Government reform The State Policy Road Map: Solutions for the Journey Ahead

Article Sections

States today should embrace the digital revolution. Given rapid technological advances, they now have several opportunities to break the trade-off between cost and quality. States should also consider reinventing themselves by recruiting, developing, managing, and engaging their employees differently.

Delivering the digital state

By William D. Eggers  and  Steve Hurst

Explore: A modern state workforce | Lower-cost government | Data-driven government

Delivering the digital state

What is the issue?

From the Internet of Things to artificial intelligence, no single factor may alter citizens’ experience of state government more than the pure power of digital technologies. Governments worldwide are in the midst of a historic (and frequently wrenching) transformation as they abandon analog operating models and embrace digital.

Learn more

View the full collection

Subscribe to receive Public Sector content

View the table of contents and create a custom PDF, or download the full collection

Sign up for the webcast

Explore the collection:

Delivering essential services

The challenges that could change everything

Emerging trends

Ten bold plays

Improving quality of life

At the state level, citizens want outstanding digital service from their government for the same reason they want it from an online clothing retailer, a bank, or a travel booking site: Great service makes their lives easier. The less time people spend searching for information or filling out forms, the more time they can spend getting on with their lives.

So what do state governments need to do to forsake analog, industrial-era models in favor of their digitally enabled counterparts? This article provides a set of strategies that may help in getting from here to there. One thing to understand is that transformation is not just about the technology— it’s a changed mind-set that puts customers and users before organizational interests, can turn human-centered design into a state’s core competency, and improves the way state agencies serve their citizens.

Issue by the numbers: Digital government transformation

  • State and local government IT spending is 56 percent ($108 billion) of total government IT spending in the United States. This is expected to increase up to 58 percent ($117 billion) by 2018. Some of this additional funding will likely be used for transition from legacy to cloud systems.1
  • According to Deloitte’s 2015 digital government transformation survey, 73 percent of state and local government respondents believed that their digital capabilities were behind the private sector.2
  • The NASCIO 2016 State CIO survey findings show that over one-third of CIOs stated that greater than 10 percent of their state’s IT budget is allocated to modernization work.3
  • Nine of ten state CIOs considered at least 20 percent of their systems due for replacement or modernization, while nearly two out of three CIOs saw more than 40 percent of the systems as legacy.4

How can state leadership tackle the issue?

Develop a statewide digital strategy

Our research points to a strong link between an organization’s success and the presence of a digital strategy.5 States with a clear, coherent digital strategy are likely better equipped to respond to opportunities and threats, and are more likely to foster innovation and collaboration. The strategy should consist of a road map that addresses the key elements of digital transformation: culture, leadership, workforce, and procurement. A high-profile strategy can accelerate the digital journey.

Establish a state digital studio

State officials should have a central point for orchestrating the digital vision. Many commercial organizations—and some leaders in the public sector—have put a creative digital studio at the center of their digital transformation. The studio can provide web development, design thinking, and prototyping capability. This operation might be housed within the organization, or it might be co-sourced or even outsourced.

One of the first governments to set up an organization to function as an enterprise-wide design studio was the United Kingdom, which formed its Government Digital Service (GDS) in 2011. The GDS soon evolved into a Cabinet office and seemed to inspire other governments to form organizations based on its practices. These included the United States Digital Service and 18F in the United States, the Digital Transformation Agency in Australia, and the Canadian Digital Service.6 Hong Kong, Singapore, and Thailand have also established organizations of this kind.7

When smart organizations develop digital studios, they usually make those resources available to all departments and agencies with existing contract vehicles and attractive incentives. For example, the city of New York is in the process of creating a master service agreement (MSA) for several digital studios in order to provide design capabilities.

Create an end-to-end digital experience from the citizen/customer’s point of view

Most citizens don’t care about a state’s organizational chart. They certainly don’t want to spend time hopping from one state agency’s website to another, trying to figure out which ones can help them with which concerns. They want to get their questions answered or their transactions completed in a few simple steps.

Like the best e-commerce sites, the most seamless state digital service environments don’t greet you by asking, “Where do you want to go?” Instead, they ask, “What do you want to do?” and then whisk you off to the place where you can accomplish what you need. Want to register to vote? You don’t need to know the name of the agency that handles that. It’s the service’s job to take you to the right place.

Use design thinking principles

Work conducted according to the principles of design thinking can be highly iterative. Practitioners conduct research to understand the real human needs behind the problem they’re trying to solve or the service they’re building. They commonly use brainstorming to generate large numbers of ideas and do a great deal of sketching, prototyping, and testing.8 Whenever you see an organization that excels at digital design, you’ll likely find that it builds a user focus into every step of every project.

Phase out legacy systems gradually

In the second decade of the twenty-first century, an alarming amount of critical state government business depends on IT systems that date back to the age of punch cards and green screens. Reliance on obsolete technology can open government agencies to potentially serious perils.

So how can you move off obsolete systems without risking a major belly flop? Refactoring, especially automated refactoring, can be a promising solution in many cases.

Refactoring is a straightforward approach that replaces old code one module at a time, producing code written in a contemporary language that can use a modern environment. The benefit is limited disruption, as end users shouldn’t detect any difference in the systems they use from day to day. They would continue to use the same interfaces to execute the same business processes. But behind the scenes, refactoring creates an environment based on a modern framework such as .Net or JAVA that can run on newer platforms such as Windows or LINUX, providing a strong foundation for future modernization.

