I was quoted in a recent Guardian newspaper article which described a London Clinical Commissioning Group’s wasteful use of external management consultants. That in turn came after I spoke at the CASS Business School seminar on the same topic on 9th May this year. In this blog, I set out why I believe the NHS is enticed by management consultancies and I offer an alternative option of ‘internal consultancy’ as practised by the Strategy Unit.

A few things by way of introduction

First, I see aspects of what can be called’ the consultancy’ model as very beneficial. For an organisation or system to be able to call in expert advisory and technical support in addressing complex questions can be very helpful and good vfm. Maintaining these skills locally and having senior, experienced staff with the space in the day jobs to do such work can both be difficult. Sometimes, the extra degree of objectivity and critical thinking that can come from an external trusted advisor can be valuable. And when it comes to things like high-grade analytical work, perhaps to determine whether a complex intervention is actually working, then there is real benefit to be gained from concentration of such skills (which are scarce) and creating an ability to call them in as required. There is also in my view some clear advantages for the client in having to think through how to specify a requirement (and really test that it stands up) and to assess the value of buying that work in. For the provider, the advantages are mirrored…. meaning that work undertaken is more likely to be really wanted and that there is opportunity to nail down requirements at the outset (which reduces the likelihood of wasted work). Realising these benefits, however, is not automatic…it requires the provider to have what I would call ‘public service values’ and the client to be a good and effective customer.

So my argument isn’t about ‘consultancy ’per se, but is about how it is secured for the NHS.

The second thing I want to get out of the way at the outset is to puncture any notion that my argument is simply ideological and ‘anti private sector’. The Strategy Unit works routinely with a set of partners, some NHS, some academic and some private sector. We have no problem with that if the partnership is allowing us to access expertise and skills that benefit the NHS. What we do, however, is we strike agreements with our private sector partners (with whom we have worked for a long time, so we know we have shared essential values) that mean they work on our projects at our ‘’NHS day rates’.

Why does the NHS turn to external commercial consultancy?

The financial benefits for management consultancies to work with the public sector are clear- the NHS is the single biggest client for many of them and the daily rates charged by many (eg see rate cards for Consultancy 2 framework) can only be explained by very substantial profit margins. But let’s instead examine the reasons given by those in the NHS turning to external consultancy support to see what benefits are assumed for the NHS.

In my experience, the reasons why people (say they) turn to external consultancy boil down to three:

1. expertise/wider perspective
2. short run capacity (urgency)
3. ‘political’  (small ‘p’) imperative (especially from regulators) and the fact that it is seen as a ‘get out of gaol’ card by some (what more could I do? Ive brought in x,y,z)

Let’s examine these reasons in turn:

1. There is a requirement for expertise or a wider objective view

Expertise…..for some things, yes. If I need an engineer or a legal opinion, then ‘yes’ ; if I need niche expertise or innovative capability from a truly expert outfit dedicated to what it does and bringing considerable added value ( and there are lots of those as well), ‘yes’ . But much of what I see from large commercial management consultants doesn’t look like extra special expertise to me and the skills and knowledge they deploy look pretty standard and certainly are not the sole preserve of their organisations. Nothing can persuade me that an organisation the scale of the NHS can’t generate most of the expertise it needs in excellent, attractive jobs and then organise itself to take collective advantage of it and at scale. Similarly, I know from the experience of recruiting to my team that there are plenty of people with real advisory and technical expertise who don’t need the pay or other motivations offered by commercial consultancies to work for the NHS; their motivation instead is the quality and interest ( and variety) of the work and the opportunity to make a contribution to improving health and care.

Wider perspectives….for any significant project my team undertakes, we trawl the international literature; we ply national and international networks; we talk to people working inside and outside of health. We look to seek out methods from other sectors that we can deploy to tackle NHS problems. We routinely draw in people from out of area to act as catalysts. Bringing ‘Wider perspectives’ isn’t the sole preserve of commercial organisations but instead is a way of working that the NHS can achieve for itself.

