Unlocking Performance Gains in US State and Local Governments
Facing Fiscal Pressure and Rising Expectations
State and local governments in the United States are increasingly expected to do more with less. While demands from residents continue to grow, many local agencies must also confront budget shortfalls—exacerbated by potential reductions in federal support and long-standing struggles with outdated technologies, organizational inefficiencies, and workforce challenges.
Recent shifts in federal priorities, particularly the Trump administration’s emphasis on efficiency, are pushing state and local entities to reconsider how they operate. These governments are still recovering from the financial and organizational impacts of the COVID-19 pandemic and related stimulus reductions. Additionally, as experienced workers retire, many agencies are losing critical institutional knowledge faster than they can recruit replacements.
Despite these constraints, there’s a compelling opportunity. History shows that limitations often drive innovation, and state and local governments are generally trusted more by citizens than the federal government. This local trust gives leaders a unique chance to reimagine operations for long-term performance improvements.
Six Strategic Actions for Sustainable Transformation
Governments, like individuals trying crash diets, often seek quick fixes that don’t last. Austerity measures might temporarily cut costs, but without changing the underlying structures and behaviors, agencies often fall back into old habits. To avoid this “yo-yo effect,” governments should embrace a more holistic, sustained approach to performance improvement.
Here are six proven actions that can build lasting effectiveness and efficiency across government functions:
1. Simplify
Eliminate unnecessary work and reduce demand on systems and staff. This might involve shutting down outdated programs, simplifying service processes, or solving root causes of inefficiency. For example, reducing the volume of incoming calls to a help center might be achieved by improving websites or deploying chatbots to answer frequent questions—eliminating the need for calls altogether.
2. Orchestrate
Redesign processes to reduce friction, streamline handoffs, and improve user experience. Lean and agile methods, such as process mapping and rapid experimentation, are especially effective. Delegating decision-making authority and removing bottlenecks are key. Some agencies use “tiger teams” or “war rooms” to quickly identify and implement high-impact improvements.
3. Digitize
Introduce digital solutions to make systems more integrated and efficient. Agencies can offer centralized portals where residents can access services, or unified job application systems across departments. Collaboration between CIOs, procurement teams, and front-line agencies is crucial to making these digital shifts successful.
4. Automate
Adopt technologies—from everyday desktop tools to advanced AI—to reduce manual effort and enhance outcomes. Simple tools like SMS updates or chatbots can offer quick wins, while more advanced solutions, like generative AI, can automate complex tasks such as document drafting or coding.
5. Reorganize
Ensure the organizational structure aligns with new ways of working. Streamlining management layers, consolidating support functions, and shifting talent to high-impact roles can greatly enhance performance. Creating shared-service units for IT, procurement, or vehicle fleets can also reduce redundancy and increase value across the enterprise.
6. Strengthen
Develop internal capabilities and leadership mindsets needed to sustain improvements. Training programs, like Missouri’s Leadership Academy, and statewide systems, such as Arizona’s Management System, empower employees at all levels with shared tools and language for problem-solving and accountability.
Driving Enterprise-Wide Impact
These six actions can be tailored to fit any government agency’s mission. A fire department may target fleet management, while a DMV might streamline service delivery at physical locations. Leaders such as governors, city managers, and mayors can take a broader view—applying the framework across agencies to unlock systemwide benefits.
Some states have uncovered between $300 million and $1.5 billion in potential savings by pursuing large-scale improvements. Here are five enterprise-wide levers that can be used to capture these gains:
1. Asset Optimization
Maximize the value of public assets—real estate, vehicles, parks, and infrastructure—by right-sizing usage and identifying monetization opportunities. For example, governments can charge for naming rights, manage fiber-optic leasing, or improve vehicle resale values using fleet data.
2. Lean Operations
Apply lean principles to redesign processes, improve citizen experiences, and cut waste. One-stop-shop digital portals, like those used in Utah and New York City, exemplify how technology can unify fragmented services. Virginia’s real-time permit tracking system is another example of enhanced transparency and user-centered design.
3. Technology Modernization
Upgrading outdated systems can yield substantial cost savings and performance gains. Replacing custom-built applications with standardized, commercial-off-the-shelf (COTS) software and enhancing cybersecurity reduces risk and complexity. Better data sharing also enables faster, evidence-based decision-making.
4. Vendor Management and Procurement
Centralized purchasing allows governments to secure better pricing, consistent services, and tighter contract execution. Procurement teams benefit from strategic category management, collaboration across departments, and training to write stronger RFPs and oversee contracts effectively.
5. Agile Organizational Design
Regularly reassess how work is structured and who is doing it. Analyzing management spans of control, workforce roles, and decision-making chains can help eliminate inefficiencies. True agility also means fostering skills, culture, and collaboration to deliver on the new organizational model.
A Path to Trust and Transformation
A robust performance agenda allows state and local governments to become both more efficient and more effective. Cost savings don’t have to come at the expense of service quality. In fact, improving resident and employee experiences tends to build public trust.
As local governments navigate uncertainty and limited budgets, a strategic and well-executed transformation agenda offers not just financial returns—but stronger institutions and more satisfied citizens.
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect those of Bespoke Business Development. They are intended to encourage discussion and reflection, rather than serve as legal, financial, accounting, tax, or professional advice.
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