DMV to Medicaid: Improving customer experience in state services – McKinsey

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In January 2023, the clock starts ticking for 36 new or second-term US governors, their cabinets, and agency heads. The first one hundred days of a new term in office represents the traditional window of expectations for delivering impactful changes for the public while laying the groundwork for broader, sustainable improvements. Many pressing problems will be vying for attention and resources, but new McKinsey research suggests there is one area where state leaders could start delivering significant results for the constituents they serve: customer experience.
Customer experience is a function of expectations compared with a lived experience. Our research finds when a customer’s experience (as a constituent, business, or another government agency) utilizing state services meets or exceeds expectations, it can boost trust in government, improve morale among the civil services, diminish negative media coverage, and lower costs for government agencies.
For McKinsey’s latest State of the States benchmark, we surveyed nearly 80,000 Americans across all 50 states and Washington, DC, to gain a more thorough understanding of people’s experiences with 21 common state government services. Our goal was to identify pockets of excellence and gain insights into what is driving improvements in states that excel in certain areas (see sidebar “Survey methodology”).
The key metric of this benchmark is customer experience as measured by the percentage of individuals who are satisfied with their states’ services. Customers were asked to rank their satisfaction with their states’ services on a scale of one to ten, with ten being extremely satisfied. A score of nine or ten was coded as “satisfied.” Individual services are based on the average percentages of customers in all 50 states and Washington, DC, who indicated satisfaction levels of nine or ten (satisfied). National high and national low are the highest and lowest average percentages achieved by any state or Washington, DC. We ensured that the survey sample in each state was demographically representative of the state’s demographic census data, and residents using each service were proportional to the rate at which customers used those services in each state. The survey was fielded via Qualtrics.
Overall, when asked to assess satisfaction with government services alongside nine private-sector industries, respondents ranked government last. Still, as our data below show, many states stand out as delivering customer experiences on par with top-rated private-sector industries.
The highest customer-experience-satisfaction rate for a single state beat all but one private-sector benchmark and is nearly 30 percentage points higher than the lowest-ranked state (Exhibit 1). That gap illustrates that some states are delivering excellent customer experiences, setting a bar that all states could aspire to reach. And understanding the drivers of those states’ performance could help governments meet rising customer expectations.

Customer experience also varies within individual services, between the paths people take to accomplish tasks within them—their journeys—and the channels they utilize during those journeys, such as online, phone calls, or email.
Across our research, five key insights emerged:
When starting a new or second term—or even outside of traditional election cycles—governors, cabinet members, and agency chiefs could secure quick wins to improve customer experience while pursuing a foundational transformation across government to anchor people, processes, and technology in customer centricity. To help in these efforts, this article outlines a three-phase approach that state leaders could consider: build aspiration and purpose across state agencies and functions, identify high-impact opportunities, and enable successful transformations.
Improving customer experience can yield significant value for US state governments and their constituents. By establishing a link to value, state leaders could help build a clear aspiration for change and establish a road map for achieving it.
Our research finds that people who say they have more satisfying experiences with public services generally also share positive perceptions of their state on metrics such as affordability and education quality. By contrast, people who are dissatisfied with their customer experience are likely to believe that their state is not performing well on key benchmarks. 1 These improvements in customer perception happen nonlinearly. Our research finds that as customers move from dissatisfied (score of one to six) to neutral (score of seven or eight), and especially from neutral to satisfied (score of nine or ten), the number of people who say their state is performing well on key metrics increases sharply (Exhibit 2).

