Few topics in the NHS have provoked as much controversy as the use of external management consultants. They provide advice on strategy, organisation and financial planning, and help implement new IT systems and other changes.
While some claim that this brings much needed improvements, critics question their value – particularly at a time when the NHS is strapped for cash. Even Patrick Carter, recently charged with reviewing NHS efficiency, admits that he has “a bugbear with employing management consultants”.
For the first time, research by a team from the universities of Bristol, Warwick and Seville has properly looked into their cost effectiveness. From a study of 120 English hospital trusts over a four-year period, published in the journal Policy & Politics, we found that spending on external management consultants was associated with increased inefficiency.
Although a minority of trusts did experience improvements in efficiency, the overall impact of management consultants was negative. This lends support to the critics’ case.
A clear cause
In financial terms, the average annual losses of hospitals that used management consultants were quite small: £10,600 for each hospital trust. But this does not take into account the management consulting fees paid, which amounted to £1.2m per trust per year on average. This roughly equates to the salaries of 20 managers, ten consultant doctors or 35 senior nurses for each trust. Though some trusts spent nothing on management consultancy fees, others spent as much as £5.6m a year.
Of course, it could be that the cost of external management consultancy was justified by bringing improved service quality. This, however, was ruled out by further tests that focused on the impact of the management consultants on patient outcomes.
Analysing the data over time pointed to the fact that it is spending on management consultants that makes hospital trusts more inefficient, rather than the other way around (already inefficient trusts using management consultants more).
The reasons why
Our study data does not give a conclusive reason for why management consultants cause inefficiency. One possibility is that management consulting projects are highly disruptive. This is especially the case if, for example, the demand for them has been generated artificially by sophisticated selling, back stage deal-making and revolving doors between politicians, regulators, healthcare managers and civil servants.
This can be seen in the government’s NHS reform initiatives such as the new sustainability and transformation plans (STPs). These STPs were developed in 44 parts of England by NHS and local government leaders to improve care and manage limited resources. But they are heavily reliant on management consultants and are said to have “created an industry” for them.
Responsibility for the inefficiency of management consulting projects is also likely to sit with politicians and NHS managers. Failures in things like their budgeting and staff planning practices may result in management consultants being used simply to justify or force through existing decisions. And this is often done instead of considering alternative sources of expertise such as internal management consultants or other managers in a trust or elsewhere in the NHS.
Another issue is that management consulting projects are often justified and assessed by those who are directly involved in them – management consultants and their clients – who are often reluctant to expose problems.
Watchdogs, such as the National Audit Office, have been calling for change across government for years, with only minimal effect. Also, the new NHS Improvement regulator seeks to ensure the effective use of external advice. A key obstacle has been that evaluating management consulting results is notoriously difficult, not least because projects are often carried out jointly with clients and based on subjective assessments.
This study, however, used existing data (hospital trust management consulting spending) to provide a more independent assessment of management consulting services.
So what is to be done? In many ways, the study is only a first step. In future, transparent and objective data is needed to stimulate a more evidence-informed discussion about how and when management consulting should be used in both the NHS and in public services more widely.
But data is only part of the solution. It also comes down to politics, both in terms of the role of management consultants in serving the agendas of politicians and client managers, and management consultants’ own commercial interests in generating more business.
In the meantime, given the financial pressures facing the NHS, trusts should seriously rethink their use of external management consultants that do not deliver value for money – and, in fact, do quite the opposite.