In the absence of any specialist government department to deal with specific emergencies such as COVID, politicians tend to spend big on consultants.
By Andrew Sturdy, University of Bristol Business School
September 18, 2023
Consultancy UK, one of the leading voices in the industry, spoke on 10 March 2020 of a darkening outlook with the “UK consulting market books slowest growth in seven years.”
With Brexit heavily weighing on the local economy, the numbers predicted a wider global downturn.
The National Health Service, which a month earlier claimed parts of it were “seriously financially unstable”, was meanwhile dealing with the sixth death from the spreading COVID-19 virus, which would be announced as a pandemic the next day by the World Health Organization.
By the end of the month, 1,789 would be dead from the virus while the prime minister, health minister and future king had tested positive and the entire country was in lockdown.
It wasn’t only the NHS struggling. The functions of government within the UK were already working overtime to keep up with the pace of a nation undergoing enormous change stemming from Brexit.
Taxpayer money spent on consultants within the government had been increasing year on year from £700 million in 2016 to £1.2 billion in 2019-20.
These numbers would surge during the pandemic, with the UK government spending £2.5 billion in 2020-21.
The media was full of stories of how much governments were spending on consultants to support various pandemic-related activities, a cost which might have been justified on the basis of the scarcity of expertise and the short-term nature of the role.
By October 2020, it was reported that £175 million had been spent, with The Guardian claiming: “The government has bought consulting services from almost 90 different companies as it scrambled to fill gaps in the civil service’s pandemic response.”
By the end of the pandemic’s first full financial year, government and public bodies had issued £664 million in Covid-19 consulting contracts.
However, no one seemed to be questioning why management consulting firms would have the requisite skills to organise for a pandemic. Or, at least, why would they have better skills than say civil servants, healthcare managers or even regular and cheaper temporary staff such as interim managers.
Indeed, in the absence of any convincing case for specialist skills, it seems that consulting firms were used as expensive ‘temps’.
By 2022 the UK government had reportedly contracted £2.8 billion worth of work from consultants, while the National Health Service quadrupled its budget on outside advice in the same year.
Spending caps brought in more than a decade ago by then British PM David Cameron appear to have been quietly dropped within the halls of power despite the constant reaching for the consultant’s button being described as a “lazy habit” by cabinet minister Theodore Agnew.
So what else could the government do to deal with a pandemic? The concept of a government department solely set up for such rare events, brought into action when required, staffed by experts, and deploying the latest technologies might seem ridiculous.
Nevertheless, some sort of contingency or capacity, perhaps shared by multiple governments, is more plausible.
However, in the UK and elsewhere, there was no such availability. Because, as many claim, the public sector has been ‘hollowed out’ to the extent that when extra staff are needed, there is no capacity.
This is the dominant view in most research and news media, with the added irony that public sector staff cuts were often the result of earlier advice from the consultants issued the contract to analyse the efficiency of government departments.
However, this does not explain why the most expensive option is chosen and for a sustained period.
Research elsewhere suggests that the strong brand (for some) of management consulting in general and specific firms in particular is important.
This reflects deference to private sector ‘solutions’ over civil/public service expertise and values as well as close and ‘revolving’ relationships between decision-makers and consultants.
In short, senior civil servants and politicians have developed a consulting ‘habit’.
In fact, this is sometimes the case whether or not their own management is hollowed out. The use of external consultants is higher where there are more managers – consultants are not simply substitutes.
While it is difficult, if not impossible, to establish whether others would have done better than externals for less. A further irony is that the immediate availability of consultants was partly founded on a COVID-induced downturn in consulting business generally, which should have led to a significant reduction in rates.
If it is true that governments have been hollowed out, the obvious question should be what can be done to fix it? What lessons can be learned from the COVID experience and what, if anything, has changed? For example, a new ‘crisis’ is being constructed by consulting firms around AI which will be leveraged to sell more business.
First, however, we should note that many of these issues are not new, even if the scale of government consultancy use has extended beyond the early neoliberal adopters.
This means that various policy options are readily available and some are even in use and occasionally re-launched.
Watchdogs such as national audit bodies and parliamentary accounts committees have repeatedly urged government departments to plan for future demand for generic skills (e.g. project management) and, in the case of new specialisms, to insist on knowledge transfer and sharing from consultants as a priority.
A recent example of this is the publication of a Consultancy Playbook by the UK Cabinet Office which is used to help clients and purchasing departments to be more effective. Similarly, in 2022, The Australia Institute called for the publication of consulting reports to government departments.