States that achieve that kind of step change in service delivery could see a clear and compelling link to value including the following:
The state of Colorado has focused on digital services, releasing the MyColorado application in 2019, which allows customers to access their driver’s licenses digitally. The state worked with an identity management solution to provide online registration, multifactor authentication, and image verification. Today, customers can also share their COVID-19 vaccine card digitally, renew their driver’s and sporting licenses online, and access ten other government services through the app.
In addition to establishing a clear rationale (a link to value) for investing in customer experience, states could establish a road map that prioritizes strategies based on impact, feasibility, and amplification. Impact reflects the value that can be captured relative to the aspiration and timing—within the first one hundred days of a new term, for example. Feasibility can help determine whether the agency currently has the resources or the ability to mount new resources to execute on a particular use-case transformation. For example, would current technology and workforce be sufficient, or would new tools and skills be required? Finally, the question of amplification could prove critical because it can help determine the extent to which the use case in question can embed the ability to execute on more use cases.
Once state leaders have a clear aspiration and case for change, they could enable a transformation by setting a baseline of customer experience and importance for residents. This baseline could help them swiftly zero in on key services and journeys that are most important to constituents and uncover where the biggest opportunities for improvement may lie.
Once the opportunities have been identified, states could then invest in initiatives to optimize customer experience from end to end across public services, journeys, delivery channels, and demographic groups (see sidebar “Focusing on what is important to residents: Retirement benefits in Maine”).
Maine has the oldest population in the United States, with more than 21 percent of residents over the age of 65. Our benchmark found that retirement benefits delivery is the fourth most important service to the state’s residents (compared with 15th nationally). The state’s satisfaction score with retirement benefits delivery is six percentage points higher than the national average, boosting Maine’s customer experience performance overall.
A key finding of our research is that certain services disproportionately influence customer experience. To get a handle on which ones could yield the biggest impact for a state’s transformational efforts, our benchmark measured which services are most important to residents’ overall satisfaction with their state, how often residents use these services, and residents’ relative satisfaction with each service (Exhibit 3). Nationally, vehicle services, taxes, public transit, affordable-housing assistance, and employment benefits are seen as the most important—driving over half of overall satisfaction. But fewer than 40 percent of residents say they are satisfied with their experiences interacting with these services. 6 Our research also finds that states with high overall customer experience tend to overperform on the services that are most important to their residents.

To improve customer experience, states could redesign not only the services that matter most to people but also the drivers of satisfaction underlying them. Our research shows that, in most states, reliability, transparency, and ease of use drive 35 percent of resident satisfaction with a state service. However, this varies based on the service. One state set out to improve customer experience for residents using its Department of Motor Vehicles by shrinking processing and wait times. But a deeper benchmarking analysis found that accuracy was the most important driver of this particular customer segment’s satisfaction. Informed by this insight, the department adopted a new “first-time-right” ethos and identified initiatives to lower errors and painful revisits by up to 40 percent.
Customers experience a variety of journeys when accessing public services, from learning about them to submitting applications and then receiving services. And just like services, some journeys have a disproportionate impact on customer experience. To find out which ones, we asked US residents about 14 different journey steps they have taken across 21 state services (Exhibit 4). The journeys include the following steps: learn, apply, wait, check, obtain approval, enroll, access, receive, use, renew, update, appeal, cancel, and resolve.

We found that across states and services, residents say they are most satisfied with their receive journey step. But the learn and apply steps together drive more than 40 percent of average customer satisfaction. This suggests that focusing on experiences at the point where customers start engaging with a service could hold significant opportunity for a high-impact transformation. Addressing low-satisfaction journeys could also generate significant improvements. Nationally, appeal, cancel, and resolve top the list of least-satisfying journey steps, reflecting the opportunity for an all-of-government approach that some states have taken to redesign their services (see sidebar “Streamlining user interface for employment benefits in Wyoming”).
When it comes to employment benefits’ resolution journeys, Wyoming has twice the number of satisfied customers (with 100 percent of customers reporting they are satisfied) compared with the second-highest-ranking state. Wyoming launched a new unemployment insurance (UI) site in 2018, with the benefits (claimant) side going live first. Over the course of 2019, the tax (employer) side was brought online, followed by other functions and tools to help customers and support the administration of UI benefits.
Across all 50 US states and 21 services, 60 percent of residents report a strong preference for digital channels, compared with 30 percent for phone and 27 percent for in-person. However, across all services, residents say that they are using each of these channels more than they would like, with dissatisfaction for phone and in-person channels especially pronounced. This suggests there is an opportunity for states to improve customer experience by supporting users as states transition their services to digital channels. Across all states, some 37 percent of residents say that they had significantly increased their use of digital channels to access government services during the COVID-19 pandemic, and nearly 90 percent say that they would continue to use those channels. But here, too, are sharp disparities between customer preferences and usage rates. While 79 percent of residents across all services report using digital channels, only 60 percent prefer to do so (see sidebar “Digital solutions customers prefer”).
We polled residents to find out which digital solutions they preferred. Across all states, customers indicate the strongest preference for electronic applications, heightened security, and electronic-payment options. While these solutions could benefit customers across services and contexts, preferences did vary slightly by state.
Our research also finds that across all services, nearly 80 percent of customers switched channels throughout the course of their journeys. This varies widely across services, with the highest level of channel switching (over 90 percent) involving financial assistance for small businesses, and the lowest level (44 percent) involving tax services. This insight suggests that customers who need to channel switch are likely experiencing more process complexity, increasing the chances of poor individual interactions and decreasing cumulative satisfaction over time. And residents may need more or different support to use digital channels effectively, such as access to affordable, high-speed internet service, devices, and higher levels of digital literacy.
Across all US states, our data show that certain groups have poorer experiences based on their demographic and socioeconomic backgrounds (Exhibit 5). Looking at income level, for example, our data reveal a strong correlation between household income and satisfaction, with the two rising in lockstep. Low-income residents making less than $25,000 report they are 18 percentage points less satisfied with government services than high-income residents. Disparities such as this were found by gender (both male versus female and male versus no gender specified), race (White versus non-White 7 ), and geography (urban versus suburban and urban versus rural).

