Report on
Management Consultancy Sector in Hong Kong

Management Consultancy in Hong Kong

The management consultancy industry in Hong Kong is among the largest and most advanced in the Asia-Pacific. It is a along way ahead of most of Southeast Asia, and is by far the biggest and best centre in Greater China for management consultancy services. The sector’s contribution to Hong Kong is substantial. It not only generates a significant turnover in domestic and export sales, but acts as a vector for transferring global best management technology and practice into other businesses in Hong Kong and surrounding economies. A wide range of businesses are using management consultancy services here, and the industry is expected to grow considerably as markets expand in Hong Kong and China, with a lack of qualified consulting professionals likely to be the only serious obstacle to growth.

Range and Quality of Services

Hong Kong is home to a relatively broad and deep management consulting industry by regional standards. Business directories that list the specialities of Hong Kong management consultants and descriptions provided by management consultants themselves indicate a broad scope of services available in Hong Kong (see Appendix 2). The users and non-users we spoke to confirmed that there is a wide range of services provided in Hong Kong.

To quantify the breadth and quality of services found here, we asked management consultants themselves to assess Hong Kong against a number of other cities for the range of services available.

The results indicate that Hong Kong is simply not in the same league in terms of range of services available as other major international centres such as New York or London. This indicates that Hong Kong has a long way to go if it is to join these two truly global business service centres. In the Asia-Pacific, Sydney and Tokyo were both deemed to have a broader range of services on offer. In Tokyo, this is probably due to the sheer size of the Japanese economy and its relative maturity when compared to Hong Kong. In Sydney, a much smaller city than Hong Kong, it is apparently due to the maturity of the economy, an established system of professionals built on the UK model, and a possibly greater propensity to use outside experts on the part of Australian firms than Hong Kong firms.

The range of management consultancy services available in Hong Kong is generally wider than those in:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Singapore, an economy roughly half the size of Hong Kong’s, is considered to have a comparable range of services as the SAR, probably due to the strong presence of multinational firms in Singapore. However, although Singapore is rated as being roughly equal with Hong Kong in terms of breadth of services by respondents, Hong Kong has more management consultant firms and personnel, both local and international, than Singapore. Hong Kong also is a preferred location for the regional headquarters of multinational consulting firms. Of the foreign headquartered management consultancy firms that answered our question about the location of their regional headquarters, 11 said that it is Hong Kong and only two said it is not (and one of these claimed to have no regional headquarters).

Hong Kong is judged to have a far wider range of services than anywhere else in Southeast Asia and, perhaps most importantly, the widest availability of services throughout Greater China by a very wide margin. In this last category, Taipei is viewed as behind Hong Kong, and Beijing, Guangzhou, and Shanghai trail a long way behind.

Hong Kong based management consultants judge the quality of services available in the SAR as high by regional standards. Hong Kong is rated as offering higher quality services than anywhere else in the Asia-Pacific, with the exception of Sydney. The consultants’ view of themselves (which is likely to have some bias) was reinforced in interviews with both users and non-users of consultancy services in Hong Kong. These generally thought service quality in Hong Kong to be equal to or superior to anywhere else in the region, and for foreign multinationals here, the availability of high calibre consulting and other business services is a large component in their decisions to locate and remain in Hong Kong.

Management consultancy services available in Hong Kong are generally of better quality than those in:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

The upshot of these results is that Hong Kong has a reasonably broad range of services on offer, and significantly a much wider range than elsewhere in Greater China, but that the Hong Kong management consultancy industry has substantial scope for future development. The quality of services available is considered to be high by regional standards, and should provide an excellent platform on which future development can be built.

Contribution to the Hong Kong Economy

Management consultancy firms contribute to the Hong Kong economy in many ways. The first is through the sales they generate and the expenditures that they make in Hong Kong. The second is through the economic benefits that their work generates for clients. The third, very importantly, is through the contribution that the industry makes in enhancing Hong Kong’s position as a leading international business, commercial, and financial centre. Given the difficulty in obtaining data needed to quantify these benefits, it is at best problematic to estimate the industry’s total contribution in absolute financial terms. Hence, we attempted a number of different approaches to getting some form of solid evidence of the contribution of the industry to Hong Kong.

