At a press briefing earlier this week to mark the formal launch of Grant Thornton Jingdu Tianhua, the Grant Thornton network’s new member firm in Hong Kong, Managing Partner Daniel Lin was upbeat, but realistic. “We now have a fully functional firm,” he said. “But we need to increase our size from 1,500 people [across China], including Hong Kong, to 5,000 people within five years, by which time the Hong Kong office should have a thousand people.”
That’s an ambitious target. Jingdu Tianhua is currently staffed by only about 80 people. Only six of the 27 partners of the former Grant Thornton member firm in Hong Kong, which was expelled in September, signed up with Jingdu Tianhua. The majority, 17 partners, decided to switch to BDO, Grant Thornton’s closest rival in Hong Kong, which has now replaced GT as the city’s largest accounting firm after the Big Four.
Eighty is hardly the optimum number for a partnership in a key financial centre. The former Grant Thornton member firm had some 500 partners and staff, and even then it was considered only a mid-tier practice. Lin was previously quoted as saying that Jingdu Tianhua will have 100 people by the end of 2010 and 150 partners and employees by summer 2011.
‘One Firm, One China’
The failure to attract the target number has financial implications. Edward Nusbaum, CEO of Grant Thornton International, who was in Hong Kong for the launch, conceded that Jingdu Tianhua failed to retain many of the old firm’s clients. But he insisted: “Our strategy, we believe, is more important than any short-term loss of revenue . . . We’re serious about our strategy, and it takes precedence over any short-term financial issues.”
That strategy is what Grant Thornton calls its ‘one firm, one China’ approach. As GT sees it, the traditional model of independent and autonomous member firms that enjoy wide latitude about how they work with each other is no longer relevant in today’s globalised world.
“The vast majority of our clients have operations in both mainland China and Hong Kong,” Lin explained. “So if we are two separate firms and if they come to us for services, they will probably have to go to the Hong Kong firm and the mainland firm [separately].”
The situation gets worse if, like some of its competitors, GT has different member firms in Beijing, Shanghai, Guangzhou, Shenzhen and other mainland cities, argued Lin. “That would create a lot of obstacles to the client to get good advice. We strongly believe that this ‘one firm, one China’ policy is good for our clients, and what’s good for our clients is good for us.”
Little Resonance
But for now, the approach is apparently failing to find resonance among finance professionals in Hong Kong and the old member firm’s clients.
In an interview with CFO Innovation last year, Alex MacBeath, the member of Grant Thornton International’s global leadership board with responsibility for strategy in Asia Pacific, said that “a number of senior partners believed [integration] was the right strategy to go forward. But as a group the firm was unable to agree, unable to work in a cooperative way with the firm in PRC.”
Patrick Rozario, the former member firm’s chief executive and now partner, head of risk advisory, and executive board member at BDO, was blunter. “We consider BDO, which is run independently in Hong Kong and China, respectively, as a model that suits us better,” he
told the South China Morning Post newspaper.
There are other possible reasons why most partners and staff voted with their feet for BDO. For one, BDO assured the former Grant Thornton people that they would all come in as equals. “If they are partners in their firm, they will join as partners,”
BDO Hong Kong chairman and CEO Albert Au told
CFO Innovation. “If they are managers, they will join as managers.”
It is unclear whether they would have gotten the same treatment at Jingdu Tianhua. It would have been unrealistic for Grant Thornton China to make these promises anyway, given that the ‘one firm, one market’ model is untested in the Asian environment and so requires utmost flexibility in implementation.
That said, MacBeath had taken pains to reassure would-be recruits about the working relationship of the Hong Kong unit and the other Chinese offices. “Hong Kong partners will have a very strong influence in everything going forward,” he said. “They will make independent decisions about hiring staff in Hong Kong, in client acceptance in Hong Kong.”
2012, May 22 
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