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Brave new world: How the NHS can fix its expensive management consultancy problem

Brave new world: How the NHS can fix its expensive management consultancy problem

Overspending on strategy and management consulting firms is an endemic problem within the UK’s National Health Service.

A critical piece of research from Bristol University published earlier this year found that spending on consulting firms to make Trusts more cost effective was higher than the savings their advice actually achieved. Each Trust now haemorrhages an average £1.2 million to management consulting firms every year and with frontline services facing overwhelming pressure, it’s a price tag gaining increasing and justified scrutiny.

There is however, a growing cohort of highly experienced and cost effective independent consultants that the NHS can draw upon to solve its expensive management consultancy issue.

Historically, the NHS has approached the buying process of management consultancies with a level of immaturity. There is often a notable absence of accountability and tracking from the get-go that makes a firm’s cost-to-output difficult to measure.

What’s more, as a heavily under-resourced organisation the NHS often lacks the management presence to ensure large consultancies are assessed against clear objectives. The general approach amongst the executive directors that hire a management consultancy is to ‘trust that they’ll do a good job because they’re a well-known brand’. 

There is also a tendency amongst Trusts to appoint consulting firms too early, without deciding upon what the problem is that they want them to solve. Ideally, Trusts need an experienced consultant to help them define the problem they are looking to tackle and undertake initial strategic analysis to ascertain what it is they actually want to achieve. Trusts are time constrained, and outsource this scoping process to the consultancies, and so lose control of the deliverables from the outset.

At the moment Trusts use consultancies a bit like a shield instead of using them strategically. It is the same quick-fix method often seen in the private sector where busy chief executives hire a management consultancy as a way of demonstrating they’re ‘doing something’ about a problem, but not really taking control.

This initial strategic engagement is therefore critical in order to avoid inefficiencies and misalignment, whether they’re generated through the build-up of extraneous projects and costs or by the general lack of ongoing governance.

For NHS Trusts, turning to a management consultancy for this strategic direction means engaging a Partner who will sell them a team of junior analysts to deliver the work, despite the fact that those analysts have potentially never worked on a healthcare project before. A common approach is to then apply a template solution; a methodology that has worked for one organisation that can be repackaged for the next – developing a clinical strategy would be one example of this.

It’s what Bristol University’s research paper refers to as the ‘sophisticated selling of often standardised solutions’. Given the complex and varying nature of NHS Trusts and bodies, this ‘rinse and repeat’ method cannot work with every problem and is therefore a root cause of the cost inefficiencies in hiring a traditional management consultancy. For independent consultants however, this is an approach that is completely anathema to the way they work with the NHS.

An independent consultant will try to get to the bottom of what the problems are, as opposed to trying to sell additional pieces of work. They will tailor their approach to each organisation and work with internal strategy teams so that they can learn how to do things themselves and ideally only bring in consultancies when there is a specific problem to fix. i.e. bilateral knowledge transfer that will ultimately increase the NHS Trusts’ ability to do it themselves in the future.

Quality of work is in most cases the key differentiator between an independent consultant and a traditional consulting firm. Their reputation is how they continue to secure work and they can’t hide behind a brand. The end product is always associated with the independent consultant so they will often try to over deliver.

From a budgetary perspective, bringing on board an independent consultant is significantly more cost-effective than using a management consultancy. When making a direct comparison, a Trust will often pay the same day rate for an analyst, three or four years out of university as they would for an independent consultant with anywhere between 20 to 30 years’ experience. Given the cost of a management consultancy and the general lack of experienced individuals they bring to a project on the ground, it’s unsurprising that Bristol University’s research found that efficiency gains from management consulting firms ‘were the exception rather than the norm’.

Cost efficiency and quality of work are not the only benefits in using independent consultants. When it comes to a staff point of view, bringing in a single or small team of independents has a much more positive effect. From a morale perspective, bringing in ten consultants from a Big 4 has a terrible impact. Existing staff often feel like they’re being replaced, as if they’re not doing a good job. When bringing in an independent consultant there’s much more integration within teams; existing staff feel like the consultant is working with them, as opposed to separately.

With the pool of highly-skilled and experienced independent consultants growing in the UK, they would seem like the perfect solution to the NHS’ escalating management consultancy problem. Why then, have they not been used more widely? Currently, it’s almost impossible for an independent consultant to get onto the Framework Agreement. As a result, Trusts who want to work with experienced independent consultants have to submit a business case to NHS Improvement for approval. This is often a long and bureaucratic procurement process and makes it very restrictive for independent consultants to work with the NHS and effectively discourages Trusts from doing so.

The Framework Agreement is a preapproved list of firms that NHS Trusts are allowed to use for consultancy work. If the NHS is to really tackle its management consultancy problem then it needs to address this framework to ensure Trusts are being provided with the best quality and most cost-effective consultancy support available, which increasingly is independent. This coincides with the key recommendations laid out by the Bristol University research paper which advises the NHS to ‘review and strengthen existing procedures for the procurement of management consultants’.

Other challenges also need to be overcome. Executive directors and general managers are extremely busy and under immense pressure at the best of times, often leading them to outsource both the problem and the solution to consulting firms, foregoing any accountability of the work that needs to be done. It means the problem is susceptible to retrofitting by the Big 4 which can often lead to a disconnect with what outcomes the Trust really want. Greater ownership of the initial problem means any form of consulting support can be held to account at successive stages of their engagement, thereby reducing the opportunity for inefficiencies to build up.

With hospitals and Trusts facing unprecedented pressures and the UK’s tumultuous political landscape creating funding uncertainties, it’s clear that the NHS can no longer be used as a training ground for the Big 4’s junior analysts. A cost-effective solution exists in the use of independent consultants; alumni from the traditional consultancies, who will go out of their way to deliver results and ultimately cost the NHS a fraction of what it is currently paying for consultancy support.