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Consulting Industry

The Chimera of Consulting: Government and Public Sector Advising

Discussion on management consultancy often reduces the clientele of strategy firms to multinational corporations. Although this might largely be the case, such a simplistic view ignores a major field of consulting: governmental and public sector advisory services. MBB strategy firms and the Big 4 professional services companies all have departments specifically designated for public policy and chartable organizations, which is by no means a coincidence. McKinsey has concluded more than 5,400 public sector projects for over 300 governmental agencies, BCG has signed over 1,000 governmental contracts only in the past five years, and fellow competitors are raking up comparable figures in the segment.

In a nutshell, public sector consultancy is definitely a field worth thorough examination, not only due to its sheer size, but also as a potential entry-point to the industry, especially for those with social science and humanities degrees. Nevertheless, government and public sector advising is a beast of its own kind, a chimera which incorporates many of the business solutions of conventional management consultancy, but borrows its outlook and conceptual framework from think-tanks and policy-hubs.

This article will highlight two key differentiating factors to bear in mind if you wish to specialise in public advisory services.

1. Different mindset

The biggest inherent difference between private and public sector consultancy is client expectations. Although both private corporations and national ministries seek to extract the greatest return on investment, be that the shareholders’ or taxpayers’ money, companies typically measure these ‘returns’ as profit. In contrast, governments and charities mostly measure their success in terms of social outcomes. Although it is rarely obvious what the ‘common good’ actually means, social programmes need to establish their priorities on another basis than mere financial efficiency.

I personally confronted this issue while devising a policy-paper for the UK Department of Environment, Food and Rural Affairs on the reformation of its agricultural subsidy-system post Brexit. The British government announced ‘public money for public goods’ to be the guiding principle of the new programme, aiming to dispel the inefficiency of the EU’s Common Agricultural Policy.

Despite these good intentions, we quickly realized that what many described as the ‘misallocation of resources’ under the previous subsidy-regime was the outcome of structural issues. The inefficiencies of the previous system primarily arose from the commitment to protect small-scale family farmers from the market competition of giant agricultural conglomerates, which could survive solely on subsidies. For a profit-oriented company, cutting inefficient farms would be a no-brainer, but the government has to face the social consequences of rural communities losing their livelihoods.

The European Community’s Common Agricultural Policy did not primarily aim to boost agricultural productivity in the first place, but to cushion the social consequences of economic transition in the post-war era. Even beyond such considerations, the subsidy-scheme intended to monetise the perceived value of public provisions, which are often difficult to calculate. How can a governmental scheme fairly assess the value of water-safety, the leisure provided by forests, or a healthy eco-system? Benchmarking creates additional complexity for public sector consulting, which private firms do not need to face.

2. Different stakeholders

What further complicates governmental advisory services compared to private business consulting is that the actual commissioner is not the only stakeholder who formulates the project’s outcome. Unions, lobby groups, and other pressure groups can occasionally wield disproportionate influence on policymaking, forcing politicians to act against the ‘common good’ or their original publicly declared intentions.

Although board-rooms can act just as much as a stage for power-struggles as cabinet rooms, what distinguishes governmental services is their susceptibility to ‘Olson’s Law’. Economist Mancur Olson pointed out that interest groups have a huge advantage in democracies. Getting organized is a pain, requiring lots of money, time, and energy. As a result, narrow constituencies pursuing goals that matter deeply to them are much more likely to do the organizing.  Broad constituencies pursuing general goals lack the necessary organisational focus and are often plagued by free riders wanting to enjoy the benefits of political action without incurring any of the costs. “The larger the group, the less it will further its common interests” was Olson’s neat formulation of the problem.

Aside from lobby groups, there are conflicts of interest within governmental agencies as well. Elected officials are primarily incentivised to prioritize short-term benefits in order to win the next election, and professional bureaucrats tend to unnecessarily inflate projects in order to increase their importance for the sake of progressing their careers. Limited accountability can also be a major factor, which can result in reduced pressure on staff to conclude projects quickly and efficiently.

Final thoughts

The different mindset and different stakeholders involved in governmental advising make it a considerably unique branch of consulting. In order to achieve success in this field, you will need to acquire a nuanced understanding of social issues, and a realistic assessment of the power-relations behind the projects you overtake. Public sector consulting requires us to be more sensitive, more astute, and at times more cautious.

Bence Borbély is a Hungarian first-year History and Politics student at the University of Cambridge whose professional fields of interest are management consultancy, public policy-making, politics and international relations.

Image: Pixabay

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