Journal of Service Science and Management, 2011, 4, 300-314
doi:10.4236/jssm.2011.43036 Published Online September 2011 (http://www.SciRP.org/journal/jssm)
Management Consulting in Human Resource
Management: Central and Eastern European
Perspectives in Light of Empirical Experiences
József Poór1, Ágnes Milovecz2
1Faculty of Economics and Social Sciences, Szent István University, Gödöllő, Hungary; 2Faculty of Business and Economics,
University Pécs, Pécs, Hungary.
Received January 14th, 2011; revised April 2nd, 2011; accepted April 25th, 2011.
ABSTRACT
We analyze the evolution of management consulting in the field of human resources (HR) for the past 20 years in the
transitional eco nomies of Centra l and Ea stern Europ e (CEE). Our framework for HR consultancy is based on extensive
professional experience in the region, several sets of multiyear surveys, and a review of the literature. We focus on the
evolving HR theory and the current HR practice in Bulga ria, Czech Republic, Hungary, Poland, Romania, and Slovenia.
Our paper relies on three major sets of multiyear surveys, conducted by the authors’ direct or indirect involvement.
Special attention is paid to HR consulting in multinational firms and public sector organizations.
Keywords: Central and Eastern Europe (CEE), Human Resource Management (HRM), Hungary, Management
Consulting, Multinational Companies (MNCs), Transitional Economies
1. Introduction
In undertaking a study of management consulting with
specific attention on HR consulting practices in different
countries in Central and Eastern Europe, and specifically
in Hungary, we begin by adopting a broad framework
encompassing the major external and internal factors that
affect the evolution of such activity. Figure 1 proves
particularly useful when discussing the phases of devel-
opment that consulting organizations and their clients
have experienced during the past 18 years in Hungary
and elsewhere in Central and Eastern Europe.
While a discussion concerning each item and the rela-
Figure 1. Generic model on the context of management consulting industry in six CEE countries.

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of 301
Empirical Experiences
tionships among them in this model is beyond the scope
of this paper, this model provides a context for the dis-
cussion, consistent with recent presentations highlighting
the criticality of HR consulting variables in the context of
situational variables. This model is based on different
publications regarding general and HR related consulting
industry analysis 1-5. Generally speaking, consulting is
“a knowledge-based service, it can be sold and bought,
but it cannot be dropped on your foot, and it cannot be
displayed in a shop-window. The service of a consultant
is often intangible, hard to store and/or transport, and
difficult to demonstrate its advantages to potential cli-
ents” 6. Sveiby 7 describes a knowledge-intensive
organization as one in which the majority of employees
are highly educated, and the product is not standardized
and involves a high degree of problem-solving skills and
information manipulation. In this respect of such services
we need to highlight four important aspects in the fol-
lowing areas:
 Human capital and knowledge intensive,
 High degree of intangible activities and services,
 Difficulties in standardization,
 Intensive interaction between consultants and cli-
ents.
Management consulting is the rendering of independ-
ent advice and assistance about management issues. This
typically includes identifying and investigating problems
and/or opportunities, recommending appropriate action
and helping to implement those recommendations. Be-
sides traditional management consulting (e.g. strategy,
organization, HR, change management, IT advice and
project management) new service lines (e.g. development
and integration excluding software development and out-
sourcing) also belong to this profession 2,5.
1.1. Underlying Issues
The one-party political and power system in CEE coun-
tries collapsed at the end of the 1980s and these countries
are now well on their way in the move from dictatorship
to democracy. The dizzying speed of the capitalist ren-
aissance in the past 18 years has tied a number of coun-
tries—ten new EU members (the Czech Republic, three
Baltic States, Hungary, Poland, Slovakia, Slovenia, Ro-
mania and Bulgaria)—more closely to the West than at
any time in previous decades. Such a quick transition
from centralized state control and national economic
planning to free-market, globally competitive capitalism
is unprecedented in the history of the world. This diffi-
cult political and economic process has had the cones-
quences shown below.
First, the political and administrative map of the region
has undergone drastic change. Before the sweeping po-
litical transformation, eight countries existed in this re-
gion; now, besides the Eurasian region of the former So-
viet Union, there are 16 different sovereign countries
with a combined population of more than 200 million.
Before these changes, from a cultural perspective, the
whole region had been treated in a very similar manner
by the Western world, all were considered to be “behind
the Iron Curtain”. These nations belonged to the commu-
nist bloc. We have to recognize that, behind the new
borders, there is a historically and culturally highly di-
versified environment. Recognizing the complexity of
this increasing regional diversity both perceived and real,
is critical to understand the different management prac-
tices and their logical consequences on management
consulting.
