Recession Heralds a New Era in Government

Frontier Centre, Public Sector, Role of Government, Uncategorized, Worth A Look

Amid global economic turmoil, there is a broad consensus about two factors: Economic recovery depends largely on effective government action, and yet the public is also skeptical about government’s ability to both fulfill its newly expanded mandate and achieve efficiency-minded savings that will help restrain overall spending.

Resolving this paradox requires pursuing a new era in government, upgrading its managerial capabilities to ensure a stronger return on taxpayers’ investment. Political leaders and civil servants will need to go further and faster than they did in previous reform initiatives to meet this “whole-government transformation” imperative.

Canada’s leaders can build on substantive steps already taken. Thanks to both federal and provincial reform efforts of recent years, Canada is better positioned than many other countries to deliver further change. Canadian leaders can also continue to learn selectively from what has worked well in other countries.

For example, New Zealand responded to an economic crisis in the 1980s by giving each government agency a clear set of objectives and an agency-level CEO with the flexibility to innovate – and it used this change to shrink the size of government while improving the quality of public services. Similarly, Sweden responded to a 1990s financial crisis by using top-down budgets to drive annual improvements in government efficiency that exceeded many parts of the private sector.

Larger and more complex countries have recently undertaken equally ambitious initiatives. For nearly 12 years, the British government, under Tony Blair and now Gordon Brown, has pursued an integrated reform program that links departmental budget allocations to predefined outcome targets – successes so far include reduced waiting times for medical treatment and improved test scores in public schools. In the past year, the French government under President Nicolas Sarkozy has launched a program to re-think every aspect of its public service model. In Washington, President Barack Obama has put government reform at the forefront of his agenda.

There is no single prescription for success, yet there is a core set of priorities that we believe define whole-government transformation. Foremost is the need to improve performance and delivery through focused objectives, consistent measurement of progress, accountability for success and failure, and alignment across government agencies on decision making, performance management and service delivery.

For example, lean operations can streamline decades-old processes and reshape public services around the citizen. Modern information systems can transform the use of data and analysis, enabling better decisions. And superior talent management can help public agencies attract, develop and retain highly skilled employees – especially important as Canada prepares for a wave of retirements by government employees.

Achieving clarity on such broad priorities is just the start of the reform process. Implementing truly transformational change is arguably a greater challenge. Many an ambitious reform initiative has delivered only part of its promise. Four factors are critical:

First, leaders should establish a vision of reform that tells public sector employees what is required of them and why, and that causes citizens to expect and demand high-quality services. Articulating a reform narrative has been a priority of Mr. Blair, Mr. Brown and Mr. Sarkozy, illustrating the importance of top leaders’ full and sustained engagement in reform.

Second, leaders should articulate and deliver a prioritized program. This means being both comprehensive, touching all aspects of government; and specific, setting out objectives for performance improvement. There must be a clear sense of what “good” looks like, with change implemented in priority order and manageable chunks.

Third, a renewed institutional capacity should be built to drive reform at an accelerated pace and with sufficient rigour. The Blair government’s “Prime Minister’s Delivery Unit” was charged with meeting top-priority objectives for individual departments while embedding a delivery culture across government. More recently, the French government created a co-ordinating group to drive cross-government reforms, ensuring that top-quality performance is on the agenda of every department.

Fourth, there should be a new focus on building managerial capabilities. Managing talent in any decentralized, diverse organization is no easy task. The recent Harper budget’s proposed centralization of the federal human resources function – realigning six separate federal agencies – marks an important step forward. Yet it does not address the human capital gap in attracting and developing high-potential employees, or the managerial gap in leading them.

The economic crisis presents Ottawa and the provincial governments with an opportunity to embrace a more radical phase of reform. In doing so, they can create a more agile and resilient public sector and help Canada become more competitive to meet future challenges.

Jiri Maly is a principal and Nora Aufreiter is a director in the Toronto office of McKinsey & Co.