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Consultants face uphill battle\;
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Liu Fuzhong\;
GUANGDONG Nowadays Group, a beverage and foodstuff firm, made news recently by hiring the world's leading consulting company McKinsey & Company to help hammer out a strategic plan for the group. Nowadays Group reportedly paid 12 million yuan for McKinsey & Company's service, the highest consulting fee a Chinese company has ever paid.\;
In fact Nowadays Group was not alone in paying handsome fees for outside consulting services. Shenzhen Ping'An Insurance Company also hired McKinsey & Company, paying 10 million yuan for 10 management suggestions. Leading local technology firm Huawei Technologies Co Ltd is working closely with a group of specialist consultants from IBM on a number of new projects. Many other companies in Shenzhen and elsewhere have also expressed interest in using outside advice.\;
With the surging demand for expert consulting, many big-name international consulting firms have established or expanded their presence in China including McKinsey & Company, Morgan Anderson Consulting and PriceWaterHouse.\;
Most foreign consulting firms have reported increased revenue over the past few years. As a result, local consulting firms, being much less sophisticated than foreign competitors, are feeling the pinch.\;
There are currently over 100,000 consulting firms, at least registered firms, in China according to Peng Jianfeng, professor of human resources of Chinese People's University. But not many can compete with leading international consulting firms at the same level, Peng said.\;
Many of these Chinese consulting companies started small, trying to sell ideas, according to Professor Peng. While the giant international consulting firms, equipped with specialized techniques, years of experience and well-trained professionals are indeed heavyweights to their Chinese counterparts.\;
How do Chinese consulting companies compete with the foreign heavy hitters? How will Chinese consulting companies reinvent themselves in the future? These were among the most pressing questions raised at the recent China Management Consultants' Forum held here in Shenzhen.\;
To answer these questions one has to understand the market and operators in the market.\;
What's behind the foreign preference?\;
Researchers say that it is an inevitable fact that most large Chinese companies, especially those in new areas, prefer foreign consulting firms. For example, most large Chinese stock brokers have hired foreign consultants over the past few years. Guangdong Development Securities Company hired Anderson consultants last October to advise them on strategic planning, organizational restructuring, business processes and human resource management. Milk Way Securities soon followed suit, contracting PriceWaterHouse for financial advice.\;
Analysts believe these firms are willing to spend millions of yuan hiring foreign consultants because big time know-how is only available with big foreign consulting firms. The same is true with the information technology area, according to analysts.\;
Sophisticated foreign firms accordingly market their services to large Chinese companies in need of consulting service and with the money to pay for it.\;
Are these giant foreign consulting firms really all-conquering? With these questions in mind, Shenzhen Daily interviewed some management specialists and consultants from the United States.\;
David Frame, PhD, professor of University of Management and Technology, senior consultant to Morgan Stanley Dean Witter Banking Corporation, believes that the methodology tested and proved effective over many years by Western consultants has made them very competitive.\;
“Most consulting firms have strong research capacity or access to research results from universities. This enables them to make sound judgement during consulting services, " Dr Frame said.\;
“On the other hand, they have accumulated their experience in the form of electronic databases, which are also available commercially. This is a statistical basis for their decisions," he said.\;
Dr Frame also believes that the Western management concepts are different from those in China and other Asian countries. “Therefore, for Chinese businesses operating globally, Western business consultants can indeed play a big role in helping them out," he said.\;
However, Larry Joseph, former program director for the US Energy Department and management consultant for the Washington-based consulting firm Bridge Group, said that despite the sophisticated management tools consulting firms can offer to their clients, it is still up to the recipient firm's intelligence and experience to make management decisions.\;
“Tools are only as good as people using them. In the US we say garbage in, garbage out. Only with good understanding of the clients can a consulting firm offer good service. Indeed big-name foreign consulting firms cannot do everything. It would be misleading to believe that their tools will solve every problem," he said.\;
“There is also the issue of cultural difference. Management is not entire science. For some subtle areas, such as communications and personnel management, Western consulting firm's help is indeed limited," he said.\;
The way out\;
Professor Peng Jianfeng believes that Chinese consulting firms also have the ability to make up lost ground by strengthening their merits and finding niche markets.\;
“Foreign consulting service is way too expensive for Chinese companies," he said. “As these big international consulting firms are targeting big Chinese companies, they leave open the market for smaller companies," Professor Peng said.\;
As foreign consulting firms are working hard to localize their service, Chinese firms should seek to absorb foreign experience and improve their own service.\;
Knowledge-based consulting\;
The market for consulting service did not exist in the period of planned economy. The market arose because companies were seeking beneficial changes and improved competitiveness. A key element to a market economy is management knowledge and understanding its value.\;
Therefore foreign consulting firms invested billions of dollars in market research, developing new techniques to cope with new situations. In a way, consulting firms in the West are think tanks for companies.\;
Chinese consulting firms should understand the implications of knowledge economy in this regard, according to Professor Peng. Small idea companies will be winnowed out of the market in no time, Professor Peng said.\;
Many other scholars also point out that universities should play a major role in providing useful research products.\;
“Many management schools in the United States do research projects for companies," Dr Frame said. “Indeed they are good advisers for American companies."\;
Chinese consulting firms, which are either left to their own devices or depend on foreign consultants, should seek to improve their own repository of knowledge.\;
Professionalism\;
Consulting firms in China were among the easiest companies to build. There has been no formal certification procedures for consulting firms or consultants.\;
Most consultants in North America and Europe are certified professionals, according to Paul Grace, project management certification director with Project Management Institute in the USA. “One of the most popular certifications is now project management professional (PMP) status. It is now being offered in several Chinese cities including Shenzhen," Mr Grace said during a recent interview.\;
Indeed many Chinese management professionals seek to be certified by the international management organization. But upon reflection, it's easy to realize that it only indicates problems in China to systematize management practice for the maximum benefit for corporate think tanks.\;
There is currently no a unified code governing the consulting market now, according to many participants at the China Consultants' Forum in Shenzhen. They believe that unified rules will improve the credibility of fledgling Chinese consulting firms.\;
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