Home advantage for management consultants

Do international management consultancy firms still have the right answers for China?

Edward Tse, former chairman, Greater China of Booz & Co, thinks they do not. Regarded as one of China's leading management thinkers and author of The China Strategy, Tse has recently launched his own Chinese management consultancy Gao Feng Advisory.

He says most international consultancies now have their DNA locked away in the United States and increasingly do not understand the complexities of the China market.

Instead, according to Tse, they just merely resort to selling one-size-fits-all products and services devised in New York, Chicago or elsewhere, that have little relevance to the problems most companies face in China.

His comments come amid speculation that US consultancy firms may be banned from working for Chinese state-owned enterprises, a major part of the business of certain firms, particularly McKinsey & Co.

Tse says the gap in the China market is for a consultancy of scale with many of the existing Chinese operators lacking the operational reach to take on the big players－and he now aims to create one.

In his Shanghai office, Charles-Edouard Bouee, president of Roland Berger Strategy Consultants Asia, one of the few international management consultancy firms that is European in origin－its eponymous 76-year-old founder setting it up in Munich in 1967－agrees with Tse that some consultancies no longer understand China.

"I think he is right but we do (understand it)," he says.

Bouee says the US consultancies had the right model for China for reform and opening up in the late 1970s until about 2008, which he sees as a major change year for the country.

"I think that year was a turning point. I think in the 30 years until that year China pursued an American spirit. Deng Xiaoping had said getting glorious was rich and I think this provided a fertile ground for the American management consultancies. People wanted to know how business was done," he says.

"Then we had the Olympics and the financial crisis and we went from the American to the Chinese Dream. China realized－even if not consciously－that the old model had reached its limit. It had led to inequalities, pollution, bad business practices and corruption. We are seeing now a shift to a new management model."

Terence Tsai, assistant professor of management at China-Europe International School, or CEIBS, believes that Tse is right that there is now an opportunity for the sort of Chinese management consultancy he wants to create.

"There are a lot of unhappy voices among Chinese firms working with the big US-based multinational firms about not getting good service. US consulting firms have a tendency to apply in the Chinese market what they have learnt in the US without a lot of modification.

"There are many differences here (in China). If you take the large State-owned enterprises, in the upper echelons of them an agement, you have professional managers but you also often have the involvement of Party officials. Often they have greater influence than the professional managers and the consultancies sometimes overlook that."

In his office on the 22nd floor of the Hang Seng Bank Tower in Shanghai's Lujiazui financial district, Johnson Chng, managing partner of AT Kearney Greater China, a leading global consultancy that has been in China since the early 1990s, says China is different from other markets.

"China is pretty much the exception. I have lived and worked in North America and in Europe and have served more than 10 markets in Asia but China is by far the toughest."

The 46-year-old Singaporean says one of the differences is that many Chinese companies place a high value on experience rather than "how smart you are".

"In other markets, we might stress what business schools we went to. In China, we don't even bother since it is not seen as relevant. What is important is what experience you have had and what you have done before. The first thing they ask is whether you have previous experience of the topic they want advice on."

Chng says there is also a reluctance to think laterally, whereas in the West this is often the key to management decision-making.

"If you take a Chinese bank, they will always ask you how Citibank does a, b or c or how HSBC does x, y or z. This wouldn't occur to Citibank. They would perhaps be looking for ideas outside their industry, maybe from the fast food industry or whatever. That is because as a leading player they are playing top-up while the Chinese are playing catch-up.

"A Chinese company would typically tell you it is not interested in what is happening in another industry. It wouldn't see the connection."