Transcript - public sector transformation: interview with Steve Dahl

David Hearn (DH): So Steve, you were the Deloitte partner responsible for a major transformation programme in Minnesota State, which saved $350 million in its first wave. Perhaps you could tell us a little bit about the background that gave rise to the need for a major transformation programme?

Steve Dahl (SD): Sure, to start with, Minnesota is a state of about 5 million people in the Midwestern part of the US and has a very similar-sized revenue budget to Ireland. We were dealing with a significant budget deficit, so that deficit was a key driver for needing to look at fundamental reform and change. 

We also had two other key factors that were driving needing to look at how do we deliver services in the public sector in Minnesota differently. Now, one was we had a changing demographic in the public sector workforce, with about half the people in the workforce becoming eligible for retirement in roughly five years, which meant a lot of key knowledge, key expertise was going to be leaving the State. 

We needed to figure out a way how do we capture that knowledge and how do we also use that knowledge to redesign and reform how we’re delivering services going forward. 

Lastly, we had a significant customer demand: we had customers, citizens, that were used to and are used to getting online services from their banking environment to their retail environment, 24/7 access, secure access, that they were comfortable with, more options for service delivery, and they were really demanding that the Minnesota Government provide a similar set of services that didn’t exist before the programme began.

DH: Okay, so in Ireland, the public sector has gone through a round of pay cuts; it has cut supplier costs; there’s an embargo on recruitment; and there’ve been several reports on public sector transformation. But we are in a difficult situation: we don’t have much money to invest in major transformation programmes. Perhaps you could tell us a bit about how in Minnesota you got over those kinds of problems?

SD: First I’d say I feel your pain in Ireland because in Minnesota we were in a very similar scenario. We’d gone through reductions and some of the cost cutting that you’ve just gone through. It was very difficult to do, obviously painful, and what it did was created an environment within the public employee base where morale was down.

People were feeling uncomfortable with how do we take these costs out over the long run versus the one-time cut that now bounces back and those costs come back next year, how do we take the cuts we’ve made, and we redesigned processes, reorganized and looked to make those arrangements sustainable over the long run but also looked to go deeper and find more savings because Minnesota didn’t have any money to start a big transformation initiative but had key drivers or demands to do so. 

So we started by looking at what are some quick wins, what are some areas where we can drive change in a very short increment, that drive cash, available cash, to the State, so that we can add to the reduction in cost, reduce the deficit but also be able to capture some of those savings to fund a programme. So one of the core principles in the programme was that it was self-funded. It wouldn’t be new dollars that are allocated, that wouldn’t be recovered through cost savings, so we dealt with that fairly head-on by the cost reductions also or the quick wins also showing some momentum, some success, and some areas to lift morale and excitement around the programme as well.

DH: So, the key thing is to get some quick wins, get some momentum, generate enough cash to fund the transformation programme. Perhaps you could tell us a little bit about how you actually organized yourselves to do, to execute, the transformation programme.

SD: You know, I think that is one of the key aspects of what’s different in Minnesota from a lot of reform efforts that you hear about. 

Because we looked at all these reports that were out there, all these studies that had been out there, and we tried to understand what are some of the core issues that have stopped these reports and these ideas from being implemented because they’re good ideas but they just were not being executed on; they’re not being delivered. So, there was something missing in the ingredients to the programme to make that happen. 

So, we got together and we looked at those and we refreshed some ideas from a top-down perspective knowing that certainly having the direction and the vision of executive leadership, what should happen and what time frame, was a crucial part of the way to look at the programme. 

But then we really concentrated a lot of effort on trying to think about how do we go from the bottom up, so how do we engage the employee base across the State of Minnesota to develop their ideas but also to help us vet the ideas that are coming from these other reports and to try to understand which ones are actually actionable and which ones are not and the ones that are not, are there changes that could be made to those so that they would be actionable. 

We also then looked at – so that was our bottom-up view – and then we also looked outside, from inside out, where we looked at what are other states doing, other public sector organizations and private sector organizations, and bring those practices in and looking at which of those could apply. And we also looked from the outside in; we looked at engaging customers and engaging the citizens and saying what we can understand from that of what our customers wanted to see happen, what our citizens wanted to see happen, and how that relates to these ideas. 

So, we took a fairly inclusive and comprehensive look at this approach and there were a lot of benefits to the 200 state employees being involved in this programme that we engaged from this bottom-up approach, not the least of which that they understood the programme, they understood the ideas and they bought into them because they more or less owned them. 

So it created a groundswell of excitement and support for, “Actually, let’s make these happen” because it was all of us doing it together versus someone doing it to you. So, it was a very different kind of approach, a different kind of a feel, and I think that ultimately is what made the programme executable.

DH: Okay, so in the case of Ireland, where we’ve had OECD reports, the McCarthy Report, they’re extremely useful background for setting the overall direction for the programme but the crucial difference here is assembling a team of public servants augmented with expertise from the private sector to drive forward and execute a plan bottom-up, as well as top-down.

SD: Yes, absolutely, I would think other than doing it through brute force, which as we all know is not very sustainable as an organization, if we don’t add in the rest of the ingredients to the puzzle, the execution on those ideas is going to be very difficult one to get done but the other part is to have it stick and be sustainable over time.

DH: And it fuels the pace of change as well: if you want to do this quickly, you need to get the momentum behind that very quickly. And after the five years this programme has been running, what are in your view the key impacts and results for the State of Minnesota?

SD: Well, beyond the, you know, we saved another $350 million net of cost to do this programme, those are also sustainable long-term savings, so we put things in place that made the cuts that happened beforehand, things that we don’t need to go back and readdress, those cuts are in the ingredients for the long run so we got the sustainable cost reduction. 

We’ve improved the quality of service; we’ve opened online access and channels for services through e-government. We’ve improved the quality of management tools internally in the organization and systems, the quality of information based on sharing services, sharing systems; and been able to leverage additional cost or additional investment into those while still reducing the cost because we’re sharing what had once been multiple redundant systems and processes across the organization. 

We’ve improved the level of security around transactions and around the quality of our data and information so we can get to some of our financial and other information; we can get to a common point or single point of truth. So that allows for managing for results more effectively and also improving the accountability measures within the organization and being able to answer questions that the legislature or the citizens might have around programmes in a more effective manner. 

But lastly, and I think most importantly, what happened from this programme was the leaders that were trained and developed from the start of the programme through the execution over the multiple years are now experts in business process reengineering, lean techniques and change management, how to run change programmes, and the State has continued, has now a culture of continuous improvement and employees that are empowered to drive change where they see it needs to happen within their department, within their service delivery channel, and that’s happening in a natural, ongoing basis that has not only savings and quality improvement results for today but into the future and Minnesota has a crop of wealth, of leaders that have now risen up that will carry this thing forward into the future.

DH: Well Steve, that’s a very positive story. I mean, we obviously have a very challenging task ahead of us in Ireland but it’s good to know that there are places in the world where these kinds of challenges have been tackled and that it’s not just a pure monetary saving, that there are also benefits for the employees and sustainable benefits going forward from these kinds of transformation programmes. Thank you Steve.

SD: Thank you.