The second major consequence of the transition has
been privatization. The private sector has become domi-
nant in the CEE in GDP terms. The highest level of pri-
vatization occurred in the Czech Republic, Poland and
Hungary. An important characteristic of Central and
Eastern European privatization is that besides internal
forces (managers and workers buy-out) 8 foreign capi-
tal played a key role in the process. Certain western poli-
ticians refused to create a new Marshall Plan. FDI into
CEE countries has gradually increased since the begin-
ning of the 1990s when these countries abandoned their
socialist systems and started market-oriented reforms
9,10. According to data gathered by Lewis 11, around
US$ 260 bn. of foreign direct investment (FDI) has ar-
rived in our region over the past 15 years. The plan for
CEE countries was that multinationals’ investments were
going to fill this gap.
Third, the transition has been overshadowed by high
inflation and a drastic decrease in output performance
during the 1990s, with more and more countries in the
region trying to change this trend. Today, most of their
economies have begun to grow. Despite the recent eco-
nomic growth and lower inflation rates of many CEE
countries, a wide range of differences in GDP and GDP
per capita remains between the earlier EU members and
those countries that have recently joined. Due to the lat-
est global economic crisis, “the growth rates in CEE re-
gion are beginning to slow down, the opposite is the case
with inflation” 12.
From the point of view of our topic, it is worth taking
an overview of the socio-economic characteristics in the
countries examined. If we compare the six countries
based on economic performance and cultural indicators
(based upon 2008), we can conclude that:
 Of the six, Poland is the biggest in terms of both
population and territory. Bulgaria, Czech Republic
and Hungary are roughly the same size. Romania is

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
302
Empirical Experiences
second largest in terms of territory and population.
Slovenia is the smallest in terms of both territory
and population.
 With regard to GDP per capita—based on 2008
World Fact Book data—the ranking of the countries
is: Slovenia $30.000; Czech Republic: $26.000;
Hungary $18.600; Poland: $17.300 Romania:
$12.300 and Bulgaria $12.300.
 In recent years, including 2008 (the basis of the
comparison) the Bulgarian, Czech, Polish, Roma-
nian and Slovenian GDPs increased significantly
more than 2.5% and 7.1%. The Hungarian GDP in-
creases hardly above 0%.
 Inflation was lowest in Poland (4.2%). The Bulgar-
ian, Czech, Hungarian and Romanian inflation data
were approximately the same for 2008, around 6
and 7.8%.
 Probably due to the high number –3 - 3.5 million,
according to certain estimates—of Romanian guest
workers, the unemployment rate there is 4.4%, well
below the EU average. Bulgarian, Czech, Hungar-
ian and Slovenian rates approximated to the EU av-
erage, at around 5.4 and 8.7%. Unemployment was
highest in Poland (9.8%).
 With regard to culture, following the dimensions set
up by Hofstede 13, we can affirm that power dis-
tance is greatest in Romania (90). Bulgarians and
Romanians are the least individualistic (30), whilst
this indicator in the other countries varies between
58 and 60. Slovenians are the most individualistic.
Hungarians the most masculine (88) while the same
indicator is 55 in Czech Republic, 42 in Romania
and 40 in Bulgaria. Slovenians have the lowest un-
certainty avoidance index (27). The highest score of
this indicator (93) is occurred in Poland 14.
It can be seen that all six countries differ in territorial,
economic, and cultural aspects. However, the crisis had
reached all by the end of 2008 and governments were
forced to respond to the challenges. Most responses were
similar although a few minor differences could be seen
due to the above variations.
1.2. Emerging Issues
In addition, the latest trends of globalization and enlarge-
ment of the European Union have influenced the trans-
formation of the CEE countries. Today’s globalization is
very different from the 1990s. Key drivers of the global-
ization are the market and no ideology 15. New MNEs
from China, Latin America and oil-rich Russia have
moved into this region. “By manufacturing in these coun-
tries they avoid the substantial tariffs that the European
Union imposes on imports e.g. from China 16. In fact
nowadays, traditional investors looking for cheap labour
have already started to relocate from the region, but
knowledge-intensive industries and service-sector in-
vestments appear to be taking their place. According to
different sources 17, many investors choose this area,
not only because of its cheap labour; the skilled, blue-
collar workforce, engineers, technicians and perceived
higher flexibility are also among the key motives.
2. General Evolution of Management
Consulting in the Region
2.1. Early Years and Communist Past
Management consulting on a global scale traces its ori-
gins to the 19th century, with the early pioneers appear-
ing in England and the United States. Among companies,
Arthur D. Little claims to be the first “pure” consultancy,
tracing its founding to 1886. But even before ADL, we
can cite the names of Samuel Price, George Touch, and
William Deloitte of auditing fame. This group of indi-
viduals and small firms constitute the true first genera-
tion of advisors to business. They were followed by a big
wave of second generation whose members include Ed-
win Booz, James McKinsey, Tom Kearney, George Fry,
Lydon Urwick, Charles Bedaux and others; they and
their small consulting firms made their appearance on the
two sides of the Atlantic during 1910-1940.
