Report
onManagement Consultancy Sector in Hong Kong
Report
on
Management Consultancy Sector in Hong Kong
Summary of Findings
The Hong Kong Coalition of Service Industries recently commissioned a group from the School of Business and the Poon Kam Kai Institute of the University of Hong Kong to study Hong Kong's Management Consultancy Sector. The following are some of the major findings of the study conducted between March and June 1998. Results are based on survey responses from 267 users and non-users of management consultancy services and 95 management consultancies, as well 100 interviews. For further information, please contact the Hong Kong Coalition of Service Industries.
Management Consultancy is important to Hong Kong and its Future
Management consultancy adds directly to Hong Kong's economic output.
The total annual turnover from management consultancy for the 82 Hong Kong consultancies willing to state their turnover in the HKU/PKKI survey amounts to approximately HK$1,520 million or an average of HK$18.5 million a year. The local offices of non-Hong Kong headquartered consultancy firms account for an estimated HK$856.5 million in annual 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. Turnover for the industry as a whole is considerably larger than the survey total.
Management consultancy is the type of knowledge-based industry upon which Hong Kong's economic future rests.
The future of the Hong Kong economy lies in knowledge-based service industries and the knowledge-intensive portion of the value chain of manufacturing industries. Management consultancy is an important component of the SAR's increasingly knowledge-intensive business service sector.
Management consultancy is a growth industry for Hong Kong.
Even in the midst of the current downturn, management consultancies reported double digit growth in all practice areas, with some areas set to see growth of greater than 30% per year for the next few years.
Management consultancy adds to Hong Kong's service exports.
Hong Kong headquartered firms indicated that approximately 25% of their revenues came from the Asia-Pacific region outside Hong Kong. The Hong Kong offices of overseas consulting firms indicated that 40%-50% of their revenues came from projects in the Asia-Pacific region outside Hong Kong.
Management consultancy adds to the depth and breadth of managerial expertise in Hong Kong.
Management consultants enable Hong Kong to be wired into the cutting edge of global best managerial practice. The industry draws upon the talent of local firms and individuals as well as from abroad. Most of the world's leading consulting firms regard Hong Kong as a key node in their international networks of specialist expertise. Many consultants move on to other industries in managerial positions, hence bringing their skills into other sectors of the economy.
Management consultancy adds to Hong Kong's position as a leading international business centre.
Local and overseas companies across all business sectors in Hong Kong agree that a vibrant management consulting industry is important to the SAR's future as an international business centre. This is true even among businesses that have not used Hong Kong based management consultancy services themselves. This indicates that there is a strong 'public goods’ aspect to management consultancy. (See Table 1)
Hong Kong's Management Consultancy Sector is robust, but has yet to reach its full potential
Hong Kong has the broadest and deepest management consultancy sector in Greater China and among the broadest and deepest in the Asia-Pacific.
According to industry experts, the range and quality of management consultancy services available in Hong Kong is by far the best in Greater China. In the Asia-Pacific, only Tokyo and Sydney are considered to have a broader and deeper sector.
However, Hong Kong's management consultancy sector does not yet compare to those found in leading world business cities.
Hong Kong's management consulting sector does not currently measure up to that found in New York or London in terms of breadth or depth. If Hong Kong wishes to become a truly global business centre, there is a need for an even more developed management consulting sector in the SAR. (See Table 2)
Despite impressive growth rates, a number of obstacles to further growth in Hong Kong Management Consultancy remain
A shortage of qualified personnel is an important constraint.
Management consultancy requires individuals with advanced analytical, interpersonal, and presentation skills. Many firms find people with the appropriate skills in short supply in Hong Kong.
Perceptions of professionalism and 'value for money’ of the sector could be improved.
Users and non-users of Hong Kong-based management consultancy services have a favourable view of the professionalism of the sector. However, their view of the professionalism of management consultancy is not as favourable as those for the legal or accountancy professions. Users and non-users of Hong Kong-based management consultants are only neutral on whether the sector provides good value for money.
Management consultants cite one set of reasons for some firms not using consulting services.
Most consultants indicated that Hong Kong firms do not understand the services offered by the consulting profession. Consultants believe that such a lack of understanding creates mistrust that often prevents firms that would benefit from their services from using them. Other reasons for "non-use’ cited by consultants included that it had not occurred to many firms to seek out management consultancy services and that many Hong Kong firms were too small to use the services. (See Table 3)
Firms that have not used Hong Kong management consultancy services cite a different set of reasons.