Refactoring is typically a lower-cost, lower-risk strategy that lets an agency conduct business with very limited disruption. It usually takes only about 18 to 24 months to complete a refactoring project. In a typical modernization, it can take that long just to gather requirements.

Build digital capacity

Many government leaders identify workforce issues and technical skills as the most challenging areas for digital evolution.9 Many state government agencies seem to lack the skills needed to take advantage of digital transformation—skills in user research and analysis, agile and iterative project management, financial modeling, and digital supply chain issues, as well as coding and design. They should have a plan that pinpoints the capabilities they need and suggests ways to secure them.

Hiring, retaining, and training the right talent may require new approaches to recruitment, training, and engagement with the wider digital talent ecosystem. It will likely require offering the best candidates something beyond compensation and benefits, and creating a workplace in which they can thrive.

Make agile work for a government environment

Agile development is neither new nor unproven; in fact, agile projects are 350 percent more likely to be successful than waterfall development (600 percent for very large projects).10 Despite this, agile is used relatively sporadically in state government. This means that the moment agile projects interact with parts of state government that have not adopted the methodology, they often meet resistance.

Traditional agile is designed for small teams working on well-defined projects over short periods of time. Scaling agile to large state IT projects involving dozens of teams over multiyear time horizons typically requires adapting the approach. Key modifications often include multiyear road maps, strong governance, coordinating cross-team dependencies, consolidated reporting, and increased testing.

Develop enterprise-wide identity management

Today, many governments rely on a sprawling patchwork of systems to manage information about people, using everything from passwords to smart cards to biometrics. Every department seems to handle the issue differently. The result can be inconvenient to the end user and can limit government’s ability to leverage information it possesses but cannot access. These disconnects can be frustrating at best and crippling at worst.11

Imagine the potential if states could “connect the dots.” Someone seeking benefits wouldn’t have to provide their name, address, and other information to multiple agencies. Citizens would get tax forms with fields pre-populated with data. Agencies could take steps based on actions taken in other agencies, too. For example, someone sent to prison could have his or her unemployment benefits stopped, or someone who applied for nutrition assistance could be told that he or she qualifies for a school lunch program.

Today’s limitations often stem from the way government manages identity: databases that can’t talk with one another, limited information sharing, and complex rules and protocols. To make digital government work and deliver great customer experiences, state governments likely need something simpler: a unique, uniform digital ID that grants agencies access to all of the appropriate data and services, from anywhere and any device.

Transform procurement

Our digital government survey shows the big changes government organizations seem to want in the procurement process: agile development, less restrictive terms and conditions, and a more decentralized procurement model. Any proposed procurement reform should consider these issues.12

Digital-age procurement entails simplifying the procurement process, breaking large projects into smaller parts, and increasing flexibility and agility in procurement approaches.

You don’t need to look too far for inspiration

Access Health CT

Connecticut developed an online health insurance exchange widely viewed as successful. How did the state do it? By focusing on user-centric design and testing to eliminate pain points, address glitches, and prepare for contingencies.

Texas Health and Human Services Commission

How can digital projects improve the customer experience? One way is by working to understand user behavior and focusing on the user perspective while designing the project. That’s exactly what the Texas Health and Human Services Commission (HHSC) did when it integrated eligibility systems for all federal and state programs and launched a mobile app for document verification.


Apart from conventional recruitment criteria, evaluating candidates’ motive for joining the team and testing whether they are a good cultural fit can play a role in hiring the right individuals for the job. The US federal government’s digital studio, called 18F, reengineered, or “hacked,” the government’s hiring process to build a digital dream team.

Michigan’s MILogin

The MILogin identity management system allows users to access state information and applications, including private data, from multiple agencies with a single sign-in. The system uses tools such as credentials verified by a third party, strong passwords, and multifactor authentication to protect the user’s identity, with specific requirements determined by the agency that owns each application. As of September 2017, more than 60,000 state employees and contractors, plus 100,000 Michigan citizens and 700,000 business entities, had registered for a user account to access over 170 state applications from multiple agencies.13

A state workforce to meet modern challenges

By John O'Leary and Julie Quinn

Explore: Delivering the digital state | Lower-cost government | Data-driven government

A state workforce to meet modern challenges

Changing the rules of engagement

Today, most citizens expect government to deliver at Internet speed—and are too often disappointed. Those state leaders who can deliver high-level services may enjoy a competitive advantage.

But how can state leaders achieve twenty-first century performance management with workforce approaches often rooted in the twentieth century? Elected officials rely on state employees to carry out their agendas, but often struggle to get the best from their workforce, for reasons that may be both structural and cultural.

In a nutshell, the challenge is this: From recruitment to compensation to pension systems, the way most state governments manage their workforce doesn’t seem well suited for attracting and retaining top employees—particularly those with digital-age skills. Today’s most innovative and disruptive firms have reimagined work. In contrast, government too often still operates on legacy employment rules from a bygone era.

Perhaps the greatest divergence today between government and the private sector isn’t technology; it may lie in how work gets done. How work is organized. How it's rewarded. How people are hired. How team performance is measured and optimized. What the employee experience feels like.