Turnover

The Management Services Agency’s March 1996 report on the industry suggests a total annual turnover of around HK$820 million for the 36 firms answering its survey. It should be noted that this is a very rough figure worked out by multiplying the average turnover per firm given in the report, HK$23 million, by the number of respondents, 36. (It should not be assumed all of those respondents actually gave their turnovers). The total annual turnover from management consultancy for the 82 firms willing to state their turnover in our survey of Hong Kong management consultancies amounts to approximately HK$1,520 million (estimated by taking the mid point in each turnover category and multiplying this by the number of firms indicating that category. The more accurate method of asking for precise turnovers would, from prior experience and interviews, have elicited fewer and less accurate responses). This would suggest an average turnover per respondent firm of HK$18.5 million a year.

Table 14.

Non-Hong Kong headquartered consultancy firms account for an estimated HK$856.5 million in annual Hong Kong turnover, or approximately HK$53.5 million per firm. Hong Kong headquartered firms account for roughly HK$663.5 million in Hong Kong sales, or HK$10 million per firm.

Exporting

Fifteen of the responding consultancies indicate that they only do business in Hong Kong. Another 79 state they do business in Hong Kong and elsewhere, indicating that their turnovers deriving from ‘exports’ to mainland China, other Asia-Pacific countries, and elsewhere could be considerable. The 31 Hong Kong headquartered firms that supplied data generate an additional HK$186 million (an average of HK$6 million per firm) from their offices outside the SAR, a figure equal to around 25% of the total reported annual Hong Kong turnover of locally headquartered firms.

Our data does not allow us to say much about foreign headquartered firms. But interviews, and the fact that Hong Kong hosts a large number of such firms’ regional headquarters, both indicate that they, too, use Hong Kong as an ‘export’ base for the Asia-Pacific. Anecdotal evidence suggests that perhaps as much as 40% – 50% of the turnover of their Hong Kong offices comes from elsewhere in the region. This figure coincides with the general opinion in the industry.

Employment

The 78 firms in our survey which responded to the question concerning number of employees indicate that in Hong Kong they employ a total of 705 consultants, and 408 support staff. While only 35 firms supplied relevant data, a further 131 consultants were reported to be employed within China, together with 92 support staff there.

Approximately how many consulting and support employees does your firm have in Hong Kong and China relating directly to management consulting?

The data we gathered concerning salaries for consultants indicate that they are paid an average of HK$43,000 per month. Hence, the 705 consultants reported to be employed could be calculated to earn a total of HK$364 million per annum, exclusive of bonuses and other perquisites. Salaries varied by years of experience, type of education, and additional professional qualifications. Many reportedly obtain further remuneration by way of bonuses.

Please indicate how many of your consultants in Hong Kong fall into the following categories of experience/qualification level and the average monthly salary you would expect to pay for a new employee in each category. (Use approximate figures. If you wouldn’t employ a category, write zero under salary):

Some 400 consultants are reported to have had training and education paid for by their employers. This ranges from short courses to MBA funding.

Please indicate the number of your consultants which:

It should be noted that many respondents did not fill in the items relating to employment. Consequently, all of the above figures are very probably a considerable understatement of how many people are employed in the management consultancy sector here, in China and elsewhere. Certainly the 1,000 consultants stated to be working in Hong Kong in the Trade Development Council’s 1996 report (page 51) on exporting services looks likely to be an underestimation.

Managerial Technology Transfer

Perhaps the hardest to measure contribution made by the management consulting industry to Hong Kong is that which it makes indirectly to the economy via managerial technology transfer. This takes essentially two forms. One, the deliberate selling of value added expertise/services to clients which have a multiplier effect on those clients’ operations and the economy more generally. Two, the inadvertent spill over of expertise from the industry into other sectors, both private and public, as executives move from consulting into other fields.

