IBM Study Outlines Course of Action for Governments Facing Aging Populations

Innovation, Preparation and Public/Private Sector Partnerships -- Critical to Maintaining Economic Strength as Workforce Matures

ARMONK, NY -- Sep 21, 2005 -- Today, IBM released a new study which zeroes in on the need for public and private sectors to engage in “innovative collaboration” as a way to help alleviate some of the economic challenges that will result from maturing workforces. The study, “When governments seek future prosperity,” was conducted by the IBM Institute for Business Value as part of its ongoing business research initiative.

While governments bear the burden of maintaining their nations’ future prosperity, the report stresses that the responsibility doesn’t lie solely in the public sector. “Nations need to recreate the way they operate, and governments must be the catalyst of that innovation. This will require new forms of collaboration among governments and citizens, across traditionally separate disciplines and even beyond country and corporate borders,” said James Cortada, IBM Institute for Business Value.

According to US General Accountability Office estimates, from 2008 onward the economic burden is expected to worsen in most developed countries as higher numbers of the “baby boom” generation, born between 1946 and 1964, reach retirement age -- a demographic shift that will result in some nations retiring up to half of their government employees in the coming decade.

The report outlined a three-pronged approach to sustaining economic strength:

Accelerate short-term actions to attain fiscal balance
Focuses on short-term initiatives to relieve immediate budget pressure. These actions cut costs and require little or no legislative action. They show a commitment to reform and provide the “breathing space” to enact more substantial change. Examples include reducing costs by integrating and streamlining processes that support common functions, such as IT, HR and finance. Supplementing or replacing manual processes with automated ones can also increase productivity. A more controversial option would involve recalibrating program eligibility and benefits requirements to reflect reality. This is based on the premise that many existing programs and services were created in a very different economic setting -- when aging demographics was not a factor.

Launch and sustain innovation strategies to enable growth
To gain the economic resources necessary to handle the growing demographic situation, governments must play an important role in nurturing innovation. Governments can look for ways to innovate their own operations, and look for new ways of partnering with the private sector. The US government for example, with the high number of pending retirees, can work towards revamping its operations so that the impending loss of employees is not detrimental, but actually brings economic benefit. In this case, innovative approaches can help with knowledge transfer and with identifying improvements on a larger scale than quick fixes would typically allow.

Adopt an outcome-based approach to steer transformation
Focusing on outcomes is most vital to long-term, substantial governmental change. Traditionally, governments tackle symptoms individually and measure their progress the same way. An outcome-based approach begins with defining, prioritizing and selecting what constituents want. Then the strengths (and weaknesses) of current processes to meet those needs are evaluated. Next, the outcomes of competing strategies are examined. Finally, ’stakeholders’ -- citizens, businesses, community influencers -- are engaged to evaluate the results.

While the report indicates that an outcome-based approach will be necessary to steer transformation, it acknowledges that changing the current operational model of government is often long and hard work. To be successful in implementing outcome-based government, the private sector also has a big role to play.

About the IBM Institute for Business Value
The IBM Institute for Business Value develops fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues. This paper is part of an ongoing commitment by IBM to provide forward-looking industry and business points of view, and to help companies and industries transform their futures. The IBM Institute for Business Value, which is part of IBM Business Consulting Services, draws on IBM consultants around the world to identify issues of global interest and to develop practical recommendations with local relevance. With consultants and professional staff in more than 160 countries, IBM Business Consulting Services is the world’s largest consulting services organization. To download a copy of this paper and find out more about the IBM Institute for Business Value, visit www.ibm.com/bcs/iibv.

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Linda Hanson

IBM Media Relations

IBM

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