The problem isn’t with public workers—it’s with the systems in which they work. State employees often have a wealth of domain expertise and are steeped in the complexities of various policy areas, from air quality regulations to SNAP eligibility, from budgeting to procurement. But while important, such knowledge alone won’t be enough if state government is to keep pace with the technology revolution rapidly transforming the private sector.

Issue by the numbers: State workforce

  • US state and local governments employ a total of 19.5 million people (local: 14.4 million, state: 5.1 million).14
  • The state government workforce is aging. The median age of workers in public administration jobs has been increasing since at least 2011, reaching 46.5 in 2016 (figure 1).

Median age of public administration workers

  • Recruiting and retaining qualified personnel was ranked as the most important issue for the second year in a row by state and local government human resources managers, according to a 2016 survey (92 percent rated this issue important or somewhat important).15
  • Interpersonal (63 percent) and technology (53 percent) skills are the skills state and local governments need most, according to state and local government human resources managers (figure 2).

What skill sets are most needed in new hires?

How can state leadership tackle the issue?

In these times of change, leaders across government are being pressed to rewrite the “rules” for how they recruit, develop, manage, and engage twenty-first-century employees.

Put the purpose first

Here’s a typical state job description, modified from a state employment website:

Program Director 1, Compliance Reviewer: This position provides mental health and substance use expertise to review new and existing entities licensed or certified by the Department of Mental Health. Position is responsible for reviewing provider policies and procedures, client files, and other collateral information for compliance with laws and contract requirements. Master’s degree, licensure in substance use treatment or mental health field preferred.

The job listing then goes on to list all the benefits of working for this particular state, including pension, vacation, dental coverage, free parking (!), and the like.

Would this inspire you, or anyone you know, to apply for this position? Hardly. While it explains what the job entails and what you’ll receive for doing it, it misses the most critical element of all: the why. The mission. The purpose. Compare it with this ad for the same job:

Substance Recovery Director: Are you a mental health professional concerned about the opioid epidemic and other addictions? Come join the team at the State Department of Mental Health, where you can put your knowledge of substance abuse treatment to work as we combat one of the biggest public health challenges of our time. We have the resources to help you make a bigger difference than you ever thought possible.

If you recruit people by telling them about the dental benefits, you will get applicants who care about dental benefits. If you recruit people by telling them how they can make a positive impact—well, you might be surprised at who might apply.

One of the advantages that state employment has in attracting great candidates is the critical mission that benefits society. Instead of selling widgets, state employees are keeping the roads safe, helping the homeless, putting away criminals, and so forth. Intangibles such as purpose may be even more important than the size of the paycheck.16

But many state governments have a brand problem.17 Many job seekers won’t automatically equate state government and “good cause.” Take every opportunity to remind them.

Leadership disrupted: Developing the next generation of state leaders

In an era of incremental change, the gradual development of leaders working their way up the ranks might have made sense. But in today’s era of rapid change, leadership development often needs to be accelerated, and it should include more than training programs. Most leaders need firsthand experience driving change, especially during large-scale transitions.

Government agencies should engage high-potential leaders in real-world scenarios that expose them to digital disruption in order to help develop a pipeline of leaders equipped to lead through change.18 Strong government leaders typically embrace innovation and risk-taking, and they ideally have a strong technical understanding. A frequent lament among state leaders is the challenge of finding enough employees with the professional skills needed to drive change in areas such as cybersecurity, data analytics, and digital government. Hands-on experience is critical. In the United Kingdom, for instance, the Department for Work and Pensions (DWP) created a boot camp-style digital academy to train and upskill staff. Workers are trained on key elements of digital technology such as user-centric design, agile development, and digital government services.19 While started by the DWP in 2014, the Digital Academy has now been expanded to provide digital training to the rest of the UK government. 20

GovCloud: The future of government work

Read more about the GovCloud model at GovCloud: The future of government work.

GovCloud: Creating a more flexible, adaptive workforce

The “GovCloud” model represents a potential future of state government talent management. In a GovCloud model, high performers aren’t put into traditional, static jobs. Instead, they are given assignments, and can be shifted to various departments and projects as needed. While likely not for everyone, this agile, collaborative, and efficient talent pool often fits well with the talents and preferences of younger professionals as well as meeting the rapidly shifting needs of government organizations.

With this in mind, a GovCloud talent pool translates the job-hopping consultant model to the permanent workforce.21

Imagine a techie in her early twenties—let’s call her Tina—starting a job at a state department of transportation. After working at the agency for a year, Tina finds herself seeking a new challenge. Under the GovCloud model, she could undertake a wide variety of creative, problem-focused work in a virtual staffing cloud. And she wouldn’t be limited to the department of transportation.

While young workers may vary in background and expertise, many exhibit traits of “free agents”—self-sufficiency, self-motivation, and strong loyalty to teams, colleagues, and clients. A cloud system would allow teams to form and dissolve as needed, encouraging civil servants to focus on specific project outcomes rather than ongoing operations. Tina, for instance, could start a six-month stint at the department of health and human services helping to design mobile apps for social workers. As a cloud worker, she could go wherever her skills are needed and where her passion draws her—learning and growing along the way. From the agency’s perspective, the department of transportation may not require a permanent, full-time employee building mobile apps, but could use the occasional infusion of just-in-time talent in areas such as data analytics, project management, or behavioral economics.

