Perils of half-baked knowledge

Zhang Chengliang / China Daily

Management consulting is not exactly something new in Chinese business. But with the high fees such consulting services command, how do Chinese businesses justify their value?

There can surely be no point simply in selling the firms' standard consultancy models and products developed in the United States, Europe or elsewhere. The value of consulting advice is, after all, the way management theory and models can be applied practically in a particular business in order to help it perform and compete better.

You can find most management consultancy models and products on the Internet and you will not have to pay a cent.

Indeed, an increasing number of young Chinese business leaders are fully aware of these management theories and models. The market for selling standard Western management consultancy models and products is already shrinking, and that means management consultancies need to rethink where their value lies.

What the management consultancy companies need to do is apply Western theories and models to Chinese situations rather than selling standard models and products that simply leave clients in the dark as they are forced to apply and use those tools as best they can.

The question then arises of who is better at doing this work, Western management consultancies or domestic ones.

Western management consulting has a long history. McKinsey, for example, was established nearly 80 years ago. They helped develop models and products with management theories that, properly applied, are still valid today.

In China, domestic management consultancy companies go back 20 years. In their early years they were preoccupied with catching up with foreign rivals' products. But today, their knowledge is as good as that of their foreign competitors, for which they charge a third or even less of the fees of foreign companies.

An example is Allpku, the largest domestic management consultancy in China. Its recruits have to be MBA graduates from one of the top Chinese business schools, such as those at Tsinghua University, Peking University, Shanghai Jiaotong University, and Fudan University.

These schools have full-time management courses, mainly teaching advanced Western management theories and models. So the methodology that domestic management consultancies use is as polished as that of their foreign rivals.

More importantly, domestic consultancies better understand Chinese culture.

This helps when working with Chinese business in the following spheres: interpreting and forecasting government policy in an industry, understanding Chinese people (for example customers) and knowing how Chinese human resources work.

China is still a developing country, and policies in many industries are still taking shape, so for Chinese businesses, being sensitive to public policy is crucial.

Consultancies such as Allpku are staffed not only by young talent just out of business school, but by dozens of partners with a wealth of experience.

Most of the latter will have reached senior management level in their specialized industries. They know their industry inside out and follow government policy closely.

In contrast, most partners in Western management consultancies are those who go into the consulting industry immediately after graduating from an elite university.

Granted, they will also be specialized in certain industries when they reach senior levels, but their perspectives will differ sharply from those of people who were soaked in the targeted industry for decades and then joined a consultancy later in life.

That means domestic management consultancies may well be better at forecasting and interpreting government policy.

Management models and products used by Chinese businesses ultimately serve the Chinese customer. If management consultancies do not fully understand the culture of Chinese people, the products they sell will have limited use.

Take the example of a State-owned ocean cruise company that wants to improve processes in its sales call center - processes that come from the US and do not work in dealing with Chinese customers.

The reason is that under US procedures, after cruise tickets are sold, the company emails the itinerary to the customer and charges his or her credit card.

However, the Chinese customer will not necessarily have an email address or be willing to give credit card details over the phone.

This illustrates that a one-for-all solution cannot be applied, and suggests that engaging a Western management consultancy could be fraught with risks.

Human resources are playing a more and more important role in most Chinese business these days. At the same time, HR consultancy products account for a large proportion of management consultancies' revenue.

That means it is important for management consultancies to sharpen up in this area.