Report on
Management Consultancy Sector in Hong Kong

Potential Industry Activities

By all appearances, the management consulting industry in Hong Kong is in good shape. Growth is anticipated and the sector is probably more highly regarded than many of its players think. The problems it suffers in terms of limited human capital supply are common to other professional business service sectors and can perhaps be regarded more as a sign of the current robustness of the industry rather than as an indicator of impending fragility of growth.

To a great extent, consultancies are well aware that their individual futures depend very much on how they each internally develop and externally promote their own respective practices. Management consultants worthy of the name need no advice on such matters, and firm or consultant specific recommendations are beyond the scope of this project, and, as many interviewees suggested, are best left to management consultants and management consultancies themselves.

However, our research has uncovered several issues that the industry does face and which might relatively easily be addressed in a practical manner on an industry rather than individual consultancy level. The primary issues, in no order of importance, are:

• availability of skilled personnel
• levels of knowledge and understanding of management consultancy, while better than many practitioners think, could be better
• perceptions of the professionalism of management consultants on the part of those outside the industry, while again better than many practitioners think, could be more favourable
• ensuring industry expansion both inside and outside Hong Kong
• relations with government
• appropriate mechanisms for management consultants and consultancies to develop and carry out collective activities

To address these issues, partly as a result of interviewees’ suggestions and partly from our own analysis, we investigated a series of activities that might potentially be undertaken at the level of the industry and the profession. We have eschewed any elaborate or overly ambitious suggestions for reasons which will become apparent when we discuss some of the practicalities of collective action. The activities we have concentrated on and cross checked with industry interviewees include the following:

• improving the supply of capable individuals
• potential for joint gains or economies among consultancies
• promoting the industry and its image
• the potential for forming an industry association or a professional institute

Improving the Supply of Capable Individuals

Many management consultants in Hong Kong pointed to a shortage of qualified personnel as a major constraint on the industry. While it might be difficult for individual firms to invest much more heavily in training personnel, there might be scope for some collective action in this area. Two avenues suggest themselves as worthy of consideration.

Training Courses:

There might be scope for Hong Kong management consultants as a group to develop training courses for new hires. A number of the new hires in Hong Kong consulting firms, for example, have little or no business training. Courses might be set up with local educational institutions or organisations (such as the Productivity Council or the Hong Kong Management Association) to provide some of the generic business background that is necessary for an effective consultant. Continuing education courses on the latest in management tools and techniques could also prove useful. In order for these to indeed be beneficial, they would need to be directly relevant to the consulting companies and supported and shaped by firms in the profession. We should also note that the PKKI is in the process of putting together a program targeted at improving skills of consultants who do organisational work in conjunction with Ashridge Management College in the United Kingdom, which has recently begun offering such a program in the UK.

Links with Hong Kong Educational Institutions:

To the extent that the characteristics consulting firms desire in personnel can be identified, it would be useful for these to be communicated directly to faculty, staff, and students at Hong Kong’s universities. While historically, Hong Kong’s universities have not been closely linked with the business sector, this is starting to change. At present, the only professional group that tends to have ongoing contact with universities on the curriculum appropriate to their profession is the accountancy profession. If management consultants as a group can articulate the types of skills, capabilities, and training that they would like to see their prospective employees have, they might well get a positive response from the various schools of business. Eventually one could envision more ambitious links involving internships or consultants becoming involved in advising student projects. In either case, it is likely that it will be necessary for the consultants to make the first move.

Joint Purchasing or Renting:

In some places in the world, industries populated by small and medium sized companies find collective (bulk or joint) purchasing of goods or services to be beneficial. In management consulting the lion’s share of purchases are in office related rentals, equipment, and facilities. While in theory it would be possible for very small management consulting firms to economise by sharing conference room space, office equipment, or even a receptionist, in reality there would be limited benefits to doing so in Hong Kong. Hong Kong has a wide range of serviced office facilities that can provide such amenities at costs that are becoming more reasonable. At the same time, any sharing among firms would have to be among firms that do not see themselves as competitors. Hong Kong’s management consultants on average appear to be very concerned about preserving secrecy and very careful about anything that might give a competitor any information. Probably the only joint purchasing arrangements that would make sense in the Hong Kong management consulting industry are similar to those offered through management consultancy institutes or associations elsewhere (see section on professional institutes and industry associations).

