Consulting for the public sector

Developing a niche

Not even the largest consulting firms are capable of providing the full range of services needed by the public sector. Consultants therefore need to choose their niche and position themselves as experts in their area. There are several ways to define a niche:

–by territorial criteria;

–by level of government (federal, provincial or state, local, government agencies);

–by sector (health, education);

–by functional specialization (IT, statistics, finance);

–by methodological specialization (issue identification, facilitation of meetings, change management, training, surveys); or

–by various combinations of these criteria.

To compete within the chosen niche, consultants should develop a strategy based on product/service differentiation from other firms. A clear and communicable focus for the firm is essential for success in public sector consulting.

Building an image

It takes effort to build a successful practice in public sector management consulting. A good firm develops a team that is capable of offering quality services on demand and builds a track record of providing excellent customer service and durable solutions to problems. Through successful assignments a firm develops a reputation and builds its image in the minds of its clientele. A firm cannot serve clients well unless it allocates at least a small part of its revenues to research. This research should produce significant information on public sector issues, and the new products and ideas that are essential for the continuous development of a consulting firm. Research also ensures the involvement of staff with current issues facing target public sector organizations, keeping their learning current in the process. Publishing the results of research can be an excellent marketing vehicle for the consulting firm, as well as reinforcing its image. A firm should also aim to communicate its successful project experience through articles, Web sites and public speaking engagements.

26.5 Some current challenges

A number of innovative approaches and programme responses have emerged in the public sectors of various countries.6 Because of their novelty, magnitude and complexity, they have generated new opportunities and demand for consulting.

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Privatization

Privatization emerged in the 1980s as a radical programme response aimed at reversing trends that had literally gone out of control, such as the branching out of governments into new areas previously in the private domain, and the continuation and proliferation of state-owned enterprises and public agencies irrespective of failure to make them more performance-oriented in the highly politicized public context. The underlying rationale of privatization efforts has been: (1) that the private sector should do what it can do better, and more effectively, in the interest of the whole nation, and (2) that governments do not become stronger and more useful by running an endless number of different services and activities, but by focusing on policies, regulations, controls and services that only a government can develop and maintain on behalf of the community.

The transfer of public enterprise assets from governments to private owners has been the main form of privatization. Indeed, many people view it as synonymous with privatization. Yet there are other ways and areas of privatization. It has to be stressed, too, that privatization of ownership in the legal sense is not enough. It is more important to create a competitive environment where market forces can play their role, and where private and public initiatives complement and support each other (see also section 22.13).

To management and business consultants, privatization offers a wide range of opportunities for creative and challenging work for the government, special privatization ministries and agencies, and private companies interested in acquiring public enterprises. Assignments include a wide range of policy and operational issues, such as selecting privatization strategies and methods, business diagnosis and valuation, technical and financial restructuring, reorganization, downsizing, auctioning, etc. These assignments are multidisciplinary and require the involvement of accountants, auditors, lawyers, investment bankers and others. The management consultant may be in the position of lead agency or have a specific task under the leadership of another agent, as a rule an investment banker or an accounting or auditing firm. In addition to advising on the transfer of ownership in particular industries or utilities, consultants may take the initiative to advise governments on the pitfalls of poorly conceived privatization initiatives and on improving the regulatory and competitive environment. The negative consequences of some recent privatization initiatives, such as the California energy sector or the British railways, demonstrate amply that there are many opportunities for consultants to help governments view privatization projects from a wider and longerterm perspective.

Process re-engineering

In service tasks it is important to ask the question: Why are we performing this task and what results can be expected of it? A lot of unproductive work is done

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when people concentrate on tasks without looking at the entire process of which the task is a component. A good example is the task of accounts payable, which is part of the process of procurement of goods. Concentrating on the task of accounts payable makes the task cumbersome and creates several labourintensive operations (like matching procurement orders with receipt of goods in inventory), which must be coordinated to achieve results. Progress in information technology enables organizations to develop new ways of doing things that are more efficient and less labour-intensive, and that reduce the time needed to achieve results. Using information technology and better-trained staff to reengineer administration and other processes has become an important strategy to improve the productivity of public sector organizations.

Restructuring public agencies and organizations

In the recent past, governments in various countries have restructured their public sector organizations with the following objectives, among others:

●to clarify the accountability of ministers and departments by giving them more authority in functional areas;

●to separate policy-making from programme delivery activities;

●to promote innovation and risk-taking by relaxing some public service constraints on managers and stimulating entrepreneurial behaviour;

●to make organizations more efficient by improving human resource management;

●to undertake projects to pilot new work options, such as teleworking.

An example of restructuring has been the creation of special operating agencies for the delivery of certain government programmes. These agencies are given a stable policy environment, and full responsibility for the delivery of an operational programme. They have a clearly defined mission, mandate and budget, and are required to operate efficiently using many private sector practices. They are separate from the policy development functions of the parent department but operate within clearly defined limits through a memorandum of understanding. They are given wide exemptions from the constraints of the public service, for example in matters of budget, retaining operational surpluses from year to year, and of personnel.

Other structural changes involve reducing the number of management levels by eliminating certain middle management positions, or making adjustments to budgetary processes by eliminating distinctions between salary and operating budgets. There are also numerous initiatives to improve people management by introducing modern management thinking on quality and customer service, empowerment, training and learning, working in a task force environment, and so on.7 In the United Kingdom, the government found it useful to apply the European “business excellence model” to stimulate performance improvement within public services.