These firms indicate that cost is the most important reason they have not used management consultancy services. Other reasons cited were that consultants do not understand their particular business sector and that many firms felt they simply did not need the services that management consultants provide. (See Table 4)
Although managers of Hong Kong headquartered management consultancies and managers of the Hong Kong offices of multinational consultancy firms share many views on the industry, they differ on what might be done for the industry going forward.
Both types of firms share certain views of the industry.
In particular, managers in both types of firms identified similar sources of new consulting assignments, and had similar beliefs about the type of firms that use management consultancy services. (See Tables 5 and 6) With respect to growing the industry, both types of consultancy firms agreed that promotion of services by individual firms is critical, that competition in the industry should be encouraged, that government should not interfere in the industry, and that when choosing consultants to meet its own needs the government should choose the best consultants available. (See Tables 7 and 8)
Foreign headquartered consultancy firms were far less likely to support government action with regard to the industry than were locally headquartered firms.
Multinational firms did not believe that government should support or fund industry bodies, take the initiative to promote management consultancy, help develop indigenous consultancies, fund training for management consultants, or encourage the use of local consultancies. Local consultancies felt the opposite. (See Table 8)
Managers of Hong Kong headquartered consultancies believe that collective action would be more important than do managers of the Hong Kong offices of foreign headquartered firms.
In particular, local firms were far more likely to believe that collective action would improve the image of the industry, expand demand for management consultancy, help their own practice, or improve the image of their own firm than were multinational consultancies. (See Table 7 and 9)
Whereas the industry recognises that improving their own businesses is the task of individual firms, there is scope for collective action to promote the Management Consultancy sector.
Adopting a higher profile.
Educational sessions, informational seminars, and other activities could be employed by the management consultancy sector to raise awareness and understanding of the sector. The industry also could develop a web page and other promotional material to inform potential users about the services provided by the sector.
Engaging in activities designed to promote Hong Kong.
Several government, quasi-government, and private organisations are involved in promoting Hong Kong as a business centre. The management consultancy sector should be a natural partner in such efforts, particularly with regard to the sector's expertise in setting up companies and doing business in Hong Kong and on the Chinese Mainland. The industry could take pro-active steps to ensure that this happens.
Engaging educational institutions.
The industry could engage the universities and other educational institutions in Hong Kong to make sure the needs of the industry are communicated to those in charge of curriculum development. The industry could also cooperate with those interested in setting up third-party training programmes for management consultants.
Working to improve the professionalism of the consultancy profession.
The industry could work to promote and publicise the CSI's Code of Ethics for Management Consultancies. In addition, the industry could develop an accreditation or certification process for consultancy firms or consultants.
Creating an association of firms.
Hong Kong-based management consultants indicated some support for the creation of an industry association that could work to promote the industry and engage in collective activities. Whether there is sufficient support to launch and sustain a truly effective organisation is uncertain. Less support was evidenced for a professional institute for management consultants.
The importance of common ground.
The five potential areas for collective action listed above represent areas that could benefit the industry as a whole and represent areas in which the study found common ground among different groups of Hong Kong-based management consultants.
Table 1. Availability of first class management consultancy services in Hong Kong is important to the future competitiveness of:
(Average of responses by respondent type)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
Type of respondent |
Consultants |
Non-users |
Users |
| Manufacturing industry generally | 3.91 |