Collaboration Among Firms:

The results of the surveys of users/non-users indicate that different types of firms are seen to have different and potential complementary skills and capabilities. In addition, the large number of relatively small management consultancy firms in Hong Kong means that many firms do not have the manpower to take on large projects by themselves. Both of these factors have pushed firms in Hong Kong to form consortia to take on particular projects. Our data suggests that the continuation and extension of such activity could be beneficial to the profession as a whole as well as to individual firms.

Promoting the Industry

There is a general sense among some Hong Kong based management consultants that all Hong Kong management consultancy firms would benefit from collective promotion. There also is a sentiment that large firms would benefit from such efforts more than small firms. There was no sense that collective promotion would favour local or foreign firms, or uncompetitive or competitive firms.

Promoting the management consultancy industry would have several aims. One would be to improve the perception of management consultancy on the part of those outside the industry. A second would be to educate the public about the services offered by management consultants. Another would be to expand the business of management consultants both inside and outside of Hong Kong. There are a variety of avenues that the management consulting industry can use to promote itself within Hong Kong, in China, and elsewhere. Some involve simply making more information on the industry readily available. Others involve activities that would require substantial investments in time and resources. Below we identify several potential activities.

Collective promotion in Hong Kong of management consultancy would benefit:

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

Use of the Internet and World-wide Web:

Although the Internet and world-wide web are not today considered important places to obtain information on management consultancy, this might change in the future. A simple search looking for the keywords “management consulting” and “Hong Kong” in most of the major search engines yields virtually no results. Individual companies can make their sites known to the major search engines (Yahoo, Infoseek, Lycos, etc.) by e-mailing their webpage reference with a set of keywords.

On a collective basis, a webpage could be organised for Hong Kong management consultants. At present, there is no single place where one can find information on management consultancy in Hong Kong or contact information for individual consultancy firms. A relatively simple webpage could contain a list of Hong Kong consulting firms with links to their webpages as well as to webpages of interest to consultants (such as the Hong Kong Government Management Services Agency, the Hong Kong Trade Development Council, and consulting sites elsewhere). It could also include educational information for outsiders unfamiliar with the industry by providing examples of the types of services that management consultants provide and suggestions as to how potential clients should approach engaging management consultants and maximising the benefits they obtain from consultancy projects.

A slightly more sophisticated page could allow potential clients to search for Hong Kong consulting firms by functional, industry, geographic, or language experience or expertise. An even more sophisticated page could allow for the posting of projects by potential clients or posting referrals or requests for collaborators by consultants.

Informational Seminars and Meetings in Hong Kong:

Interviewees in the user/non-user category indicated some interest in seminars or informational meetings on management topics that might by organised by Hong Kong management consultants. Short information sessions, seminars, or panel discussions by management consultants on particular challenges that firms face, such as dealing with the present economic downturn, improving information systems, management in family-owned companies, and the latest management tools and techniques, could elicit a good deal of interest. However, there already are many organisations, including the Hong Kong Management Association, the Hong Kong Management Development Centre, the Hong Kong Productivity Council, the Hong Kong General Chamber of Commerce, and other chambers of commerce, that already organise a wide range of similar activities. It might prove more efficient for Hong Kong management consultants to work with or through such groups in order to put on events that would highlight the industry. Such events are relatively simple to organise and Hong Kong appears to have large demand or great tolerance for such events.

Short seminars, panel discussions, and informational meetings can be used to try to educate the public as to the benefits of using management consultants and can showcase the practices of Hong Kong consultants and firms. Both might serve to break down some of the barriers that prevent some Hong Kong based firms and offices from employing consultants.

Trade Fairs in Hong Kong:

Some in the profession suggested that Hong Kong management consultants might hold a trade fair to try to educate firms about the services that they offer. The rationale was that the presence of some big name speakers might attract business people who would then be able to meet with the representatives of some of Hong Kong’s consulting firms. Such a suggestion, however, received a mostly negative response from consultants and users/non-users. Some consultants pointed out that such an event would likely result in consultants standing around talking to each other rather than to potential clients. Users and non-users indicated that companies typically sought out consultants when they had a problem and that consulting was not an “impulse purchase”. Though some in attendance would go away with business cards that they might pull out at a later date, it was considered unlikely there would be much direct business generated.