We were unable to quantify or even estimate the magnitude of these benefits, largely because consultants could not give us estimates of the value of these transfers from their own operations. While in some areas of consulting and for some projects firms are able to quantify the benefits their clients derive from the services, the majority either could not or would not. Ultimately, all that can objectively be said is that clients derive sufficient benefits from the services of management consultants to sustain what is probably one of the largest such industries in the Asia-Pacific. Unlike some other business services, accountancy or law, for instance, there is no regulatory or legal necessity for any client to use a management consultant. So whatever business the sector generates can only be due to the perceived benefits offered. And those benefits undoubtedly do filter through into benefits for the rest of the Hong Kong.

What is clear, however, is that Hong Kong increasingly is wired into the cutting edge of global best managerial practice through management consultants. In addition to strong local experience and expertise, the profession draws on international experience and exposure. Sixty percent of respondents to our consultants’ questionnaire – the vast majority of which are the heads of their firm here – come from outside Hong Kong. Forty percent of consultancy employees, as reported by firms, are from outside Hong Kong. Fifty-six percent of the 472 university degrees reported to be held by employees are from foreign universities.

Most of the world’s leading consulting firms have a presence in Hong Kong, and all those we spoke to regard Hong Kong as a key node in their international networks of specialist expertise. If a client in Hong Kong wants and needs a particular expertise, the consultancy firms here can supply it either domestically or through their overseas offices. This also goes for many of the locally headquartered firms, which are reportedly developing their own international networks and alliances. In addition, organisations such as the Hong Kong Productivity Council have as part of their mandate identifying and importing best practice tools and techniques.

Interviews with consultants suggest that the industry contributes significantly to Hong Kong through the training of the human capital it uses, and the personnel it loses to other sectors. Consulting staff turnover rates would seem to vary from near zero to over 25% per annum. While much of this turnover is accounted for by consultants moving from one firm to another within the industry, a significant portion leave to work in other fields, often in client organisations for which they have undertaken assignments. The consulting personnel absorbed into both private and public sectors in this way are often highly skilled. This results not just from the experience they acquire as consultants, but also from the formal training and education that many consultancy firms report providing for their people.

In surveys of users and non-users, and also with consultants, we attempted to gauge just how important management consultancy is to Hong Kong in a more general sense. It is thought that the sector is necessary to the profile of Hong Kong as an international business centre likely to attract and retain multinationals by both users and non-users of management consultancy services, as well as by the consultants themselves, of course. It is also agreed that a first class management consulting sector is important to the success of both the manufacturing and service sectors here. Somewhat surprisingly, users and non-users indicated that the presence of first class consultancy services was more important to Hong Kong overall than to their firms or sectors. In addition to the direct benefits to Hong Kong of the business generated by Hong Kong management consultants, there are many additional benefits. Although they are difficult to quantify, these “public goods” aspects of management consulting are real, worthy of note and wider understanding.

Availability of first class management consultancy services in Hong Kong is important to the future competitiveness of:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Use of Management Consultancy Services

In interviews with users/non-users and consultancies there seemed to be general accord as to what kinds of firms in what circumstances use management consultancy. However, consultants tended to the view that users, and particularly non-users, regarded management consultancy to be a business service the use of which carried some connotations, and even perhaps stigma, of failure. In order to understand and compare the possibly conflicting perceptions of what types of organisations purchase management consulting services, we asked both users/non-users and consultants to indicate what type of organisations use management consultants.

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Views on what types of clients use management consultants are almost identical amongst consultants, what ever way they are divided up. Consultants think relatively strongly that firms that value outside expertise and opinions, that wish to improve their operations/process, that are in the process of change, that wish to improve their goods or services, and that have specific problems are the most likely to use management consulting services. Users/non-users tend broadly to agree, although they rank these choices a little differently.

