Consider this: If 10 key countries increased their aggregate public-sector efficiency a mere 1 percent a year, they would collectively save nearly $2 trillion annually by 2025.
But to do this, these same countries must identify and achieve substantial cost savings. According to Accenture research, by 2025, the gap between expected demand for services in these 10 countries and the ability to pay for them is projected to total $1.6 trillion.
Today’s political and economic realities are putting enormous demands on public services throughout the world. Aging populations, growing fiscal uncertainties and rising citizen expectations have put governments worldwide in unsustainable positions. For example, already high government debt in countries in the OECD ballooned by some 30 percent of GDP between 2007 and 2011.
Citizens’ expectations—in many cases, conditioned by their experiences as customers of best-in-class private-sector players—have shifted significantly in recent years, and the public sector has often been slow to accommodate these changing attitudes. At the same time, governments must contend with dwindling resources as tax revenues remain stagnant in countries still hampered by underperforming economies, rising expenses and, for many, an inability to provide the comprehensive service solutions their citizens want.
To better understand the fundamental disconnect between what governments are being asked to achieve through public services and what’s actually possible, Accenture launched a research program across 10 major countries focused on the economic impact of maintaining the current business-as-usual level of public-service delivery.
Our findings are sobering. Through 2025, the gap between expected demand for public services and government’s ability to meet it in these countries ranges from $10 billion in Singapore to nearly a trillion dollars in the United States (see chart). Expressed in terms of GDP, the shortfalls range from 1.3 percent in Italy to 5.4 percent in the United Kingdom.
It is clear, in the words of the OECD, that the “fiscal positions in many countries [are] unsustainable.”
Given current budget situations in many countries, these expenditure gaps are simply not viable. Worse, most citizens already consider public-service levels inadequate. A 2012 Ipsos MORI/Accenture survey shows that only 36 percent of citizens across all 10 countries are either very or even fairly satisfied with public services. In other words, the delivery gap is actually larger than these funding shortfalls suggest because most governments already fail to meet citizen expectations.
But governments can do better. In the course of extensive work in the public sector, Accenture has identified four paradigm-breaking shifts governments can make to close major funding gaps while delivering higher levels of service.
- Shift from offering standardized to personalized services.
- Replace reactive approaches with insight-driven ones.
- Move from standard public management techniques to a public entrepreneurship style.
- Replace piecemeal efficiency improvements with a holistic “mission productivity” mindset
The rewards for making these shifts are potentially huge. Using 2010 data as a baseline, Oxford Economics projected that an overall public-service efficiency gain of half a percent per year across the 10 countries we surveyed could reduce public spending by approximately 7 percent by 2025. A full 1 percent annual efficiency gain would cut public spending requirements by 13.5 percent over the same period. The United States alone could save as much as $995 billion by 2025 by increasing public-sector efficiency by just 1 percent a year.
One size does not fit all: Personalizing services
Traditional public services often follow a one-size-fits-all model: Governments pour resources into a standard mold to produce the same public services for everyone. Unfortunately, simply funneling more resources into the mold to improve service levels does not typically produce the desired results. Data from OECD member states shows that even massive spending increases for standardized education services, for example, do not necessarily lead to better outcomes in areas such as reading scores.
This standardized services model stands in sharp contrast to the “market-of-one” evolution in the private sector, which has allowed commercial organizations to serve customers better at reduced costs. The personal computer industry has embraced the market-of-one concept of mass customization for years, enabling customers to “spec” their machine with a wide variety of performance options and accessories. To drive productivity, governments must shift to this same model of personalized services. This implies designing services in partnership with citizens—and delivering them in integrated ways to provide exactly what’s needed, when and in the most appropriate manner.
Governments can provide personalized services using fewer resources by taking advantage of new technology and organizational design to make it easier for service providers to collaborate. The Istituto Nazionale della Previdenza Sociale, the main Italian welfare agency, has organized its services around the citizen. Users submit a single request and regardless of how many subsidiary agencies are involved, the INPS and local authorities collaborate to address the user’s needs. Personalization can also reduce the cost to deliver services via better-targeted, more preventative approaches.
Effective public-service personalization depends on three actions.
Develop deep citizen insights
These should form the core of personalization initiatives. While the public sector has cautiously embraced advanced analytics to improve service, several examples already illustrate how “rich data” can provide insights and guide actions in public services.
New York City’s Health and Human Services developed a program that employs advanced data management methods to create a comprehensive, cost-effective view of a citizen’s interactions with city services. Caseworkers across agencies can use the information collaboratively to create tailored services for families or individuals.
Design citizen-centered services
Greater personalization requires governments to put citizens at the center of service design. As outlined in the Driving Efficiency report in the Australian government’s 2011–2012 budget, Canberra supported the development of ICT systems that make it easier for customers to access Centrelink, Medicare and Child Support Services. This measure decreased administrative overhead and will deliver efficiencies of $140 million over four years.
The government of Maharashtra, India’s second most populous state, is at the forefront of implementing the Aadhaar (UID) project that will ensure the delivery of benefits more efficiently. To date, 40 million residents have been enrolled. By reducing database duplication, the state is projected to achieve savings of up to 25 percent.
