Consultants in China
are a dime a dozen
--here's how to find
the one right for
your company

So nothing could have convinced me then that consultants would develop a presence in China as quickly as they have since I've been here. I would not have predicted that by 1999, until November not a great year for US-China relations or business, most large international consulting firms would have at least representative offices in China. But they are here, and they are making their presence known.

On a more personal level, this month a researcher from an international think tank asked a friend of mine if he could provide her with a list of domestic Chinese consulting firms. Until last year, however, there weren't many Chinese consulting firms to speak of. Now there are many. Early in 1999, I was asked to join a China-based, foreign-owned consulting firm that had, to my surprise, been doing business in China for several years already. This past fall, one of the "big eight" American consulting firms tried to recruit two of this firm's consultants. On the one hand, it was a compliment. On the other, it was a wake-up call.

Why the recent rush of big consultancies to China? Like other multinational corporations, no one wants to be left out, especial ly once China accede s to the World Trade Organization (see table). MNCs in China are grappling with larger and more complicated issues and technology as China progresses toward developed country status. And other firms, feeling profit pressure, are looking for alternatives to hiring full-time expatriates to handle many of these more complex technical and global tasks. Moreover, while localization is under way, it will still be some time before local PRC staff are qualified to handle such tasks independently.

So, for better or worse, the consulting business is growing in China and the competition is heating up. As the number of foreign and local consultants swells in China, general and other senior managers find themselves spending more time sorting through messages and sales calls to determine which consultant they should use and why.

At best, managers in China will learn from the experience of their counterparts in the United States and avoid some of the big mistakes that have been made there. In their 1998 best-seller Dangerous Company (Penguin USA), James O'Shea and Charles Madigan warn executives in the United States and elsewhere to beware of consulting firms. And with good reason: too many consultants promise that which they cannot deliver; fail to practice what they preach; and waste more money than they make or save for their clients.

The book's last chapter, "Keeping Dangerous Company: Caveat Emptor," should be required reading for every manager, especially those now in Asia, as the big consulting firms head eastward and younger Asian-owned consulting firms try their hand at the consulting business. This chapter sums up the lessons learned and provides practical guidelines managers can use to determine if consulting is for them and to sort the good consultants from the bad. In China, where there is so little experience with consultants, the danger of managers making the mistakes highlighted in the chapter, if not bigger ones, is quite real.

Below is some advice I have developed that may help companies steer their way clear of unnecessary and incompetent consulting providers.

• Why seek outside advice?

In general, consultants provide assessments and evaluations; hands-on assistance in creating or changing policies or procedures; training; project management; and staff-development support. Companies can benefit from consulting help when they need:

• Skills that are lacking in country

Companies entering Chinese markets with new products that use special technologies commonly import experts to explain to local employees how the t echnologies work and how to use them. Large MNCs often bring staff from their operations in other countries to China as consultants, particularly to complete technology transfers.

In developing economies, it is not unusual to seek outside help for general management services--quality and information systems; tax, accounting, and legal support; and recruiting and human resources. In the last few years, Chinese managers have quickly acquired competency in many of these areas. Often all they need is the perspective of mature consultants able to provide examples from other companies and industries, and increase their confidence by providing real-time feedback on the approaches they are using to solve their companies' problems.

• Help on a short-term project but cannot add or import staff

Consulting assignments that assist with specific projects that a company cannot complete on its own can be a real win-win situation for both the consultant and the company. The consultant comes to understand the organization in depth and appreciate its business problems, internal politics, and culture. And the temporary nature of the relationship allows the company flexibility over its costs that it might not otherwise enjoy with full-time staff. While it is true that a company can often assign extra work or projects t o existing staff, there are times when this is impossible. In these instances, using a consultant to handle the short-term project is a practical alternative.

Many multinationals import their own staff from abroad--but for some companies, the travel and lodging costs of this option can be prohibitive, and the staff may not be able to communicate in Chinese. In these cases companies may opt for locally based consultants (both foreign and Chinese) with the appropriate China experience, and technical and consulting skills. These consultants can also act as liaisons with visiting expatriates, keeping a given project on track between visits.

