In-House or External? Rethinking Organisational Design and Development in Local Government Transformation

Context: Transformation in UK Local Government

Local authorities across the UK are navigating a perfect storm of financial pressure, rising demand, and structural reform. Since 2010, councils have experienced a real-terms funding reduction of nearly 30%, while demand for statutory services particularly adult social care, children’s services, and housing has surged. This fiscal squeeze has left many councils with limited discretionary spending, forcing them to rethink how services are delivered and how organisations are structured. In response, councils have embarked on ambitious transformation programmes, often underpinned by local government reorganisation (LGR), devolution deals, and the creation of new unitary authorities. These changes are not just about cost savings they are about building more agile, responsive, and sustainable public services.

Source: Freepik.

At the heart of this transformation lies organisational design (OD) and organisational development (OrgDev). Organisational design provides the structural blueprint how teams are configured, how decisions are made, and how services are aligned to outcomes. Organisational development, on the other hand, focuses on the people, culture, behaviours, and leadership needed to bring that structure to life. The two are intrinsically linked: one without the other risks failure. As councils grapple with these challenges, a critical question arises: Should organisational design and development be delivered in-house, or is there greater value in bringing in external consultancy support? This paper explores the pros and cons of both approaches, drawing on UK case studies and examining the role of the Big Four, SMEs, and internal OD teams in shaping the future of local government.

Internal vs External Organisational Design Consultancy

Internal Consultancy

For many councils, the instinctive starting point for organisational design and development is to look inward. Internal OD teams are often embedded within HR or transformation functions and bring with them a deep understanding of the organisation’s history, political context, and cultural dynamics. This proximity can be a powerful asset but it also comes with limitations.

Advantages of Internal Consultancy:

• Contextual knowledge

Internal teams possess an intimate understanding of the council’s political landscape, service pressures, and community expectations. They are attuned to the subtleties of local relationships, legacy decisions, and the informal power structures that shape how change is received and implemented.

• Continuity and long-term ownership

Unlike external consultants who may exit after the design phase, internal teams remain in place to support implementation, iterate on the model, and embed learning. This continuity helps maintain momentum and ensures that transformation is not just a one-off event but a sustained journey.

• Cost-effectiveness

Internal OD teams typically represent a lower financial outlay compared to external consultancy. There are no procurement costs, and day rates are significantly lower. For councils under financial pressure, this can be a decisive factor.

• Trust and relationships

Internal practitioners often have established relationships with senior leaders, service managers, and frontline staff. This trust can be instrumental in navigating resistance, facilitating honest conversations, and co-producing solutions that are both ambitious and realistic.

Challenges of Internal Consultancy:

• Limited capacity and capability

Many internal teams are small, overstretched, and juggling multiple priorities. They may lack the specialist skills or capacity required for large-scale transformation, particularly when it involves complex systems redesign or cross-organisational change.

• Risk of bias and internal politics

Being part of the organisation can make it harder to challenge entrenched behaviours or question sacred cows. Internal consultants may be perceived as too close to the status quo, limiting their ability to drive radical change.

• Change fatigue and credibility

In some cases, staff may be sceptical of change led from within especially if previous initiatives have failed to deliver. Internal teams must work hard to maintain credibility and demonstrate that they can deliver results, not just strategy.

Case Study: Breckland Council

Breckland Council provides a compelling example of the strengths and limitations of internal OD consultancy. As part of its 2025–2028 corporate strategy, the council embarked on a transformation programme focused on digital readiness, workforce empowerment, and cultural renewal. The internal OD team played a central role in shaping and delivering this agenda, leveraging their deep understanding of the organisation to align change initiatives with local priorities. Their embedded position enabled them to build trust, tailor interventions to the council’s unique context, and maintain continuity throughout the programme. However, the team also recognised the value of external challenge particularly in areas such as digital transformation, where specialist expertise and an outside perspective were essential to avoid insular thinking and ensure innovation.

