McKinsey and Co. makes the case for federal productivity increases

Better management practices could improve government and the economy, McKinsey consultants say

How can American government meet its productivity challenge?

People talk about government performance and results, but they rarely say why they matter. McKinsey and Co. offers an economic reason why in a new report on government productivity.

Economic analysts at the global management consulting company argue that a 5 percent gain in government productivity in 10 years would add $100 billion to the U.S. economy. A 15 percent productivity gain would be worth $300 billion. McKinsey analysts based those figures on an assumption that government productivity could generate savings. The report’s authors, who include Nancy Killefer, a former assistant secretary for management at the Treasury Department, note that the federal government stopped keeping federal productivity statistics in 1996.

The McKinsey report asserts that competition and innovative management practices drive productivity in the private sector and could benefit public-sector productivity.

In talking to government leaders, McKinsey analysts found that the President’s Management Agenda and other performance goals are mostly given lip service. Agencies have pockets of employees responsible for the reporting requirements of the Government Performance and Results Act and Program Assessment Rating Tool (PART), but those performance measures typically do not change how senior executives run those agencies.

McKinsey also found that despite much talk about government performance and results, little has happened to change the dynamics of the federal budgeting process.

In addition to offering policy suggestions, the McKinsey report focuses on practical recommendations, such as requiring agencies to appoint chief operating officers and giving the Office of Management and Budget a greater role in supporting management reforms. OMB’s role is to negotiate budgets and assess agency performance. McKinsey noted, however, that OMB does not have the resources to give agencies the necessary management support.

The PART has many critics, but Robert Tobias, director of the Institute for the Study of Public Policy Implementation at American University, is not one of them. “It is the first attempt to create a measurement system across government that allows a comparison of both the effectiveness and efficiency of programs,” Tobias said.

The McKinsey report calls for new incentives for government managers and employees to achieve greater productivity. The report states, for example, that agencies should be able to reallocate their savings to frontline programs.

John Palguta, vice president for policy at the Partnership for Public Service, said productivity should be a governmentwide goal, but it should not be about doing things faster and cheaper with fewer employees. “The overall goal of improved government productivity is effective government,” Palguta said.

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