In Defense of the China Consultant

Saturday, March 5, 2011 8:15

Over the last few weeks, I have seen a few posts that caught my eye.  Posts that were directed a particular “China consultant”, were meant to question the need for a “China Consultant”, or were meant to provide advice on how to pick a “China Consultant”… but it was Dan Harris’s recent post China As Currency Manipulator. Why Can’t We All Just Get Along? that catalyzed me to put together my first post in 6 months and defend the “China Consultant”.

Certainly not a new topic, the usefulness of a “China consultant”, what I have always found interesting about attacks on “China consultants” is that they are not so much critiques of the capacity of a consultant (or firm) to deliver, but are often focused on the “consultant”.  They are personal attacks on people, and the organizations that they have built, not on their value as consultants to their client.

Perhaps this may not mean much, but where I think it is important is that there actually has never been a true debate about the role of a consultant, or how firms should look to work with these people/ organizations.  A debate that I would say is sorely needed.  Not because I think that there is anything wrong with the “China consultant”, but because I feel there is a disconnect between the value that these people/ organization provide, what the client needs, and how an engagement should be structured for success

An example:  One of my first clients was a US based retail chain looking to explore their options in China.  They already had operations on the ground (sourcing department) but were looking to understand their options for store openings in China.  It was a brand that I personally knew well, and was more than happy to work with because I personally saw the potential for their model in China.  the problem was that I could see that I was working on a project that I knew had little chance to succeed because it was clear to me that their was a lacking will to engage… and in the end I knew that my entire package would gather dust.  I said go organic and save yourselves a lot of headaches, they chose to go the other route.  Any mention of competitors entering the market were lost, as was the fundamental message that Shanghai and Beijing aren’t the only markets. For them, it was Buy up an existing “brand”, improve the quality of the “brand”, and teach them how to do things “their way”

It was a failed strategy, and they recently announced their pullout.

A second example: More recently (last week in fact), I had an implosion on my hands.  For several months I have been working on a process that was supposed to a clean handover to an internal team of a 10 city program, and at the last minute it nearly blew up in my face.  Initially, I was only mandated to do the preliminary search/ profiling for a partner, and then I was to pass off to their internal person.  The problem was that it took 4 months longer to find that person than anticipated, and I was asked to carry on the process as if I was that person to bring the partnership together and at the final meeting (were executive stakeholders were present) when the partners were talking about the partnership/ program details a problem arose when the local partner asked to change the program to better suite their programming needs.  A request whose respond could only be described as immediate and full bodied.

It was deal breaker, and any hope of a partnership were lost.

Why admit where processes I was involved with failed (early on or after 4 years of operations)?  Simple, because in both cases, the client did not fully understand the role of a consultant.  One should have listened to me and the other should have listened to themselves.  Both should have engaged themselves further into the process, and relied less on a “China Consultant”.

Which leads me to a final point.

There is absolutely nothing wrong with the “China Consultant” no matter if they are based in China or not, how old they are, what school they went to, or their level of self appreciation.

They, and their organizations, can be (and often are) very valuable to those who look to engage them, but only if they themselves have a clear idea of how and why that consultant (or organization) should be brought in to begin with, what their scope of work is, how their work will be internalized, and most importantly, where the engagement should end.

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13 Responses to “In Defense of the China Consultant”

  1. Thomas Kuball says:

    March 5th, 2011 at 9:41 pm

    It makes no logic to hire a “China Consultant” outside of China unless they are advising on what you need to do in your home country to prepare your domicile business for international business work. In China, that relates to some tax planning and for US companies, FCPA and possibly SOX awareness.

    Otherwise all you’re getting is arms length information. Many consultants not in China actually sub-contract your project and pretend to be your contact and to have all the knowledge. Theres no need for this nowadays there’s many sourcing, market research, business advisory, legal, tax and other consultants already in China a long time, the market has been open for 25 years.

    If a consultant or firm doesn’t have a real office in China then how financially or mentally committed are they? Not very much so why listen to them.

  2. Rich says:

    March 5th, 2011 at 10:51 pm

    Thomas.

    While you yourself may find no use for a US based consultant, unless it is a tax/ legal issue, I know to others who would disagree.

    Sure, there are plenty of consultants, and consulting firms, in country, but there are cases that require economic, risk, and political expertise from experts and scholars that are no found in country. Victor Shih (Chicago) and Minxin Pei (DC) being two of the more famous minds that pop into mind. However I know of two executives who have 20+ years in China (but are located overseas) who are highly demanded, very effective, and have anything but dated information

    Again, for YOU, there may be no logic to hiring someone overseas, but for others there may be.. and it is up to you (“the client”) to have a clear mind about what you need before discounting any option. No matter where that option may be located.

    R

  3. Dan says:

    March 6th, 2011 at 10:55 am

    I completely agree with Richard.  In fact, one of the best international/China tax consultants with whom I have worked is in France and one of the best China sourcing person I know is in England and one of the best China operational person I know is on the U.S. East Coast and one of the best China retail marketing person I know is in California.  All of these people are very experienced with China and all of them travel to China frequently and all of them have their own key people on the ground in China. Of course, there are countless excellent China consultants of all stripes in China as well. This really does get back to what Richard said initially, which is that it doesn’t matter where the consultant is located, what matters is what the consultant knows and how good a fit he or she is for your particular business and your particular need.  

  4. Barrett says:

    March 6th, 2011 at 7:52 pm

    I definitely believe in the value of China consultants and we encourage our own clients to use them. We are a full-service incorporation and compliance firm in HK/Beijing but don’t do marketing research, branding, sales development or related activity so often refer our clients to consultants. That being said, its consultants we have developed a relationship with and we know we can depend on the quality of their work. They can be in China or abroad, doesn’t really matter as long as we know they know their stuff.