• An objective perspective or unbiased feedback on sensitive projects

When the board of directors or top management requires a fresh or objective perspective on proposals under consideration, they often call in outside consultants. Companies are in many ways like families; employees must feel comfortable working together, and this puts constraints on how willing they will be to speak their minds about sensitive issues to the very people who make decisions about their pay, bonuses, and promotions.

Similarly, outside consultants are useful for sensitive projects that can generate bad feeling or compromise teamwork among in-house staff. Independent placement agencies and other human resource consultants often help with downsizing or other sensitive employment-termination situations. And in cases where an unbiased third party should be involved, such as in arbitration or other types of separations, the consultant can serve both as a witness and a calming force.

• New ideas or to know what others are up to

Consultants can also be sources of new ideas. In-house employees are sometimes too close to their work to find new approaches to solving problems or getting things done. As members of employee teams, consultants can ask questions that might not have occurred to existing staff.

When companies need to know other companies' strategies and solutions, consultants can sponsor benchmarking studies that allow for an exchange of information among companies. Consultants can also make suggestions in a general way based on their experiences with other companies.

• To jump-start change

Sometimes organizations want to shake people up, especially if the company has been doing well and the staff has become complacent. Consultants can kick off initiatives and forums for discussion, training, and other employee activities that can lead to change.

Where to go from here?

Deciding whether or not to use a consultant may be difficult, but finding one that is right for your organization can be even more so. Companies should require the following in any consultant they hire:

• A track record that provides evidence of the consultant's ability to assist with their situation.

In particular, the consultant must have relevant industry, product, or market experience to succeed in the project.

• Appropriate and verifiable academic, technical, and professional credentials
• Credible and positive references
• Technical competencies, including the necessary language skills
• Interpersonal skills to work constructively and productively with in-house staff.

These skills must include demonstrated familiarity with staffs' respective cultural and national backgrounds. Many consultants, otherwise extremely capable technically, may be woefully poor at communicating and working with people to get things done.

Other considerations that may be importan t include finding out what people in your organization think of the consultant-- before making any hiring decisions. Indeed, companies should beware of consultants who look good in suits. Just because a person claims to be a consultant doesn't mean he or she has the skills, abilities, or track record to back up those claims. In China, people tend to trust, and hire, their friends. Don't be afraid to ask to see credentials, get references, and check them during a thorough due diligence process. Unfortunately, in China, many consultants put more energy into marketing than quality control, and some have "played the fool's game." Consulting is still new to China and even foreigners can be fooled by consultants who speak a little Chinese and have been here for a while. Checking project references and doing due diligence is just as important in China as it is in the West, if not more so.

It is also important to identify the true costs of using an external consultant, an internal consultant, or no consultant. Compare costs for travel and related lodging, meals, and local transportation; long-distance telecommunications (faxes and long-distance calls); and other out-of-pocket expenses that existing staff would not incur.

Companies should evaluate any guarantees or warranties the consultant offers. Experienced consultants will not make impossible promises, nor will they be afraid to make part of their remuneration dependent upon achieving measurable, satisfactory results.

Finally, networks and guanxi are everything in China. The bad news is you need to watch out for people hiring friends who m ay not be qualified to help you with your projects. The good news is you can check instantly with several established networks to hear about other people's experiences with most consultants.

As China integrates further into the international economy, and companies operating there face more sophisticated problems, company managers will increasingly need to consider using consulting services. But sorting the good ones from the bad will remain just as much of a challenge. Proceed with caution, look for consultants who are flexible and willing to work on specific projects with clearly defined deliverables, and hold them to it. Obtain proposals from at least three sources and compare. There are many talented and experienced people waiting to help in China. With a little effort, you can find good guides to help you along today's silk route.

Selected US Consulting Companies with Offices in China