External Consultancy

When local authorities face complex transformation challenges particularly those involving whole-system redesign, digital innovation, or rapid cost reduction many turn to external consultancy support. Whether through large global firms or smaller, specialist providers, external consultants can bring a fresh perspective, technical expertise, and the capacity to deliver at pace. However, this approach is not without its trade-offs.

Advantages of External Consultancy:

• Expertise and innovation

External consultants often bring a wealth of experience from across sectors, including central government, health, and private industry. This cross-sectoral insight can be invaluable in introducing new methodologies, digital tools, and operating models that may not yet be embedded within the local authority. Their exposure to a wide range of clients allows them to benchmark performance, identify best practice, and challenge conventional thinking.

• Objectivity and challenge

One of the most cited benefits of external consultancy is the ability to provide independent challenge. Free from internal politics and legacy loyalties, consultants can ask difficult questions, surface uncomfortable truths, and push for bold decisions that internal teams may be reluctant or unable to pursue.

• Scalability and speed

External firms can rapidly mobilise multidisciplinary teams to meet tight deadlines or deliver large-scale programmes. This is particularly useful when councils are under pressure to deliver savings quickly or respond to external drivers such as inspections, funding bids, or legislative change.

Challenges of External Consultancy:

• Cost and value for money

The most significant drawback is often cost. Big Four firms, in particular, command premium day rates, and even smaller consultancies can represent a substantial investment. In times of financial constraint, justifying this spend to elected members and the public can be politically sensitive.

• Knowledge transfer and sustainability

There is a risk that expertise and learning leave with the consultants once the contract ends. Without a clear plan for knowledge transfer and internal capability building, councils may find themselves dependent on external support or unable to sustain the changes introduced.

• Cultural alignment and credibility

External consultants may struggle to fully understand the local context, values, and political dynamics of a council. If their approach is perceived as too corporate, top-down, or disconnected from frontline realities, it can undermine trust and reduce the effectiveness of their interventions.

Case Study: London Borough of Hillingdon (with Grant Thornton)

Facing a £54 million budget gap, the London Borough of Hillingdon engaged Grant Thornton to lead a transformation of its HR and business change functions. The consultancy brought private sector rigour, structured methodologies, and a results-driven mindset. Their involvement accelerated the pace of change and introduced new ways of working. However, the success of the programme ultimately hinged on internal leadership buy-in and the ability to align external recommendations with the council’s culture and political context. Without this alignment, even the most technically sound solutions risked rejection or superficial adoption. Read more here.

Source: Grant Thornton.

Case Study: Luton Borough Council (with Local Partnerships)

Luton took a different approach, partnering with Local Partnerships a public sector-focused SME jointly owned by HM Treasury, the LGA, and the Welsh Government. The consultancy supported the co-design of a transformation governance framework and helped improve the council’s use of data in decision-making. Their collaborative, facilitative style was well received by internal teams and helped build internal capability for long-term change. This case highlights how smaller, mission-aligned consultancies can offer a more tailored and culturally sensitive alternative to larger firms, particularly when the goal is to empower internal teams rather than impose external solutions. Read more here.

Source: Local Partnerships LLP

Hybrid Approaches: The Emerging Norm

In recent years, a growing number of local authorities have moved away from viewing internal and external organisational design support as mutually exclusive options. Instead, many are embracing hybrid models that blend the strengths of both approaches to create a more resilient and adaptive transformation capability. This shift reflects a maturing understanding of what it takes to deliver sustainable change in complex, politically nuanced environments.

In a hybrid model, internal organisational development teams typically lead on cultural change, staff engagement, and the long-term embedding of new ways of working. Their deep knowledge of the organisation’s history, values, and political context makes them well-placed to ensure that transformation efforts are grounded in local reality and aligned with strategic priorities. At the same time, external consultants are brought in to provide targeted support, whether that’s in the form of technical expertise, facilitation of design workshops, or independent challenge to entrenched thinking. This collaborative approach offers several advantages. It enables councils to scale up their capacity quickly without losing sight of the need for internal ownership. It also supports knowledge transfer and capability building, as external consultants work alongside internal teams rather than in isolation. Over time, this helps councils reduce their reliance on external support and build a more self-sufficient transformation function.

