Premium Efficiency: 5 Ways to Get Government Efficiency and More

Government efficiency is having a moment. At every level of government, leaders are setting up agencies, offices and commissions to find cost savings. As someone who has devoted his career to helping government get more for its money, the moment is both puzzling and welcome. Puzzling because efforts to make government more efficient are nothing new—from progressive reformers rooting out patronage around the turn of the 20th century to the Hoover Commission in the 1940s to Reinventing Government when I came on the scene in the early 1990s—and much more in between and since. Welcome because the work of government efficiency is never done and needs pushing and prodding to keep going and break through resistance to change, which is ever present.

In my 30 years on the front lines of federal and local governments, I was never looking for efficiency alone. My goal was what I call “premium efficiency”: lower cost, better performance and a stronger organization. I found that if you want to achieve premium efficiency, there are five things you need to do: measure it, invest in it, source it, lean into it, share it.

Measure it

One of my go-to sayings is “What gets measured gets managed.” It’s true for personal and professional goals alike. To lose my COVID 15 a few years ago, I started measuring my weight, calories and steps daily, and the pounds came off. In government, I’ve found that efficiency is rarely measured and budgets don’t show the full cost of programs. As a city budget director, soon after I started charging departments for their use of municipal office space, General Services told me it was getting calls about footprint reduction plans.

George W. Bush’s President’s Management Agenda introduced new efficiency and effectiveness standards for financial management, human resources and other functions and rated departments on each standard with a green, yellow or red light. As a federal CFO, when I saw that seven of my nine lights were red, that was motivation enough for me to “get to green.” The combination of clear standards and accountability is magical.

Invest in it

Just like it takes money to make money, it can also take money to save money. Baltimore’s Innovation Fund is an example of how investment in efficiency can pay for itself. In 2012, during the worst of the Great Recession’s fiscal gut punch, Mayor Stephanie Rawlings-Blake’s $2 million Innovation Fund line item raised eyebrows. A revolving loan fund inside city government—think Shark Tank for government—the Innovation Fund provided seed money for projects that promised an ROI in the form of cost savings or new revenue. As projects delivered on their promises, the fund grew to $9 million and is still functioning today.

According to Baltimore’s budget office, a $450,000 Innovation Fund investment to spruce up neglected surface parking lots returned $2.2 million in revenue over its first five years. The fund’s smallest investment, $100,000 to transform the city’s tree waste site, has generated revenue from lumber sales, provided cladding for new recreation centers and gained national attention as a model of urban sustainability.

Source it

When Steve Goldsmith ran for mayor of Indianapolis in 1991, his platform included privatizing many city government functions. Once in office, he realized quickly that the key to making services more efficient was not privatization but competition. Goldsmith became a pioneer of managed competition, in which city employees bid against private vendors for city contracts. During his two terms, the city bid out 68 services, from trash pickup to pothole filling to printing. The employee labor unions got resourceful to keep work in-house; for example, they proposed smaller trash crews and an innovative relay method to eliminate downtime when trucks had to be emptied. Goldsmith used savings from managed competition to reduce taxes and tackle a large infrastructure maintenance backlog.

Lean into it

What are now called Lean business process improvement techniques originated in Toyota’s auto factories in the 1950s to improve quality and reduce waste. Lean is based on the belief that the people who do the work know it best. In a Lean project, frontline staff map their work from end to end and identify steps that don’t add value and other inefficiencies: extra handoffs or approvals, excess material or inventory, unnecessary movement or delay, defects.

It took several decades, but Lean eventually migrated to the public sector. In local government, the most recognized Lean program is Denver’s Peak Academy, which was started in 2012 when Mayor Michael Hancock was trying to find $80 million to balance the budget without making further cuts to employee benefits.

Peak Academy’s story is told by one of its founders, Brian Elms, in his book Peak Performance. In a chapter titled “Forget the Fro-Yo,” Elms writes that Denver’s Excise and Licensing Department’s wait times had grown so long—three hours on average—that it decided to install a frozen yogurt machine in the lobby to appease frustrated customers. Peak Academy training helped the department find 50 innovations that reduced the average wait time to 15 minutes. Form reviews were streamlined and standardized, which not only improved customer service but made reviewers’ work easier. No longer needed, the frozen yogurt machine was removed to save money.

Share it

Another efficiency best practice that dates from the mid-20th century is gainsharing. Popularized by Joe Scanlon, a cost accountant turned open-hearth tender turned union leader, gainsharing is a labor-management agreement in which employees share the savings from productivity improvements. There are scattered examples of gainsharing in local government, but most are better described as glorified employee suggestion programs. In 2018, Baltimore launched a full-scale gainsharing initiative in its fleet division with remarkable results.

Baltimore and its three civilian labor unions entered an agreement that put efficiency savings into a gainsharing pool, with one-third distributed to employees if monthly fleet availability standards were met. Spurred by the promise of additional pay, fleet dramatically increased billable hours, brought more jobs in-house and reduced wasted parts, rags and scrap metal. At the end of the first six-month gainsharing period, Mayor Catherine Pugh visited the garage to present an oversized check for $447,000, or $1,750 for every fleet employee.

Government efficiency is not an oxymoron, nor is it code for slashing jobs and programs. It is happening every day in ways that empower employees, improve service delivery and save money.

Author: Andrew Kleine is Managing Director for Government & Public Sector at EY-Parthenon, Ernst & Young LLP. He is the author of City on the Line: How Baltimore Transformed Its Budget to Beat the Great Recession and Deliver Outcomes (Rowman & Littlefield, 2018) and has served as a county administrator and city budget director. His email is [email protected] and his X/Twitter handle is @awkleine.

The views reflected in this article are the views of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.