    In fact, if you are an experienced China consultant reading this, I’m keen to meet you!

  5. Thomas Kuball says:

    March 6th, 2011 at 7:53 pm

    You’re seriously saying that a tax consultant in France has better resources than the entire infrastructure of the big four in Beijing? Or that a sourcing company in England has better on the ground knowledge of factories in China than a sourcing company based in China? Get out of here. And they don’t have their own people on the ground unless they’re properly licensed. So…why go to France in that case? You’re just perpetrating a myth. It you want it done properly, GET IN DONE IN CHINA. Otherwise you’re only having your work subcontracted and an unnecessary margin added to it.

  6. Rich says:

    March 6th, 2011 at 8:06 pm

    Thomas.

    Let me clarify a point, and that is that some of the best China consultants are the LAST people you would want executing your program. Victor and MinXin are guys you pay 500-750USD an hour for… and you only get a couple of hours. For some firms, that is exactly what they need. A strategic input

    For you, your perspective is clearly very different. You see consultants as operational extensions of the entity (in some capacity). They are there to do the research, perform QC, etc. For issues like that, I would agree that 95% of the time, one should look first locally.

    R

  7. Danb says:

    March 6th, 2011 at 10:07 pm

    The matter where I worked with a French tax accountant involved complex Chinese tax, French tax, and international tax. The team included two people who had a combined thirty some years of French and China tax experience.  Of course the Big Four would have been fine, but they also would have cost twice as much and the last time I was involved in a China deal with a Big Four firm ALL of the people were based in New York.  The reality is that there are very few skilled non-Big Four accountants in China who have a good grasp of China taxes AND U.S. taxes and those people tend to be so swamped that they have trouble doing rush jobs.  As for the sourcing person from London, he is local. He’s local in that he gets to meet with his clients in London and then he goes to China and he and his team find the right factory.  I find it strange that anyone would find this strange.  

  8. Renaud says:

    March 6th, 2011 at 10:09 pm

    I am going to respond to the article, not to the comments thread that got pulled into another direction.
    There are basically 2 types of experts: those who know how to do something (e.g. a lawyer who helps draft a contract or an inspector who checks production quality), and those who know something (e.g. a marketing consultant who advises on a retailing strategy but who will not help in execution). Several recent books, such as The Black Swan, have made this distinction and have criticized the 2nd category. The reason is that their forecasts are usually no better than those of a guy taken randomly off the street.However, when a foreign company comes to China, I would strongly advise to consult with several such experts. If their opinions converge, the foreign company should adapt its strategy accordingly. Their forecasts won’t be better that those of a Chinese guy taken randomly, but they will be much better that those of a random foreign executive!The problem is that some foreign companies just don’t want to hear anything. They are used to knowing more about their business than any consultant, and unfortunately that’s not true in a vastly different culture.

  9. FOARP says:

    March 7th, 2011 at 4:03 am

    Agreed, with one proviso: Do due dilligence on all consultants. Don’t just get references, but also check backgrounds and qualifications.
    The reason for this is simple: whilst the vast majority of consultants are exactly who they say they are, a small minority are people exploiting the relatively lax legal and regulatory environment in China, and their clients lack of knowledge of the country, to claim qualifications they do not have, and some are in China trying to avoid shady, even criminal backgrounds. Anyone who has been an expat in China will have met at least one example of this kind of person, I am personally aware of two people working as consultants of one kind or another who have served prison sentences – one for burglarly, and another for attempted murder.

  10. Rich says:

    March 7th, 2011 at 4:17 am

    FOARP

    I don’t know any consultants who are involved in burglary or attempted murder, but I know one that got the snot kicked out of him after several clients felt his screwed them out of a lot of money. Was a pretty well known guy in town who was involved in fund raising for businesses that were considered too unproven/ risky for a bank loan.

    He got over extended on the projects he took on, and ended up in the hospital (twice I believe).

    … not saying the guy didn’t deserve it, but anyone who had done their DD on him would have probably chosen another consultant

    R

  11. Dan says:

    March 7th, 2011 at 7:30 am

    There are consultants in China with criminal records and there are consultants in China who are criminals. I am aware of some of these and I think I know to whom FOARP is referring in at least one of his examples. But there are also, I am quite sure, the same sort of people doing consulting in the U.S. and so all of this takes us back to square one and to what everyone seems to be saying, which is do your research/due diligence before hiring anyone.

  12. Chris says:

    March 9th, 2011 at 4:34 am

    Putting some of the above aside, one of the most critical issues in considering consultancy services is your own enterprises internal capacity and experience and your expectations from the consultancy. I’ve had outstanding advice as well as appalling advice from Global Tier 1 law firms for example… The outstanding advice came when it really was an issue which the firm had a lot of expertise and specialist staff – transfer pricing in this case. The appalling advice was in an area where they had little experience and they produced very expensive nonsense that would have resulted in regulatory nightmares. In the second case, we chose to write it off and chose a mid-ranking UK law firm with a wealth of expertise in China in the specific area. Their advice was excellent and the business is running well.

    There are good reasons to use consultants, in particular because enterprise incorporation and set up in China is something you expect to do rarely. Building internal capacity would be expensive and largely pointless. Where those consultants are based is not as relevant as their experience and expertise in your business area. Agree with the original post that internal clarity on what is required from an external consultant is critical to the success of the projects.

  13. Mark Button says:

    March 9th, 2011 at 8:53 pm

    Isn’t it true to say though that in the case of a law firm, isn’t it better to use a firm who is registered in China, not least because they themselves had had to go through the pre and post Chinese registration processes and are more able to add know-how value tot the client; rather than taking advice from a law firm that is not extant in China? I think you’re dismissing practical China experience rather too easily.