2. Capacity

How many of the consultancy projects let are truly urgent? How many big projects get launched with leaders vying to demonstrate their potency by demanding obviously undeliverable timelines which only ever get slipped as the project unfolds? How many consultancy commissions are agreed with tight deadlines (that ruled-out perfectly reasonable in-house alternatives) but are then unsuccessful in meeting those timelines for delivery? How many consultancy projects get let in response to a patently unreasonable (and inevitably futile) demand from others to deliver something that should be important (and therefore carefully considered) in a matter of a few weeks (the big ‘desk top’ system plans are a good example)? I see most of this as’ false urgency’, typically being a premium paid for poor planning, or rigidity in budget management or to deliver ill-founded imposed requirements.

The ability of management consultancies to be able to keep a team of bright young things ‘on the runway’ to drop into client’s offices at no notice is costly. It requires day rates that incorporate substantial non-utilised time.

Thus false urgency is a waste of public money. Real urgency should be limited to truly exceptional circumstances. I believe NHS managers who spend large sums of money to subsidise bad planning and ’ heights of folly’  should be held to account for that.

3. Political imperative

This rationale is typically the one most often cited (it certainly was at the CASS event), is largely self-inflicted, and could be switched off at will. Senior people in the NHS need to stop using commercial consultancy themselves as a default position;  stop accepting it’s use by others as a ‘get out of jail card’; demand proper rationales for why it is ever used (and sometimes, let me be clear, using it is the right thing to do); adopt a mindset that spending £hundreds and thousands on a commercial consultancy project should require the highest levels of proof in the ‘court of public value for money’.

In a similar vein, I would be wary of any argument of risk share, i.e. when the supplier bears the risk of investment but takes a share of potential savings, unless the NHS becomes a far more expert customer. To allow easy savings to be turned into shareholder profit rather than NHS benefit would be wrong. The true cost of risk for achieving savings that are actually difficult to deliver would, I suspect, typically price it out in a realistic transaction.

What this all then boils down to is that the ONLY good reason to use (expensive) commercial consultancy should be when there is a need for real expertise or in exceptional cases where there is genuine urgency/capacity constraints (and the end benefit of doing the work can be clearly described and outweighs the costs). The test of expertise should be explicit and robust and should be against whether the NHS has that expertise itself. Similarly, where urgency is cited it needs to be real and we must stop using fantasy deadlines to push work towards commercial consultancies.

How can the NHS turn to internal not-for-profit consultancy?

I was asked at the CASS event to present the ‘internal consultancy’ model (as operated by the Strategy Unit) as an alternative to commercial consultancy. There was interest because the emerging literature on the topic suggests that the ‘internal model’ can be more effective. This is what I said:

What we do:

• The Strategy Unit (c 35 people at present) is an ‘internal NHS consultancy’ specialising in analysis, decision support, research and development, strategic change and formative/summative evaluation. We have real expertise, demonstrated through publication; peer review; qualifications; track record
• We are NHS staff on NHS salaries
• We start each year with our costs, but no funds to cover them. We then seek to cover our costs through charging for specific costed projects ( c 100 pa) on a ‘consultancy basis’, working for customers locally and nationally across the NHS, the third sector and local government. We also undertake some grant funded research. We stand or fall by our ability to ‘win’/attract paying work and balancing that with our NHS values (so whilst we are on NHS contracts, we think and feel that we don’t have that as an entitlement. If we failed to earn the income, we would lose our jobs)
• Under that operating model we have grown and diversified (carefully) over the last 5 years, at each stage driven by the needs articulated by those we work for.
• We seek to earn a ‘margin’ (income net of salaries and other costs). This allows us to meet NHSE requirements and also to create headroom for innovation and development. In our most recent year we earned a margin of c20% though our target was lower than that. We work to an average utilisation rate (chargeable days) of 70%. All of our margin stays in the NHS.
• The bits of what might be called the ‘consultancy model’ that we have found beneficial (to those we work for, but also to ourselves) have included – being able to position ourselves slightly outside of the mainstream, offering independence of thought and our best attempt at objectivity as ‘trusted advisor’; the discipline of ‘pay for delivery’ -is it really needed, and if it is, how to deliver it to the best value? (we have become far more efficient in the way we work); defining when the work is ’finished’ so we can move on;
• These things can clarify matters and make all parties think about ‘value’ to the end customer, the patient/public we serve.
•  We have also used the model to create the space to innovate and develop our skills ( we invest significantly in specialist training and development for our team) so we offer real expertise that individual organisations might struggle to maintain themselves; to develop a team that has a helicopter view through working across diverse projects routinely, and the knowledge sharing opportunities that creates; to work autonomously and to set our own priorities and ways of working; to be an attractive employer to an eclectic, expert group of people who are keen to apply ‘first principles thinking’ to the widest range of problems in the interest of the NHS.
• We aren’t isolationist…we have partnerships with commercial, academic and NHS teams where we see benefit for end users. However, any partners we work with work at our NHS day rates as a fundamental part of our agreement with them