3.32 |
3.54 |
| Service industry generally | 4.10 |
3.41 |
3.69 |
| Hong Kong in attracting foreign multinationals | 3.85 |
3.49 |
3.74 |
| Hong Kong as a modern, international business city | 4.18 |
3.68 |
3.89 |
Table 2. The range and quality of management consultancy services available in Hong Kong is generally better than those in:
(Average of responses from Hong Kong-based consultants)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| City | Range of Services |
Quality of Services |
| Bangkok | 4.13 |
4.15 |
| Guangzhou | 4.13 |
4.06 |
| Beijing | 4.08 |
4.01 |
| Manila | 3.94 |
3.97 |
| Kuala Lumpur | 3.89 |
3.94 |
| Shanghai | 3.88 |
3.93 |
| Seoul | 3.86 |
3.83 |
| Taipei | 3.48 |
3.72 |
| Singapore | 2.98 |
3.23 |
| Tokyo | 2.78 |
3.18 |
| Sydney | 2.60 |
2.90 |
| London | 1.95 |
2.36 |
| New York | 1.91 |
2.23 |
Table 3. Some firms do not use management consulting services because:
(Average of responses from Hong Kong-based management consultants)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
| They don't understand management consultancy | 4.07 |
| It has not occurred to them to use consultants | 3.91 |
| They are too small | 3.78 |
| Management consultants cost too much | 3.56 |
| Management consultancy is poorly promoted | 3.48 |
| Management consultants do not understand their particular business sector | 3.06 |
| They do not need the services consultants offer | 2.93 |
| They are too successful | 2.87 |
| Management consultants have a poor reputation | 2.84 |
Table 4. Your firm has not engaged management consulting services in the past because:
(Average of responses from firms that have not used Hong Kong-based management consultancy services in the last five years)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
Type of respondent |
All non-users |
| They cost too much | 3.62 |
| They do not understand your business sector | 3.44 |
| Your firm has not needed the services they offer | 3.36 |
| It has not occurred to your firm to use them | 3.28 |
| Your firm is too small | 3.09 |
| Your firm has not known the services they offer | 2.91 |
| They have a poor reputation | 2.66 |
| Your firm is too successful | 2.46 |
Table 5. Management consultants are generally used by:
(Average of responses from Hong Kong-based management consultants from Hong Kong headquartered firms and non-Hong Kong headquartered firms)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
HK HQ firms |
Non-HK HQ firms |
| Successful firms | 3.85 |
3.82 |
3.95 |
| Firms that are falling | 3.09 |
3.09 |
3.11 |
| Firms with specific problems | 4.14 |
4.15 |
4.11 |
| Firms in the process of change | 4.27 |
4.25 |
4.39 |
| Companies with poor managers | 2.64 |
2.64 |
2.68 |
| Companies with forward thinking managers | 4.00 |
4.03 |
3.84 |
| Firms that cannot solve their own problems | 3.61 |
3.60 |
3.63 |
| Firms that value outside expertise and opinions | 4.46 |
4.46 |
4.47 |
| Firms wanting to cut costs | 3.49 |
3.43 |
3.79 |
| Firms wanting to improve their goods or services | 4.16 |
4.15 |
4.21 |
| Firms wanting to improve their operations/processes | 4.28 |
4.26 |
4.37 |
Table 6. Your new consulting assignments often come from:
(Average of responses from Hong Kong-based management consultants from Hong Kong headquartered firms and non-Hong Kong headquartered firms)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
HK HQ firms |
Non- HK HQ firms |
| Your firm's pre-existing clients in Hong Kong | 4.02 |
3.99 |
4.16 |
| New clients referred by your pre-existing clients | 4.00 |
4.08 |
3.68 |
| The personal contacts of your firm's personnel | 3.98 |
4.00 |
3.89 |
| Your firm's pre-existing clients from elsewhere | 3.81 |
3.74 |
4.05 |
| Direct from your firm's promotional activity | 3.67 |
3.59 |
3.94 |
| New clients referred by their banks, lawyers, etc | 3.01 |
3.03 |
2.89 |
Table 7. Management consultancies in Hong Kong should:
(Average of responses from Hong Kong-based management consultants from Hong Kong headquartered firms and non-Hong Kong headquartered firms)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
HK HQ firms |
Non-HK HQ firms |
| Individually promote their services | 3.61 |
3.56 |
3.74 |
| Accept government funding for an industry association | 3.51 |
3.68 |
2.84 |
| Compete with each other to win client business | 3.36 |
3.29 |
3.53 |
| Themselves take the in initiative in collectively promoting management consultancy services | 3.35 |
3.43 |
3.00 |
| Co-operate with each other to win client business | 3.35 |
3.51 |
2.74 |
| Accept government funding for a professional institute | 3.31 |
3.45 |
2.79 |
| Encourage their personnel to join foreign professional institutes | 3.26 |
3.32 |
2.95 |
| Join foreign management consultancy associations | 3.26 |
3.31 |
3.00 |
| Collectively promote their services | 3.26 |
