The spending on management consultancy services for the NHS has more than doubled in recent years, reaching £640m in 2014 alone. Is this money well spent? A new study by Ian Kirkpatrick, Andrew Sturdy and Gianluca Veronesi finds that, instead of improving efficiency in English NHS hospital trusts, the employment of management consultants is likelier to result in inefficiency.
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.
Note: this article was originally published on Policy and Politics and is republished with permission.
Ian Kirkpatrick is the Monash Warwick Professor of Healthcare Improvement & Implementation Science (Organisational Studies) at Warwick Business School. Ian joined Warwick in May 2016 after previously working at Leeds University Business School and, earlier, Cardiff Business School.
Andrew Sturdy is Professor in Management at the School of Economics, Finance and Management of the University of Bristol.
Gianluca Veronesi is Professor in Healthcare Management at the School of Economics, Finance and Management of the University of Bristol.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image: Pixabay / Public domain.
My comments remain those which I added on 29th April 2018. My surprise is that nearly 2 years later this important work has received so little publicity. I did have a letter published in a national newspaper at that time but this generated no further publications. It should have been on front pages. Sadly there is no sign that politicians or managers have got the message.
Speaking as an ex management consultant, the trick in the future will be to enshrine knowledge (from consultants OR anyeahere else) in digitally based Learning Health Systems, so NHS teams can implement change themselves.
As a retired NHS clinician I see things very simply;
1. The NHS needs more nurses, doctors and beds
2. High quality managers are essential to facilitating productive work
3. Managers who exist purely to enforce counterproductive government diktats waste money and destroy morale.
4.Successive governments over the last 50 years have added successive layers of management which have cost £billions and have done more harm than good. (See Lale & Temple 2016)
5. Politicians should be removed from direct running of the NHS
6. This paper shows how firefighting managers find it easier to rearrange deckchairs on the Titanic than to face the impossible job politicians have given them.
What Management consultants are especially good at is capturing and tracking any ‘benefit’ – this is very often the priority for the consultant team. However this benefit is commonly from ideas that the NHS teams come up with, in some case ideas they are already implementing. And the consultant team rarely see them through to completion or being fully embedded but wilfully claimed the saving. So I’m not surprised the 6:1 ratio cannot be evidenced in real, sustained efficiency.
I have also experienced some horrendous turnaround tactics to deliver benefit. For example making it virtually impossible to buy anything which creates a cash wave ‘saving’ until this wave eventually crashes. Which is fine if you are stopping a private business from folding due to short term cash flow issues; ludicrous in the public sector. Execs find themselves signing off every box of pencils and bandages and eventually give up any pretence of scrutiny by which time the people who did have control have been entirely disenfranchised from owning their budgets. Yes PWC – I’m talking about you.
As an ex-NHS driver, the opposite end of the system from Mr. Mortimer above, what he says is horribly clear even at my level.
Simple things such as being able to park a vehicle at a conveniently close spot when picking up a patient with unknown mobility status used to be plain common sense. Now “you can’t park here” is the rule, enforced by people who, of course, “are only doing my job”. Their job being, in effect, to obstruct, delay and complicate my job, and of course inconvenience and delay patients who are waiting to be taken home (or to another hospital). It was not unusual to find “my” patient had been waiting for hours in a corridor so that a bed on the ward could be freed up.
It was not unusual to take a patient home without their medication (which had not been released), then return later to the same address, sometimes 20 miles away, with their medication. Left and right hands do not merely refuse to talk to each other, they seem to live on different planets.
As Mr Mortimer says, the general feeling is that everyone is operating in “crisis management mode”.
I have spoken to many medical staff from nurses to surgeons and when I suggested, half jokingly, that half the NHS spends it’s time trying to stop the other half from doing it’s job they don’t laugh.
Alan, your comments certainly hit home – especially from you who has experienced it daily. You demonstrate that these issues are not hidden, that we dont need a consultant to try and discover the problems. They are there visible to staff every day,
Your great example of meds. The pharmacy operates as a department on its own, and has no interest in what matters to that patient. So, delays and rework caused by meds far outweigh the small cost reduction that stuffing overworked pharmacists into a single space, trying to send out a backlog of meds.
Its not rocket science. It just needs people to talk to the staff and follow the problems in real time.
Then solve the root causes of the problems you see. And focus on those who do the value work – and if they get the resources and attention they need, the waste will drop right down, and the overall NHS costs will drop.
Any half competent manager with a decent grounding in economics would realise that £6 return on £1 spend is an on offer too good to be true.
Either management consultants charge far too little for they services (a functioning competitive market should bring returns to a ‘natural level’, in which case you have to question their competence at missing the perfectly justifiable opportunity), they are doing it out of the goodness of their hearts (make your own judgement there), or its a false claim.
I work for a large organisation and once questioned a consultants claim that a new muktimillion pound IT system for procurement would lower turnover by 30% (turnover at the time being in the order of £1billion, and dominated by construction and engineering work). He rather clammed up and could only offer the evidence that was what all the management gutus promised from the IT revolution.
Naturally the complete hogwash it was never marialises, and any one who applied even a moments scrutiny to what he was saying would realise that was the case. But of course, great careers in large companies aren’t built on careful scrutiny of the facts.
I’m afraid the cult of managerialism is alive and well.
The problem is these so called specialists cut services and impose far to much work on other trusts whereverer the interfere. The nhs has many highly overpaid executives who should be responsible for doing the same job but apparently are incapable of doing the job they are employed for. The only advice that would be of any value would be to abandon the whole trust scheme, put in place as part of the move to privatisation, and returning to the last working model the district health authorities,,but of course that would lose money for the private advisors so they will continue to give bad advice.
As a consultant who has been working with the NHS and local authorities, my observation is in agreement with the main thrust of this article. What I would like to offer are some answers to your questions. But I do have to challenge your assumption of efficiency gains in the local government compared to the NHS, because both systems are fundamentally different.
In true consultant style I will list my points;
1. The NHS is an organisational system that is not designed to operate as a workflow – it consists of functions that create barriers to this workflow. No amount of innovative and operational redesign is going to remove the waste, management behaviours and lack of integrated working unless the causes of the problem is addressed. The correct design of the path of patients and their knowledge surrounding their need, has to be the starting point for NHS organisational design. This has been demonstrated when a person centred workflow has been trialled, that has been given temporary permission to avoid the main functional barriers.
2. Many consulting organisations have a purpose to sell services and maximise their returns. If this desire overrides the desire to add the right value to the NHS, then the authors are correct in their assumptions of consultants sales techniques.
3. There are several levels of the NHS as a system – from daily operational work, to strategic organisational design. NHS leaders and mid level managers are unable to cope with normal operational management- they reside in firefighting mode. Front line staff have been pushed down into the Maslow basic need levels – destroying any ability to work well. No amount of innovative approaches is going to help unless staff at all levels are given a more stable work environment, and their base personal needs are met.
4. The operational management structures and systems drive behaviours that work against efficiency, understanding, good decision-making, and transparency. For instance observing the use of the RAG reporting system creates completely dis-functional and unintended consequences. Again, when this mechanism has been temporarily removed, management can revert to a more effective style.
The questions that you raise are can be answered quite easily if you are able to immerse yourself and observe the NHS working from a patients perspective, using systems thinking. It is these answers that will provide the key to the true advancement out of the mire it currently is in. Far less consultancy support will be needed, and the excellent NHS internal innovation and development units can do their job.
I personally do not work in the NHS anymore because I realise that my efforts get overrun by the system every time. Local government on the other hand, I can, and do make a significant difference.