The management consultancy effect: Demand inflation and its consequences in the sourcing of external knowledge

Abstract

The growing use of external management consultancy services by public sector organizations has generated controversy. Some claim that users have become overreliant on, or even addicted to, this source of knowledge. However, our understanding of this phenomenon and the precise nature of its risks is underdeveloped. In this article, we address these concerns by focusing on whether using consulting services inflates future demand and on its consequences for efficiency. This is examined in the context of the English National Health Service and the adoption of New Public Management practices such as outsourcing and private finance initiative contracting. Based on an analysis of four years of data, the results suggest that using consulting services is associated with demand inflation and has negative implications for client organizational efficiency. These findings reveal a strong management consultancy effect, emphasizing the risks associated with demand inflation, with implications for both theory and policy.

Constructing the ‘Future of Work’: An analysis of the policy discourse

“…We are also reminded of Christophers' (2019) study of the rentierization of the UK economy in which he argues that a mushrooming consultancy industry is competing for public funds and outsourced contracts. The relevant problem framings in the FOW discourse often seem highly compatible with a strategy of generating demand for specific consulting services like organizational restructuring, management of digital transformation, personnel training and similar services (seeSturdy et al, 2020 for a study of 'demand inflation' for policy consulting expertise in the public sector).…”

Outsourcing the Business of Development: The Rise of For‐profit Consultancies in the UK Aid Sector

“…As Mawdsley and Taggart (2022: 3) argue: ‘going beyond “containment”, Development is ever more deeply inhabited by (capitalist) development’. We suggest that the role of for‐profit consultancies is an expression of a deeper entanglement of Development processes with prominent actors in global capitalist processes — as key intermediaries facilitating engagement with other important actors within global capitalism; and as interests in their own right, since they are critiqued as forming a growing ‘consultocracy’ with their own interests (Sturdy et al., 2020; Ylönen and Kuusela, 2019) and the tendency to produce homogenized global institutions (Faulconbridge and Muzio, 2017).…”

Consultancies in public administration

“…We can see this status relationship in the concept of the “managerial missionary” identity among some consultants working for public administration, who think the public sector is 10 years behind the private sector (Galwa & Vogel, 2021, p. 10). We can also see it in “demand inflation” from public administrations to use consultancies to solve public problems (Sturdy et al, 2022 in this issue), including professional views in some countries on who should lead in public‐private partnerships (Warsen et al, 2020).…”

“…Management consultants have been important in reforming core sectors, such as in health, education, employment, security, and environmental issues, especially in the introduction of reforms to these sectors (Hood & Peters, 2004, p. 274; Laage‐Thomsen, 2022 and Sturdy et al, 2022 in this symposium). Many international public administrations have also made a positive association between NPM administrative reforms and the use of consultancies.…”