State and local governments across the United States confront pressure to reduce costs while meeting residents’ rising expectations. The Trump administration’s actions at the federal level may reduce or even stop federal funding across a range of programs, leaving state and local governments with the dilemma of whether to continue such services or let them sunset.
At the same time, the changes originating in Washington, DC, offer many opportunities for organizational change. The current federal emphasis on efficiency only adds to the long list of challenges facing state and local governments, many of which have already confronted the effects of the COVID-19 pandemic and stimulus funding losses and have long struggled to modernize their often decades-old organizations, technologies, and ways of working. Workforce demographics exacerbate such challenges, with retirements depleting institutional knowledge and recruiting efforts failing to keep pace.
In our view, state and local governments have a historic opportunity to innovate and drive cost efficiencies and greater effectiveness—which equate to better performance—because of these challenges. Constraints can motivate creative problem-solving. Americans, moreover, have long viewed their state and local governments more favorably than they do the federal government, according to multiple surveys. This connection with their constituents may afford state and local government leaders greater imperatives and opportunities to innovate how their organizations perform.
This article offers an approach to help these leaders make lasting performance improvements in their organizations. It also identifies major actions that government leaders can prioritize to improve their overall performance across the spectrum of state and local functions.
Six actions to avoid ‘fad diets’ and achieve a high-performance lifestyle
People often see quick results with fad diets. But such dramatic changes can also risk negative health outcomes. And the results don’t last. Why? Because these diets don’t really change people’s lifestyles or get them to understand the complexity of their metabolism and other factors. So too in government. Governments undertaking rapid cuts to address fiscal challenges often find that important services are disrupted. Then, after the crisis passes, their budgets and staffing expand rapidly again. When this occurs, the outcome is clear: Like the fad dieter, agencies have not changed how they work, so they return to their old “lifestyle.”
State and local governments could consider six actions to improve their efficiency and effectiveness to avoid this sort of unhealthy rebound. These actions have been tested in government organizations as well as businesses and not-for-profit organizations. Taken together, they can deliver lasting performance change in state and local government operations (Exhibit 1).
Simplify is about stopping nonessential work and reducing overall demand on a government’s processes, people, and systems. This step is where leaders can begin addressing efficiency and effectiveness. Sometimes this action involves stopping outdated programs or pilots. It can also involve rightsizing tasks. Often, simplifying begins with root cause problem-solving to identify what really is creating demands on the system. The most effective way to improve performance in a call center, for instance, may be reducing citizens’ need to call in the first place; this often involves better website design, proactive text messaging, and chatbots to answer common questions so the public doesn’t have to make phone calls to get answers.
Orchestrate involves redesigning processes to reduce handoffs, eliminate bottlenecks, and improve constituent experience. Approaches that draw on lean management and agile design—such as process mapping and opportunity identification—can provide powerful strategies. Orchestration can also involve streamlining requirements or the delegation of decision-making authority to eliminate handoffs and friction in a process. In larger efforts, organizations may establish win rooms and expert “tiger teams” to identify, track, and implement targeted improvements.
Digitize builds upon the first two actions to integrate digital technologies and approaches to improve end-to-end processes for constituents and civil servants alike. Think improved secure data sharing across government processes, such as a single web portal to navigate all government services, or job application systems that enable job seekers to view and apply for all relevant government positions at once through a common platform. Partnerships among agencies, chief information officers, and procurement teams propel this step.
Automate holds great potential to improve government performance. This action involves incorporating the full spectrum of technologies, from improved desktop productivity software to generative AI systems that accelerate coding and customization of content such as personalized call-center responses. Some technologies—such as simple chatbots or status updates via texts to residents—can be adopted rapidly, at relatively low cost, whereas others involve more time, investment, and piloting.
Reorganize focuses on making sure that an organization’s pieces fit together to support the new ways of working now and in the future. Streamlining organizational structures and clarifying roles can accelerate decision-making. Reorganization also involves updating processes to improve collaboration within and across teams or agencies. Establishing shared-services functions can lead to greater efficiency across a government enterprise in a wide range of areas—from vehicle fleets to information technology to procurement. Reorganizing for sustained performance goes beyond tinkering with the lines and boxes of the organizational chart to considering the people who deliver the impact and their work culture. Shifting talent to higher-impact activities or programs is also critical to making new ways of working stick.