Consultants believe that their services are used by successful firms, and so do users/non-users, though slightly less strongly. Users/non-users think consultants are used by firms that are failing, but not as strongly as they think the services are used by successful firms. Contrary to suggestions from some consultancy interviewees, there appears to be no stigma attached to using consultants. In fact the opposite seems to be the case. Users/non-users disagree that consultants are used by companies with poor managers and agree that they are used by firms with forward thinking management keen to improve processes and products. The degree of user/non-user views on the use of management consultants may differ slightly from consultants, but it would be strange if consultants were not generally more upbeat and positive in their own estimations of themselves. However, and very importantly, the overall patterns of responses are very much the same between both sets of respondents, suggesting that there is no widely divergent understanding between the two of who uses management consultancy.

For non-consultant responses, even between those firms which have and have not used consultants, there are few major differences. Having said that, users tend to have views slightly more closely matched to consultants’ own views than non-users, in most instances. Interestingly, however, users seem to regard cost cutting as a less prominent reason for firms using management consultancy services than either non-users or consultants themselves.

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

There are no dichotomous stances on any specific variables, but import/export wholesaler firms tend to associate use of management consultancy more strongly with failing companies and less strongly with successful companies than either service or manufacturing sector firms. Manufacturers most, and service firms least, strongly agree that firms wanting to cut costs use consultants.

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Most consultants we interviewed (both ethnic Chinese or non-ethnic Chinese) indicated that they believed that many local Hong Kong Chinese business people had somewhat different perceptions of management consultancy than other Hong Kong based business people. Several indicated that they believed that local Chinese business people, particularly those who are the founders of their firms, think that management consultants are used only by firms on the brink of failure due to managerial incompetence and myopia. Worse, it was suggested that the use of outside expertise, even by successful firms, is regarded as a loss of face by some firms.

In order to assess this perception, we have broken down the data by ethnic background of individual respondents and the location of firm headquarters for the user/non-user group. Hong Kong Chinese respondents agree least strongly that consultants are used by successful firms, but also agree least strongly that they are used by firms that are failing. Hong Kong Chinese respondents are neutral on whether or not companies with poor managers use consultants, whereas non-Chinese respondents disagree very nearly as strongly as do consultants themselves. These differences are mirrored by Hong Kong and non-Hong Kong headquartered firms, but to a slightly lesser degree. Hence, while there do seem to be some differences in perceptions of management consultancy, or at least amongst the users of management consultancy, it is not clear that these differences are nearly as significant as many consultants believe.

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

We also asked users and non-users about which very broad categories of firms use management consultants. Their response, however we carve up the data, is that large, western, multinationals use management consultants, and government bodies, too, even more so. Local Hong Kong firms are consistently thought not to use management consultants. Almost as consistently, respondents indicate that firms in their own particular sectors are not users of management consultancy. The two exceptions to this are actual users and firms with annual turnovers above HK$775 million, but even they record means only very marginally above neutral.

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Management consultants are generally used by:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

The general perception that management consultants are not actually used by respondent firms’ own sectors is mirrored to some extent in the data on whether or not the availability of first class consultants is necessary for the competitiveness of respondents’ own firms and sectors. While overall it is agreed that it is, the mean scores are low compared to the mean of 4.18 recorded in relation to the competitiveness of Hong Kong as an international business centre (see above). Hong Kong businesses generally, and manufacturing firms specifically, think the availability of first class management consultancy most important to their own firms and sectors.

Choosing and Using a Consultant

When interviewees were asked about the way they choose a particular management consultancy, the hardest thing to get any definite answer on was how they went about drawing up an initial list of firms potentially to use. All those we actually spoke to gave the impression of simply knowing a number of firms, in much the same way they might know a number of car firms. It would seem that many clients begin with a preliminary long list already in their heads.