But it was the advocates of the “scientific manage-
ment” doctrine who made their presence first in Central
Europe: F. Taylor, L. Gilberth, and H. Gantt. These sys-
tem analysts focused on work processes, productivity,
and the man-machine interface. Their appeal to the many
manufacturers of Central and Eastern Europe emphasized
squeezing more output from a given input; but their un-
derstanding of human motivation or the role of fatigue
was meagre. Thus, for example, in the 1920s, the ‘Taylor
Office’ ran full-page print ads in Hungary offering big
cost savings, organization, mechanization and “rationali-
zation” of office and factory processes. These advertisi-
ments offered a free initial visit, access to 60 experts, and
alternative solutions to achieving higher productivity in
all operations.
During the late 1920s and the 1930s, West European
management consultants entered Central and Eastern
Europe, emphasizing their proximity and their expertise
in the field of office procedures, accounting, and admini-
stration. The “Bedaux Office” opened branches in sev-
eral countries. German companies came to be dominant,
stressing their expertise. Others, such as the Dutch firm
of Indorag, also assisted large manufacturing and service
firms in the area of re-engineering business processes.
One of the largest local consulting firms was Evolut of

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of 303
Empirical Experiences
Hungary, patterned upon German examples. But almost
all activity, by foreign and domestic firms, was sus-
pended during the years of World War II.
After the Soviet Union asserted its political and eco-
nomic power over the small nations of Central and East-
ern Europe in the late 1940s, the puppet dictatorships
have put into place cultural and managerial changes as
well. Studies of leadership, managerial practice and what
today we call organizational behaviour were widely dis-
dained. Management theoreticians and practitioners were
out; bureaucrats and planners were in. The regimes of the
1950s proved to be truly despotic and depressing in every
way and in every country of the region. Factories focused
on meeting quotas set in unit terms, with no heed to prof-
its. The laborers’ favorite phrase was: “We pretend to
work and the state pretends to pay us.”
However, by the 1960s, various institutes affiliated
with ministries began to give advice and direction to
companies belonging to their sector (e.g. agriculture,
heavy industry, etc.) in regard to improving productivity,
profits, and exports. In the previous regime scientific and
branch institutes, universities, the Institute for Industry
Development and the Institute of Management were the
bases of management consulting. These institutes fol-
lowed the Soviet school of management, political eco-
nomics and management science (Russian acronym NOT
= Scientific Organization of Work). Most projects and
assignments were exclusively related to Industrial Or-
ganization and Management Information Systems (MIS)
18.
By the mid-1970s, especially in Hungary and Poland,
staff members of institutes and leading corporate officers
were allowed occasional visits abroad. A few select Wes-
tern consultants were invited to assist in certain landmark
projects, e.g. at the Taurus Rubber Works in Hungary,
Podem and Balkancar in Bulgaria.
International Labor Organization (ILO), UNIDO, World
Bank and other international development agencies have
started to provide internships and engagement opportuni-
ties to professionals from CEE countries. Later on man-
agement training and development institutions have been
created upon insistence of ILO and UNIDO in almost all
CEE countries 1.
The universities began to offer training, and textbooks
were published in management and marketing. Re-
searchers began to probe why the East lagged so far be-
hind the West on almost all indicators. Then in the early
1980s, independent advisers made their appearance of-
fering consulting services; some were just domestic, but
others were joint ventures with “name partners” from the
West, especially from Austria, Switzerland, and West
Germany.
Slovenia, as part of the former Yugoslavia, has fol-
lowed a divergent socialistic approach in comparison
with other CEE countries. The first post-Second World
War management consulting company in Slovenia was
established in 1953. Consulting then focused on cost re-
duction and auditing of balance sheets. By the mid-
1960’s they started with market research, financial con-
sulting, support in exports and international cooperation,
introduction of information systems, company organiza-
tion, teamwork and training company executives and
experts. Even at that time Slovenian consulting compa-
nies have always been open to market requirements and
adapted their services to accommodate these require-
ments 19,20.
As it was previously, consulting approaches in CEE
countries were predominantly similar to the school of
scientific management. Human Resource Consulting
(HRC) hardly existed at that time. Since the changes that
happened in the various regimes, consulting activity
linked to privatization, firm restructuring and develop-
ment has been improving significantly in all countries.
Management consulting including HR consulting under-
went a significant development in the region.
Before we continue our analysis on the evolution of
management consulting with a particular view on HR
consulting let’s take a bird’s eye view on the develop-
ment of the region and general trends of the HR practice
in these countries.
2.2. The New Era (1989-Present)
Management consultants made their appearance, rela-
tively quickly, led by the invasion of large Western ac-
countants such as Andersen, Price Waterhouse, Ernst &
Young, et al.; law firms such as Baker & McKenzie,
Squire Saunders; and, the “pure players” such as McKin-
sey, Bain, BCG, Roland Berger, Hay, Mercer and others.