Strengthen involves building skills, capabilities, and mindsets across all levels of state and local government organizations so they can work in new ways and sustain change. This action enables all the others over the long haul. Some governments have implemented programs, such as the state of Missouri’s Leadership Academy, to develop their emerging leaders. Others—such as the Arizona Management System—have introduced common approaches, vocabulary, and skills to problem-solving across their agencies, with demonstrated results.
Capturing enterprise-wide performance impact
The performance approach outlined above can be tested across a wide range of state and local government organizations. Organizations can use different focal points when applying this framework to their unique missions. For instance, a public-safety agency may focus on optimizing its fleet of vehicles as its greatest potential impact, whereas a department of motor vehicles may prioritize its frontline operations involved in issuing driver’s licenses and registrations. Across all agencies, optimizing program design and implementation can create opportunities for high performance.
Looking through the enterprise lens of a governor, mayor, or city manager highlights specific strategies to achieve cross-agency performance impact. The aspirations for such enterprise-wide impact should be high. Some state governments, for example, have recently identified between $300.0 million and $1.5 billion in potential savings by focusing on major enterprise-wide improvements. Five cross-agency performance measures offer the starting point for identifying and then capturing such impact (Exhibit 2).
Asset optimization involves getting the highest value out of the physical things that state and local governments own and lease, such as real estate, water rights, parks, office space, vehicles, and other equipment. For instance, a government could optimize its vehicle fleet by rightsizing fleets based on telematics data, adopting best-practice vehicle maintenance, and finding the right balance between leasing and owning vehicles. More advanced fleet management teams could even consider which features might maximize the resale value of their vehicles.
Asset optimization can also generate nontax revenue for governments. Traditional revenue measures include fees for camping in parks and licenses to hunt or fish on state or local government lands. Some localities have gone further. They have generated nontax revenue through naming rights on public libraries (for instance, New York Public Library) and mass transit stations (for example, in Miami-Dade County, Florida) or charging for fiber-optic network rights-of-way on government-owned properties.
Lean operations uses time-tested techniques to redesign processes, adopt continuous improvement practices, and adapt systems to both improve user experience and reduce costs. Customer services across a government enterprise, for instance, can be improved using unified, digital self-service tools. Utah, New York City, and others have led the way in adopting one-stop-shop portals to help citizens access information across all government agencies. Similarly, the Commonwealth of Virginia recently established its Virginia Permit Transparency tracking system to provide real-time status updates on permits, licenses, and certifications to any interested party.
Technology modernization can propel major efficiencies as well as enable improved performance. A common savings measure is through reduction of agency customization via enterprise-wide commercial off-the-shelf (COTS) solutions. Rationalizing and modernizing in-house applications can reduce costs and bolster cybersecurity. Furthermore, using available data and analytics can provide managers with the insights they need to make fact-based decisions.
Procurement and vendor management provides a direct path to cost savings for state and local governments (Exhibit 3). Consolidation of spending across a government enterprise provides economies of scale in purchasing, and disciplined, analytical category management improves pricing and consistency in service delivery and terms. And enhanced skill building and collaboration among procurement teams and their internal customers can improve not only the quality of requests for proposals (RFPs) but also the management of contract implementation to ensure value for money.
Agile organization is about ensuring that governments have the right people in the right place at the right time to accelerate decision-making, improve accountability, ensure results, and deliver continuous improvement. Like scraping the barnacles off the hull of a ship, organizations require periodic reassessments to remove extra layers and streamline their operations. Basic analyses and transparency of such factors as managers’ spans of control can highlight systemic improvement opportunities. Organizational design should go beyond formal organizational charts to include not only process redesign but also the skills, capabilities, and mindsets needed to make the new organization hum. A cross-agency approach can uncover opportunities for expanded collaboration, ranging from program design and implementation to efficiencies through greater economies of scale in such areas as procurement.
State and local governments can have the proverbial cake and eat it too with a well-designed and properly executed performance management agenda. Efficiencies and effectiveness can go hand in hand. Equally important, a performance agenda can go beyond dollars and cents. Improving resident and employee experiences are two sides of the same coin. Our research confirms that as constituents experience greater satisfaction with their government’s services, their trust in government overall increases as well. That is a noble North Star to guide leaders through a period of transition and uncertainty.
At time of publishing, countries worldwide are actively revising tariff and trade policies. Final outcomes and implications for government, business, and individuals are highly uncertain.
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