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January 2021
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Consultancy and 21st Century Government

The new coalition government set an early pace with the announcement of over £6bn reductions in spending for the current year, an emergency budget and some important re-ordering of priorities at the centre. But these are small beer compared to the scale of what is planned for the next few years.

The government has a responsibility to reduce the public sector deficit; but it equally has an opportunity to achieve a step change in public sector productivity and effectiveness. Appropriately, the body tasked with overseeing this work is called the Efficiency and Reform Group. The real test for ministers is whether they can both achieve the required savings and leave public sector organisations better equipped to deliver high-quality public services.

To kick-start the debate about how we do this, the MCA recently published a new report: 21st Century Government: Adding value, cutting the deficit. It sets out some outstanding case studies of the work that MCA member companies have recently completed with central government clients, helping to deliver significant cost savings along with much appreciated improvements in public services. Modern consultancy is less about writing impressive reports; our member firms are engaged in the practical world of delivery, efficiency and implementation. They make a real difference â€- not just in back office improvements but directly to frontline services.

Examples of work by consultancies to enhance frontline services include KPMG’s work with The Home Office (UK Police Forces) and Atos Consulting’s work with West Midlands’ Strategic Health Authority. KPMG’s pioneering work improved police performance, enhanced public satisfaction, and identified over £100million of operational efficiency savings across fifteen UK forces. And Atos improved A&E performance – reducing waiting times and delayed discharges whilst identifying 21 projects with potential recurring savings of nearly £50million over a three year period.

Management consultancy’s future role

In the immediate aftermath of the general election, of course, ministers have put severe constraints on this sort of ‘discretionary’ spending. Understandably, perhaps, they wanted to check what is being spent and why. There is wide recognition that central government’s consulting spend must be rigorously focussed on projects that generate a high-value return.

But no organisation, public or private, could afford to recruit and retain full time staff with all the capabilities and knowledge that is needed to undertake everything that needs to be done, particularly during a time of massive change and transformation. And every organisation, particularly those which are so vital to Britain’s success, should want to have access to the most skilled and best-informed outside advice, new thinking and assistance.

Consulting will, however, remain controversial until politicians are reassured that it delivers significant value and the whole industry lives up to the standards and levels of professionalism set out, for instance, in the MCA’s Code of Practice.

Here are three areas where change could generate real benefits â€- for the taxpayer and for the consulting industry.

Delivering more value

First, let’s make sure that consultancy work generates the best possible value for clients. Consultancies are being challenged to demonstrate that they deliver outstanding value for money and that they work, in the words of the MCA’s Code of Practice, by -putting their clients’ interests first.”

So we want to see more emphasis on outcomes achieved and value delivered. There should be more rigorous testing of whether work can be done in-house before consulting is commissioned. And each project should be based on a clear statement of goals and the value expected from the consulting team.

MCA research suggests that the return on investment from consultancy is significant. On average, and across the range of work carried out by MCA member firms, consultancy generated benefits equivalent in value to £6 for every £1 spent. The majority of clients told us that the value to them was worth between two and twenty times fees paid. That’s where the focus of the new thinking about consultancy in the public sector should be.

Clarity between genuine management consultancy and interims

Second, we should end the confusion between genuine management consultancy and the use of interims or contractors as substitutes for full-time staff. Too often, these two are muddled; they are different services which meet very different needs.

Contractors and interims can provide a stop-gap when an organisation is finding it difficult to recruit full-time staff. Management consultants, by contrast, are better used on projects where speed of delivery is important, an independent perspective is valued, and where it would not be effective to hire in the expertise involved on a permanent basis.

Our research with member companies suggests that central government spent around £640m in 2009 on management consultancy. By contrast, nearly £1300m was spent on temporary staff, contractors and interim managers, often replacing full-time staff at an inflated price.

The blurring of the line between consultancy and staff substitution creates frustration within both government and the consulting industry, and is short-changing the taxpayer. It is true that each can provide real value when used appropriately; problems arise when there is a lack of clear thinking about the different roles that each should play. Too much money has been spent using temporary staff when a shorter and more productive consultancy project was what was really needed.

Work together

Finally, let’s work better together. Relationships between government clients and their consultancies need to be less transactional. Consultancies should be more ready to offer thinking and advice before a tender is issued; clients should be open to dialogue and debate with the industry and be prepared to share ideas on strategy and priorities much more readily. Both should routinely prioritise the transfer of skills and knowledge from consultants to their clients; a key objective of management consulting is to leave clients better equipped for their future.

A Treasury-sponsored report in 2009 celebrated the UK’s management consulting industry as a ‘world leader’. The Government will want to make good use of its services if they are to achieve the changes and savings implied by their recent announcements.

Taxpayers rightly demand both high quality services and value for money, including from consultancies. These changes will help to ensure that government and the consulting industry deliver them.

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