In all countries, domestic consultants surfaced, some
staying independent, some soon merging with larger en-
tities. Several government “think tanks” and institutes
spun themselves off from ministries and began aggres-
sive campaigns, seeking consultancies from both gov-
ernment and the private sector. Finally, a few “Blue
Ribbon” commissions emerged―staffed by big name
domestic and foreign experts―advising central govern-
ments on needed privatization and other reforms.
The major subjects for management consulting evolved
over the decades in Eastern Europe reflecting the special
situation of each nation and the region. In general, how-
ever, the pattern followed that of the West, with empha-
sis on improving agriculture and manufacturing proc-
esses early on, followed by focus on corporate stream-
lining, investment, and market development. Since 1989,

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304
Empirical Experiences
the emphasis shifted to business strategy, human re-
sources, information technology, and a mix of “old top-
ics” ranging from workplace operations to inventory con-
trol.
2.3. Key Drivers of Growth and Decline
Many positive factors came together to promote growth
of management consulting in Central and Eastern Europe
in the 1990s; some of these will pass from the scene in
the current decade, but others will remain. The “regime
change” as some labelled the shift from socialism to
capitalism and from one party rule (or outright dictator-
ship) to democracy, gave impetus to large-scale privati-
zation. The mechanics of this undertaking, whether by
voucher or other schemes, offered many opportunities for
consultants. Coupled with this process, many domestic
firms were to be sold off to foreign entities or merged
with them to form joint ventures. In either case, there
was a veritable flood of “M & A” or merger and acquisi-
tion activity, representing assignments for lawyers, ac-
countants, and, yes, management consultants. A generous
inflow of “greenfield investments” for new factories or
office buildings necessitated the use of advisory services.
An increasing number of theorists and experts claim that
privatization does not automatically improve the effect-
tiveness of the government, the companies and the social
welfare systems 8. On the contrary, it may well in-
crease opportunities for corruption and bribery. When a
company is privatized or managed by Western-type
business rules, there is no guarantee that the values and
mindsets of the people will change along with it. The
adaptation of all the financial, legal, technical and sales
frameworks in a privatized local company or in compa-
nies with foreign participation represents only the first
stage in the creation of a Western-type enterprise. Once
all this is in place, one must start to consider how to get
the people and the organization to perform in a competi-
tive way. Even the best financial infrastructure in the
world will not turn companies around from a command
economy to a market economy if the people and the or-
ganization do not perform appropriately. Today more and
more signs indicate that in these countries other areas of
the consulting business besides financial and privatiza-
tion consulting will also emerge.
Management consultancy received an impetus from
the government and the nonprofits sectors as well. Min-
istries had to be re-organized; regulations had to be re-
vised or reinterpreted; and the relationship between pol-
icy-makers and private sector leaders had to be re-built.
In addition, government offices also had to tackle new
human resource, technology, and operational problems.
Bain, BCG, Berger, Kearney, McKinsey, and others were
ready to assist and advise. Transforming socialist minis-
tries and bureaucracies required new thinking. Besides
traditional consultancies, many different donor organiza-
tions including e.g. EU, ILO, World Bank, US-Aid, and
Japanese Productivity Centre have contributed to the
immense work of transformation.
On the academic and practitioner fronts, new books
and journals appeared, including some translated classics
from the West, e.g. M. Kubr’s comprehensive volume
(sponsored by the International Labor Organization).
Universities started to offer many more business subjects;
e.g. the University of Pecs in Southern Hungary and
University Pitesti in Romania offered specialization in
management consultancy at the master’s (Msc.) level.
Finally, several professional groups, associations, and
federations established standards, especially FEACO, the
European Federation of Management Consultancy Or-
ganizations. Today, six countries in the region have na-
tional associations that are full members of FEACO:
Bulgaria, the Czech Republic, Hungary, Poland, Roma-
nia and Slovenia.
The Institute of Management Consultants Institutions
(ICMCI) was founded in 1968 in England, to further the
professional training of the local consultants (Certified
Management Consultant, CMC). The ICMCI is repre-
sented in all 6 FEACO member countries. They operate
under the umbrella of local FEACO institutions.
The slowdown in the global economy during 2001-
2003 adversely affected consultancy in the region as did
cutbacks in direct foreign investment. Numerous German,
US, and other Western firms which provided ample sums
in the past have chosen to move further East, especially
to China, in search of both more lucrative deals and
lower wage-scales.
An offset to the above trends is the needed preparation
for entry into the European Union which has required
major efforts on the part of private and public sector
managers. On balance, however, consultants will focus
more on the continuing demand to refine or re-engineer
business processes, including aligning HR and IT poli-
cies with overall strategic plans. Of course, consultants
will have to do more than deliver reports—they are being
asked to become partners and help to implement recom-
mended changes.