Designing citizen-centered services implies a much greater level of integration, but so far, many initiatives have simply been “bolted on” as a way of bypassing entrenched departmental and jurisdictional structures. In the future, governments need to integrate these fragmented structures so that public services are centered on the holistic needs of citizens.
Engage citizens as service design partners
Personalization gives citizens more power to determine how they are served. Enabling citizen participation in cost-effective ways requires a strong set of online digital services, and fortunately, many governments are already on this path. One survey indicates that more than 60 countries currently have online “e-participation” policies, which focus on the use of information and communications technologies in national government and governance processes. India, for example, introduced the Electronic Delivery of Services Bill in 2011, which, if enacted, would direct every government agency to deliver all public services electronically.
In the future, citizens will become more involved in the design of their own public services, and governments will begin to treat them as genuine partners. Fredericia Kommune, a local authority in Denmark, has developed preventative solutions that enable older citizens to live independently at home, thus reducing the need for institutional care. By emphasizing health education, enablement and smart home-based technologies, the initiative is generating significant savings. Approximately 43 percent of participating patients now become self-sufficient compared with only 5 percent three years ago, generating annual savings of approximately $2.7 million, or 14 percent of the authority’s total budget.
Tomorrow’s services today: Adopting insight-driven approaches
Governments will soon shift out of their reactive postures and embrace insights that enable them to anticipate the public-service needs of citizens. Why? The global pace of change has accelerated and become more volatile and disruptive, making reactive approaches obsolete. Adopting an insight-driven public-service strategy will allow governments to predict tomorrow’s service needs and cost-effectively provide the resources required to meet them.
To make the shift to insight-driven management, governments should focus on the following priorities.
Collaborate and cooperate
Effective cross-agency collaboration often requires strategic information-sharing programs. In one example from the public safety field, Europol, the European Union law enforcement agency, has established centralized capabilities for data matching that can identify the nature of criminal activity affecting multiple countries. What’s more, Europol’s Secure Information Exchange Network Application (SIENA) is one of a small number of secure international police systems, connecting all major police forces in Europe on the same platform. What’s unique about SIENA is that it complies with all legal data protection and confidentiality requirements and as a result ensures that member countries can exchange sensitive information securely.
Share insights effectively
Getting the right information to decision makers—whether police, caseworkers, border agents or citizens—when and where they need it while safeguarding privacy rights is an essential element of any insight-driven strategy. For police and defense forces in particular, mobile devices coupled with efficient information-sharing solutions enable those on the ground to organize complex activities from the bottom up without major input from above.
Adopt “emergent identity” services
With identity theft and fraud rampant worldwide, governments need more reliable ways to ensure that citizens are who they say they are. In 2012, Amsterdam Airport Schiphol piloted an automated border control system featuring facial recognition technology that compares passenger identities against the digital photographs in their passports. The system can also identify forged passports and recognize people who may be on an authority’s “wanted” list.
Public entrepreneurship: Focusing on value creation
Governments today are underutilizing existing public-sector talent that could help them make the transition to “public entrepreneurs.” Making this shift can help governments drive much-needed sustainable job creation and long-term growth in the current tough economic environment. Public entrepreneurs focus on creating value, forging new relationships, collaborating across traditional boundaries and breaking through organizational silos to get things done. They partner to deliver value and take calculated risks, understanding that while some efforts may fail, others will not.
The shift to public entrepreneurship repurposes the machinery of government to stimulate economic outcomes, collaborate and multiply the impact of government investments.
Beyond needed policy and legislation changes that should, for example, emphasize such areas as education and workforce development, the shift to public entrepreneurship requires governments to do three things.
Collaborate to boost impact
Public entrepreneurs have a number of options for building collaborative partnerships that can multiply the impact of initiatives. Using new delivery and organizational models can drive innovation and stimulate better economic outcomes; these efforts often involve spinning entities out of the public sector.
For example, in the United Kingdom, one healthcare center that converted to an employee-owned mutual organization in 2008 reported productivity gains of 20 percent in 2009; the quality of clinical outcomes improved or was sustained as well. The greater autonomy enjoyed by employees under the mutual model drove these productivity improvements.
Some countries are creating public/private collaborations that harness technologies to drive both economic and social outcome improvements. One example is a major redevelopment effort in Guadalajara, Mexico. With significant private-sector involvement, Mexican central, state and local governments are recasting the city center as a hub for the digital media industry with a goal of providing employment for 30,000 people while building an environmentally sustainable creative culture that can provide a better quality of life for the local population.
Develop labor pool skills
Public entrepreneurs can attempt to help businesses flourish, but if a nation’s workforce lacks the skills to compete globally, the efforts are unlikely to succeed. Given the complexity inherent in the skills development challenge, coordination among the public, private and social sectors1 is critical.
However, a recent Accenture survey of European decision makers found that although organizations from all three sectors believe that such collaboration is essential, less than 20 percent are working together on skills issues with players in the other sectors. Public entrepreneurs can address this shortcoming by building coalitions and partnerships between businesses, public agencies and not-for-profit players to provide the labor skills needed for the future.