Moreover, hybrid models can offer better value for money. By using external consultants strategically focusing their input on areas where they add the most value councils can control costs while still accessing high-quality expertise. This is particularly important in the current financial climate, where every pound spent on consultancy must be justified in terms of long-term impact.

Copyright: Somerset Council

Example: Somerset Council

A compelling example of this approach can be found in Somerset Council’s post-reorganisation transformation journey. Following the creation of a new unitary authority, the council needed to develop a Target Operating Model that would align services to resident outcomes while fostering a unified organisational culture. Rather than outsourcing the entire process, Somerset chose to lead the work internally, drawing on the strengths of its own teams to shape the vision and engage staff across the organisation. However, recognising the value of external insight, the council also brought in external facilitators to support key stages of the design process. This partnership helped to challenge assumptions, introduce new methodologies, and ensure that the final model was both ambitious and achievable. The result was a transformation programme that was not only technically sound but also widely owned and understood across the organisation.

Strategic Takeaways

Deciding whether to deliver organisational design and development internally, externally, or through a hybrid model is not a one-size-fits-all decision. It requires careful consideration of the council’s context, ambitions, and constraints. Each approach brings distinct advantages and risks, and the most effective strategy often lies in blending the best of both worlds.

One of the first factors to consider is the scale and complexity of the transformation. Large-scale restructures, whole-system redesigns, or post-reorganisation integration efforts may demand external expertise and capacity that internal teams simply cannot provide alone. Conversely, smaller-scale service redesigns or cultural change programmes may be better led from within, where trust and continuity are paramount.

Budget and procurement constraints also play a significant role. While external consultants can bring high-impact expertise, they come at a cost often a significant one. Councils must weigh the value of that investment against the potential for internal capability building and long-term sustainability. In some cases, the cost of external support may be justified by the speed and scale of delivery; in others, it may be more strategic to invest in growing internal OD capacity.

Another key consideration is the need for objectivity versus cultural alignment. External consultants can challenge assumptions, disrupt groupthink, and bring fresh perspectives but they may also struggle to fully grasp the local political and organisational context. Internal teams, by contrast, are embedded in the culture and can navigate its nuances, but may lack the distance needed to drive radical change. A hybrid model can help balance these dynamics, ensuring that transformation is both bold and grounded.

Finally, councils must think about their long-term capability building goals. Transformation should not just be about delivering a new structure it should be about equipping the organisation to adapt, learn, and improve continuously. This means investing in internal OD capacity, fostering a culture of innovation, and ensuring that any external support leaves behind a stronger, more confident organisation.

In short, the decision is not simply about who delivers the work it’s about how to build a transformation approach that is credible, collaborative, and capable of lasting impact.

Conclusion

As local government continues to navigate a period of profound transformation, the question of how best to deliver organisational design and development is more relevant than ever. Whether councils are responding to financial pressures, implementing structural reform, or striving to improve outcomes for residents, the way they organise and develop their people and services is fundamental to success.

This exploration has shown that there is no universally “right” answer to the internal versus external consultancy debate. Each model brings distinct strengths and limitations. Internal teams offer continuity, cultural insight, and cost-effectiveness, while external consultants provide fresh perspectives, specialist expertise, and the ability to scale quickly. Increasingly, the most effective and resilient approach is a hybrid one leveraging the best of both worlds to deliver transformation that is both ambitious and sustainable.

Ultimately, the decision should be guided by a clear understanding of the council’s strategic goals, organisational maturity, and appetite for change. It should also be underpinned by a commitment to building internal capability, fostering collaboration, and ensuring that transformation is not just delivered but owned, embedded, and enduring.