Meanwhile the recovery cycle began in earnest in
2003 and the upward trend has been fairly consistent for
the past three years” 21. This region has gained from
this upward trend as well. Due to the latest FEACO sta-
tistics (2010) the CEE management consulting market
amounted to 2.3% (2.1 billion Euros) of the total Euro-
pean management consulting market. Six and half per-
cent of consulting staff (37,275 professionals) are em-

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
Empirical Experiences
305
ployed in CEE countries. Table 1 demonstrates the av-
erage growth rate in 2009 in the CEE MC market that
was –13%.
3. HR Evolution in the Region
3.1. HR beyond Communist Bloc
Generally speaking, HR activity in most East European
countries, prior to the changes, was very tightly con-
trolled by the state. Personnel- (meaning management-)
related issues were under the close control of the party
and heads of state. The key positions in companies were
closely monitored by the party and by state bureaucracy.
Management was not considered as a profession and de-
cisions regarding promotion were not based on perform-
ance assessment 22. In several cases; the selection of
specialists and personnel-related decisions were greatly
influenced by party- and government politics and object-
tives, and the party instructed company directors to blend
together the aspects of individual and collective leader-
ship 23.
Certainly, there were significant differences between
the certain countries in this respect. It is worth mention-
ing the surveys of Tung and Havlovic 24 revealing that
the influence of the socialist party and the home affairs
authorities was much lower in the field of Polish HR than
in the case of human resource departments in the mean-
while split-up Czech-Slovakia. It is important to point
out that in the 80 in Hungary “the view was given voice
that economic reform should be accompanied by the re-
form of the organizational relations and personnel active-
ity. Before, the renewal of the personnel function was a
“top”-down process”. As a result of the referred surveys,
a party decree was formed in 1985 ordering that profes-
sional management activity has to be separated form
party political activity.
The traditional personnel department consisted of two
separate sections. One dealt with office staff and man-
agement and the other with blue-collar workers.
Although it may seem strange for somebody used to a
different type of economic system, under this regime, the
managing directors of state companies had little decision-
making power in respect of the amount to be paid to most
employees; and they could only marginally influence the
award of non-wage benefits 25. High performance at
work was a rarity; all that was expected was average per-
formance. Performance-related pay did not exist and uni-
fied pay structures were preferred. Employees who sim-
ply turned up to work could keep their jobs; and, if their
superior wanted them to carry out some important task,
he had to offer a premium in return, a premium which
could sometimes be as high as 200% of an employee’s
basic salary. Since the level of a premium was decided at
a personal meeting; an atmosphere of tension and distrust
was created, since employees suspected that their col-
leagues might have succeeded in bargaining for higher
remuneration than they.
People attempted to avoid taking individual responsi-
bility to the maximum extent possible 22, and only a
few directors accepted the risks. Employees, superiors
and directors seldom had sufficient information to make
appropriate decisions and communication often moved in
a single direction; that is, downwards. Trade unions ex-
isted in the time of the previous regime also; but only as
part of the government machinery; and no less than 90%
of employees were trade union members.
3.2. HR in Transition
Key trend of HR in transition can be summarized as fol-
lows 26-28:
 First cames the creation of a new labour law envi-
ronment. The New Labor Law was implemented in
all CEE countries and covers all aspects of em-
ployment in the private (although not in the public)
sector. In respect of the latter, a separate Law was
Table 1. Consulting in FEACO member Central/Eastern European countries (2006 and 2009).
Feaco Member
Association Member 2010 CMC Market (2006) Market (2009)
Country Year of
establishment Individual Firms Individuals FirmsIntroducedCertifiedRevenue
(Million)
Consultant
(person)
Growth
(%)
Revenue
(Million)
Consultant
(person)
Growth
(%)
Bulgaria 1990 0 32 Not Not 1999 57 56 2500 6.1% 90 1400 n.a.
Czech R. 1990 12 39 Not 16 2008 4 407 9200 6.4% 460 8500 n.a.
Hungary 1990 0 55 Not 26 1994 153 270 4800 3.9% 245 4300 –22.0%
Poland 1990 120 31 115 30 1997 44 260 6000 6.1% 310 5500 na
Romania 1992 0 73 Not 84 2001 31 260 6500 7.7% 350 8000 –16.0%
Slovenia 1992 0 73 Yes, n.a. Yes, n.a.1997 40 142 2100 5.7% 268.5 2700 1.5%
Sources: FEACO (2007). Survey of the European Management Consultancy Market 2006-2007. Brussels: FEACO and FEACO (2009). Survey of the European
anagement Consultancy Market 2008-2009. Brussels: FEACO. M

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
306
Empirical Experiences
enacted regarding the status of civil and public ser-
vants, including the establishment of educational
and promotional requirements 29
 Second is the ending of the egalitarian pay struc-
tures which had been a priority during the early
years of socialism. In his book about the roles
played by international enterprises in Eastern Europe;
Lewis 11 explains that in, many respects, these
multinational companies have redrawn the labor
market maps of the former socialist countries. They
eliminated the equality factor and introduced basic
salaries which were in accordance with the impor-
tance of jobs. Outstanding job performance was
awarded by outstanding pay, and, in addition to
technical skills, they emphasized the importance of
foreign language ability. Pay differentials are now
more common and have, in fact, increased from 1:5
up to 1:15/20 between highly paid managers and
skilled workers.