While the conventional wisdom among many state HR officials holds that millennials (defined as those born between 1980 and 1995) can be particularly hard to recruit and retain in state government jobs, that may not be true.22 In fact, many millennials want to work in government; millennials don’t leave government jobs more frequently than other generations; and millennials’ age-specific turnover rates are lower than Generation X’s.23 Provide a positive work environment, and millennials could become key long-term contributors.

One of the worst things a boss can do is ignore an employee, and that may be especially true of purpose-driven millennials. Performance management at its best is real-time, ongoing, and blended between formal and informal regular “check-ins.” Frequent feedback can fuel performance and drive exceptional work.24

Create a digital HR platform to enrich the employee experience

Once hired, state government workers can thrive if their organizations view them as “customers” with choices about where they work. Digital technology has transformed the customer experience in recent years, and digital tools could similarly reshape the employee experience.

Becoming digital is not just about new or more technology, but about platforms that provide access to knowledge, tools, and support at critical moments in the journey. A digital HR platform can help employees create a personalized career journey, receive regular feedback, and keep track of their training and development.

Use digital workflows to augment (and enhance) the worker experience

Outdated and poorly designed technologies can increase the time it takes to get the job done, creating an environment where employees could feel frustrated and unproductive. For example, digital tools can streamline much of the “paperwork” associated with child welfare and other family services—freeing up social workers to do social work.

Broaden the talent aperture

It used to be that most state government workers were “lifers”—they started young, worked their whole careers within state government, and looked forward to a predictable pension when they retired. But this talent model doesn’t seem to work as well in today’s climate of job mobility, skill shortages, and retirement portability. Long-term employees can still be an important part of the government workforce, but they’ll likely be joined by other sources of talent:

  • Tour-of-duty talent (workers from outside government who sign on for a few years to make a contribution)
  • Rented talent (employees of state government contractors or partner organizations)
  • Periodic talent (employees who go in and out of government service)
  • Freelance talent (employees brought in as individuals for a specific project)
  • Open-source talent (people who don’t work for the state directly, but contribute to its value chain for non-monetary purposes).25

Increasingly, many state governments are looking at a fifth source of talent—digital labor. Digital labor is the technology that can augment human capabilities and extend the reach of government workers. State governments have the opportunity to invest in technologies that could relieve overburdened departments. Those technologies could come to be seen as partners with government workers, and would finally help break the trade-off between holding down costs and meeting the mission.26

You don’t have to look too far for inspiration


For a real-world example of innovative talent strategies in state government, look no further than California. California is often ground zero in the tech talent wars, so it may not be surprising to see the Golden State innovating with its state IT workforce. Faced with a 34 percent vacancy rate for IT workers, California Health Care Services’ IT department adopted a variety of measures to tackle the metrics. For example, the IT department adopted a telecommuting policy that allowed employees to work from home on specific project activities, helping them keep their work-life balance. The state uses technology to allow employees to work whenever they want throughout the day, rather than tying them to a traditional eight-hour workday. Another effort in this direction was providing employees with substantial training opportunities in new technologies. As a result of these measures, the department’s vacancy rate for IT positions dropped to 5 percent.27

California’s overall IT system is rebooting its job titles and classifications in order to attract and retain employees. The NASCIO 2016 state CIO survey found that “modernizing IT job titles and classifications” was state CIOs’ top concern with respect to personnel reform. Several states as well as local governments have now started to address this concern with job reclassification initiatives. 28 In California, this effort is a part of the larger Civil Service Improvement Initiative. Started in 2014, the “IT Classification Consolidation Project” eliminated more than 2500 classifications, consolidating the job titles into just 60 classifications. The purpose of the initiative was to make it easier for qualified applicants to understand the career opportunities that they have with the state of California.29

Delivering innovative, better, and lower-cost state government

By William D. Eggers, Christina Dorfhuber, and Chris Rose

Explore: Delivering the digital state | A modern state workforce | Data-driven government

Delivering innovative, better, and lower-cost state government

What is the issue?

A decade after the Great Recession, a number of states still face budget challenges. In 2015, 22 states had expenditures exceeding total revenues;30 30 states faced revenue shortfalls in 2017 and 2018 or both, according to the Center for Budget and Policy Priorities.31 Like always, money is tight.

Most governors are looking for ways to reduce costs without cutting programs. While you may think most of the low-hanging fruit has already been picked, such strategies do exist.

An ongoing challenge facing public operations is the trade-off between cost and quality. One way state leaders can address this challenge is to embrace new thinking and break the trade-offs through innovation. In the private sector, this takes the shape of making a better product for lower cost. For example, in the past, you could either serve lots of people with a standard product, or a small number of people with a customized product. Today, through personalization technologies, there is the potential to do both, and break the trade-off to offer “mass customization.”

In government, innovations that break the trade-offs can involve new technologies, new policies, or new service models to deliver equal or better quality for less money. Nesta, a UK-based think tank, calls such an approach “radical efficiency”: the art of developing different and better models—not just lower-cost versions of existing ones.32

Issue by the numbers: Breaking the cost-quality trade-off

  • Thirty states face expenditures exceeding total revenues in FY17, FY18, or both (figure 3).33
  • Some states have fallen further behind on funding their employee pension systems. The gap between state pension liabilities and assets grew to $1.1 trillion in 2015.34
  • Huge savings may be possible from new automation technologies. The Deloitte Center for Government Insights projects that state governments can realize time savings of between 4 and 30 percent by implementing automation technology in the next 5–7 years. This translates to between $119 million and $931 million in potential annual savings.35

Thirty states addressed or will address revenue shortfalls in fiscal years 2017 and 2018, or both

How can state leadership tackle the issue?

