Public Sector Savings and Management Consultants

How can I even say this in the same breath?

Simple: some management consultants are very cost-effective:

How expensive are salaried staff?

Your employees need: holidays, training, sick leave, compassionate leave, pensions, NI, administration, appraisals. All of this adds up to around 2.4* the original cost of their salary, in other words whereas your front-line workforce might cost £1,000,000, your wages costs including the HR department, management etc will be more like £2,400,000.

So, coming back to your employee on £20,000 per year. Assuming 215 productive days, this is £93 per day. So you would expect the management consultant equivalent to cost £223 per day just to be the same cost to you (because management consultants have to look after their own pensions, NI, tax etc and don’t need layers of appraisals).

Your employees have specialist skills and work very hard. But they have to keep up with developments (reading time, study time), and they have to do many different tasks – very few organisations for example have a requirement for a full-time Benefits Manager. So you may get 215 productive days per year, but of these, 20% are spent on reading time, there are times in the year when there isn’t much to do but you have to go on paying them, there are even times when you create tasks to keep people occupied. The rough average is that 40% of the time, productive staff are doing the tasks required.

If you worked out how much it costs to keep your own employee, per day spent doing tasks which support the future success of the company, suddenly £223 per day becomes £557 per day. Of course I’m not talking about task-oriented staff, who do what they are told and are productive the vast bulk of the time; I’m talking about people who plan, who do specialist tasks, who engage with others.

Remember, that £557 per day is for the equivalent of an employee on a £20,000 salary. Is this the level of skill you actually want?

What level of skill do you want?

So if you want a senior manager level (£50,000 salary) for a specific task, and only expect to pay for the days worked, and of course expect the senior person to remain fully trained and up-to-date, only in their own time, then you would pay 50/20(salary multiple) * £557 per day = £1390 per effective day if you had them on payroll. You will typically get this level of person as a consultant for closer to £650 per day, a veritable bargain!

Making savings

So you want to make savings. The ONLY way to make savings is to use fewer people. But if the staff you currently have are working hard, then you have to:

Stop doing some things (usually what doesn’t need doing and perhaps never needed doing)

Do other things more efficiently (a variation on the above – often you drive efficiencies by removing steps that simply don’t need doing)

Do new things that mean that you won’t need to do some time and resource-consuming activities (this often applies in Health – taking time to help people stop smoking will pay dividends when there are fewer people with 20 years’ smoking-related diseases)

It’s difficult to see new ways of doing things or even to accept that some things don’t need doing – that’s often why organisations bring in management consultants – to look at the job with fresh eyes. 

However these “strategic” management reports that make sweeping “save £20 billion” statements have often not looked at the detail; they are often little more than company brochures with the clear message “put lots more work our way and we’ll be very pleased”.

Government “savings”

Actually often the requirement isn’t to save money, it’s to do more with the same resources. Take NHS – we expect around 7% more need by 4 years’ time. So we’ve been asked to make £20bn savings over four years, which equates to around 7% savings over the same period. This doesn’t mean this money goes out of the health service, it means that we need to do more work with the same resource.

In other words, same numbers (or similar, at least) of staff, but each more effective.

Spending their time 7% more effectively

Doing fewer of the things that don’t need doing (and one estimate is that at any one time 30% of the things we do are no longer relevant given current understanding and technology/ medicine)

Doing the things we do, better (more time with patients, less time travelling between patients; more time face to face, with the clinical notes available via IT and updating the clinical notes made simpler and easier)

Doing pro-active things, like see and treat, first responder, instead of referring people to hospital to see someone who says “that’s fine”

We have a challenge right now to invest in making these changes. Remember NHS is not about innovation, it’s about delivering a service 24 hours per day, 7 days per week, 365 ¼ days per year (don’t forget the last ¼ day!) with innovation ONLY where it is safe to introduce.