A few interviewees remarked that the success of any such operation would depend on the pulling power of the invited speakers. In other words, there was limited interest in the trade fair aspect itself, but there could be some.

It is our view that a management consulting trade fair would never come close to providing the type of marketplace that some of Hong Kong’s more traditional trade fairs provide. The purchasing process is very different for consultancy services than for the goods and services generally promoted at fairs. The substantial organisational work involved would require a fairly strong commitment from an industry group and would require a significant set of sponsors. While potentially very useful in raising the profile of an existing association of firms, such a program is probably not the best way to get such an organisation started.

Using the Resources of the Hong Kong Trade Development Council for Overseas Promotion:

Hong Kong government and quasi-government agencies have become interested in promoting Hong Kong’s service economy in the last few years, but they are only beginning to formulate strategies to do so. There is an opportunity for Hong Kong management consultants to play an important role in this process, not just to promote the management consulting industry and profession, but to promote Hong Kong as a world class business centre as well. The Business Services Promotion Unit acts in an advisory capacity to the Financial Secretary and other policy secretaries and commissions studies of interest to Hong Kong’s service economy. The BSPU itself, however, does not have a budget to carry out promotional activities. The Hong Kong Trade Development Council, on the other hand, does.

The Hong Kong Trade Development Council has as its mandate promoting Hong Kong’s manufacturing and service industries. The TDC has 51 offices around the world. In China alone, it has offices in Beijing, Chengdu, Dalian, Fuzhou, Guangzhou, Hong Kong, Kunming, Qingdao, Shanghai, Shenzhen, Taipei, Tianjin, and Wuhan. The TDC produces a variety of reports on the market potential for Hong Kong industries. The TDC keeps a database of more than 360,000 overseas business contacts,160,000 in its China databank, and a local databank of some 100,000 Hong Kong companies, including service providers. It is in the process of creating an overseas databank of potential customers or business partners for Hong Kong's service companies.

According to TDC literature, they “match the capabilities of Hong Kong's service providers with market opportunities, whether through direct exports, investment or the fostering of strategic partnerships.” Their promotional activities include:

• overseas roadshows
• participation in overseas trade fairs
• Hong Kong business seminars overseas
• corporate dialogues with business leaders overseas
• specialist trade fairs in Hong Kong
• supplements and catalogues for services

Hong Kong’s management consultancy companies can get themselves into the TDC databank on an individual basis. On a collective basis, management consultants could encourage the TDC to carry out market research on the consulting market, particularly in China, and provide information on Hong Kong’s consulting industry through TDC offices. In addition, management consultants can encourage the TDC to develop a list of Hong Kong management consultancy firms that can be referred to companies that need more help than the TDC can itself provide. This could well be a “win-win” situation for both the TDC and the management consultants. The former can provide additional information and help to those interested in dealing with Hong Kong and China. The latter can obtain referrals from the TDC. While such efforts might be a long shot in terms of generating business immediately for individual firms, they could enhance the image of the profession both inside and outside Hong Kong, as well as lead to future business.

Trade Missions:

Hong Kong based management consultants should seek representation in the various Hong Kong trade missions and roadshows, particularly those in China, North America, and Europe. These are generally planned and executed through the Hong Kong Trade Development Council. The SAR’s trade missions to the rest of China are likely to highlight the types of products and services that Hong Kong can provide that would be of maximum benefit to the Chinese Mainland. Management consulting and business advisory services in general should be at the top of that list. At a time when some 300,000 Chinese state owned enterprises have been told that they will eventually face market competition without state support, such services are in desperate need. There should be ample reason and scope for Hong Kong based consultants to play a role in missions to China. There might even be the potential for the Hong Kong government to pave the way for representatives of the profession to meet with national and regional officials with responsibility for enterprise reform.

Even given the current Asian economic crisis, research undertaken by us on international businesses indicates that European and North American multinational firms expect to significantly increase their activities in the Asia-Pacific over the next five to ten years. Many of these companies have a goal of doubling or tripling their Asia-Pacific business, but no detailed plans as to how this will actually be achieved. This means that there will be substantial opportunities for consulting firms that can provide expertise and advise on further penetrating Asia-Pacific markets.