A new administration can be an opportunity for state leaders to look at state operations with a fresh set of eyes. Rapid changes in technology can create a chance to borrow great ideas from commercial best practices. Advances in understanding the customer experience likewise offer opportunities.

But what’s the best way to approach such an effort?

A methodical approach

Rather than starting with a set of preconceived notions and a few “prime targets” for cost reduction, taking a more methodical approach may be more effective. Start with analyzing your data—expenditure data, budget data, HR data, and performance data. The results of the analysis will identify some potential focus areas. With these focus areas identified, cast a wide net to generate ideas. Reach out to employees, senior government executives, think tanks, consultants, academics, and other partners.

The next step is key. How to choose from among the (hopefully) long list of cost-reduction ideas? One of the best approaches is to treat each idea as a “hypothesis” and critically test that idea against a set of criteria, including:

  • Investment required
  • Time horizon
  • Likely return on investment
  • Complexity and risk
  • Impact on service levels
  • Impact on state employees

This step can also include input from focus groups, surveys, and other “crowdsourcing” instruments. By critically testing these hypotheses up front, you can bring the best ideas forward.

Now, you can prioritize these ideas and start to execute with confidence. With a data-driven approach, you are more likely to pull the right levers and overcome possible resistance.

There may be opportunities for “incremental” cost savings—but saving even a small percentage of a large operation can generate meaningful savings. There may also be opportunities for more dramatic savings. For example, if you charge $20 for annual license renewals, a policy change could enable you to charge $60 for a three-year renewal instead—and cut the total number of transactions by 67 percent.

The break-the-trade-off ideas will likely fall into several different buckets.

“Break the trade-off strategies” vs. zero-sum strategies

Organizing for ongoing efficiency improvement

Develop institutional capabilities

Some states have created independent agencies that conduct periodic top-to-bottom reviews of state programs, agencies, and departments and make recommendations for maintaining, eliminating, redesigning, or restructuring them. Texas is one state with robust independent review capabilities. Created in the wake of a recession-led budget deficit, the Texas Performance Review (TPR), launched in 1991, resulted in savings of over $10 billion over the course of the next decade.36 Meanwhile, the Texas Sunset Commission has resulted in $981 million in savings and increased revenues over its 33-year history.37

Other states such as Arizona and Washington State are adopting lean thinking to maximize project impact while reducing waste.38 For instance, Arizona launched a results-driven management system called Arizona Management System based on lean principles. The idea was to track and improve state agencies’ performance on a regular basis, honing customer value. As a part of this initiative, the state has revised its processes and policies, saving millions. One such revised process is data-driven procurement, which helped Arizona achieve $20.4 million savings in 2016 alone.39 Similarly, following lean thinking, Washington State automated the monthly manual billing process, which involved 300+ organizations, generating savings estimated at $500,000.40

Build a balanced portfolio

To achieve results, leaders can build achievable, robust programs that contain a portfolio of initiatives to potentially reduce costs. Some pitfalls can include taking on too many initiatives at once and constructing a cost-reduction portfolio that lacks balance and coherence. This can lead to one initiative diluting the benefits of another and, possibly, a wider failure of confidence in the whole program.

Cost savings take a varying amount of time to extract. Think fast money and slow money. Fast money can come from opportunities that are not particularly complex to implement and where savings can be realized more quickly. Slower money can come from projects that are more complex, that may require a greater level of attention and management, or that have more dependencies with other projects underway. It can take years, for example, to extract savings from shared services, consolidation, and other changes in the government’s operating model. Additionally, the timeframe may be affected by the level of risk involved in the opportunity.

Workforce strategies

Personnel costs can represent a large chunk of state budgets. In looking for possible savings, state leaders may consider looking at functions that involve large numbers of public employees.

Outsourcing, automation, self-service, and other forms of alternative service delivery are several options state leaders can consider. Can the function be performed through self-service? Can parts or all of it be automated? Can it be contracted out or done through a public partnership? Can policy changes reduce effort with little or no impact on outcomes?

Careful workforce planning that takes advantage of natural attrition can help to minimize adverse impact on state employees.

Operating model: Reconfiguring bureaucratic structures to achieve policy outcomes in a different way

Often, the fiscal gap is so big that efficiency savings alone may not suffice. State officials can identify cost-reduction opportunities that change the shape and the way they do business, allowing services and policies to be delivered in a different way. This can take many forms, depending on the circumstances of the organization in question. Some common techniques that can help reduce costs through operating model change include:

  • Implement shared services: Share back-office functions (for example, HR, finance, procurement) and delivery models with other departments or public bodies, including boards and commissions.
  • Reduce overlap: Adjust the responsibilities of state agencies and departments by merging or modifying programs to reduce overlap.
  • Rationalize: Reduce the number of agencies, units of local government, and “arm’s-length bodies” involved in delivering public services.
  • Redesign: Adjust organizational hierarchies to increase spans of control and “delayer” middle-management roles through new workforce civil service paradigms and other means.

Changing the operating model can be harder than driving out efficiency savings because it can require state agencies and employees to fundamentally alter their ways of working and to adapt to a larger degree of change.

