By the summer of 1995, Price Waterhouse was involved in a consulting partnership with 23 firms globally. The two largest firms were the European firm and the US firm. Price Waterhouse has maintained an office in Hungary since 1989, and has advised corporations in both the public and private sectors as well as multinational companies.
Price Waterhouse/Hungary divides its practice groups into three distinct services: Audit and Business Advisory Services, Tax and Legal Services, and Corporate Finance and Recovery.
The Audit and Business Advisory Services group provides many of the accounting services that are related to accounting. These services are broken down into Audit and Accounting Services, Due Diligence Reviews, Opera-tional and Working Capital Reviews, Internal Audit Services, and Computer Information Services. In 1995 there were five partners in Audit and Busi-ness Advisory Services; one is a Hungarian speaker, one was from the United States and had extensive auditing experience, another partner was fluent in Hungarian, and the last two were from Britain and the United States.
Tax and Legal Services was broken down into two divisions: Taxation Services and Legal Services. Some members of the Taxation Services team had served with the Hungarian Tax Office and the Ministry of Finance, and others have extensive international experience. The Legal Services group was responsible for advising multinational and Hungarian corporations on a wide range of legal and technical questions, which included joint-venture agreements, incorporation, intellectual property, leases, registration, licens-ing, and interpretation of legislation. The managing partner of Price Water-house/Budapest was a lawyer by training, but none of the three partners in Tax and Legal Services were lawyers; two of these partners spoke Hungarian.
Corporate Finance and Recovery assisted in transforming Hungary from a state-run economy to a market-governed economy. Corporate Finance and Recovery was divided into the following activities: Acquisitions, Disposals, and Finance Raising; Privatization Advice; Corporate Recovery; Asset and Business Valuations; Real Estate Services; and Human Resources Consult-ing. There were two partners in Corporate Finance and Recovery. The partner in charge of this department was Andrew Terner.
Terner had extensive experience in crisis and recovery management, some of it in bankruptcy work in the United States. Terner once owned a consulting firm in Beverly Hills, California. An American citizen, Terner was born in Hungary and speaks fluent Hungarian.
Price Waterhouse has actually been in Hungary since 1987, when the Canadian Partnership of Price Waterhouse won a bid for a World Bank project to design an executive information system for a major utility. This
initial presence was followed up by the establishment of a permanent office in Budapest in 1989. This office, which was established by the European Partnership of Price Waterhouse, was the first permanent, foreign consulting firm in Hungary. The office initially had three consultants. Terner has been with Price Waterhouse in Budapest since 1990, when the firm had 50 employees. By 1990, KPMG, Ernst & Young, Arthur Andersen, and Coopers
& Lybrand were established in Hungary. Deloitte & Touche, the remaining Big Six firm, entered the market a short time later.
Early on, Price Waterhouse established a policy of hiring as many young Hungarians as possible. By 1990, however, only half of the employees were Hungarian. Most consulting work at Price Waterhouse was done by en-gagement teams flown in from other Price Waterhouse partnerships on a case-by-case basis.
By the summer of 1995, this was no longer the case. Less than 10% of the employees at the Budapest office held foreign passports. Although this transformation has been rapid at the low levels of the organization (mid-level consultants and support staff ), it is not as evident at the partnership level, where only one of the partners is a Hungarian national. However, five of the partners speak fluent Hungarian.
The key employment challenge for Price Waterhouse/Hungary has been balancing “local skills” with “technical skills.” Hungarians generally have the local skills, such as knowledge of Hungarian processes and customs. In addition, Hungarians have the language advantage. Foreigners generally have more proficient technical skills: one acquires these skills through ex-perience and formal education. Price Waterhouse/Hungary appears to have made the assumption that it is easier to teach Hungarians technical skills than to teach foreign consultants local skills.
Price Waterhouse has a policy of training and promoting staff internally.
In the Corporate Finance and Recovery area this policy is evidenced by the fact that by the summer of 1995 50% of the local consulting staff had MBAs (most of the foreign consultants had MBAs). The average age of the consulting staff is under 30.
The period between 1989 and 1991 was a gold-rush period in Hungary, especially in Budapest. Large multinationals would often have their annual meetings in Budapest to check Hungarian opportunities firsthand. Hungar-ian expatriates and foreign “prospectors” were arriving by the planeload.
There were many get-rich-quick schemes, and there were more business op-portunities than could be taken advantage of. By 1995, the Hungarian mar-ket for consulting had come full circle. This maturing process was character-ized by increased competition from local consulting firms and savvy on the part of clients of what can and cannot be expected from a consulting firm.
Price Waterhouse’s major competitors in 1995 were the remaining five of the Big Six accounting/consulting firms. In addition, local consulting firms, investment banks, law firms, and other international management consulting firms were becoming competitive.
Another challenge was to maintain a balanced portfolio of clients. Large multinational companies were initially the most desirable clients, and would always constitute a significant part of Price Waterhouse/Hungary’s business.
However, it was expected that most future growth would come from adding large Hungarian companies to the client list (MAT ´AV, MOL, MALEV, and so on). Price Waterhouse/Hungary was trying to increase its business through local contacts and a strong Hungarian presence in its Budapest of-fice. International business would continue to be developed and enhanced by the established position that Price Waterhouse had with the home offices of major international companies that conduct business in Hungary.
Hungary is very network oriented, with considerable emphasis placed on personal contacts. Many national leaders have known each other since their student days. When Terner first returned to Hungary he asked a friend from the apartment complex where he used to live as a boy to set up meetings with some influential Hungarians. His friend arranged 170 meetings with the newly established “movers and shakers” in Hungary.
Terner emphasized the necessity of keeping close contact with a wide variety of influential people. Business executives make up the core of this group, but the group also includes a strong contingent of politically powerful individuals. These political contacts are (and will continue to be) especially vital given the government’s strong influence in the Hungarian business world during the mid-1990s.