It is interesting that on Hong Kong’s North American and European roadshows, it is quite common to have attendees ask specific questions about doing business in China that the panel of Hong Kong speakers, normally drawn from government, academia, and the business community, cannot answer. It would be helpful if someone with the expertise to answer such questions and to provide contact information for an entire profession were on such panels. Large firms often know where to look and have resources to investigate market opportunities in Asia. Small and medium sized firms, even those with products or services that could sell well in the region, often do not. The presence of Hong Kong-based management consultants on panels in the various roadshows could help small and medium sized firms form linkages with Hong Kong that might not take place otherwise. This could be another “win-win” proposition. The panels and forums become more useful to overseas companies and Hong Kong consultants become able to promote the profession to an international business base.

Promoting Elsewhere in the Asia-Pacific:

There should be potential benefits in promotional activity for Hong Kong management consultants in China (for making links with Chinese companies requiring assistance) and in North America and Europe (for companies that need help in setting up or expanding their presence in China or in the region in general. In order to gauge the potential benefit of promoting the Hong Kong consulting industry in other economies in the Asia-Pacific, we interviewed managers in 16 companies by telephone in other economies in the region (Taiwan, Singapore, Malaysia, Thailand, and the Philippines). These were chosen from our own personal contacts in these economies. Half of the managers were from offices of foreign multinational firms and half were large local publicly listed companies. These interviews were generally relatively short conversations, since most of the managers did not think that the Hong Kong management consultancy industry had any relevance for them.

In each case, they indicated that for projects in the economy in which they were located that they would choose either an international firm with strong brand recognition or a local consulting firm. They saw no benefit in engaging a Hong Kong firm for such work. The managers of multinational firms indicated that decisions about work in Hong Kong were made by another office (Hong Kong) as were most decisions on work in the Chinese Mainland. Of the firms headquartered in other economies, half indicated that they would consider using Hong Kong based management consultants for such work in Hong Kong if they were to use consultants. The group as a whole indicated that there was no “Hong Kong brand” for management consulting as far as they were concerned, but that if they were convinced that specific Hong Kong based firms or consultants had the expertise that they needed, they would consider engaging such firms or individuals.

The sense of these conversations was that while there was some scope for Hong Kong based management consultants to promote their own Hong Kong or China skills and capabilities in these markets, there was relatively little interest in learning from collective promotional activities. As for consultancy projects in those economies themselves, the sense was that only if a firm had a strong international reputation or the client developed a specific relationship with a given Hong Kong consultant or firm would there be the potential for business to develop.

Government Relations

Government relations are important to the Hong Kong management consulting industry because various government agencies in Hong Kong are at times customers, suppliers, competitors, substitutes, or complementors for private sector consultancy firms. Some consultants we spoke to were of the view that the government should in some ways proactively support and subsidise the sector generally. One or two even suggested that the Hong Kong government should subsidise the industry in a particularist manner, giving support of one form or another to smaller consultancies, although this was not a common or widely supported position. Other interviewees seemed content that government should, on one hand, restrict its involvement with the industry simply to providing and maintaining an appropriate macro economic environment, well populated with broadly rather than specifically educated potential consultants. On the other they felt the government should play its part in driving up standards through rigorous and stringent selection when it contracts consultants for assignments.

When we surveyed consultants on what the government should do with respect to some of the suggestions they had given us, the strongest support from all consulting firms is for the government to choose the best available consultants when itself engaging consultancy services. The second highest supported response was not to interfere in the management consultancy industry and the third was not to interfere in industry in general - this latter question being included as a comparative reference.

Non-Hong Kong headquartered firms were positive on encouraging competition in the industry and encouraging the presence of foreign management consultancies, but were negative on any government attempt to encourage or fund industry bodies, or encourage or favour local firms. Hong Kong headquartered firms were positive on government support for industry bodies, trainees, and local firms. Neither group was positive on restrictive practices or regulation of the industry.

The government of Hong Kong should:

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

The views of users and non-users on the appropriate role of government were also elicited. Consultants’ sentiments were broadly echoed by the user/non-user respondents, though they were far more ready to see government regulation of management consulting than the consultants. Their strongest support was for government choosing the best consultants available in their own purchase decisions and the least support was for regulating the respondents’ own industries. While users and non-users gave similar patterns of responses, managers of Hong Kong headquartered users/non-users were more supportive of government involvement than managers of companies headquartered outside of Hong Kong. The former were far more supportive of fostering and favouring local consultancies. In fact, these managers were more supportive of government fostering and favouring local consultancies than the local consultancies themselves.

