Saturday, September 10, 2011

Public Sector & Management Consulting: An emerging paradigm

Birth of Government Consulting 
Since the inception of Management Consulting in early twentieth century, for seven decades, predominantly all the growth was in the private corporate sector. Consultants popularized the approach now commonly referred to as ‘best practices’. By nature, the private sector has always been a competitive sphere, and hence the value associated with adoption of best industry practices was immense. In the last two decades, however, there has emerged an interesting trend in the consulting world. More and more public sector concerns are beginning to hire management consultants. Governments across the globe- US pioneered the movement and UK and India followed suit- are recognizing this as a quinine tablet for many strategic and operational challenges.
There are several stories of this strengthening relationship. McKinsey & Company handled the transformation endeavored by North Carolina’s Department of Transport. Among other makeovers, it dramatically cut down a mammoth $440 million shortfall in 2005 to $2 million in 2007. In Germany, Booz is revamping Public-Sector Occupational Pension Plan, and aiding the Ministry of Education and Research in launching nationwide university projects. UK is no alien to the trend, nor is India, where McKinsey has played important roles in major sectors like infrastructure and railways. Deloitte and Booz Allen have strategic penetration in sensitive sectors like defense, in UK and US respectively.

Strengthening hold in public sector 
Kennedy Information, an American firm that monitors the consulting industry, estimates that the public sector now accounts for over 30% of the global consulting market. Kennedy forecasts that the public sector business will grow by 6-9% for each of the next three years; private-sector business, it says, will grow by only 1-4% over the same period.
Britain's Management Consultancies Association (MCA) reckons that the value of public-sector consulting to its members grew by 46% last year, while private-sector business grew by only 4%. Two-fifths of the British consulting business of Deloitte, one of the Big Four accounting firms, is now for the public sector.Mitt Romney, US presidential candidate for 2012 elections, had told the Wall Street Journal, he would have no qualms hiring McKinsey or Bain, to advise him on how to reorganize the government. Ian Davis, former managing director of McKinsey has long been known as a strong proponent of role of consultants in running the government’s businesses. In 2007, he wrote a famous article ‘Government as a Business’ which attempted to break down the complex and chaotic world of federal governments and apply learnings from the business world to achieve efficiency and productivity in government organizations.

The Indian landscape
In India, we see a two pronged trend in management consulting in public sector. On one hand, private players like McKinsey, BCG, and Bain are being increasingly hired by federal and state governments to work on varied projects. BCG, for instance, has been involved with the Central Bank, and made recommendations to streamline the public food distribution system. In parallel, there is a rising trend of establishing public sector consultancies under the ministries of central government. To name a few: Agricultural Finance Corporation, Natural Resources Management Consultants India Pvt. Ltd., Educational Consultants India Limited, are all initiatives of different ministries. While their rise inspires confidence in government’s effort to improve public sector efficiency, critics have remarked, this might as well be an attempt to evade overt scrutiny and interference by global private consultants. Understandably, this is more for time to tell than experts to predict.

Another very interesting initiative is the Consultancy Development Center, headquartered at India Habitat Center, New Delhi. This organization has been set up for promotion, development and strengthening of consultancy skills and capabilities in the country including enhancement of export of consultancy and professional services. Opportunities are being discovered and analyzed not only in India but other countries across continents. Projects are being taken up in countries like Kazakhstan, Morocco, Israel, and Turkey. Specialized training programs on consultancy management are being launched and start-up ventures in this space being promoted.

In this hour of rapidly rising acceptance of consulting paradigm in the public sector affairs, however, there are strong opponents too. David Cameron, the current prime minister of UK, though more diplomatic today, had openly condemned the ‘rotting’ influence of this fast settling norm on UK government’s functioning. “For the last decade or so, in the name of modernization, rationalization and efficiency, we have been living under a regime of government by management consultant and policy by PowerPoint. The result has been an explosion of bureaucracy, cost and irritation, endless upheavals and pointless reorganizations.” he said in a speech to the Campaign to Protect Rural England.
Similar strong emotions were voiced by the famed but controversial journalist Johann Hari, when he targeted McKinsey on the firm’s involvement in the global drive for saving rainforests. He mocked the firm’s much publicized policy on confidentiality and pointed out data that seemed to corroborate his fears on company’s vested interests rising from its mining consulting division, straining the mission to conserve rainforests. On other occasions too, there have been similar and parallel arguments like inability of management consultants to go beyond the idea of financial efficiency and view public sector affairs in a holistic light.

A different approach
Almost as if apprehending this concern, Booz Allen Hamilton, the largest public sector consulting firm in US, has traditionally divided its business into two streams; one for public-sector work and one for the private sector. It recruits separately for the two streams, and employees follow different career paths and different pay structures.
Jess McMullin of boxesandarrows takes on the challenge of consulting the public sector, and breaks it down into:
Appreciating the differences- realizing that ROI in public sector is more complex than simple finance, and involves political returns too, which often outweigh finances in terms of significance
Understanding the culture- making sense of the complex hierarchies of different governments, and making connections at all levels
Finding your niche- adapting and innovating core strengths to suit the public sector demands
All in all, these developments depict growing awareness and interest in the field of consulting. Focusing on the Indian arena, they offer opportunities both for new ventures and lively debate on policy and paradigm! Figure out what is in it for you!


  1. "BCG, for instance, has been involved with the Central Bank, and made recommendations to streamline the public food distribution system"
    To the best of my knowledge, the RBI does not handle the PDS system. So could you give some links/sources to this information?

  2. @Anandh:
    I guess it got conveyed like the recommendation about PDS was made 'to' the central bank.
    Indeed not.
    We meant:
    1. BCG has worked with the central bank;
    2. BCG has advised the govt, regarding PDS


    hope that helps

  3. 'Great' Thoughts and Nicely Put!!

    The role of consulting in Public sector is for sure need of the hour and examples given in the post also reinforce the same.

    But I have one simple question for the writer, 'What is this consulting we are talking about? "

    Is it the 'Dream' consulting assignment where a thick report is handed over to the Client or is it the 'Dirty' one that requires you to get into the dirt itself. I am not sure if so called 'Global' firms and their employees are ready for the second case which completely justifies the existence of various State Run Consulting 'Firms'. And, not to mention, we know how they would perform.

    Lastly just to repeat what I said, 'Great Thoughts and Nicely Put!!

  4. @DJ:

    Fair point, we'll try and find out more about the 'nature' of their involvement with governments, particularly in Indian context; and we'll get back.


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