 Third came the end of the era of the right to work –
job entitlement. In parallel with the right to change
jobs there came for many workers considerable dif-
ficulty in finding jobs as unemployment became
common in CEE countries.
 Fourth came the restructuring of the social welfare
system—something which is now placing a tax
burden on both employers and employees. The rela-
tively cheap labour-force is made more expensive
with increasing payroll taxes for services once pro-
vided entirely by the state. Employers’ social se-
curity contributions for health and pensions in dif-
ferent CEE countries total somewhere in the range
of 28.7 - 33.5 percent. Political and economic
changes have created unprecedented issues and
demonstrated the need for a total reconstruction of
the whole social and welfare system.
At the beginning of the change or system, the labour
markets of the Eastern European countries were not able
to satisfy the special needs (e.g. market-oriented man-
agement skills, new kind of marketing, financial and con-
trolling knowledge, etc.) expected by international com-
panies coming to different countries of the region. This
situation described above had changed a lot by the end of
the 90s. Shekshena 30 writes that “by this time the la-
bour market had significantly transformed, the business
knowledge of local people had highly increased their
concept of business ethics improved and applicants de-
veloped a more practical attitude”. At the same time re-
searchers of this field recognized that “Eastern-European
—including Russian—tended to underestimate the new
challenges and the complexity of tasks arising from the
free market environment” 31. The labor markets of
Eastern European countries have significantly changed
by now. The shortage in the case of managerial, legal,
economic and administrative positions has notably de-
creased. However, there is severe shortage of technicians,
IT engineers, doctors and skilled workers.
High amounts of workforce have migrated from many
Eastern European countries to some Western EU coun-
tries. This has created an interesting situation e.g. in Ro-
mania, one if the neighboring countries of Hungary, al-
ready mentioned above. The earlier very cheap labor
force has suddenly become expensive what has made life
difficult for local employers seeking for labor force and
for HR specialists. After the EU expansion in 2004, a
new wave of emigrants set off from East towards the
West. It is important to indicate that no sooner than the
significant wave of emigrants reached the Western coun-
tries, mainly Ireland, England, Italy and Spain, an oppo-
site trend has started to take shape. As a result of the Irish
economic recession, many Polish guest workers consider
returning home.
In former socialist countries (excluding Slovenia) the
number of organized employees in the public sector has
dramatically decreased 32. After the text edit has been
completed, the paper is ready for the template. Duplicate
the template file by using the Save As command, and use
the naming convention prescribed by your journal for the
name of your paper. In this newly created file, highlight
all of the contents and import your prepared text file.
You are now ready to style your paper.
4. Consultancies in HRM in Analysed
Markets
4.1. HR Consultancies
The Eastern European HR consulting market is highly
fragmented. The competition is much intensified between
global players and local firms in each CEE country. HR
consulting seems to be a great business opportunity for
traditional firms and new entrants as well. According to
several researchers’ opinion 33,34 significant consoli-
dation is expected in the global HR consulting business
between global and local firms.
Most of the global consulting companies opened local
offices in CEE countries during the transition or earlier.
Some of them led by their own business interests, others
settled as helping partners of MNEs. The local market
had been underrepresented; therefore the early birds
(PWC, IBM, Accenture, Deloitte, KPMG, Mercer, Hay,
Hewitt, AON) could gain significant market shares. The
competition for the bigger clients was among the global
firms. The domestic/local consulting firms had several
disadvantages:

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of 307
Empirical Experiences
 Lack of know how
 Lack of practice
By analyzing and learning the “way of the consulting
business” local firms started to strengthen. As subcon-
tractors, local consulting companies had been partakers
in the knowledge transfer as well. The domestic market
in the CEE region has also changed. SMEs also demand
consulting services within their range of possibilities
(money, time, power).
In 2007 we can declare that both the traditional global
competitors and local competitors (e.g. Selectio/Croatia
and MCS/Hungary etc.) are very strong. Competition has
been sharpened and the market shares also have changed
significantly. Local HR consulting firms have also ex-
tended their services.
According to Kennedy’s report 35 the big firms own
70% of the total European HR consulting market. This
proportion, based on different country analysis’ at the
latest FEACO conferences 2006 (Budapest), 2007 (War-
szawa) and 2008 (Dubrovnik), is less in different coun-
tries of the CEE region. Globally there are 32 major HR
consulting firms or business of general or IT firms. Due
to our estimation one third of these firms are present in
the CEE region. As Table 2 below presents the over-
whelmingly majority of big HR businesses which have
offices in this region.