The government of Hong Kong should:

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

There are some areas in which users and non-users believe that the Hong Kong government can play a role in the management consulting industry. There is, however, a deep division within the consulting profession between locally headquartered consulting firms, which exhibit a moderate level of support for government involvement, and the non-Hong Kong headquartered firms, which basically want the government to stay away and out of things.

A number of other issues came up in the course of our interviews:

Lobbying Government:

Some Hong Kong-based management consultants have expressed a desire to lobby government for support of the industry or of its potential clients to use management consultancy services. We did not detect any sentiment on the part of any government agency to do the former. The management consultancy industry is relatively well known to various government bodies through their commissioning of consultancy projects. It would appear that the sector has favourably impressed many public bodies, and the industry is generally thought to be doing very well. When we discussed with officials the likelihood of government funding for areas like training, there was scepticism that this could be necessary. The reason for this scepticism stemmed from consultancies themselves having included in their proposals for government assignments extensive details of the high skill levels of project team members. It would seem likely, moreover, that extensive government funding for successful industries will not be an overt feature of policy as other sectors possibly move into recession.

In terms of support for consultancy clients, only in the context of programs to assist small and medium sized firms or in special programs like the services support fund, do we see an openness to supporting users of private sector consultancy services. Some in government believe that the government already does enough with its present programs as well as its contributions to organisations such as the Hong Kong Productivity Council.

Relationships With Government Organisations:

Given the fact that agencies of the Hong Kong government use management consulting services extensively, there is little reason to promote the industry directly to most agencies. There are, however, a few agencies which the private sector might consider as potential partners in efforts to improve the level of knowledge of the industry in general. The Management Services Agency and the Productivity Council might be two such agencies. The former has an interest in ensuring that the quality of consultancy services available in Hong Kong is first rate. The latter has an interest and a mission to educate companies about advisory services that can be offered. Any group formed to promote the industry in Hong Kong should have ongoing contacts with these agencies, among others. Our research indicates that as a whole management consultants in Hong Kong view the activities of these agencies as complementary to those of the private sector rather than competing.

Initiation of Projects:

The Hong Kong government has a set of procedures in place to ensure that it identifies the best consultants for projects it commissions and that it conducts its selection process in a fair and transparent manner. The procedures appear to generally meet these objectives. However, there are some issues that members of the consulting profession have raised that might allow the government to better achieve its ends. One concerns the turnaround times for responding to government requests. Several consultants pointed out that the turnaround times for expressions of interest and then for complete proposals can be very short. One described a situation in which a government agency spent several months developing its terms of reference and then required a response within seven days. According to members of the profession, the result of short turnaround times is that smaller firms find it difficult to pull senior people off existing projects to respond at short notice and often do not have the time to put together a consortium to properly address the issues. Both small and large firms have indicated that the short turnaround times limit their ability to think creatively about the specific project at hand and can result in “off the shelf” or “boiler plate” proposals that soon become locked-in, limiting the opportunity for applying more creative approaches.

Hong Kong management consultants can urge the appropriate agencies of the government to provide a sufficient lead time for them to put together well-thought out proposals whenever possible.

Optimising the Scoring on Contract Awards:

There is strong sentiment within the consulting profession and within the user/non-user group that the Hong Kong government should use the best consultants available when it commissions work. However, it is not clear that the scoring methods that the government uses ensure that this actually occurs. The problem that we see most often with consulting work done for the Hong Kong government is insufficient knowledge of Hong Kong and a tendency at times to apply solutions that might work well elsewhere without sufficient modification to a very different public and private sector context. This tends not to be a problem when the issues are ones of technical specialities, but tends to be an issue when broad areas of policy are involved. One way of remedying this situation is to acknowledge that Hong Kong has many attributes that are different from most other places in the world and that as a result, knowledge of the local environment should receive a greater weighting for some projects than it tends to.

Hong Kong management consultants could urge the Hong Kong government to take extra care to assess the likely importance of knowledge of the local situation in Hong Kong to the successful completion of the project at hand and weight such knowledge accordingly.