BUT OUR WAY DIFFERS IN MANY RESPECTS FROM THE TYPICAL COMMERCIAL CONSULTANCY OFFER

• All our margin is retained in the NHS and used to fund innovation work eg our national work on mental health/physical health, ultimately secured for all 44 STPs by NHSE, was kick started and developed methodologically through use of margin
• All the knowledge we gain is for the NHS and is shared openly….we publish; we put our work on line (not just ‘marketing case studies; the actual work)
•  We don’t ‘upsell’ …once the NHS has paid, it doesn’t pay again; we don’t develop solutions and then go seeking a problem to sell them into
• We don’t do ’12 week team drop and leave’ projects….we work on things that matter, taking the time it takes to do the work properly
• We use the best methods, not the cheapest….and in any project, document these fully and ensure that they are transparent and open to scrutiny
• If we get asked to do work that would be profitable to us but of poor value to the NHS end user (patient/public), we don’t do it….we try to offer alternative, better/cheaper ways; we offer to do low cost initial scoping projects to help develop thinking…and in extremis we turn it down and say why. We regard this as critical…we see £millions wasted through ill -considered large scale consultancy commissions, especially analytical commissions. We see it as part of our duty to help the NHS get best value from employing our expertise
•  We train people for the NHS….eg we have set up and run our own graduate training programme in complex analytics, including training staff for another internal consultancy team elsewhere in the NHS; we regard skills transfer as a fundamental principle to work by.
• Our average day rate is c £650.
• Our feedback, cumulative, (NB not all projects received a score) shows 85% projects scored as 4 or 5 out of 5 on ‘enabled us to deliver change’; 95% scoring 4 or 5 out of 5 for vfm; 98% scoring 4 or 5 out of 5 for quality of the work. Our net promoter score runs at 78%

Thus the ‘internal consultancy’ model takes the best of the disciplines needed to operate effectively in an advisory role, includes some real commercial edge (if we don’t perform, we don’t get the income and we fold), yet rejects many aspects of the typical commercial model that simply don’t work in the public interest. It is a hybrid form that aims for ‘the best of both worlds’ and one that I believe should be nurtured and promoted in the NHS. The Strategy Unit is but one example of this model in operation already, but it’s the one that of course I know best. We certainly aren’t perfect and we are always striving to improve how we work and the skills and expertise we bring to bear on questions. But we have made the transition;- we have been operating on this model for over 3 years (a lifetime in the NHS!); we have grown in response to demand; we have developed a whole range of new ways of working to be more effective; we have done work that has attracted significant acclaim and that our clients tell us has enabled them to make a real difference to health and care.

In conclusion

I think elements of the ‘consultancy model’ have real value and  I am not anti private sector consultancy per se.  Rather, I think the threshold and criteria for using private sector consultancy need to be set far higher and tighter, that the terms of using it should be more tightly managed (eg our agreement to peg day rates), and that the NHS should invest more in internal (and more cost effective ) specialist consultancy capacity as its primary resource.