Alan Leaman
The use of management consultancy is accepted business practice in many sectors. The UK industry, recently described by a government-sponsored report as a 'world leader', generated fee income of around £9bn in 2008; there is clearly considerable demand for consulting services.
But the focus of public discussion continues to be on the cost of consultancy; there is very little research or analysis that identifies and quantifies the value that this spending generates – either for individual clients or the economy as a whole.
This matters for the public sector especially. Without a deep understanding of the return on the investment, how can public sector managers know whether they are spending wisely on consulting? And how can politicians take sensible decisions about the appropriate level of spending on consultants if they are looking at only one side of the equation?
This week, the Management Consultancies Association (MCA) addresses this gap in a new report, The Value of Consulting. We have based our conclusions on research into 1,800 consulting projects and in-depth interviews with 30 clients. We don't claim that this is the last word on the subject; but our findings strongly suggest that the UK consulting industry is delivering significant value to its clients.
To assess this value we first collated the results of the largest ever survey of client satisfaction levels with consultancy projects. A large proportion of clients say that they are satisfied or very satisfied with the work carried out by their consultants.
Project delivery
Second, we built a model which indicated that the contribution of consultants comes in three parts: the specialist knowledge that helps clients take better decisions; their experience in project delivery that helps clients execute plans more effectively and efficiently; and the skills of individual consultants that improve the capability and team of managers in client organisations.
Based on this model, we then asked clients in detailed interviews to judge how much value they gained from consultancy projects. We were careful only to ask them about the return in the first year.
Very satisfied clients reported that this is a multiple of the fees that they spent, estimating that it ranged from around twice to 20 times the cost, with most grouped around the midpoint.
Assuming an average of 10 times the fees paid, and taking account of other projects where value is equivalent to price, this suggests that the benefits provided by consultancies are equivalent in value to around £56bn to UK clients, a return of £6 for every £1 spent.
This way of thinking about consultancy will help consultancies to engage in the sort of dialogue they need to have with their clients. It will help clients to be intelligent and demanding customers.
And, second, it will help re-balance and re-shape the conversation we have as a country about consulting. We should look at the benefits as well as the costs, and think of the value as well as the price.
Many clients already do this when they plan, commission and review their work with consultants. The public sector more generally should follow their lead.
Significant savings for the taxpayer
After all, management consultancy will be a big part of the solution to the country's problems with the public sector finances. Consultancy can – and does - deliver significant savings for the taxpayer, along with major improvements in public services. Any arbitrary decision to reduce the use of consultancy could easily lead to the public sector paying a far bigger price in lost opportunities and higher expenditure over all.
Too many discussions of consultancy begin and end with the assumption that it is just a cost. A 'smart' government would see that it is also an investment which can deliver excellent returns.
Alan Leaman is chief executive of Management Consultancies Association