Both users and consultants in interviews suggested that business contacts were probably the most important source of knowledge about the sector generally. This is born out by our data for all types of users, and non-users. For users, the next most important source of information is trade associations, closely followed by consultants’ own promotion and the business press. Much less important are government bodies. The general press, radio and television are unimportant. The Internet is more or less neutral.

Important sources of your knowledge about management consulting are:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Asked the same set of questions, consultants tended to overestimate the importance of most information sources, particularly the Internet. Non-Hong Kong headquartered consultants slightly underestimated the importance of trade associations, too.

Important sources of knowledge for potential clients about management consulting are:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

However, to assume that new clients somehow in isolation draw up lists of potential consultants they might use would be to misunderstand the way that most client assignments reportedly come to consultancies. When surveyed on this, both Hong Kong and non-Hong Kong headquartered consultants suggest that personal or firm level contacts of one sort or another are the chief conduit of new business. Non-Hong Kong firms do, however, rank their own promotion as important to a higher degree than their Hong Kong headquartered counterparts.

Your new consulting assignments often come from:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

To assess the specific criteria used by clients in the selection of a particular consultant, we drew up a list of those factors most often mentioned by both users and consultants in the course of interviews. The criterion of prime importance is the industry/consulting experience of the consultancy team. The general reputation of the consultancy is rated next most important, followed closely by local and regional/international experience. Quality of written proposal comes next, on a par with the known educational qualifications of the consultancy team. Then, both fairly importantly, come recommendations of business contacts and personal, prior contacts with consulting firms.

Cost is only really an issue for Hong Kong headquartered users. Both Hong Kong and non-Hong Kong users report that their firms’ use of a particular consultant outside of Hong Kong is a fairly important factor in the selection of a particular consultant, although to a lesser extent for locally headquartered firms. For Hong Kong headquartered users, consultants’ membership of professional associations is relatively important, whereas it is not for foreign headquartered firms. Whether this is membership of associations on the part of individual consultants or consultancy firms is not clear because of the ambiguous usage of the term ‘consultant’. However, it would seem from this and from focus groups that locally headquartered clients regard associational and professional memberships as a ‘comfort’ factor

Consultants’ responses to the same series of factors indicate that they themselves overestimate the importance of recommendations from business contacts and personal contacts between clients and their own consultancies. It would seem also that consultants, particularly non-Hong Kong headquartered firms, underestimate the importance of price in the selection process. Non-locally headquartered consultants also appear to underestimate the value of association memberships to Hong Kong headquartered clients.

When a particular management consultant is selected, the following are important factors:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

When asked if they actually construct a clear brief prior to engaging a management consultant, users indicate strongly that they do. Non-Hong Kong headquartered firms say they do so more than locally headquartered users, and smaller firms, with annual turnovers under HK$775 million, are less like to draw up a brief than larger firms. Fewer firms are likely to seek proposals from several firms than draw up a brief, with smaller firms being the least likely to shop around. Locally headquartered users are the least likely to quantify expected benefits, and non-Hong Kong Chinese executives are the ones agreeing most strongly that they do.

It would seem that the less likely a firm is to draw up a brief beforehand, and the less likely it is to seek several proposals, the lower its satisfaction with quality of service provided is likely to be, if the reports of smaller firms are anything to go by. These smaller firms and import/export wholesaler firms, while indicating they have been satisfied with quality of service provided, score the lowest means.

Service and manufacturing firms, together with Hong Kong Chinese executives, record the highest levels of satisfaction. All categories of users agree that they have been able to measure the benefits delivered when they have engaged management consultancy firms, particularly service users. Larger firms, with turnovers in excess of HK$775 million, and non- locally headquartered clients record the biggest gaps between expected benefits and being able to measure benefits.

There are dangers in stretching the interpretation of this kind of data too far, but there does seem to be some observable correlation between drawing up a brief, seeking several proposals, attempting to quantify expected benefits and eventual satisfaction with measurable benefits. For instance, service firms, which record the highest means for satisfaction and measurable benefits, also record high means for drawing up a brief, getting several proposals and quantifying expected benefits. On the other hand, smaller firms record the lowest mean for satisfaction, the lowest for drawing up a prior brief, and the lowest mean for seeking several proposals.