Licensing or Compulsory Membership in Institutes or Associations:

It was suggested in a very small number of interviews with consultants that the government should run some form of licensing system to improve professionalism. As already noted, professionalism is not actually so large an issue as many consultants believe. We found essentially no support from any constituency (users/non-users, consultants, members of government bodies) for a government licensing system or government mandated membership in professional bodies for management consultants. Several interviewees pointed out that management consultancy is not like law, or medicine, or accountancy, or architecture, or engineering, where there are well established areas of practice and compelling public goods reasons for licensing or mandatory membership in

professional bodies. The difficulties in defining the precise nature of management consulting and codifying its practice areas were cited as further reasons that such a government mandated system would be difficult to set up or inappropriate to try.

Types of Collective Organisation

The sections above identify several practical, modest activities that could be of benefit to the Hong Kong management consultancy industry. But carrying any of these essentially tactical activities out entails the prior, more strategic question of what type of organisational mechanism would be the most appropriate vehicle for undertaking their execution.

CSI Management Consultancy Group:

There are a number of activities that the Management Consultants Group of the Coalition for Service Industries has undertaken to support the industry, including the promulgation of a code of ethics for management consultancies and, of course, the commissioning of this project. Some of the activities suggested above could be undertaken by this same group with the support of the CSI. These would include organising a management consultancy webpage, further promulgating the code of ethics, participating in trade missions, organising meetings and panel discussions, and attempting to exert some influence on government policies.

There are, however, some drawbacks in the current arrangement. Since the group relies on the CSI (which has responsibilities to a wide range of service industries) for its secretariat, it has limited resources for organising ongoing activities dedicated to management consultancy. Another is that is appears to be difficult for the present group to claim to speak for the management consultancy industry as a whole. This makes it less than optimal as a lobbyist or as a counterpart to other organisations that it might deal with or co-operate with in Hong Kong or abroad. Another drawback is that it is not constituted in a way that would allow it to be a certifying body for the profession or industry as a whole. These drawbacks indicate that, depending on the type and scope of the activities that the group wishes to support, there might be reasons to set up a professional institute or an industry association.

Professional Institute:

There are a number of activities that might be best carried out by a professional institute. In particular, such an institute would be the best way to start a certification process among Hong Kong based management consultants. Users/non-users and consultants themselves indicated that the existence of a credible certification process could enhance the professionalism and image of professionalism of management consultancy. They pointed to the lack of a formal program of education or certification as one of the reasons that they considered the professionalism of management consultants in general lower than that of accountants and law firms. Both users/non-users and consultants supported the creation of such an institute.

However, individuals reported differences in the impact that the presence of a certifying body and certification process would have on their own behaviour. A number of managers of local firms indicated that the presence of a certification process might make them more open to listening to management consultants. Managers of overseas multinationals, on the other hand, while they thought the presence of a certification process would enhance the image of the industry, did not believe it would change their own purchasing of management consulting services. Similarly, while many management consultants felt that a certification process would help the industry overall, relatively few indicated that it would change their own hiring patterns. They would still look to hire the best individual with or without a formal certification by an institute of management consultants. Presumably the marketplace would ultimately determine whether any such certification would create value for the certified.

In other parts of the world, it appears that professional institutes of management consultants are largely populated by members that are sole practitioners or from small firms. The institute becomes a way for consultants from smaller firms to network, obtain information on running the business, and keep abreast of the latest developments in the field. In some nations, there are relatively few members from large firms, perhaps an indication that those in larger firms tend not to need the services provided by the institutes to the same extent.

The diffuse membership of professional institutes means that they are generally better at providing services to members than to representing the industry before government and other external organisations. The specifics of the situation in Hong Kong could have some additional biases against such an institute becoming a strong voice of the profession. In Hong Kong, the quickest way to ramp up membership in a professional institute would be to get the various government bodies involved in management consultancy (such as the Management Services Agency, the Efficiency Unit, and the Productivity Council) to promote membership in or certification by a professional institute to their own employees. If they did, public sector employees would probably come to dominate the institute. This would make it difficult for an institute to be the voice of the private sector before government or to push for promotional activities in markets beyond those that can be served by the public sector.

In addition to our interviews and focus group discussions, we attempted to gauge the thoughts of management consultants on a professional institute.

