The structure of the consulting services market, in terms of the number of clients, the size and experience structure of local consulting teams, and the complexity and size of typical projects, shows that it is a market still significantly influenced by the economic crisis, but with great potential for development.
Changes that have occurred in the market due to the crisis, but primarily due to Croatia’s EU membership, have forced domestic companies to seek advice from consultants, as well as consulting firms to adapt to new client demands. However, as is often the case, some are quicker to adapt to changes than others, for example, the private sector compared to the public sector, but there are also differences among private companies. Nikola Nikšić, a business consultant at the consulting firm Konter, says that the most significant gap still exists in smaller, rapidly growing enterprises. It is more challenging to establish a relationship between consultant and company, even though this is the segment where advice is most needed.
Research on Collaboration
Indeed, Nikšić notes that collaboration is poorer due to a lack of trust in the quality and specificity of consultants, which is partially, he says, justified. Another reason is that a good portion of entrepreneurs has an exaggerated belief that their success is possible only based on their intuition and courage.
– These are key entrepreneurial traits, but at the moment when the game heats up and the market pushes for growth and development, it is essential for business entities to strengthen in the area of professional management – says Nikšić.
Darija Mateljak, director of Hauska&Partner, shares a similar view, stating that the possibility of collaboration between companies and consultants is still being explored, if we are not talking about classical consulting. For instance, in project monitoring, finance, legal issues, and development in quality processes, consulting services are quite developed. These involve restructuring jobs, but difficulties exist in interdisciplinary areas, organizational development, the process of corporate social responsibility and sustainability, as well as the development of corporate identity and culture.
– For example, companies that will soon be affected by the new European directive on non-financial reporting have not yet recognized that they need expert assistance for this. Of course, there are always good examples in both the private and public sectors, which will surely be visible over the next year – emphasizes Mateljak.
Limited by Public Procurement
Danko Sučević, director of Infokorpa, says that there are clients who intentionally withhold information, which is likely related to entrepreneurial caution in approaching consultants, as Nikšić also notes. Another problem, Sučević continues, is that some of them do not have established systems for collecting information, making it difficult to determine even the most banal facts, such as, for example, the margin of a product.
– Other clients do not share all information, often because they think it is not important or they forget it. When incorrect assumptions are made, it is impossible to arrive at a good solution – emphasizes Sučević.
His colleague Tauno Olju, executive director in the consulting department of EY Croatia, adds that sometimes consultants encounter situations where clients are unsure of which direction they want to go and what they want to achieve. Both Sučević and Olju say that in such situations, it is harder to meet client expectations.
In addition to these differences, consultants from experience highlight that there is also a difference in the approach to engaging consultants between the private and public sectors. This was, after all, to be expected, but they specifically explain why the private sector, generally speaking, is faster than the public. Hrvoje Zgombić, CEO of PwC Croatia (a consulting firm that announced it achieved an exceptional overall revenue growth of 22% in Croatia in this business year compared to the previous one, and the PwC network of firms globally achieved the highest revenue growth in the last eight years), says that one reason is that the decision-making process in the private sector is shorter than in the public sector. This is understandable, he notes, as the public sector is limited by public procurement. Miroslav Dragičević, director of Horwath and Horwath Consulting Zagreb, warns of this problem, but he believes that the new EU regulations will also help the public sector to speed up its processes. Namely, the mentioned regulations will not be so restrictive, meaning that goods and services will not only be procured at the lowest price but at the most economically advantageous price.
Chaos in the Market
Dragičević states that the private and public sectors have different needs, and thus different models for engaging consultants.
– The private sector is direct in its demands and generally knows how to articulate the need for acquiring consultants. The public sector does this mainly when it has to or when it comes to external demands for specific expert analyses or solutions. The public sector generally does not master the knowledge of articulating the procurement of consulting services as well as the knowledge of setting up transparent tenders that select quality rather than price. There is a particular chaos in this area in the Croatian market. Nevertheless, in the end, the most important thing is the quality and creative delivery of the consultant, regardless of how much it is applied in practice. Our experience is such that quality service deliveries to the private sector usually lead to further orders, while quality deliveries to the public sector often end in turbulence due to the inability to apply real solutions, primarily due to populism and/or political opportunism – says Dragičević.
On the other hand, he adds, just as there are qualified and unqualified consultants, there are also qualified and unqualified recipients of consulting services. The request for consulting on how to solve a problem needs to be genuine and well-articulated, as our interlocutors have already mentioned. However, Dragičević emphasizes that in this respect, the private sector is far more efficient, while the public is, as he put it, ‘in a learning phase.’
Entering into a business relationship with the public sector can be a double-edged sword for consultants. Nikšić says that the public sector is more focused on reactivity, that is, on detecting and eliminating its own organizational weaknesses and acting against threats from the environment, optimization, and various forms of cuts. At KPMG, they say that in the implementation of consulting projects, the difference between the private and public sectors is mostly expressed in the area of readiness for implementation and determination in executing measures and actions that result in the engagement of consultants. This is precisely the trap for consultants because, as they say at KPMG, it is often harder for them to later clearly demonstrate the success of their reference projects in the public sector to the same or other clients. In other words, the public sector collaborates less with consultants, which often results in poorer service outcomes, and this does not benefit consultants.