We asked respondents about several equity-driven solutions that states could pursue and scale to address these disparities. We found that, across all states, residents voice the greatest preference for strong and affordable internet access, phone calls that are answered in two minutes or less, and flexible fees and payment support. By pursuing initiatives such as these, states could embed equity into cross-governmental efforts to improve customer experience (see sidebars “Structural factors and differences in customer experience” and “The potential benefits of an equity mindset”).
Research shows that marginalized groups are more likely to need services most urgently, and therefore disproportionately experience the burden of complex and time-consuming administrative processes to access them. These groups are also more likely to experience challenges such as health problems that create a “human capital catch-22” whereby their likelihood of needing state assistance increases while their cognitive resources required to navigate complicated processes decreases. Even when they are able to access services, certain demographic groups may struggle to use formats that were not designed with their specific needs or experiences in mind.
States that have transformed services successfully typically invest in foundational enablers that sustain early improvements and then build on those to scale customer centricity across the whole public-services enterprise. These enablers span three areas: culture and capabilities, organization and governance, and technology.
Our data show that as overall satisfaction with states improves, the increase is not shared equally across income brackets. States with higher average overall satisfaction do not have higher average satisfaction across all income groups compared with their peers. Rather, the satisfaction levels of higher-income groups in high-performing states were significantly higher than in other states, while satisfaction levels for lower-income groups trailed far behind. Consequently, even high-performing states have an opportunity to improve customer experience—particularly for lower-income communities.
Successful transformations often pivot on mindsets and behaviors. Shifting from a culture where only a few frontline employees see customer experience as their responsibility to one where all employees do could drive a successful transformation. Making that leap often entails investing in capabilities such as human-centered design, where customers are put at the center of service delivery. Governments that invest in their workforces in this way could substantially increase their ability to deliver satisfying customer experiences.
Governments that deliver successful customer experiences tend to organize themselves around customer-oriented outcomes and power their decisions and actions with data. Establishing customer-experience-monitoring systems could allow states to use real-time data to drive improvements. Leveraging data in this way can be done prior to modernizing the underlying legacy technology systems and could cover the following four components:
Our research highlights multiple aspects for states to consider as they seek to adopt an all-of-government approach to customer experience by applying enterprise solutions across agencies to address common pain points. Shifting to cloud technology and analytics is often the foundation of delivering more effective public-sector services. States are at different points in their cloud journeys; many are moving toward public cloud services that are centrally hosted by a third-party provider (platform as a service and software as a service) to help configure and automate residents’ experiences.
Public cloud automation could encompass multiple channels and, when used effectively, unlock benefits such as promoting continuity of look and feel and enabling faster deployments of enhanced customer experiences. These solutions can also be easier to use and maintain, help ensure compliance with accessibility and security standards, and even integrate features for core services such as multifactor authentication and single sign-on, digital signatures, and chatbots. States could prioritize how they migrate and adopt cloud services based on use cases that matter most to their residents.
Our research is clear. Customer experience matters, with higher satisfaction levels driving greater trust in government, cost savings, and fewer negative media mentions. And there are many opportunities for US state leaders to identify high-impact opportunities and pursue critical enablers to start generating more satisfaction across services, journeys, delivery channels, and demographic groups. As new and second-term state leaders consider how to deliver meaningful positive impacts for the public, focusing on customer experience could deliver results residents feel immediately, while laying the foundation for a sea change in public satisfaction down the line.
Ashka Dave is an associate partner in McKinsey’s Detroit office; Marcy Jacobs is an associate partner in the Washington, DC, office, where Sarah Tucker-Ray is a partner; and Kunal Modi is a partner in the Bay Area office.
The authors wish to thank Satya Balanagu, Jeff Barkas, James Birkland, Kathleen Bishop, Eric Bochtler, Crosby Burns, Jenny Cordina, Jesal Dalal, Tony D’Emidio, John C. Jones, Steven Kirsch, Alex Lapides, Adrian Nelson, Amanda Patarino, Haneul Ryoo, and Hrishika Vuppala for their contributions to this article.
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