When your firm has engaged management consulting services, it has generally:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

When your firm has engaged management consulting services, it has generally:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

When, respectively, your foreign and Hong Kong headquartered clients have engaged your firm’s services, they have generally:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

When consultants are asked the same questions concerning client engagement procedures, they indicate that fewer clients do in fact draw up prior briefs or attempt to quantify expected benefits than is suggested by clients themselves. In particular, consultants do not agree that locally headquartered clients draw up prior briefs. Consultants also tend to overstate the levels of client satisfaction, although their assessment of being able to measure delivered benefits is roughly the same as their clients.

Industry Growth

In terms of the future potential for the industry, secondary data sources indicate that modest growth of between 5%-15% in management consulting was anticipated by Hong Kong firms in 1996 (MSA report). When asked about their own firms, our interviews and survey of management consultants show them to be considerably more optimistic. Despite the prevailing ‘Asian Crisis’ during the period of research, very few firms were expecting any major or long run contraction of business. Most interviewees foresaw a difficult next two years ahead, but those firms answering survey questions relating to growth during the next two to five years were more sanguine.

During the next two to five years, what do you expect the average annual percentage growth to be in your Hong Kong office’s turnover in the consultancy areas and sectors below, both overall and separately from within Hong Kong, mainland China and the rest of the Asia-Pacific? (Include estimates for management consultancy services only. Indicate any expected turnover decline with a negative sign):

Average percentage of growth reported

Note. Figures in parenthesis are averages which exclude the five lowest and highest individual estimates so as to eliminate significant distortions occasioned by either new firms entering, or established firms exiting the industry. It should also be noted that many firms did not fill in this question and that many which did only partially completed the matrix.

Even when we delete the five most optimistic and pessimistic views of the future reported, the average overall growth rate expected by firms that responded was a staggering 36%. Average annual growth of 23% is expected in Hong Kong, 27% in China, and 16% in the rest of the Asia-Pacific. The vast majority of this growth is expected to be in the private sector in all three geographical areas. While such forecasts (or guesses) must be taken with at least a grain of salt, they indicate that Hong Kong management consultancies tend to be bullish on their own futures.

In terms of management consultancy service areas, overall information technology is thought to have the highest growth prospects (26% per annum), followed by strategy (22%), then sales and marketing (21%). In China, the highest expected growth is in operations and process management fields (30%).

Unfortunately, it is not easy to reconcile such forecasts with the views of all users and non-users of management consultancy services. The pattern for all firms generally indicates only slightly more usage of management consultancy services in the future compared to now. Firms which have previously used consultancy services are somewhat positive about increasing their usage during the next two years, as are Hong Kong headquartered firms. Non-users of consultancy services and non-Hong Kong headquartered firms, by comparison, are less likely to increase their future usage over all time periods.

However, the industry growth anticipated by consultants may well be fuelled solely by those firms indicating higher usage. Even where a majority of firms do not expect to increase usage, which results in mean scores below three, the minority saying that they will increase their usage of management consultancy could, of course, generate all the growth consultants expect. Moreover, nothing in our interviews or data suggest decreased usage.

Your firm will probably increase use of management consulting services from within Hong Kong during the next:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Increased future use of management consultancy varies by industry classification. The firms most strongly agreeing that they will increase future use of management consultancy are manufacturers. The fact that firms in other industries are not positive in their outlook for their own use of management consultancy services is a cause for concern, given that these industries now dominate the Hong Kong economy.