3.41 |
2.68 |
| Form a self-regulatory trade association to ensure service quality of member firms | 3.22 |
3.41 |
2.53 |
| Form a professional institute to certify credentials of individuals working in management consultancy | 3.20 |
3.36 |
2.58 |
| Themselves fund an industry association | 2.99 |
3.10 |
2.53 |
| Themselves fund a professional institute | 2.94 |
3.03 |
2.58 |
| Use a public relations firm rather than form industry bodies to promote a code of practice and consultancy services | 2.51 |
2.51 |
2.47 |
Table 8. The government of Hong Kong should:
(Average of responses from Hong Kong-based management consultants from Hong Kong headquartered firms and non-Hong Kong headquartered firms
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
HK HQ firms |
Non-HK HQ firms |
| Select the best available consultants when itself engaging management consultancy services | 4.25 |
4.18 |
4.47 |
| Not interfere in the management consultancy industry | 3.58 |
3.49 |
3.84 |
| Not interfere in industry generally | 3.55 |
3.46 |
3.79 |
| Support with funding the formation of industry bodies | 3.53 |
3.69 |
2.89 |
| Encourage management consultants to form industry bodies | 3.48 |
3.65 |
2.79 |
| Encourage competition among management consultancies | 3.38 |
3.35 |
3.58 |
| Take the initiative in promoting management consultancy | 3.36 |
3.51 |
2.84 |
| Encourage the presence of foreign management consultancies | 3.33 |
3.33 |
3.32 |
| Help develop local, indigenous management consultancies | 3.32 |
3.46 |
2.84 |
| Fund training for aspiring management consultants | 3.31 |
3.41 |
2.89 |
| Encourage use of local rather than foreign consultancies | 3.02 |
3.24 |
2.32 |
| Regulate professional service industries generally | 2.91 |
3.00 |
2.63 |
| Favour local, indigenous management consultants when itself engaging management consultancy services | 2.84 |
2.99 |
2.42 |
| Only engage management consultancy services from members of a Hong Kong based industry body | 2.84 |
3.00 |
2.26 |
| Regulate the management consultancy industry | 2.78 |
2.92 |
2.37 |
| Only engage management consultancy services from foreign’ firms if they work with a local Hong Kong partner | 2.53 |
2.70 |
1.89 |
Table 9. A trade association formed by management consultancy firms in Hong Kong would:
(Average of responses from Hong Kong-based management consultants from Hong Kong headquartered firms and non-Hong Kong headquartered firms)
1= strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree
| Type of respondent | All consultants |
HK HQ firms |
Non-HK HQ firms |
| Improve the image of management consultancy | 3.91 |
4.03 |
3.47 |
| Be a good way to promote management consultancy | 3.85 |
3.97 |
3.37 |
| Be appropriate to collect industry/market data | 3.84 |
3.97 |
3.26 |
| Be appropriate to maintain a data base of consultancies | 3.82 |
3.89 |
3.53 |
| Expand the market for management consultancy services | 3.79 |
3.93 |
3.26 |
| Be a good way to improve industry professionalism | 3.77 |
3.96 |
3.05 |
| Be appropriate for setting an industry code of practice | 3.73 |
3.90 |
3.05 |
| Be a good way for the industry to lobby government | 3.71 |
3.84 |
3.21 |
| Be a good idea if membership were voluntary | 3.69 |
3.77 |
3.37 |
| Be a good way to monitor legislation affecting consulting | 3.63 |
3.78 |
3.05 |
| Be appropriate to provide professional training | 3.61 |
3.76 |
3.00 |
| Increase business for all management consultancies here | 3.58 |
3.67 |
3.21 |
| Improve the service quality of local Hong Kong firms | 3.53 |
3.66 |
3.05 |
| Be useful mostly to activist members | 3.50 |
3.47 |
3.58 |
| Provide a necessary forum for meeting other consultants | 3.47 |
3.56 |
3.11 |
| Improve the image of your firm if it was a member | 3.45 |
3.71 |
2.47 |
| Be useful for meeting potential employees at other firms | 3.43 |
3.48 |
3.21 |
| Work only if most firms operating here were members | 3.38 |
3.46 |
3.05 |
| Be appropriate to police an industry code of practice | 3.34 |
3.54 |
2.63 |
| Ensure the greater professionalism of your firm | 3.26 |
3.44 |
2.58 |
| Be unnecessary to your firm's future success here | 3.11 |
3.00 |
3.53 |
| Be more beneficial to its secretariat than consultancies | 3.10 |
3.01 |
3.42 |
| Increase business only for member firms | 3.08 |
3.21 |
2.63 |
| Be unnecessary to your firm's future success in China | 3.08 |
2.99 |
3.42 |
| Be an appropriate organisation to act as a clearing-house’ for new business leads | 3.01 |
3.19 |
2.47 |
| Be appropriate to police professionalism of non-members | 3.01 |
3.17 |
2.47 |
| Improve the service quality of foreign international firms | 2.94 |
3.06 |
2.53 |
| Be a good idea if membership were compulsory | 2.15 |
2.30 |
1.63 |
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