4.2. Path to CEE Makets―Regional Presence
In seeking to understand the various factors driving in-
Table 2. HR consulting in Central/Eastern European coun-
tries (2006-2007).
Market share Present
No Firm Europe
total
CEE
Countries
Other parts
of Europe
CEE
Countries
1 PWC Yes Yes
2 Mercer Yes Yes
3 Accenture Yes Yes
4 Watson Wyatt Yes Yes
5 Deloitte Yes Yes
6 Towers Perrin Yes No
7 Hay Group Yes Yes
8 Aon Consulting Yes Yes
9 IBM Yes Yes
10 Ernst & Young
67% 55%
Yes Yes
11 Hewitt Yes Yes
12 Buck Consultants Yes No
13 Other 33% 45%
Total 100% 100%
Source: Kennedy (2006): Kennedy HR Consulting Marketplace 2007-2011.
Kennedy Information Institute and firms’ websites.
ternational or local firms to extend their operation to
CEE countries, we can identify the following important
factors 36,37:
1) Client demand has played an important role in in-
sisting that international consultancies move to this region.
The internationalization of consultancy has been im-
mensely facilitated by the fact that during the last years
there has been a very strong globalization in the whole
business world. The expansion of industrial, banking and
other clients of the home country have forced to expand
these companies, as well. The possibility to take an active
part in preparation and managing government-level pro-
jects, international banking projects (e.g. World Bank,
EBRD) and EU projects (e.g. PHARE) contributes to their
entering this region as well. Many Western European
consultancies (e.g. Atos, ECO etc.) with strong EU as-
signment references have created local project offices.
These units offer coordination and back office support to
any HR and non HR assignment occurring in these coun-
tries.
2) The consultancy companies’ inclination for interna-
tional growth cannot be explained simply by economic
reasons. Those employees, who join such companies,
have a motivation to feel intellectual satisfaction every
day. These people have come from business schools.
They work hard, they are ready to travel extensively and
work under tremendous pressure. The international ex-
pansion of consultancy companies is a good possibility to
attract these kinds of people. This personal factor was as
an underlying motivation in the case of CEE countries as
well. We met such partners who have hired first-year
associates from the native labor pools within these coun-
tries. These partners remained outside of targeted coun-
tries and helped to build business. This approach requires
a longer business development process than the previous
one.
3) Today an average consultant fee amounts to 1000
Euro/day at international consultancies. Revenue factor
plays an increasing role in entering the region or into a
new country of the CEE region.
4) The latest development of globalization put in fur-
ther ground the cost factor in the internationalization of
the professional service industry. These companies try to
consolidate their local offices into their newly developed
global or pan-European organizational structure. HR
consultancies run between 3 - 4 (Human Capital/HC,
Information, Research etc.) and 6 - 10 (HC, HR Trans-
formation, Talent Management, Health & Benefit, Mer-
ger & Acquistions/M & A, Executive Compensation, Em-
ployee Engagement, Outsourcing etc.) lines of business.
With the increasing maturity of their local subsidiaries, a
number of major HR consultancies try to integrate local

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
308
Empirical Experiences
operational units into their regional or pan-European
business lines. It means that their country managers lose
traditional business development and operational roles.
As their new emerging role will be coordinating joint
efforts of different business lines, managed directly out-
side of the country.
5) Due to our field experience, few big local compa-
nies stated that they have an interest to set up a presence
in neighbouring countries. We found such firms among
HR consultancies mostly in the field of personnel selec-
tion and training.
We already identified four major drivers of growth
that govern path of management consultancies in the
region: client demand, economic reason, revenue and
cost factors as well. In addition to these fundamental
features, the domestic (or: local, national) management
consultancies of the region have chosen to emphasize the
following aspects in their service offerings and promo-
tion schemes: 1) language skills; 2) specialization by
industry and/or function; 3) use of multiple avenues of
communication; and 4) lower per diem fees. While a few
of these consultancies forged joint ventures with Western
counterparts, many refused opportunities to merge and
stayed entrepreneurial (Lunsford & Fussell, 1993).
