Public sector calls in cost-reduction consultants

I’ve been banging on for what seems like ages about the public sector’s lack of experience in restructuring and reducing the size and cost of organisations. Twenty years of real-terms budget increases mean that only those with quite a lot of grey hair will remember the last round of serious spending cuts and even they would have been relatively junior at the time. I was only half joking when I suggested, three years ago, that the government should call in some consultants to help it reduce the amount of money it spends on consultants.

Experience of large-scale cost-cutting is rare in the public sector and, indeed, in many parts of the private sector too. Outside the lean manufacturing firms there are relatively few organisations that have reduced their costs by 25% over four years – the task that will be facing many public sector bodies between now and 2014. 

So it’s certainly no surprise to me that government organisations are having to recruit consultants to help them reduce costs. And, if these people really are seasoned cost-reduction experts, £1,000 a day is cheap at the price. As the demand increases, the rates are likely to go up so it might make sense for management teams who know they are going to have to make big cuts to grab their consultants now while they are still relatively cheap.