Policy choices: Changing costs without sacrificing mission

Policy choices can be a sensitive part of any cost-reduction program because they can affect large constituencies external to government. But this also represents an area where cost savings can be found without undue impact on core services. While some policy changes may require legislation, others may be accomplished through executive action.

Policy choices, in some cases, are rooted in long-ago decisions that established processes appropriate for the time but are no longer necessary due to technology changes. Does it really make sense to publish certain public notices in newspapers in the Internet age? Does having a different license plate for each county in the state justify the costs of managing multiple inventories? For that matter, is having a service office in each and every county the best use of scarce resources?

Reexamining existing policies can also reveal current practices that may be needlessly causing inconvenience to citizens. What is really gained by requiring documents to be notarized? Why can’t someone simply take a photo of his or her latest utility bill and email it in, rather than dealing with the hassle of finding an envelope and stamp to mail in a paper copy?

In some cases, there may be good reasons for continuing the current practices, but it never hurts to ask questions. Policy choices are driven by leadership, and cost-saving directives can often provide a useful spur to creative policy thinking.

Technology- and data-driven solutions

Rapid advances in technology, in areas including robotics, cognitive computing, and cloud, mean that almost every aspect of state operations can be reevaluated for streamlining through new technology.

In the past, tech upgrades in state government were often synonymous with large system implementations that were slow and costly to implement. Some systems will still fall under this category, but there are increasing places where more “lightweight” automation or cloud IT solutions can yield savings with less risk, less cost, and a faster payback in a shorter period of time.

The tech revolution is reshaping the economy, and state government is a target-rich environment for opportunities to use automation to improve efficiency. Mobile applications, for example, can allow field workers, such as social workers, to input and access critical data on-site, creating huge efficiencies without incurring massive costs.

Digital government, online self-service, artificial intelligence, and a host of other technologies offer a chance to rethink workflows, reduce costs, and in many cases to do so while enhancing service levels.

In addition, technology now allows for data-driven solutions that, through predictive analytics, can dramatically improve the allocation of state resources, from people to facilities to budget dollars.

AI-augmented government

Read more about how state governments can apply cognitive technologies in AI-augmented Government.

Management by data to optimize programs and operations

Big advances in data analytics in recent years can help states save time, money, and energy.41 By making decisions based on data rather than intuition, states can allocate budget resources to maximum effect.

Consider Oregon, a leading state in using data to advance more evidence-based programs and services. The state targets many of its grants to local public safety agencies to test strategies that reduce recidivism and save prison costs. In human services, the state’s Pay for Prevention initiative directs funds to evidence-based interventions with the goal of preventing children and youth from entering the state’s child welfare and foster care systems in the first place, ultimately saving tax dollars.42

Asset management

From real estate and fleet maintenance to procurement and energy efficiency, state governments control significant assets. In some cases, practices established in the past may not be optimal today in light of new technologies or new practices. For example, states are now able to better understand usage patterns in offices and design flexible spaces that meet the needs of the modern and often mobile workforce. This can result in avoiding construction of new buildings or reducing the total square footage needed to support the existing workforce.

Internal operations

Robotic process automation (RPA) can replace the keystrokes on scores of repetitive manual tasks sometimes common in internal operations, allowing workers to focus on higher-value work. These technologies can take over repetitive tasks from human workers, freeing up those workers to perform more high-value activities. Bots, which mimic the actions of human workers, can automate processes in human resources, finance, payroll, IT, and procurement (figure 4).

Key functions replaced by bots

Procurement rules and hiring processes are also potential targets for innovation. Finance and budgeting functions can be dispersed and highly manual.

Cutting fraud, waste, and abuse

Elimination of fraud, waste, and abuse is the equivalent of found money—money that can be spent on delivering real value.

Shutting down fraud, waste, and abuse

Read more about fighting fraud, waste, and abuse in Shutting down fraud, waste, and abuse.

Fraud perpetrators can be highly inventive. Keeping pace with them requires states to build anti-fraud systems that contain all relevant information and are capable of learning new fraud patterns on the fly. However, new tools that allow states to employ artificial intelligence-enabled fraud detection are coming online and can help states build such systems.

Tennessee’s Medicaid program TennCare took a holistic approach when it enforced statewide sharing of suspected fraudulent provider lists. The relatively simple policy, procedure, and technology changes associated with this move allowed Tennessee to save $50 million in one year, according to TennCare’s former director.43

Behavioral “nudges” can boost voluntary individual tax compliance

Tax systems overwhelmingly rely on voluntary compliance, for both individuals and corporations. Efforts to boost compliance through enforcement can be costly and difficult. The emerging field of behavioral economics, or nudge thinking, has the potential to increase revenues without raising taxes. A successful example of nudge thinking application comes from the Canadian province of Ontario, where the government turned to behavioral science to tackle delinquencies in employee health tax (EHT) filing by the businesses. To assist employers who were running late on filing, Ontario tested new messaging that focused on implementation intentions. In 2015, a subset of employers tweaked their collection letters, guiding participants about where they could file a return (directing them to websites and the mailing addresses of service centers) and providing detailed instructions for filing and deadlines. A month later, employers using the implementation intention approach reported a 13 percent increase in their filings vis-à-vis the control group that received the standard delinquent message.44

Nudge toolbox: Implementation intentions

Committing to a plan can help individuals accomplish a specific goal by spelling out “how, when, and where” they intend to carry out an action, which is known as an implementation intention. In a number of studies concerning fruit and vegetable consumption, people who expressed their dietary goals in an “if/then” format—for example, “If I am at home and I want to have dessert after dinner, then I will make myself a fruit salad”—consumed significantly more healthy foods.45

You don’t have to look far for inspiration


In 2013, North Carolina launched an initiative to analyze and reform state government operations. Better known as the North Carolina Government Efficiency and Reform, or NCGEAR, this initiative was a “data-based approach to improving state government processes, enhancing customer service, and realizing cost savings and cost avoidance.”