Your firm will probably increase use of management consulting services from within Hong Kong during the next:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

The growth by geographical area anticipated by consultants is broadly mirrored by users and non-users of consultancy services. Respondent firms, whether headquartered in Hong Kong or elsewhere, agree that they will use management consultancy services from within Hong Kong for work in China more than for work in Hong Kong, and quite lot more than for work in the rest of the Asia-Pacific. Again, previous users of consultancy and Hong Kong headquartered firms are markedly more positive about future use than non-users and non-Hong Kong headquartered firms.

In future, your firm will probably use management consulting services from within Hong Kong covering the areas of:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

The degree of anticipated future usage of management consultancy in different geographical areas also depends on industry sector. Service sector firms are much less positive about future use in Hong Kong, China, and the rest of the Asia-Pacific than either manufactures or import/export and wholesaler firms. Both of these latter sectors expect relatively high future use in China, in particular.

In future, your firm will probably use management consulting services from within Hong Kong covering the areas of:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Users and non-users expect to use consultancy services in information technology more in the future than other consultancy areas. This is true of Hong Kong headquartered firms in particular, but also by previous users and even non-users of consultancy services. Previous users of management consultancy services ranked human resource management second. Hong Kong headquartered firms as a whole ranked marketing/distribution/sales management second, strategy third, and financial management fourth.

Table 37.

In future, your firm will probably use management consulting services from within Hong Kong covering the areas of:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Expected future usage of various areas of consultancy services varies by sector also. Manufacturing firms rank strategy, financial management, and operations/process management much more highly than do either service or import/export firms. Service firms are only positive about using consultants for information technology management. Import/export and wholesaler firms anticipate the strongest future use of human resource consultancy amongst the three sectors.

In future, your firm will probably use management consulting services from within Hong Kong covering the areas of:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Obstacles to Growth

Interviews with Hong Kong based management consultants revealed a number of factors generally thought to retard the growth of the management consultancy industry in Hong Kong. Some related to the nature of potential buyers, some to the structure and capabilities of the management consultancy industry itself, and others to supply factors, essentially availability of suitable personnel.

In many senses, however, the management consultancy industry in Hong Kong is seen to be in a very good position. Consultant interviewees generally gave the impression that the industry is in robust health. Few complained of excessive competition or lack of market demand. To the contrary, several suggested that demand outstrips supply due to a shortage of good quality consulting staff. Nonetheless, nearly every interviewee thought that the local market still held plenty of potential, as yet untapped demand in the form of local businesses that currently do not fully appreciate or are reluctant to use management consultancy services.

Your own firm here would have more clients if:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Much of what was found in interviews is supported by the survey data we gathered. Respondents do not regard competition, whether in the form of Hong Kong headquartered or non-Hong Kong headquartered consultancy firms, as limiting their own business. Respondents ranked greater market understanding, greater individual firm promotion, and a greater supply of high quality local Hong Kong personnel as most important for future growth. They also identified that improving the reputation of management consultants generally, increases in the presence of multinational companies, the presence of more qualified international personnel, and collective promotion would all contribute to growth.

Various wholly public and quasi-governmental organisations in Hong Kong were pointed out by interviewees as major purchasers of management consultancy services. There was some recognition that the Hong Kong Government, one way and another, is already a larger provider of business to the sector than many other governments around the world are to their ‘local’ industries, and this was uniformly welcomed. Nevertheless, some consultancy interviewees thought it could always purchase more from the management consultancy industry. However, no interviewees suggested that governmental bodies lacked understanding of consultancy or regarded it as unprofessional, and there seemed little fear that government buying of management consultancy services would drop in the near term.

A few consultancy interviewees expressed some concern that they thought tendering processes for different bodies varied and were not always clear. A handful of others indicated that getting on the relevant long lists for government assignments was not easy or open. But most consultants were of the opinion that government tendering processes had become more open and simpler of late, and it was generally reported that efforts to improve tendering procedures in government were ongoing.

It would seem from interviewees’ remarks that government tenders can be somewhat time and resource consuming, given the chances of actually winning them. This was ascribed chiefly to the short time horizons stipulated in the tendering process, with consultants often being asked to produce or amend proposals within deadlines so tight that good and accurately costed projects using appropriate teams and consortia of consultants could not be produced.