A professional institute in Hong Kong for individuals (not firms) working in management consultancy would:

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

Overall positive sentiments on the part of consultants mask a substantial division between the Hong Kong headquartered firms and the non-Hong Kong headquartered firms. The former are broadly supportive of such a body and the impact that it could have on the industry. The latter most strongly support statements that membership of such an institute should be voluntary and that it would be unnecessary for the success of their own firms. The latter group shows little support for the activities that such an institute might undertake. Neither group believes that membership of a professional institute should be mandatory. These results indicate that it would be very difficult to obtain broad-based support for a professional institute among the non-Hong Kong headquartered firms. This might make it problematic to achieve a critical mass of membership.

Association of Management Consulting Firms:

The creation of an association of management consultancy firms in Hong Kong could address some of the drawbacks of the current situation. A formal industry association, depending on the number and nature of eventual membership, could have more of a claim to speak for the industry than the present CSI Management Consulting Group, even if the initial membership were to be identical to the group of firms represented in the current group. As a representative of the industry, it would probably carry greater weight in discussions with government, educational institutions and other organisations at home and abroad. An association of firms might have the advantage of being less diffuse than a professional institute, though it probably would not have the same ability to draw in sole practitioners and very small firms as members. An association might, on the other hand, however, instantly lose credibility due to the conspicuous absence of any particularly large firms.

An association of firms could have its own secretariat and activities, assuming that members would be willing to fund them. Such an organisation could engage in a number of the activities described above.

Support from the profession for an association of management consulting firms is somewhat greater than for a professional institute. As a whole, the profession believes that such an association would improve its image, would be a good way to promote and expand the industry, and would be an appropriate mechanism to collect data on the industry as well as maintain a database of consultancies. Again the Hong Kong headquartered firms are far more optimistic about the benefits of an association of management consultancy firms than are non-Hong Kong headquartered firms. The latter group is positive enough on the impact of some activities to lead us to believe that several of its members might, perhaps, support such an association.

A trade association formed by management consultancy firms in Hong Kong would:

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

Support for Collective Activity?

Further investigation leads one to question whether there is sufficient support for a professional institute, an association of firms, or any collective activity in general. The user/non-user group is strongly supportive of the formation of a professional institute to certify credentials of management consultants and of an industry association to help ensure the service quality of management consulting firms. They also agree that management consultancies should promote the industry collectively in addition to firm-specific promotional activities.

Management consultancies in Hong Kong should:

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

The industry itself is not so sure. Again, Hong Kong headquartered consultancies are more supportive of collective activities than are non-Hong Kong headquartered consultancies. The reason for the difference in point of view can be traced to a difference in perceptions of the usefulness of such undertakings. Members of Hong Kong headquartered consultancies believe that industry bodies could have a positive impact, whereas members of foreign headquartered consultancy firms clearly believe that professional or industry bodies would have only a limited beneficial impact on the industry.

Management consultancies in Hong Kong should:

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

The Hong Kong management consulting industry:

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

To some extent, being in favour of professional or trade associations which might theoretically do some good to the management consultancy industry is rather like being in favour of motherhood and apple pie. What really matters when it comes to actually setting up and sustaining such bodies is the level of material support. Consequently, we also canvassed individual management consultants as well as firms about their willingness to pay for membership of a professional institute or trade association.

The vast majority of the respondents indicated that they might be interested in joining a professional institute if the price were right. The indication from these people was that the bulk of the respondents would consider joining a professional institute if the out of pocket cost was on the order of HK$2,500 or less. If we assume a membership fee of, say, HK$2,000, it would take 500 members to generate fee income of HK$1,000,000 per year (price discrimination would be very nearly impossible). This latter figure is probably near or below the lower bound of the cost for a secretariat consisting of a small office, one administrator, and one support person.

What is the maximum you personally would be prepared to pay from your own pocket for annual, membership of a Hong Kong management consultants’ professional institute for individuals (not firms) working in consultancy, if one existed?

The 500 figure would be a substantial portion of the total number of management consultants in Hong Kong, and would represent quite a stretch when compared to the penetration rates of professional institutes we found in other economies (see Appendix 5). It is also unlikely that such a sizeable membership could be achieved quickly or maintained easily, given the relative mobility of many consulting professionals here.

Consultancy firms are not particularly keen to support their employees in joining a professional institute, with 20 percent stating they would not be prepared to contribute anything to their employees’ membership, and less than 25 percent suggesting they would be prepared to contribute more than HK$1,000 per annum.