Accenture’s own Skills to Succeed initiative provides an example of this approach. By the end of fiscal 2011, the initiative had equipped more than 160,000 people worldwide—two-thirds of the way to the goal of training a quarter of a million people—with the workplace and entrepreneurial skills they need to get a job or build a business. Partners in the Skills to Succeed initiative include the International Federation of Red Cross and Red Crescent Societies, Junior Achievement, Plan, Save the Children and Youth Business International.
Introduce intelligent stewardship
Governments have many ways to capitalize more fully on the resources they manage. They can, for example, use their sizable procurement budgets to catalyze innovation. Near Dublin, the Dún Laoghaire-Rathdown County Council invited teams of academics and businesses to bid for a low-energy street-lighting contract. The winning bid involved a new kind of streetlight that reduced running costs and associated carbon footprint levels by 33 percent.
Governments can also make better use of the data they collect. For example, “data mashing” enables agencies to merge public information with different types of data to produce new products and services that they then can sell. In Denmark, Geomatic, a private company, uses government data to develop market insights that they sell to clients for marketing and strategy development purposes.
Another opportunity: using technology to simplify interactions between business and government. One leading example is Norway’s Altinn portal, which provides a single connecting platform to cover a whole range of government agencies. Through Altinn, small and medium-size enterprises can obtain information and submit applications without having to contend with multiple authorities at different administrative levels. Between 2008 and 2026, the government expects Altinn to save Norwegian businesses approximately $1.6 billion through data handling cost savings and the more efficient use of time.
Optimal efficiency: Encouraging a "mission productivity" mindset
Instead of pursuing piecemeal attempts to improve efficiency, governments need to shift to a holistic “mission productivity” mindset that embraces broad, integrated thinking to prioritize and manage initiatives better. They must also take steps to eliminate service delivery duplications and make use of the public sector’s considerable scale and assets.
|Savings from these actions could be substantial. Oxford Economics estimates that if the United States achieved annual 0.5 percent efficiency gains, it would realize more than $500 billion annually in savings by 2025 (see chart).
To capture such gains, governments should pursue three courses of action.
Focus on outcomes
This will require governments to introduce performance management approaches that prioritize services based on desired outcomes. While full-scale prioritization efforts can be difficult, their impact can be profound: In Sweden, a priority review during the 1990s reduced average departmental spending by 11 percent, helping to move from a budget deficit of 10 percent into a 1.9 percent surplus within four years.
Some public-service organizations have increasingly adopted performance management to drive improved outcomes. While this is a good start, we believe they should also use performance systems to drive continuous improvements in the value of investments. This approach requires a budgeting process that rewards outcome delivery and shifts away from inflation-based budget adjustments. South Korea has developed a unique performance management mechanism whereby all public agencies must regularly review their programs through self-assessments focused on total cost. Programs that are rated ineffective face 10 percent budget cuts.
Restructure core functions
The second main thrust for optimizing efficiency involves the core functions of government agencies. Worldwide, public services are delivered in highly fragmented ways. For example, New York State alone has nearly 5,000 local government entities.
By restructuring core functions through consolidation and collaboration, governments can drive considerably higher levels of public-service productivity through economies of scale and scope, which can dramatically reduce overhead costs and duplication. In a notable example, Service Canada merged more than 70 services from multiple agencies—from the Canada Pension Plan and Old Age Security to Employment Insurance—into a single customer service organization. The program saved more than $265 million in its first year alone.
Introduce operationally excellent administration practices
These will support and enable more productive core functions in two ways. First, public entrepreneurs should fully exploit government scale to drive efficiencies. New Zealand’s government agencies, by jointly purchasing supplies and services such as vehicles, office supplies, air travel and legal services, are expected to save almost $300 million over the next few years.
Second, they should make better use of existing assets. For instance, government agencies in Singapore developed a shared human resources, finance and procurement system to provide support to 15 agencies and 17,000 users. Over its lifespan, the system is expected to help cut the cost of IT infrastructure by 30 percent.
Governments worldwide face daunting public-service challenges. But with the right approach, we believe they can overcome these obstacles by tapping into the massive opportunities to make public services more effective and efficient. Leaders must realize, however, that the four shifts described here will require a reformist’s zeal and a true commitment to significant change.
While undoubtedly difficult, these shifts can help governments worldwide resolve today’s seemingly intractable public-service problems while effectively positioning them to meet the needs of tomorrow’s citizens.
1. Situated between the public and private sectors, the social sector includes cooperative organizations, nonprofits and charities. (Back to story.)
For further reading
"Singapore Ministry of Finance: Shared Services,"Accenture 2012
About the authors
Bernard Le Masson is the management consulting managing director for Accenture Health & Public Service. He is based in Paris.
Brian J. Moran is the managing director of Accenture’s Public Service Operations & Management group. He is based in Cleveland.
Steve Rohleder is the group chief executive of Accenture Health & Public Service. He is based in Austin, TX.