Saturday, September 19, 2009

McKinsey: NHS & Vogue


Great Barracuda, BVI/ ©2009 Am Ang Zhang


Snorkelling can be very inspirational. I have often wondered why so many fishes stay around the Great Barracuda, running the risk of being gobbled up before the end of the day. Perhaps these fishes have not been warned. The NHS certainly has.

I read that McKinsey, one of the leading Management Consultancy firms is expected to recommend 25% cost cuts at Vogue. They have already advised a 10% staffing cut in The NHS to achieve a saving of £20 billion by 2014.

In actual fact the NHS could have saved even more money by doing away with the likes of McKinsey. A new book was published by one insider Matthew Stewart on management consultants. The Independent had the details:


Thursday, 17 September 2009
I will just pick out a few points that may be of interest.

The truth:
“Wherever I was in the world, at the beginning of every consulting project, one thing was certain: I would know less about the business at hand than the people I was supposed to be advising.”

How to impress:
“Firstly, they constructed a database of the client's customers, detailing each customer's product and transaction activity over the preceding year. Next they established a clean profit and loss statement for the whole business, including all overheads but excluding extraordinary items. Then, to allocate the revenues and costs of the business to each customer, they devised algorithms based on detailed models of each kind of product and transaction. The complexity of these algorithms, naturally, was such that they were far beyond the powers of most clients to comprehend. The result was an analysis of the exact revenue, expense, and profit to the client attributable to each of its customers. Finally, the team lined up the customers according to their profitability, thus allowing the client to see how much of its profits could be attributed to its most profitable customers, and how much to the least profitable."

The Whale Chart: "The Whale" is a graph. Its official title is "Cumulative Customer Profitability" and it also goes by the generic name "skew chart".
“I eventually came to understand that it is possible to construct a Whale chart for just about any business anywhere. It makes no difference whether the business is inherently good or bad, well-managed or in the hands of chimpanzees. It doesn't even have to be a business – it can be a football game or a population chart.”

It gets better:
“In fact, you don't even have to do the analysis. You can save 80 per cent of the effort by just borrowing data from a previous analysis. There's always going to be a skew. It isn't science; it's a party trick.”

The Clients---including The NHS and Vogue:
"The management consulting industry depends on a small number of gargantuan clients; we thought we were doing pretty well out of one of our clients who spent $12m annually on our services – until we learned that this behemoth's total spending on "strategy" consultants was about $100m per year. In order to grasp why some large organisations (but not others) spend so much money on something as ethereal as "strategy," one must dispose of the naïve idea that consulting involves the transfer of knowledge."

Communication:
"The most important of the all-too-human functions of shaman-consultants is to sanctify and communicate opinion. Like ministers of information, consultants condense the message, smooth out the dissonances, unify the rhetoric, and then repeat and amplify it ad nauseam through the client's rank and file."

Writing your own report card:
“The pretence of knowledge where none is to be had, after all, is also a licence to represent private interest as a public good. Managers of client organisations easily abuse this licence, using shareholder money to pay for consultants in order to confer legitimacy on actions that deserve proper scrutiny from truly independent sources. For consultants, the arrangement has all the beauty of writing your own report card.”

According to the Management Consultants' Association, the NHS spent £300m on external consultancy last year.

The ultimate message:
“……you will be expected to work much harder than you ever have before and your chances of losing your job are infinitely greater than you ever imagined.”


Birthday Grand Rounds: Residency Notes

NHS: Budget 2010-£110 Billion, McKinsey

1 comment:

Tracy said...

Sometimes big companies have to cut employees because if not the can´t survive in the market. Last year I had to travel to argentina to consult a tourism agency. They were growing a lot because of all the tourism Argentina is receiving and they needed help to manage it. It is a good job!