In terms of competition, the general structure and nature of the industry here in Hong Kong was not reported to present any serious obstacles to its growth. Management consultancy is nowhere a cut-throat business, and it would seem particularly gentlemanly here in Hong Kong. A few interviewees from smaller consultancies mentioned that they sometimes lost business to larger, international consultancies when it came to sizeable projects, whether for the private or public sector. It was also suggested that larger consultancies give the industry the image of charging very high fees in the eyes of locally headquartered, smaller user firms. Some larger consultancies indicated that sometimes very small, often single operator, firms delivered service well below promised or expected levels and that this could give the whole industry a reputation for poor professionalism.

However, there was no consensus on these points, which are complaints that could be levelled in any sector of business services anywhere in the world. Indeed, the consultants we spoke to generally described an industry composed of relatively distinct supplier groups focused on particular niches and market segments, as might be expected in a field like management consultancy. Knowledge of most direct rivals was reported to be commensurate with the compact and relatively small size of Hong Kong, and there would seem to be very little ‘treading on each others’ toes’, as one interviewee termed things.

A couple of consultants mentioned that the Hong Kong Productivity Council competes with the industry for entry level clients, thereby marring the possibility of establishing initial relationships with such potential clients that might in future be developed. We put this point to a number of other consultants and found that most thought the Council to be in fact very beneficial to the industry as a whole. The argument advanced, broadly, was that the Council, as an essentially public body, tends to introduce the notion of using outside expertise for the first time to firms which might not otherwise be prepared to seek it from the commercial sector. Such firms are then thought to be more willing to use management consultants in future as they grow. This was a view with which the Council itself concurred when we spoke to them.

Data show clearly that consultancy firms on average do not think they would have more clients as a result of fewer competitors or the non existence of the Hong Kong Productivity Council.

The one area where there was broad consensus as to the existence of competition between consultancies was in the area of recruitment. For all consultancies, but for non Hong Kong headquartered firms in particular, the shortage of both local Hong Kong and other qualified personnel is reported to constrain growth. While there is no doubting that this is a problem for the sector, it should be noted that, from our research work across a number industries in Hong Kong, shortage of good quality, qualified and experienced professional human capital is always a difficulty senior managers cite as holding back their firms’ growth.

Understanding of management consultancy, or rather the lack of it, is widely regarded as an obstacle to growth. There is general agreement among consultants that the sector suffers from a lack of understanding by potential clients of what management consultancy is and what it can do for their companies. This is viewed as particularly the case for potential clients among local Hong Kong businesses. Ignorance of management consulting is thought to be compounded by market perceptions of dubious standards of professionalism and related concerns about value for money. As far as Hong Kong headquartered consultants are concerned, this applies fairly strongly to all potential client firms. But non-Hong Kong headquartered consultants were neutral in their estimation of whether or not greater understanding of management consultancy would expand their market. Multinational users and non-users would seem from our interviews already to have good knowledge of the sector and the potential benefits its can afford them.

When probed further, Hong Kong-based management consultants indicated that they strongly believe that non-users do not understand what they offer. They also indicated that many non-users had not considered using management consultants and that the size of firms and cost of consultancy services were also obstacles.

Some firms do not use management consulting services because:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree

Non-users give a different picture of why they do not use management consultancy services. These firms claim that the primary reason is one of cost. A lack of understanding was considered important as well, but a lack of understanding on the part of the consultants (about the business of the non-user), not the non-users. Many non-users have apparently never thought of using management consultants (perhaps indicative of greater scope for firm and industry promotion). Non-users also claim that they have not needed the services of management consultants. The non-users do not agree that they have not used management consultants because they do not know the services offered by them. Note that the reputation of management consultants does not seem to factor in decisions not to use consultants.

Your firm has not engaged management consulting services in the past because:

1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree