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Public Sector Cases

Anonymous A asked on Jul 02, 2019

How should we handle public sector cases? Profitability of the projects would be a constraing in these types or just the public benefit etc. should be considered?

Thx!

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Sidi
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updated his answer on Jul 03, 2019
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 90+ candidates secure MBB offers
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Hi!

In essence, there is no substantial difference to any other case. You first have to clearly outline the core question, then define the criterion to answer this question, and the run the test on whether/how the criterion can be met.

The one big difference usually lies in the focus metric that you are scrutinizing. Profit or revenue are clearly defined metrics. But in public sector cases, it is YOUR duty to nail down the interviewer on the PRECISE definition of the focus metric (which is usually non-monetary).

For example, if you are asked to figure out ways to improve the education system in Tanzania, then you HAVE to first align on a definition of what constitutes "quality of the education system". Is it # of children entering school? Is it # of graduates from school?# Is it the quality of the graduates? All of these? Only after having nailed down the interviewer on the precise definition you are able to disaggregate the components of this definition and identify levers to influence each component.

So at the methodical level, there is no difference between for-profit and not-for-profit cases. You just have to make sure that you have precisely defined your (non-monetary) focused metric.

Cheers, Sidi

(edited)

Ian
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replied on Jul 04, 2019
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Hi Daniel,

My approach

Public sector cases are tricky because they feasibly be any case type (Product Launch - new service for citizens; M&A - merging two departments; even Profitability - cost cutting mandate). For any public sector case, I recommend:

  1. First identifying the type of case it is.
  2. Second, leverage your knowledge of the public sector as constraints/considerations.

Considerations/Constraints

Regards #2, you know that public perception is particularly important to consider in any public sector move. Additionally, you can count on bureacracy/slowness in implementation. You should identify the goal/mission of the organisation as well and keep this top of mind (if it loses money, but achieves it's goal of helping the poor, no problem). Howvever, just because the government sector doesn't have profit as a target, doesn't mean you should ignore the profit tree altogether - governments are still obliged to take into costs (and sometimes revneues) in decisions (example: setting up a public transport initiative). Don't get tricked into thinking you can't consider the economics of the case!

Other items to consider include, but are not limited to:

  • Politlcal landscape (i.e. upcoming elections, special interest groups)
  • Sustainability
  • Private-public partnerships
  • International vs governmental vs state vs local partnerships/alignment
  • Income = taxes/budgetary landscape
  • Digitialization of government

Framework Resource

In terms of resources, the UPenn Wharton 2011 casebook has a framework for public sector. It's split into:

  1. Strategic rationale (Mission of organisation and stakeholder reactions)
  2. Deal economics (planned investment and returns, if any)
  3. Other (Required capabilities and risks)

Practice Cases

If you want some practice cases:

  • Tepper 2008's "NGO Effectiveness"
  • Colombia 2011's "MadeCasse"

Hope this helps, and please don't hesitate to ask any follow-up/clarifying questions!

Vlad replied on Jul 02, 2019
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Hi,

These types of cases are actually pretty traditional, especially for McKinsey. The reason why people think that they are rare is that the casebooks (that are in general not a good source of cases) do not have enough of them.

To provide a bit of structure, there are several types of non-profit cases:

  1. Factors / drivers influencing smth (What are the factors influencing the price of oil? Factors influencing the price of real estate?)
  2. Macroeconomic cases (How will you improve life expectancy in a particular city? How will you decrease the unemployment?)
  3. Public sector non-profits (Increasing the revenues of a museum; increasing the revenues from tourism in a city)
  4. Redesigning the processes (How will you develop a new anti-monopoly regulation?)
  5. Non-profit investments (A billionaire is building a new school. What are the factors to look at?)

The most important is defining the objective. Two types of questions you should ask:

  1. Could you please clarify the model / business model? E.g. if a billionaire is building a new school, is it a school for talented kids, rich kids or mass segment? Is it going to generate revenues?
  2. What are the main criteria for success? Is it NPV, ROI, share talented kids entering the top Universities?

Feel free to reach out if you need help with them. I usually give a homework of 10 cases and we discuss your solutions.

Best!

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