Report on
Management Consultancy Sector in Hong Kong

Definition of Management Consultancy

“The defining characteristic of management consultancy is that it is impossible to define in a commonly acceptable way.”

Asia Pacific manager, global ‘management consultancy’ firm

Management consultancy has never been easy to define, and it would seem to be getting more difficult as the industry evolves to cover more activities and functional areas. There are a variety of definitions of management consultancy available. Many of these are rather vague. The following are among the more useful definitions we found:

Management Consultancies Association (UK)

“The rendering of independent advice and assistance about management issues. This typically includes identifying and investigating problems or opportunities, recommending appropriate action and helping to implement those recommendations.”

Recognised Fields of Activity

• Corporate strategy and organisational development
• Financial and administrative systems
• Human resources (including executive search and interim management)
• Production and services management (including technology, logistics, R&D and quality control)
• Marketing and corporate communication
• Information technology and systems
• Project management
• Economic and environmental studies

Source: MCA literature

Institute of Management Consultants (IMC) (UK)

A management consultant is an independent qualified person who provides a professional service to business, public and other undertakings by:

1. Identifying and investigating problems concerned with strategy, policy, markets, organisation, procedures and methods.
2. Formulating recommendations for appropriate action by factual investigations and analysis with due regard for broader management and business implications.
3. Discussing and agreeing with the client the most appropriate course of action.
4. Providing assistance where required by the client to implement his recommendations. The three main pillars of independence, objectivity and integrity which are implicit among qualified practitioners of management consulting have been brought together in the Institute’s Code of Professional Conduct.

Source: IMC UK

Definition Within the Hong Kong Industry

Across the range of consultants we spoke to, no common definition of their industry was apparent. Certainly neither users or non-users of consultancy services were unable to give a clear definition of what management consultancy actually is or is not. Definitions from secondary sources vary widely, though a summary of the secondary source definitions would read like: ‘Management consultants give independent advice, based on experience, analysis and expertise, to managers in commercial and public organisations on various aspects of how they can better achieve their organisational objectives’ (see Appendix 1).

Hong Kong based management consultant interviewees raised a number of issues concerning a definition. The first was the question of what broad types of activity constitute consultancy itself. There was unanimity that consultancy covers advice based on expertise. But there was some uncertainty that such advice should also be based on original investigation and analysis, and there was less certainty still that management consultancy necessarily involves actual implementation of advice.

A second issue interviewees raised related to what specific areas of functional activity management consultancy normally covers. Most interviewees could readily agree that management consultancy includes such functions as quality control or organisational structure. But there was less certainty about whether it covers some closely associated activities. It was thought, for instance, that human resource management definitely comes under the rubric of management consultancy, but recruitment was more doubtful. Similarly, there was little doubt that analysis of potential take-over targets was covered by management consultancy, whereas corporate finance was regarded by some as being more in the domain of investment banking.

To help quantify these points raised in interviews, we surveyed consultancy firms about what broad and specific types of services management consultants offer, in effect attempting to let the management consulting industry of Hong Kong define itself. In broad terms, ‘advice’ on policy, closely followed by ‘investigation’ of organisational problems and ‘analysis’ of economic/business environments emerge as the highest ranked services undertaken by management consultants. ‘Implementation’ of advise is ranked slightly behind these, but is still relatively high. The ranking of these broad types of services is similar for both Hong Kong and foreign headquartered consultancies, although the latter tend to agree slightly more strongly.

Management consultants offer the following broad types of services:

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

A list of specific activities was also drawn up, based on those which are commonly associated with management consultancy. To this were added other activities pointed out by interviewees, together with some functions thought debatable, like corporate finance, and a few, such as media buying, which are definitely not normally regarded as being covered by management consultancy services.

Results indicate there is generally broad agreement across all firms about those activities which are strongly thought to be covered by management consultancy. Organisational structure comes out as highest ranked, followed closely by strategy, human resource development, information systems, quality assurance and the like. The only clear difference between Hong Kong and other headquartered firms is the stronger agreement by the latter that distribution and sales are management consultancy-covered activities. Unsurprisingly, activities not normally associated with management consultancy, like media buying, advertising and lobbying, score the lowest levels of agreement by both Hong Kong and non-Hong Kong headquartered firms.

The results do suggest that perhaps recruitment is not thought to be so definitely within the domain of consultancy as human capital planning and development, especially so far as non-Hong Kong headquartered firms are concerned. But there is no indication that recruitment should not come under a definition of management consulting. Similarly, while corporate finance is ranked lower than mergers and acquisitions, it would seem, too, that all types of consultants operating here consider both to be activities covered by their industry.

Management consultancy services cover the following specific areas:

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

Overall, the survey results serve to show that management consultancy is an industry covering investigation- and analysis-based advice across a very wide spectrum of functional and managerial activities. Indeed, the sector covers such a broad spectrum of activities that it defies any overly concise definition, and as the range and nature of activities covered is reportedly increasing, elaborating a useful definition will become even harder. This, and the evolving nature of the sector itself and adjacent industries, will undoubtedly serve to ensure that both existing and potential users of management consultancy services will continue to find pin-pointing exactly what the sector does and does not do extremely hard.

Where there was some, but not total, accord in all interviews was in the view that advice given to managers primarily as part of the customer service attached to the delivery of a specific, deliverable product, like a computer system, does not constitute management consultancy. However, more and more goods and services are being sold with a higher and higher level of customer service in the form of what might traditionally be regarded as management consultancy-type advice. The information technology hard- and software industries are cases in point where customers are both getting, and increasingly expecting, substantial advice about not just the products they purchase, but advice on the management of the information systems those products are a part of.

Our own take is that the summary definition supplied above, plus the activities down to and including ‘personnel motivation and remuneration’ provides a serviceable definition of management consultancy. Other services might reasonably be included only to the extent that advice cuts across multiple activities, or is specifically linked to strategic or organisational development

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