After a comprehensive evaluation of the executive branch (which includes major state agencies), the NCGEAR published its final report in March 2015 with 22 reform recommendations. Following an eight-step process of opportunity identification, the initiative’s recommendations included a host of major changes, such as transitioning to an enterprise-wide approach for state programs and services from the current traditional agency-focused approach. The initiative is expected to result in savings worth $14 million in the first year, cumulating to $615 million by 2025 in net present value.46

Smart government: Unleashing the power of data

By Mark Price, William D. Eggers, and Rana Sen

Explore: Delivering the digital state | A modern state workforce | Lower-cost government

Smart government: Unleashing the power of data

Finding the value hidden in data silos

The twenty-first century so far has been an object lesson in the power of data. Moore’s Law observed more than 50 years ago that advancements in computing power, with chip capacity doubling approximately every two years, were enabling a rapid expansion in our ability to manipulate data. With the advent of the Internet, the same exponential increase now applies to the ability to share that data as well.

The result is a new information age, with new rules of value creation. Indeed, some observers rate Google, Apple Inc., Microsoft, Amazon, and Facebook as the five most valuable global brands—all of them information companies first and foremost.47

Why is this relevant for states? Most states are sitting on an untapped treasure trove of data and are just starting to scratch the surface of how they can use this data to deliver value to their citizens.

To some, the term “smart government” may sound like marketing hype. But just as digitally savvy companies rely on data, a 360-degree smart government looks to leverage data to improve outcomes.

The digital infrastructure of a state allows entrepreneurs in government to discover new ways of creating value. Moreover, smart governments often foster partnerships between government, businesses, non-profits, community groups, universities, and hospitals—with all entities focused on a shared goal: creating a smarter state and improving the lives of citizens.

Digital government creates the data-rich platform. Data-smart government then delivers the goods. Perhaps the biggest challenge is getting the data out of the shadows and making it available for use. If states can succeed in that, then, and only then, can the potential power of all that data be realized.

The vision is a government that embodies the best attributes of the public sector today—one that is intuitive, integrated, and intelligent:

  • Intuitive. Intuitive governments understand the power of data, harnessing digital technology to sense citizen needs as they emerge. Performance analytics can help governments to continuously improve services and proactively connect with citizens through easy-to-use interfaces.
  • Integrated. Integrated governments make data-sharing the spark that burns down silos. Data integration allows data sets from across departments, domains, and sources to be combined into meaningful and valuable information. When data—lying around in several disparate sources—is integrated, the impact can be multiplied dramatically. The integration of data into a single, unified data layer could be essential to unlocking the true potential of government data and, thus, of digital government itself.
  • Intelligent. Smart governments can also make use of emerging fields such as behavioral economics, psychology, and data analytics to manage risk, empower their workforces, and continuously evolve in pursuit of better outcomes. By tapping into citizens’ knowledge, a smart state can make superior use of scarce resources, and share data to help their citizens make better choices.

Issue by the numbers: Data and smart government

  • An estimated 90 percent of all data in existence today was generated during the last five years.48
  • Performance data, such as program evaluations and outcome analyses, can be a critical tool in enhancing performance. According to the Pew Charitable Trusts, most states engage in some form of this evidence-based policymaking, with Washington, Utah, Minnesota, Connecticut, and Oregon leading the way.49 Figure 5 shows how each state fared in Pew’s evaluation of evidence-based policymaking in US states.
  • Open, transparent data can also be critical to a data-smart government. A US States Open Data Census evaluation of nine key data sets showed that only 21 out of 50 states scored at least 50 percent.50 These data sets were evaluated on various metrics—free availability of data sets, machine readability, and bulk availability being just a few.

Evidence-based policymaking: How each state scored

How can state leadership tackle the issue?

There is no magic formula for a state that wants to take advantage of data it already has; there are various ways to tap into that latent data potential. What is important is recognizing the value trapped in currently available data and committing to unleashing that value for citizens.

That said, several barriers can exist to making this data available. Some are technical: For instance, users are often unable to access data housed in different systems. Some are cultural: Various departments may not put a high priority on sharing information outside their own organization. Legal restrictions on data-sharing and privacy concerns must be considered, too. For example, a department that shares sensitive data with another department needs to ensure that appropriate cybersecurity measures are in place to safeguard that data.

Here are some concrete steps that states might consider on their data-smart journey.

Create a data analytics center of excellence (CoE) for state government

Government agencies can better realize the benefits of data by putting some structure behind their data effort. One way of doing this could be by establishing centralized oversight for the government’s data analytics. An analytics center of excellence (CoE) staffed with data scientists, information designers, and cognitive scientists can promote cross-agency knowledge-sharing. A data analytics CoE can share skills, tools, and techniques to meet the needs of all state government agencies. This CoE can become a tiger team for data challenges that can be assigned to whatever priority problem state leaders identify, from the opioid crisis to Medicaid fraud to transportation. The collaboration among this data community can inform decisions made by state leaders.