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Public–private partnerships

The concept of public–private partnership provides a useful approach to the division of roles and to cooperation between public and private sector organizations. The questions are: In what ways can public and private organizations work together to take full advantage of the possibilities of each sector in providing necessary services? How can they design and operate joint programmes and enterprises, combine resources and share responsibilities? What safeguards would help to prevent old scepticism and mistrust concerning the other sector and to resolve conflicts before they become antagonistic? What should be done to achieve synergy on a long-term basis?

In recent years, new kinds of public–private initiatives have been rapidly developing rapidly in various regions, in building and managing transportation and communication infrastructure, waste management, health services, cultural and sport facilities and institutions, public information, regional development and other activities. New formulas are being developed for service outsourcing, quality and cost control, joint enterprises, programmes and foundations, co-financing, mobilizing private capital for public purposes, risk and profit-sharing, etc.

Preparing governments for accession to the

European Union (EU)

Important changes are taking place in the public administration of European countries that have applied, or are planning to apply, for membership of the EU. One of the principal prerequisites of membership is public administration that complies with European standards and is able to ensure the application of the acquis communautaire, i.e. the EU legislation that is binding for all EU members and superior to national law. In addition to making national law compatible with EU law, preparations for membership include major programmes of public administration reform that are country-specific, but that all include clusters of initiatives such as:

●decentralization and strengthening of regional and local administration;

●development of capacities for active participation in Community activities and programmes, including the structural funds;

●building of institutions and development of procedures for enforcing application of Community standards in a number of sectors;

●regulatory reforms;

●reforms of public budgeting and financial control;

●restructuring and modernization of the civil service;

●extensive training and development of public administration staff at various levels of the hierarchy.

These programmes put great and unprecedented pressure on the governments involved, which in many cases are turning to consulting firms to

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make up for the shortage of internal capacities for planning and managing change, bring in new perspectives and private sector experience, and keep the whole process moving within an extremely tight timeframe. Consultants who can show competence and commitment at this stage are likely to gain a longterm competitive advantage and get further business from these governments at later stages, e.g. in developing and implementing programmes sponsored by EU structural funds, for which a considerable amount of consulting expertise will once more be required.8

E-government

The impact of advances in information technologies on government services and processes is profound: it concerns processes, information bases and flows, linkages and communication among services and organizations, provision of information and other contacts with citizens, knowledge management within public administration, organizational structures, and work methods in all areas of government and administration. The opportunities for practical application of new, faster, more reliable, user-friendly and ever cheaper information technologies and systems in public administration and services are at least as significant as in business organizations (see also Chapters 13, 16 and 19).

Advanced and large-scale IT applications are already in full use in many government services. However, governments often struggle with problems of coordination, compatibility, cost-effectiveness, interlinkages, standardization, sharing of data, confidentiality, coping with new demands and pressures, and others. A common ill continues to be a lack of policies and capabilities for choosing and modernizing IT, managing and supervising large and complex IT projects, and sharing experience among various government agencies. ITrelated decisions are often left to officials who are ill-prepared for the task and cannot turn to an internal government service for advice and help.

Since the late 1990s, the Internet has created new opportunities for enhancing government services and improving public administration with the support of new information and communication technologies. Shortly after e-business, the concept of “e-government” has been coined; it has even been said that e-business could never develop fully and effectively without e-government.

It is fair to say that the reaction of many governments, including their regional and local bodies and municipalities, has been surprisingly entrepeneurial and fast. The scope and quality of information provided to citizens and the business sector through public administration portals and Web pages has expanded and improved dramatically in a short time. Transparency and openness have increased. Public officials are becoming more accessible through email; consultations with the public are taking place on important new programmes and decisions. Communication, consultation and information-sharing within public administration are accelerating and improving. However, as in business, this is just the beginning of a process that will revolutionize administration in future years.

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Here too, management and IT consultancies have an important mission.9 Governments will continue to be short of internal capacities for programme design, selection, monitoring and evaluation. They will need protection from unscrupulous vendors trying to sell them costly systems that are not fully suitable or compatible. They will be looking for reliable and cost-effective service outsourcing arrangements, and will be keen to keep pace with developments in the private sector without losing sight of the specific conditions, needs and resources of public administration.

1World Bank: The state in a changing world, World Development Report 1997 (Oxford, Oxford University Press, 1997).

2D. Osborne and T. Gaebler: Reinventing government: How the entrepreneurial spirit is transforming the public sector (New York, Plume, 1993).

3The Government’s use of external consultants (London, HMSO, 1994).

4See: www.hm-treasury.gov.uk, visited on 4 Apr. 2002.

5J. Prokopenko, H. Johri and C. Cooper: Internal management consulting: Building in-house competencies for sustainable improvement, doc. No. EMD/20/E (Geneva, ILO, 1997).

6See e.g. Modernizing government, White Paper and action plan of the United Kingdom Government, on www.cabinet-office.gov.uk/moderngov, and Management Consultancies Association: Business, government and the new citizen (London, MCA, 2000) on www.mca.org.uk. Sites visited on 4 Apr. 2002.

7See also “Value for money, best value and measuring government performance”, special issue of International Review of Administrative Sciences, Vol. 66, No. 3, Sep. 2000.

8Technical support to these changes is provided by a joint EU Phare and OECD programme SIGMA. See e.g. Preparing public administrations for the European administrative space, SIGMA Paper No. 23, 1998. Also on: www.oecd.org/puma/sigmaweb, visited on 4 Apr. 2002.

9See “Successfully marketing to the government”, in P. Meyer: Getting started in computer consulting (New York, Wiley, 2000). Examples of services in e-government can be seen at the e-government knowledge channel www.egovt.tv (visited on 4 Apr. 2002), established by KPMG.

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