BSNL has been dialling the incorrect advisor

‘The over-reliance on consultancies erodes the capability of the state to innovate and handle its enterprises successfully’
| Picture Credit score: The Hindu

In Could 2024, a report that the American consultancy group, Boston Consulting Group (BCG), was to be concerned within the revival technique of state-owned Bharat Sanchar Nigam Restricted (BSNL) and that BSNL was to pay BCG ₹132 crore for the consultancy drew a lot consideration. BCG has reportedly really helpful decreasing the workforce amongst different main steps. Whereas this turned a much-talked about information merchandise, this isn’t a one-off occasion. In recent times, the general public sector’s reliance on the companies of exterior consultancy companies has elevated exponentially — and never simply in India but additionally worldwide. Whereas the general spending of the federal government will not be accessible for India, there’s some knowledge accessible for different international locations. For example, France spent over €1 billion on mental companies offered by consultancies in 2021, whereas the Australian authorities spent A$21 billion on exterior labour rent in 2021-22.

Want for scrutiny

The case of BSNL has as soon as once more drawn consideration to the contentious concern of the rising affect of consultancy companies inside the public sector. It raises essential questions concerning the efficacy and the implications of outsourcing strategic decision-making within the public sector. Given the elevated involvement of exterior consultancies, there’s a want that that is scrutinised.

The central critique by most individuals is rooted of their lack of “pores and skin within the sport”. Consultancy companies are given initiatives and contracts to supply strategic recommendation however bear no duty for the outcomes of their suggestions. Like on this case, for instance, if BSNL’s fortunes fail to enhance regardless of the implementation of BCG’s methods, the consultancy faces no penalties. This lack of accountability creates a troubling misalignment of incentives. The consultants are rewarded handsomely whatever the outcomes, whereas BSNL — and by extension, the Indian taxpayer — will bear the complete brunt of any failure.

Furthermore, such an association undermines the very function of hiring exterior experience: to ship tangible enhancements and long-term viability. Additionally, if you’re paying somebody to unravel your issues with none main accountability, there’ll all the time be some issues left to be solved.

As well as, the over-reliance on consultancies erodes the capability of the state to innovate and handle its enterprises successfully. Over time, this dependence on exterior experience creates a vicious cycle. As a substitute of constructing inside capabilities, they turn out to be perpetually reliant on exterior recommendation — and this doesn’t come low-cost.

Influence on state capability, battle of curiosity

This type of dependency has a lot broader implications for the state capability. The abilities and the data realized by the consultancies on these initiatives are usually not transferred to the general public officers. In impact, this units up a unfavorable suggestions loop, the place public sector workers lose expertise and institutional data, that means, the subsequent undertaking or piece of labor will nonetheless want exterior inputs.

The proliferation of consultancy contracts displays a deeper disaster of confidence within the public sector’s potential to manipulate itself as nicely, by implicitly undermining their very own legitimacy. This outsourcing of experience not solely weakens public establishments but additionally creates an unaccountable parallel forms of consultants who wield important affect over public coverage and useful resource allocation with out topic to the identical democratic oversight or accountability as public officers or political leaders.

Consultancy companies usually serve a number of shoppers throughout industries, together with rivals and regulators, which may create conflicts of curiosity. Their recommendation could also be influenced by these overlapping relationships, elevating questions concerning the impartiality and the integrity of their suggestions. The battle of curiosity has lately been a lot debated in most international locations resulting in main consultancy companies contemplating breaking their varied capabilities.

A further downside is that the targets of public sector enterprises are sometimes very completely different from these of the non-public sector. Consultancy companies usually method issues from a profit-maximisation perspective, emphasising cost-cutting, effectivity, and market competitiveness. Whereas these methods may yield short-term beneficial properties, they might not align with the broader public service mandate of organisations. For example, BSNL, as a public sector enterprise, has traditionally performed a significant position in India’s telecommunications panorama, significantly in bridging the digital divide and bringing telecommunication companies to rural and underserved areas. The aggressive cost-cutting measures may compromise the standard of service in rural areas, the place BSNL’s presence is essential in offering reasonably priced telecommunications entry. General, a purely market-driven technique may divert the general public enterprise’s focus from its social duties, which is able to basically undermine its position as a public items supplier.

What is going to work higher

A greater various, as Mariana Mazzucato and Rosie Collington, the authors of the e book, The Large Con: How the Consulting Business Weakens our Companies, Infantilizes our Governments and Warps our Economies, recommend could be to put money into strengthening the inner capabilities of the general public sector establishments. This might contain recruiting and coaching high expertise, fostering a tradition of innovation, and empowering workers to take possession of the corporate’s strategic course. They write, “As a result of data will not be cultivated inside state workforces and establishments, a dependency on the ‘experience’ of consultancies spirals.” By constructing inside experience, these organisations may develop methods that aren’t solely efficient but additionally aligned with their long-term objectives and public service mandate. This may assist them reclaim their strategic autonomy as nicely — which will get compromised with an excessive amount of reliance on exterior the system.

The case of BSNL and BCG serves as a microcosm of the broader debate concerning the position of consultancy companies in public sector governance, state capability and accountability. There’s a want for governments the world over to rethink this mannequin of governance.

Aasheerwad Dwivedi is Assistant Professor (Economics), College of Administration Research, College of Delhi. The views expressed are private