IMF boss issues Davos call for poor countries to curb consulting spend

24 January 2019 Consultancy.uk

The head of the International Monetary Fund has raised eyebrows by warning poor countries against spending heavily on global consulting firms. Speaking at the annual World Economic Forum in Davos, Christine Lagarde voiced criticism of ‘inefficient’ spending on consultancies drafting development strategies for developing countries, but faces accusations of hypocrisy for the IMF’s own past in those nations.

Formed in 1945 after the end of the Second World War, the International Monetary Fund (IMF) is an international organisation headquartered in Washington, D.C. It consists of 189 countries, and its mission statement says that it was founded to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. While the entity continues to paint itself in these benign colours, however, what manner of society it actually facilitates is a debate that continues to rumble on.

The most commonly cited criticism of the IMF is its favouring of neo-liberal economic policies. When the IMF makes loans to countries in need of investment, it often makes them on the condition of certain economic policies being implemented. These policies tend to ultimately be geared toward structural adjustment. By making the terms of a loan the reduction of governmental spending, nation states are often unable to continue supplying vital public services, leading to privatisation and deregulation, which predatory companies in wealthy nations rapidly take advantage of.

IMF boss issues Davos call for poor countries to curb consulting spend

The problem is that these policies of structural adjustment and macro-economic intervention can make difficult economic situations worse, as was seen over the last decade in Greece, or for decades across the continent of Africa. At the same time, as long as countries favour these economic parameters, the IMF has little to say when it comes to the treatment of citizens residing there. The body has subsequently propped up a number of military dictatorships across the world, particularly in South America, with notable examples including Pinochet’s Chile receiving a $900 million loan, with the brutal regime promising to sell off the democratic socialist state which had previously been assembled by ousted President Salvador Allende, years earlier.

As a result of this, it is undoubtedly difficult for the Fund’s opponents to take it on good faith that the organisation’s Managing Director has the interests of developing nations at heart, when advising on spending plans. During the World Economic Forum (WEF) in Davos, Switzerland, Christine Lagarde, the head of the IMF, told poor countries to stop using global consultancy firms to write development strategies. The warning from the senior IMF figure has undoubtedly caused many a raised eyebrow, both outside and inside the gathering of the world’s most wealthy and powerful people.

Consistent with the long-term economic policies favoured by the IMF, Lagarde argued the private sector had a key role to play if poorer countries were to ever achieve the 17 development goals set by the UN. However, she singled out one aspect of private sector intervention – inefficient spending on consultants – for criticism at an event on funding the sustainable development goals at the WEF in Davos, Switzerland. During the speech, she also ordered any representatives of “the McKinseys and Boston Consulting Groups”, and any consultants in the room, to listen to her uncomfortable message about the way their work is perceived.

Lagarde then warned, “I see many, many low-income countries and emerging-market economies spend millions of dollars commissioning consultants to build their strategy plan. I would recommend some saving be made by taking the 17 principles, the actionable items, and start with that. From there, the consultants can actually do their job of putting it into reality. But don’t reinvent it – it’s right there. So much is wasted. That’s part of the inefficient spending that can actually be saved.”

‘Financial discipline’

Consulting spending in the public sector has increasingly come under the spotlight in the past few years, both in developing and leading economies. As such, comments in line with Lagarde’s would be relatively uncontroversial, were they not coming from one of the chief drivers of privatisation – and champions of market solutions over state intervention. 

Lagarde was similarly accused of hypocrisy following comments at the same event one year ago. She said “I hope people will listen now”, in allusion to the wave of reactionary populism currently sweeping developed economies, and harking back to another speech she made at Davos in 2013, when she warned that economic “inequality is corrosive to growth; it is corrosive to society.” The IMF has been expressing public concern about inequality since 2010, but without translating this into concrete action within the IMF’s own policies and programs, according to research by British political economists Alex Nunn and Paul White.

Nunn and White analysed 11 countries, including all seven member states that have struck new borrowing arrangements with the IMF since its guidelines were updated to reflect mounting concerns on inequality. In every case, the IMF continued to recommend fiscal discipline, while very few of the policies that could be used for reducing inequality were even mentioned.

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”