Report
onManagement Consultancy Sector in Hong Kong
Report
on
Management Consultancy Sector in Hong Kong
Key Points from the Management Consultancy Study
Hong Kong’s economy has evolved from one based on manufacturing to one based on advanced business services and the knowledge-intensive activities associated with manufacturing. In the process, Hong Kong has become a major business and management centre for locally headquartered firms as well as for overseas multinationals. One of Hong Kong’s key advantages as a business and management centre is the SAR’s cluster of professional service providers. This cluster creates value in its own right and supports the critical value-adding activities of the rest of the economy as well.
Management consulting is an important component of this cluster. Management consulting adds value to Hong Kong through its own sales and expenditures, through the revenues and profits brought back to Hong Kong from “exports”, through the increased competitiveness of its local client base, and through its ability to transfer global best practice management tools and techniques to the local business environment. Local and overseas businesses in Hong Kong agree that a vibrant management consulting industry in Hong Kong is important to the SAR’s future as a major international business centre. This is true even among businesses that had not used Hong Kong-based management consultants themselves. This ‘public goods’ aspect of management consulting should not be underestimated. The Hong Kong Government has already acknowledged the public goods aspect of some types of consulting through its support for the Hong Kong Productivity Council and the Hong Kong Management Development Centre. The benefits of the private consultancy sector should not be allowed to go unnoticed. Nor should the sector’s potential to play a part in the overall promotion of Hong Kong as a business centre be ignored.
Hong Kong already has a vibrant management consulting industry. Hong Kong-based consultants indicate that their business has growth substantially and promises to exhibit strong growth in the future. Hong Kong-based consultants offer services that are strong growth in the future. Hong Kong-based consultants offer services that are considered ahead of most other centres in the region in terms of their scope and quality.
However, Hong Kong-based consultancy has not nearly met its potential. The industry is considered not to have a breadth and quality of services equal to those found in Tokyo, which is reasonable, or Sydney, which is not. In addition, Hong Kong has a long way to go in order to come close to matching the range and quality of services offered in global business centres such as New York or London. If Hong Kong is to be the leading centre for business in the region, or if it hopes to be an international business centre on par with consulting industry. After all, the next revolution in Hong Kong’s economy will not be a technological revolution, but a managerial revolution as both opportunities and threats push Hong Kong companies to develop and employ leading edge management tools and techniques. Hong Kong-based management consultants will play an important role in this process.
Expanding their own business is the task of individual consultants and individuals consulting firms. However, there are a number of constraints to industry growth that are difficult or impossible for an individual firm to reverse by itself that might well be amenable to collective action on the part of the industry. These include the overall reputation of the industry, the knowledge that Hong Kong-based business people have of what management consultancy is and can do, limits in the availability of qualified personnel, and some forms of promotion of the industry outside Hong Kong. Specific steps in these directions are outlined in the project report.
While some of these activities could be undertaken by an informal group or committee of Hong Kong-based consultants, others, particularly those involving substantial organisational capabilities or those involving the Hong Kong Government or other potential collaborators, would benefit from the existence of an association that could speak and act for the industry or at least a significant portion of the industry. There appears to be some support in the industry for an association of management consultancy firms that could undertake some of these collective actions. The specific activities that might be undertaken and the appropriate organisation to undertake them is the next step for the CSI Management Consultancy Group to consider.
Background
Service industries are vital to Hong Kong's economic future. At present they account for approximately 84% of GDP. Hong Kong also has had the fastest growing services sector in the world, accounting for 2.9% of the world trade in commercial services in 1997. One distinctive feature of Hong Kong's services sector is the importance of business to business services. In fact, Hong Kong has become a regional centre for a wide range of business services, including consulting, accounting, engineering, surveying, communications, media, and financial services. This benefits the Hong Kong economy in several ways: through the direct impact on output, though their role in helping attract and retain businesses in Hong Kong, and through their vital role in Hong Kong's export economy.
Management consultancy is one such service. Hong Kong is the home of a range of consulting firms as befits its position as one of the world's leading business centres. The management consultancy industry directly benefits the Hong Kong economy in three key ways: 1) It generates revenues for the firms and employment for talented professionals whose skills and experiences can have important spillover effects into other areas of the economy; 2) Because Hong Kong acts as a regional centre for multinationals covering Greater China and Southeast Asia, it adds to export earnings; and 3) Less tangibly, but perhaps more significantly, the Hong Kong management consultancy industry helps its client base of Hong Kong organisations to improve their own efficiency and competitiveness.
Management Consultancy is clearly an important business service in Hong Kong, but its extent and scope is not clearly understood by potential users. Therefore, there is a need to determine how the management consultancy sector can be developed to make Hong Kong "self-sufficient" in these resources, meeting the widest range of client needs both locally and within the region. Thus the competitiveness of Hong Kong-based consultancy practices would potentially be increased, reducing the dependence on services provided by overseas resources, but with no diminution in service quality. This would benefit the Hong Kong economy as a whole.
Financed by the Services Support Fund, the Hong Kong Coalition of Services commissioned the Poon Kam Kai Institute of Management of the University of Hong Kong to undertake a study of the current and future place of management consultancy in Hong Kong's competitiveness, together with an analysis of how the sector might be promoted. The objectives of the study are:
Project Team
Management Consultancy Project Group, The Hong Kong Coalition of Service Industries
Convenors:
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Mr Paul Woodward, Asian Strategies Limited |
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Mr K K Tse, K K Tse & Associates |
Members:
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Mr David Ng, Arthur Andersen & Co |
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Mr Rabin Kilbert, Buck Consultants |
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Mr Nigel Knight, Coopers & Lybrand |
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Mr Neil Maxwell, Ernst & Young |
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Mr Jurgen Kracht, Fiducia Limited |
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Mr Anthony Griffiths, GML Consulting Limited |
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Mr Sidney Yuen, HK Benchmarking Clearinghouse |
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Mr Valerie McFarlane, International Securities Consultancy Ltd |
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Mr K K Yeung, K K Yeung Management |
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Mr Steve Bingle, KPMG |
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Mr James C C Pang, KPMG Management Consulting |
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Mr Bill Galvin Kurt, Salmon Associates |
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Mr Fred Brown, MVA Asia Limited |
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Mr Peter Barrett, Organisation Development Ltd |
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Mr Gregg Li, Poon Kam Kai Institute of Management |
Research Team
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Professor Michael J Enright, School of Business, University of Hong Kong |
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Dr Edmund R Thompson, School of Business, University of Hong Kong |
Funding Source
This project is financed by the Services Support Fund of the Government of the Hong Kong Special Administrative Region.
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