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April 30, 2008

Growing pains

Grant Thornton Hong Kong’s new leader has a simple mission over the next two years: help half of the firm’s workforce settle down and then double in size across Greater China. It’s a challenge that Jonathan Leong is embracing with open arms. He speaks with Arvind Hickman.

Jonathan Leong has many things on his mind but one thought stands out – growing pains. The new managing partner of Grant Thornton Hong Kong has the immediate task of bedding down phenomenal growth at his firm over the past year while also contemplating, with new managing partner of the China practice Desmond Yuen, what it might take to grow the Greater China presence even further by 2010.

Leong has worked at the Hong Kong firm for 15 years and his remarkable rise from partner to managing partner has only taken a decade. He began his auditing career with KPMG Johannesburg in 1988 but left South Africa in 1993 to escape the political instability in the country at that time. Leong and his wife moved to Hong Kong, the birthplace of his parents, where he joined Grant Thornton. For the past four years he has headed the firm’s audit department, which generates about 70 percent of the firm’s revenue.

Leong has also been the director of the firm’s International Business Centre where he coordinated inbound and outbound referral work – a role that allowed him to develop good contacts within the Grant Thornton International network.

He believes it is a combination of leading the firm’s key service line and his experience in networking with other member firms that provided the skills necessary to lead the firm. Leong succeeds former leader Gabriel Azedo who accepted a full-time position on Grant Thornton International’s global leadership team.

Grant Thornton is going through a massive growth spurt in Hong Kong. In 2007, the firm doubled its head count to 550 staff, with the appointment of eleven partners. Four were internal promotions and six joined together with 80 staff when parts of the former Moores Rowland Hong Kong firm joined Grant Thornton. Leong’s immediate challenge is to help new staff members settle down, assimilate and adopt the firm’s culture.

He explains: “In Hong Kong and China there is a huge demand for qualified people, particular people with three to five years’ experience. It is really hard to come by these people.

So we end up obviously recruiting from some of the mid-sized firms and the smaller firms and we find these people when they come either sink or they swim. Some of them last two, three, four months and it just does not work out and they move on. And then there are others that knuckle down, adapt and grow with the firm.

“It ’s a big change for them as our audit is done electronically using proprietary software; whereas almost all the newcomers come from a background of doing a paper-based audit.”

Electronic age Leong says Grant Thornton is one of a handful of firms in Greater China that do all their audits using an electronic software. Outside of the Big Four, most firms in the region are groomed on the old paper based approach and most new audit recruits require additional training to competently use the electronic platform.

Leong said that while this new age approach attracts some staff, it also causes others to leave and this ‘sink or swim’ phenomenon accounts for around half the firm’s staff turnover rate of around 30 per percent.

Despite the significant training requirements and the cultural challenges, the surge in organic growth suits Grant Thornton’s goals for the Greater China region.

Leong reveals the firm has been set an ambitious target by Grant Thornton International to have 1,100 staff in China by 2010. At present Grant Thornton has about 450 staff in China. Leong remains confident the firm can meet this goal through organic means.

“We should be able to reach 1,100 reasonably comfortably by doing it organically, so we don’t see that as a major problem,” he says.

However, Leong accepts there is always pressure for Grant Thornton to grow at much higher rates as is occurring in rival networks. Last month, IAB revealed that RSM international admitted Mainland China’s fifth largest firm to its stable, immediately adding 2,600 staff.

New strategy Grant Thornton has traditionally adopted the organic growth approach in China. However, it is becoming increasingly apparent that size and critical mass does matter and the mid-tier firm is now considering the acquisition route to greatly enhance capacity.

Leong admits the Chinese Government would also like to see the world’s sixth largest accountancy network accelerate its efforts to grow its China practice; preferably by admitting one of the larger independent Chinese firms into its China practice.

Leong says they have been talking to a number of interested firms in China, but these discussions are all a very preliminary stage and there is still some way to go in the due diligence and negotiation process.


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