Shift from reactive to preemptive government

Rethinking human services delivery

Read more about data-driven human services delivery in Rethinking human services delivery.

Data-driven public policies can help governments shift resources to where they are needed most. Predictive models, as well as other types of data analysis and visualization, allow states to focus more efforts on prevention rather than on reaction and remediation. For example, rather than simply reacting after a noncustodial parent has missed support payments, a predictive model can alert enforcement officers ahead of time about which noncustodial parents are likely to go into arrears. This can allow the agency to proactively communicate with and offer additional services to potential defaulters, possibly even preventing them from going into arrears in the first place.

With 15 years of historical data, Pennsylvania’s Bureau of Child Support Enforcement developed a payment score calculator using predictive modeling. This calculator estimated the likelihood of different scenarios: that a noncustodial parent would begin to pay court-mandated child support, that the parent would fall behind at some point in the future, and that the parent would pay 80 percent or more of accrued amounts within three months.51 Based on this score, caseworkers can now follow a series of steps and keep a case from becoming delinquent.

Beyond carrots and sticks

Read more about how nudges can help state government yield better results using fewer resources in Beyond carrots and sticks.

Employ “nudge thinking”

Ideas inspired by behavioral economics—a.k.a. nudge thinking—can help encourage better behaviors, from voluntary tax compliance to following the rules of public benefit programs. The behavioral nudge revolution, which coexists with the data revolution, is a fairly recent phenomenon, popularized by authors Cass Sunstein and Richard Thaler. Their 2009 book Nudge helped inspire the establishment of governmental behavioral economics units in the United States, the United Kingdom, and elsewhere.

The concept behind nudge thinking is this: Minor, often inexpensive, tweaks to choice environments can motivate big changes in people’s actions. Combining behavioral insights with the latest in digital technology and data science can take nudge thinking to a new level, enabling smarter decisions by citizens, groups, and the governments that serve them.

Create personalized government

State governments with a strong data platform can shift from merely providing services to creating more personalized citizen experiences.

For example, Oracle (through its acquisition of Opower) uses the power of data and behavioral economics to motivate people to save energy. It creates personalized energy reports that compare a household’s energy use with that of their neighbors—those who live nearby in similar types of homes. Through these reports and an online scoreboard, the company has gamified the experience of energy consumption. It encourages people to compare their household electricity use with their neighbors’, allows energy users to complete challenges, and earn points and badges tied to reduced energy use.52

A billion to one: The crowd gets personal

Read more about how state governments can use crowd-based insights to personalize citizen experiences in A billion to one: The crowd gets personal.

Develop an API strategy

With today’s technologies, creating an enterprise system is often less about trying to corral dozens of disparate agencies into using a single platform and more about creating systems of systems built around data exchanges with a common understanding of how that shared data is defined. The key enabler for this is a strategy around application programming interfaces (APIs)—tools that allow one computer program to communicate with another. APIs enable the government’s core IT assets to be reused and shared. They can also facilitate the development of third-party applications from government data.

Tap into unstructured data

State governments mostly think in terms of structured data. But as they expand their data capabilities, they should consider tapping into unstructured data sources as well, such as video feeds, surveillance cameras, public tweets, and geotagged 311 reports.

New analytical tools now enable these kinds of unstructured data to be analyzed in order to shine a light on what was dark, thus potentially increasing effectiveness and leading to better decision-making.

You don’t need to look too far for inspiration

Nudging New Mexico

Nudging New Mexico

Read more about New Mexico’s use of behavioral tactics to encourage honest self-reporting in Nudging New Mexico: Kindling compliance among unemployment claimants.

Behavioral science can sometimes help government agencies solve some of the trickiest problems. The New Mexico Department of Workforce Solutions used behavioral tactics to enhance the accuracy of responses among unemployment insurance claimants.

By including pop-up messages at key points in the digital workflow, claimants were reminded of the importance of providing correct information at a critical moment. Administrators tested different messages to determine the most effective one—another data smart approach. In the year after the smarter system went live, improper payments fell by half and unrecovered overpayments were reduced by almost 75 percent, saving the state almost $7 million.

Identifying at-risk children in the District of Columbia

Child welfare agencies across the nation often struggle to return children to their parents quickly (reunification) and help them remain there (stability).53 The District of Columbia’s Child and Family Services Agency (CFSA) tackled reunification by building a statistical model that would predict the extent to which a successful reunification was probable or unlikely based on the specific facts of the case. The predictive model segmented children into different groups, flagging those least likely to have a timely and stable reunification. Perhaps more importantly, the model identified why children faced these risks and which factors were under the CFSA’s control.54

Until 2015, Ohio was behind most states in digital budget transparency. Things changed when the state launched, an interactive spending transparency platform that allowed people to view and use budget data from various categories—all the way down to specific expenditures. OhioCheckbook delivered value not only to people outside, but also to those working within the government, who used it to perform various tasks instead of relying on internal tools. illustrates how better data presented interactively can engage more people within and outside an organization. This, in turn, can help identify data quality problems and may result in even better data and insightful analysis, thus creating a virtuous cycle.55