What is the maximum your firm would be prepared to contribute per employee towards the cost of their membership of a Hong Kong management consultants’ professional institute, if one existed?

With respect to a trade association of management consultancy firms, the majority indicate a willingness to pay, although not very large sums, for annual membership. Assuming that all those firms responding to this question did in fact pay what they state they would to join a trade association, there would be an annual income of around HK$1 million. Differential pricing may well be feasible given firms of differing sizes, so this is worked out by taking the mid point in each HK$ parameter and multiplying by the number of respondents ticking that parameter. Again, the amount of annual fee income could be anticipated to be at the margin of making a minimal secretariat viable.

Obviously, it is cheaper to declare in an anonymous questionnaire that a firm would be prepared to pay for association membership fees than to actually do so. The decision to buy a membership ultimately rests on a cost benefit calculation. The outcome of this, in turn, depends very much on what an association can deliver to members which they could not otherwise enjoy as non members.

What is the maximum your firm would pay for annual membership of a Hong Kong management consultancy firm association, if one existed?

There might be the possibility of combining both a professional institute and a trade association to achieve greater financial viability. But this might blur the foci of one or other - or both - and so achieve little. Any collective body, once launched would need to continue successfully into the future and not fail for lack of clarity of purpose, or other reasons. Indeed, it would probably be better not to attempt to launch any collective action in the first place than to see such an enterprise founder with potentially adverse consequences for overall perceptions of the industry.

Conclusion

Hong Kong’s management consulting industry is strong and is poised to continue its growth into the foreseeable future. The bulk of the work in promoting and expanding management consultancy services has to be done by individual firms and consultants themselves, and they, for their part, clearly recognise this. But there are some modest, practical activities that could be useful to the industry that are perhaps best, and in some cases only possible if, carried out collectively. These activities include:

• public education and promotion within Hong Kong through informational meetings, short seminars organised independently or with like-minded groups, and Internet based information

• promotion abroad, primarily in conjunction with the HKTDC, to raise the profile of the profession as well as taking part in and perhaps helping to shape the TDC’s promotional activities

• improving availability of skills and capabilities by organising or monitoring training courses directed at management consultants and by making the industry’s presence felt in the tertiary educational community

• government relations that would provide ongoing interaction in buyer-supplier issues, trade missions, and other government policy areas that impact the industry

• liaison with other public organisations (such as the HKMA, HKPC, etc) to make sure that the various groups are aware of each others’ activities and to create gains from trade and collaboration

• consultant-consultant services, including information on the industry, networking, referrals, and potentially consortia building

Some of these essentially tactical and practical activities would benefit from the presence of a professional institute or an industry association set up with the strategic intention of undertaking them.

However, a professional institute, particularly one that actively certified consultants, would be difficult to set up, given the apparent level of potential monetary support within the industry.

Instead, the industry could, perhaps more realistically, explore the possible creation of some form of an association of firms. A well supported and representative association of firms could undertake many of the above activities beneficially. While there is likely to be moral support for such an association in the industry, this support does not appear to run very deep in financial terms. Such an association would have to pick its activities and agendi very carefully to ensure participation by all segments of the industry. If it did not, it would quickly lose any ability to speak for the industry as a whole and would rapidly lose credibility, too. Such an association would ideally organise itself into subgroups addressing the activity areas listed above. The bulk of the work in such an association, given the likely funding constraints, would have to be undertaken by a limited number of activists.

The key question is whether there is such a group of Hong Kong management consulting industry activists that feels it worthwhile and is actually prepared to step up to the challenge. If so, then an association of firms may prove to be a good vehicle to further the interests of the industry. If not, then some of the suggested activities could be added to those of the present CSI Management Consulting Group, though on a lesser scale and with less effect, given its inability to speak for the industry as whole.

Most of the suggested activities do not demand a large financial expenditure to initiate. But they will require time commitment. Simply attempting to organise just one such activity through an association of firms or through the HKCSI Management Consultants’ Group would allow the industry to explore and test how serious it ultimately is about collective action to enhance the reputation, scope, and business of Hong Kong management consultants. The industry should attempt to make such a strategic step. And we believe that the HKCSI Management Consultants’ Group should endeavour to set the ball rolling.

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