to ensure results, communicate the transformation vision so that it resonates and energizes the entire organization, specify which future behaviors are expected, and integrate these behaviors into performance initiatives that can be tested along the way. Finally, teams can measure whether changes are indeed happening against the initial fact base.
True transformational change in a government agency always involves tackling a complex set of challenges. A balanced approach of addressing performance and organizational health equally can help government leaders tackle these challenges and support the full potential of transformational efforts.