Management Insights

Public Pensions and the Lessons of Success

Do we learn more from success or failure? When it comes to state- and local-government pensions, we tend to focus on the plans that are struggling. But there are valuable lessons to learn from public-sector retirement plans that have remained well funded and from governments that have successfully negotiated changes to put their pension systems on a path to full funding.

Well funded in Illinois: Given all the headlines about Illinois' seemingly endless struggle to reform its pensions, some might be surprised to learn that that the Illinois Municipal Retirement Fund (IMRF), the state's second-largest public pension, is a model of fiscal responsibility. READ MORE

The Blurry Future of Health-Care Spending

Total U.S. health-care spending rose just 3.7 percent in 2012, decreasing as a share of the economy for the second consecutive year. In fact, health-care costs grew more slowly each year from 2009 to 2012 than in any other year since the Centers for Medicare & Medicaid Services (CMS) began collecting the data in 1960. The news was welcomed, because for years soaring health-care expenditures had far exceeded U.S. economic growth.

But as Pew's State Health-care Spending Project found in a recent analysis, the national health-care spending story in 2011 and 2012 was very different from the experience of state and local governments, where spending increased twice as fast, principally because a temporary surge in federal Medicaid funding delivered through the American Recovery and Reinvestment Act stopped flowing. As state and local governments continue to navigate the aftermath of the Great Recession, health-care spending remains a source of fiscal pressure. READ MORE

The Amazon-ification of Government, and Why We Need More of It

Ours has become an "experience economy" in which people have shifted from passive consumption of products or services to active participation in the process. Recognizing this shift, many companies now invest in the delivery of experiences -- what might be called the Amazon-ification of retailing. This process has come to be known as "design thinking," and governments need to pay more attention to it.

Design thinking is a "next practice," a methodology that infuses innovation activities with a human-centered design principle powered by a thorough understanding of what people want and need and what they like or dislike about the way a particular service is provided. READ MORE

Innovation and Government's Fear of Failure

"Why can't government be run like a business?" How often have we heard that question? In my mind, many government functions should be run in a business-like fashion; help-desk units, customer-service offices, financial transactions and dozens of other government activities should seek out and adopt the best private-sector practices. But many Americans really don't want government to act like a business if that means investing their tax dollars in innovative (and thus risky) programs.

Any experienced entrepreneur knows that the process of innovation involves trial and error, and often failure. Think of your favorite high-tech companies. Many of them -- Apple, Twitter and PayPal, among others -- began with failures. Indeed, Silicon Valley entrepreneurs have a mantra: "Fail fast, fail often." They know that you rarely get it right the first time. Develop the product, get the "beta version" in the hands of some users, learn what doesn't work, fix it and repeat the process until you have a winner. READ MORE

Government's Slow Takeoff into the Cloud

Cloud computing is revolutionizing the world, bringing huge economies of scope and scale to information capture, storage, communications and analysis. Networks and trading communities that used to be local are increasingly global. Applications that used to be designed for tens of thousands of users can now be used at extremely low cost by hundreds of millions or more.

For governments to realize the benefits, however, they must take much of the work they have been doing for themselves and outsource it. True, this outsourcing may simply involve consolidation across the local, state or federal enterprise, keeping things within the government tent. But some of it will need to go to private-sector providers that can serve communities larger than any given government. READ MORE