The case for government reform now

The expanded role of governments means that taxpayers will pay more for public services—and will demand more in return. To meet these expectations, the public sector must transform itself.




Source: Public Sector Practice, The McKinsey Quarterly
François Bouvard, Thomas Dohrmann, and Nick Lovegrove

Long before governments around the world faced the current economic crisis, they wrestled with many difficult, complex challenges—health care, social security, education, national security, crime, and critical infrastructure. The demands on public services were growing, along with the burden on taxpayers, and there was no long-term certainty about how to pay the bill. Several countries ran large budget deficits, raising already high levels of public debt.

In recent months, the pressures on governments have multiplied further as a result of a potent cocktail of interlocking emergencies—the financial and economic crises, major shifts in energy prices, climate change, food supplies, and natural resources. The combined effects threaten economic and social breakdown as consumers suffer and unemployment and poverty rise. Even the viability of capitalism has been questioned.

Whatever the public sector’s role has been in creating these crises, few doubt that it has a critical role in resolving them. Governments are not only intervening to an unprecedented degree in private markets—to rescue or reinforce banks, insurance companies, and automobile manufacturers, among others—but also accumulating financial covenants that threaten their long-term solvency in the process. Indeed, at a time when they have limited political, social, and financial room for maneuver, they are taking on a whole range of tasks beyond the scope of traditional policy and public services.

So now more than ever, governments must discharge their functions efficiently and effectively. But few of them have an established track record or reputation for managerial excellence. Indeed, their historical performance running departments and agencies often arouses skepticism. Many public officials, knowing this, seek to reform the way government works.

In our experience, these reforms typically fall short: with few exceptions, they skim the surface, cover too little ground, take too long, and leave much of the public sector relatively untouched. That’s why we see a need for broader, deeper, and faster reform: what we call whole-government transformation. The current crisis provides both the necessity and the chance to improve the machinery of the state fundamentally—a challenge of vast scale and urgency.

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