By  Ian Kirkpatrick, Andrew Sturdy and Gianluca Veronesi

Few topics have provoked as much debate and controversy in many western societies as the growth in public spending on management consultants. In the UK’s public healthcare sector, the National Health Service (NHS), this spending more than doubled from £313 million in 2010 to £640 million in 2014. Understandably, it is under constant scrutiny and there are considerable pressures to cut the use of management consultants, but spending remains high.

Management consultants provide advice on strategy, organisation, financial planning and assist with the implementation of new information technology. Frequently, they promise significant improvements in efficiency. According to the main industry body in the UK, the Management Consultancies Association (MCA), for every £1 spent on consulting fees, clients can expect £6 in return. However, as shown in a study we conducted recently, published in Policy & Politics, the use of management consultancy in English NHS hospital trusts is more likely to result in inefficiency.

A key question centres on why public sector (or indeed any) organisations use management consultants. On the one hand, it is clear that the growing size and complexity of the NHS has generated a demand for expert advice and support which cannot always be provided in-house. However, critics argue that management consulting firms have fuelled unnecessary demand through sophisticated selling techniques and backstage deal-making with politicians (the so-called ‘revolving door’). A recent example is the development of ‘Sustainability and Transformation Partnerships’ in the NHS which are said to have ‘created an industry for management consultants’.

To date, it has been hard to evaluate these competing claims about the value of management consultants. According to David Oliver, most NHS organisations have been either unable or, for political reasons, unwilling to engage in formal evaluation, resulting in an absence of ‘rigorous, peer reviewable, transparent data’. In this regard, our own study breaks new ground.

To estimate consulting use, we collected data on ‘consulting services’ expenditure from the Annual Reports of acute care hospital trusts in England for four years (2009/10 to 2012/13). In 2013, the 120 hospital trusts included in the sample had a cumulative cost of hiring management consultants of nearly £600 million. This meant an average annual expenditure on consultants of around £1.2 million per trust (although this varied from zero to £5.6 million).

Using pooled time series regression analysis, we looked at the relationship between this spending and the efficiency of each hospital trust over time. The results of this analysis were undoubtedly revealing. While in some cases spending on management consultants did improve efficiency, overall consulting use generated inefficiency, thus making the financial situation of clients worse. In monetary terms, these losses were not great – on average £10,600 for each hospital trust per annum. However, this is in addition to the £1.2 million fees already paid annually to management consultants on average by each trust for little or no gain.

To conclude, these findings suggest that while efficiency gains are possible through using management consultancy, they are the exception rather than the norm, as one would legitimately expect. Overall, the NHS is not obtaining value for money from management consultants and so, in future, managers and policymakers should be more careful about when and how they commission these services. More thought could also be given to alternative sources of advice and support, from within the NHS, or simply using the money saved on consulting fees to recruit more clinical staff.

Of course, when drawing this conclusion, it is necessary to strike a note of caution. From the available data, it is not possible to explain exactly why management consultants are having such a negative impact on efficiency. Part of the problem may be their lack of in-depth understanding of healthcare organisations or disruption caused by having too many consulting projects. However, some responsibility for inefficiency should also sit with politicians and NHS managers who make poor procurement decisions and then fail to implement the advice (even the good advice) they receive. These caveats suggest that more research will be needed in future. Nevertheless, our study is a useful first step in strengthening the evidence base and challenging the myth that management consultants generate efficiency in the NHS.

This article was originally published on Policy and Politics and is republished with permission

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6 Comments

  1. Eric Alan Leach says:

    A timely article this, but perhaps it understates the profligate spending by the NHS in some geographies. Take my region, North West London (NWL). Since 2009/10 NHS NWL has spent £88,655,158 on management consultants. This spending has been assiduously tracked by medical researcher Colin Standfield.

    Since 2011 much of this spend has been on supporting the 2012 NHS NWL ‘Shaping a Healtheir Future’ (SaHF) care improvement/cost cutting project and the 2016 Sustainability and Transformation Plan (STP). SaHF promised to cut annual costs by 4%. Sadly no SaHF cost savings have ever been announced.

    Draft business cases were bought – some revealed to the public and some kept secret. Finally a ‘finished’ SaHF business case appeared in public in December 2016. Labelled ImBC SOC1, it requested £513 million from the Treasury for building work. It has failed to even get to the Department of Health as in November 2017 NHSE/NHSI (London) rejected it. ImBC SOC 2, wanting another £314 million more for building work in ‘inner’ NWL, appears to have been shelved.

    £6 million could have hired, trained and employed 10 First Class graduates, PhDs and MBAs for six years. They might have done a better job than the management consultants – and saved us all £82,655,158.

    1. Ian Kirkpatrick says:

      Thanks for this. I have seen some of Dr Standfields’s posts, but wasn’t 100% clear about the storyline. Are you saying that since 2011 trusts in NW London have spent £82 million on consultants? With no evaluation or results (except for more funding requests)? If so, do you know whose budget this has come from? Individual trusts? And how calculated? I’m also wondering which MC firms have been involved.

      Apologies for the extra questions. But at face value this seems like a major scandal.

  2. Anonymous says:

    I commend reading “To save everything click here-technology , solutionism and the urge to fix problems that don’t exist” by Evgeny Morozov Allen Lane London 2013.
    The gist is that consultants sell simple solutions for political problems to unwitting politicians desperate to get the monkey off their back.
    But we are all implicated if the public elect politicians who promise to make the UK great again (or whatever the equivalent is) without examining too closely the ways they intend to do it.
    This creates a market for consultants.
    Who is the greater fool : the consultant or the people that commission them? or the people who elect unscrupulous politicians.?

  3. Ian Kirkpatrick says:

    We are trying to mobilise support for a moratorium on the further use of management consultants in the NHS. Any ideas on how to promote that would be most welcome. Not much traction as yet from LP shadow team, although John Ashworth is aware of the study.

  4. Martin Rathfelder says:

    Its not politicians who employ managements consultants in the NHS. It’s managers who want to find someone else to give their schemes bogus legitimacy. They don’t seem to have noticed that it doesn’t work

  5. Not only are these management consultants’ fees exorbitant, their reports can be guaranteed to point the way towards even more privatisation and parasitisation of the NHS. At the same time, they degrade the capacity of NHS organisations to manage themselves, with loss of personnel and of experience.

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