CERGAS Seminar "The relative (in)efficiency of external management consulting expertise in the public sector"

Coauthors: Andrew J Sturdy, Ian Kirkpatrick, Antonio Blanco-Oliver and Gianluca Veronesi

There is a long and controversial tradition of seeking to improve the management of public sector organisations, and public administration more generally, by bringing in external knowledge, especially from the private sector. While much research is critical of the effectiveness or appropriateness of private sector management expertise in public sector organisations, comparing the relative effectiveness of types of knowledge domains has so far proved elusive. Furthermore, the boundaries between public and private management expertise and structures have become increasingly blurred and hybridised since the introduction of NPM-inspired reforms in the past four decades.

In this paper, we compare the financial performance (in terms of efficiency and profitability) of public sector organisations in relation to the use of management expertise embedded internally versus the external expertise largely rooted within the private sector. Specifically, as proxies for these two forms of expertise, we concentrate on internal and external management consultancy. While definitions of consultancy are often debated, there is some consensus over the core roles of providing expertise in the form of advice, support for implementation and legitimacy for client decisions. On the one hand, consulting work can be performed by internal managers (embedded within public sector organisations), while, on the other hand, it can be supplied by experts drawn from commercial consulting firms. To investigate this, the study centres on the case of internal and external management consultancy use in publicly owned acute care hospitals in the English National Health Service (NHS). The analysis is based on a composite database of 165 organisations over 9 years of data (2008/09-2016/17), for a total of 1,416 firm-level observations.

Overall, we find that internally embedded management expertise leads to better financial performance when compared against external private sector-based knowledge. Furthermore, we find evidence of nonlinearity, with external management expertise associated with rapidly worsening performance whereas the opposite holds true in the case of internal management expertise, which is linked with increasingly higher performance. This supports critics of the value or fit of private sector knowledge (and of external consultancy) in public sector organisations, but the results also point to a more complex picture, suggesting that different combinations of levels of usage of internal and external consultancy can yield better outcomes. In particular, low use of external private sector knowledge can lead to better performance when paired with a high presence of internally embedded management expertise. This nuanced picture has important implications for public administration theory and practice as well as the governance of external consultancy use.

Speakers:

Gianluca Veronesi is Professor of Public Management and Accounting at the University of Bristol Business School since 2017. Prior to that, he worked for 10 years at Leeds University Business School, where he earned a PhD in Governance in 2011. Gianluca is a visiting scholar at the Crown Prince Frederick Center for Public Leadership at Aarhus University. His main research interests are in the area of governance, organisational performance, and leadership and management in public services. Gianluca has published on a number of reputable academic outlets such as Public Administration Review, Journal of Public Administration Research and Theory, Organization Studies, Public Administration, and Public Management Review. He is currently serving as the Head of the Operations, Management Science, Healthcare and Innovation academic group.

Link zoom: https://unibocconi-it.zoom.us/j/95388774850?pwd=M0FQV0ZvQTlhdFBRd2JPSVR2MEcydz09

Meeting ID: 953 8877 4850

Passcode: 597098

For those willing to participate in person, please write to erica.dugnani@sdabocconi.it before Friday, May 12th.