Such initiatives conform to demand-side approaches more generally which prioritise various forms of insourcing such as internal consulting and, when this is not possible, professional purchasing.
These need to be implemented more effectively, but also reinforced. For example, they could be combined in the idea of public-public (not private) partnerships which trade skills between similar agencies or ‘progressive purchasing’ which is more specific and flexible.
Likewise, ‘serial purchasing’ could be introduced, where repeat business with a particular supplier is highly constrained. More could be done with systems to share not just knowledge gained from consulting projects, but evaluations of firms’ or individuals’ performances – something akin to an internal ‘Trip advisor’ or ‘ratemyconsultancy.com’.
The latter illustrates the idea of governance through the market, an approach which, in general, would find favour among some clients and consultants.
The problem — one which plagues many policy issues in consulting — is that management consulting is mostly ambiguous, opaque and often co-produced with clients. This makes it often hard to specify in advance and identify clear failure/poor quality or attribute blame for it.
Clients need to rely on trust and may well also not want their own actions made transparent. This is one reason why many are not keen on a more transactional or transparent approach to purchasing and may seek to resist or bypass rules.
The classic example is ‘chaining’ where a large number of small projects are created to avoid invoking the need to make a business case which is required for projects over a certain size . Reputation concerns are a clear impediment to transparency .
For these and other reasons — such as a reluctance of politicians to invest in internal resources for the long term — demand-side governance is vulnerable.
Certainly, in the UK for example, the recent 2023 removal of a fees cap on government departments noted earlier and the closure of a government-wide internal consulting alternative suggests that the political will to govern consultancy usage is intermittent at best.
Besides, there will always be some need for external advice. Perhaps additional attention could be given to the supply-side.
Here, governance, beyond that which applies to any service and the market, has been difficult or has taken the form of self-regulation. This comprises mainly professional ethics codes for which there is little evidence of enforcement or prospect of improved effectiveness.
Where most attention is needed is in the reform of the reward systems in consulting which prioritises ‘sell-on’ – the selling of further or ‘repeat’ business, regardless of client, need to secure long-term income and short-term rewards
This applies to both global firms and individual practitioners as well as those in between. It partly derives from the importance of trust, noted above, which makes securing new versus repeat clients a costly and time-consuming business.
However, it is also rooted in the structures of large firms where selling, not effectiveness is the key criterion for promotion and financial reward – ‘eat what you kill’.
The traditional ‘partnership’ structure was long considered to temper individual ‘greed’ by sharing profits among partners , but this also encourages long-term tenure of senior managers who therefore seek long term business growth.
Such structural reform (along with the need for firms to declare to their clients any conflicts of interest e.g. other clients) is the most pressing policy issue.
Even with the introduction of more ‘balanced’ ‘scorecard’ reward systems and demand-side pressures such as serial purchasing, such a change requires broader organisational structural change.
This implies a shift in values as well, perhaps towards those of traditional professional notions of being ‘social trustees’.
In particular, external consulting operations, where selling and profit are not the driving forces of business or even of the (management) services offered, could be developed further.
Historically, these are quite common such as bodies linked to industry associations or Organisation Development and process-based consulting traditions
There are also signs that alternative approaches are appearing and in demand.
With the financial and climate crises, combined with technological developments and the values of GenZ recruits, apparently new forms of consulting are emerging with a different ethos or structure such as the BCorp (Benefit Corporation) model of purpose-led business which makes companies accountable to stakeholders, not just shareholders or other owners such as partners.
Such an approach might sometimes be more of an exercise in branding or ‘cosmethics’ than different values or priorities – a de-growth consulting firm has yet to be found!
At the same time, even if consultants can be considered to be ‘genuinely radical’ or progressive, as Soline Blanchard suggests in her work, it is important to acknowledge that the paid consultant role is ultimately to serve clients ie ‘servants of power’.
And, as Jeremy Fyke and Patrice Buzzanell wrote about in their work on consultants selling ‘conscious capitalism’, clients are often very conservative and so limit the possibility for change.
Nevertheless, compared to the relentless neo-liberalism since the 1990s, there is at least some potential here for such new forms of consultancy to do more than simply exploit a hollowed-out and sometimes addicted civil service with ‘expensive temps’.
And, in our emerging post-COVID world, it would certainly be more effective in the long term than a permanent department for pandemics.
Andrew Sturdy is a Professor of Organisation and Management at the University of Bristol. His current work looks at the use of management consultants in the UK health service; the governance of consulting use; and ‘socially responsible consulting’.
This research was partially funded by QS impact grant from UKRI, a UK government funding council.
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Originally published under Creative Commons by 360info™.