Management Consultancy and the British State

A Historical Analysis Since 1960

Antonio E. Weiss

• Éditeur: Palgrave Macmillan
• Année: 2018
• ISBN:
  9783319998763
• Sujet: Business
• Sous-sujet: Consulting

This book traces the emergence and development of therelationship between management consultancies and the British state. It seeks to answerthree questions: why were management consultants brought into the machinery ofthe state; how has state power been impacted by bringing profit-seeking actorsinto the machinery of the state; and how has the nature of managementconsultancy changed over time?

The book demonstrates the role consultants played in major developments in the postwarperiod.Specific case studies interrogate how consultancies influenced the policy fields of health service reform and social security benefits. This book will redefine debates amongst business historians and historians of the postwar British state about the nature of management consultancy and public sector reform.

© The Author(s) 2019

Antonio E. WeissManagement Consultancy and the British Statehttps://doi.org/10.1007/978-3-319-99876-3_1

Begin Abstract

1. Introduction

Antonio E. Weiss¹

(1)

London, UK

Antonio E. Weiss

End Abstract

In May 1940, Colonel Lyndall Urwick, founder of the British management consultancy Urwick, Orr & Partners, was asked by Sir Horace Wilson, Permanent Secretary of the Treasury, to join a cross-departmental team aiming to improve administrative and clerical productivity in government departments. Urwick readily accepted the offer, convinced that better management would improve efficiency in the civil service.¹ Yet within two years Urwick had departed, bemoaning that:

In Whitehall, even in wartime, the fact that I was Chairman of an up-and-coming management consultancy company gave me no status at all, but was in fact a handicap, a kind of certificate of freakishness, was a shock from which I never entirely recovered as long as the 1939–1945 war was on.²

By 2010, the experiences of Urwick reflected a bygone era. In 2009, the Management Consultancies Association (MCA) (a UK-based trade association) proclaimed “the public sector’s use of consultants has long been…on a growth path because of the changing nature of public services and the growing demands [from] all parts of government.”³ In 2006, the National Audit Office (NAO) estimated public sector expenditure on consultants to be £2.8 billion.⁴ (By comparison, this was roughly equivalent to the high-profile unemployment benefit Jobseeker’s Allowance.)⁵ Remarking on these figures, the House of Commons Committee of Public Accounts declared: “Consultants, when used appropriately, can provide considerable benefits for clients. There are examples where consultants have added real value to departments and enabled them to make improvements they would not have achieved otherwise.”⁶ In 1942 Urwick left frustrated and convinced that the Treasury needed to pay “more attention to modern methods of management” and that the views of consultants were not valued by the civil service.⁷ By the early 2000s, clearly something profound had changed in the British state’s relationship with management consultants. This book explains this change.

Three issues are covered in this book, each addressing important questions in the fields of modern British history, political science, and business history, respectively. First, why were management consultants brought into the machinery of the state? Broadly speaking, consultants are hired by clients to solve problems which clients lack either the capability or capacity (or both) to address with internal resources. This begs certain questions. As the postwar state increased in size, why did it not create the internal capability to fulfil the functions and services which consultants undertook? Given the assumed hostility to outsiders that some histories of the British state posit, why would state agents look to non-state agents for help?⁸ It is widely accepted that consultant-client relationships are predicated on trust.⁹ If so, how did these outside actors gain this trust? Growth in the use of consultants cannot be explained merely by the expansion of the state. From the mid-1960s to mid-2000s, the amount spent on management consultants by the state far outstripped growth of the state: spend on public sector consultancy as a proportion of total public sector expenditure increased by a factor of 70.¹⁰ These questions play directly into major historiographical debates regarding the British state. The answers derived seek to further a “revisionist” view of the state as much more expert and open to external ideas and expertise than some previous historians assumed.

Second, how has state power been impacted by bringing profit-seeking actors into the machinery of the state? This question raises further investigations into the British state. For example, what exactly is the British state and what power does it have? Where does this power lie, both institutionally and geographically? In which parts of the British state have consultants worked? And how have politicians and civil servants reacted to their work? Politicians, the media, political scientists, and others have suggested that putting non-state actors with their own interests into the heart of state functions have led to an attenuation of the state’s powers.¹¹ This book considers the accuracy of these claims and aims to further our understanding of the nature of state power in Britain, contributing to contemporary debates amongst political scientists concerned with the scale, scope, and powers of the state.

Third, how has the nature of management consultancy changed over time? Consultancy has attained a high status in various fields. The 55,000 consultants currently working in Britain are deemed part of a “new elite” in society.¹² Academic studies on consultancy have increased significantly in recent years.¹³ Considerable media attention is devoted to what consultants do or what they think.¹⁴ Yet management consultancy itself remains a poorly understood industry. Unlike law or accounting, there are no formal professional qualifications required to be a management consultant. And the type of work consultancies undertake has varied enormously over time. This makes it important to question whether it is meaningful to speak of a coherent “management consultancy” industry at all. The answer to this has important ramifications for the emerging academic literature—especially that by business historians and sociologists—on “management consultancy.”

Bringing the Consultants (Back) In

Since Urwick left Whitehall, consultants have permeated all parts of the public sector, advising august bodies such as the National Health Service (NHS), Bank of England, British Rail, as well as every central government department and most likely every local authority in Britain.¹⁵ The nature of the British state has changed dramatically too: the size of the state (as a proportion of gross domestic product) expanded significantly, nearly doubling from 25 per cent to over 45 per cent from 1940 to 2000. At the same time, state expenditure moved away from high levels of warfare expenditure towards greater levels of welfare expenditure.¹⁶

As Fig. 1.1 demonstrates, since the mid-1960s—when the use of consultants became formalised and encouraged across central government departments—there has been widespread procurement of management consultants by the British state. Unsurprisingly therefore, though seldom noted, consultants have played an important role in changes in the British state. For example, in the 1950s, in the early years of the postwar state, British consultants advised on more efficient use of utilities and cleaning practices in hospitals for the Ministry of Health.¹⁷ Throughout the 1980s, Arthur Andersen played a pivotal role in the largest civil computerisation project outside the United States—the “Operational Strategy”—which automated benefits payments, fundamentally changing how the British state engaged with its citizens.¹⁸ In 1992, the consultants McKinsey & Company assisted the British Transport Commission’s “privatisation strategy” of the railway system.¹⁹ And in the 2000s, Accenture, McKinsey, and other consultancies staffed, alongside civil servants, Tony Blair’s Delivery Unit which was instrumental in the implementation of New Labour’s public sector reform agenda. The unit consciously partnered state and non-state actors in the management of public services.²⁰

Fig. 1.1

Total estimated UK public sector expenditure on management consultancy, 1963–2013. (Compiled, collated, and analysed by the author. Pre-1979 figures based on company returns in MCA archives. Boxes 22, 23, and 24. Post-1979 all “public sector” work was recorded as such by MCA firms. Post-1979 figures from MCA annual reports. RPI inflator figures from Office of National Statistics. Estimates of MCA returns as a proportion of total UK consultancy market from MCA Annual Reports. Assumptions used in calculations: (i) all public sector work equates to work recorded under Board of Trade classification of “Public administration and defence,” “Local government,” “Government department,” and “Miscellaneous (other public sector) services” work; and (ii) where total industry estimates are made, public-private sector split of work undertaken by non-MCA firms is assumed to be the same as for all MCA member firms. MCA annual company returns do not classify nationalised industries as “public sector” work, meaning work in these indust...