5. Convergences and Divergences in HR
Consulting
Consultancy, like any kind of problem-solving activity is
a multi-step process. Typical consultant intervention
methods in relation to HR―based on the Markam model
(1999)―can be divided into four major categories as
follows: provide information-benchmarking, design sys-
tems and framework, delivery change & learning and
carry out outsourcing. Depending on the characteristics
of the problem (e.g. operation management, organiza-
tional development or IT) various consulting companies
and theorists will recommend different solutions on how
to proceed with the consultancy assignment. Various
consulting books 3,38-41 offer several models. In gen-
eral, a consulting process consists of five steps. Regard-
ing this matter one of the most typical discussion subjects
is the cultural aspect. The subject matter of convergence
and divergence is not new in Human Resource Manage-
ment 14,42,43 but it is brand new in the management
consulting literature. Three major cultural streams can be
identified in connection with the matter:
5.1. Convergence (Universalist) Stream
Representatives of the so-called convergence (universal-
ist) stream 45,46 believe that technological develop-
ment dims cultural differences and fosters convergence
among nations and sectors as well. The expansion of
globalization has made this theory increasingly widely
accepted in the field of HR 47,48. Due to this theory, a
universalistic consultant doesn’t recognize cultural and
people related differences. For him the world is flat, in-
different to where he stays and works.
Today, the increasing range of product and service are
marketed online not only in Western Europe but in Cen-
tral/Eastern Europe. As changes are accelerating, the
companies specialized in delivering these services will
have to satisfy their clients’ needs more quickly, and new
technologies and e-solutions will probably provide a lot
of support in this.
The above discussion has centered on the positive out-
come of the usage of new technologies and the univer-
salistic management style. But we shouldn’t forget that a
robust, expensive expert system, developed in US does
not always satisfy specific needs of the CEE consulting
market. Consequently, we argue that a jointly developed
system, less expensive and closer to the specific demands
of these markets in the CEE region is needed.
5.2. Divergent (Cultural) Stream
At the opposite pole, a divergence perspective stresses
national, cultural and sectoral differences. The divergent
(contextual) stream, however, highlights the importance
of local culture, business and institutional systems and
the labor market when applying management techniques
14,44,49,50. According to Moran 50  “each techno-
logical transfer has a cultural dimension”. Consultancies
are less globalized than manufacturing firms 37. In our
view, the complexity of a HR consultancy business in
different countries and employing different professionals
is a key variable that reinforces divergent approaches.
Regardless of headquarter, donor organization (e.g. EU,
World Bank etc.) or expat (who is a foreign representa-
tive of mother company in host country) driven assign-
ments, local language plays a primary role. Reports,
presentations and workshops are delivered in the local
language or in a bilingual way. HR is specifically subject
to specific forms of local regulation including labor law,
taxation and benefit scheme.
5.3. Cross-Vergence Stream
According to the middle-of-the-road, cross-vergence ap-
proach, convergence and divergence coexist in the world
52. Looking at Europe, Brewster 42 identifies the
differences between the US and European HR manage-
ment systems, the differences between regional group-
ings within Europe, and then the differences at the na-
tional level. Traditional values of the organizations of the
private and public sectors are fundamentally different
53, which, in consequence, results in the difference of

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
Empirical Experiences
309
substance of the organization, management, and man-
agement environment of human resources. Broad re-
search has shown the influence of ownership on HRM
policies and practices. Local subsidiaries of multinational
companies emphasize and promote globalized, regional-
ized or localized HR frameworks and systems. HR prac-
tices of local public organizations are driven by collec-
tive bargaining; however, certain convergence has been
initiated on behalf of these institutions to learn and ab-
sorb modern HR tools 54,55.
6. Consulting in HRM
This section of our paper relies on three major sets of
multiyear surveys, conducted by the authors’ direct or
indirect involvement.
6.1. Proportion of HR Consulting
The first set was and is conducted by FEACO among its
23 member institutions including the previously men-
tioned 6 CEE countries. The authors of this paper have
been involved in reviewing the result of the data analysis.
In this subsection of our paper we rely on a subset of the
FEACO data (1999-2004 and 2007)―the proportion of
HRM consulting in Western Europe and in Eastern
Europe in light of the total consulting market. For exam-
ple, in Eastern Europe the use of HR consulting service
exceeded 15% - 24% of firms surveyed, far beyond the
US or Western European average (10.8%) 55-57 until
2004. This difference may stem from the fact that this
region has no tradition of Western like people manage-
ment and training. Before leaving this issue it is appro-
priate to acknowledge that the latest research data shows
a more consolidated development in CEE countries re-
garding HR and non-HR consultancies between Eastern
and Western European practices. Most of HR related
critical changes are over in this region. In other words,
there is no need to involve HR consultancies in CEE
countries above the usual level of developed economies.
Concerning the European Management Consulting mar-
ket, the decreasing trend in the contribution of HR con-
sulting of the total turnover of MC had been continued;
the share of HRC reached 9% at the whole European MC
market in 2008. Table 3 shows that in 2005 the propor-
tion of HRC equaled to 20% of the European MC market.
In the year of 2008, in the Hungarian MC market 16 mil-
lion euros (3% of the Hungarian MC turnover), in Slove-
nia 34million euros (6% of the Slovenian MC turnover))
were generated in HRC. There are no discrepancies be-
tween the trend characterizing the Western European MC
market and the Eastern European MC market concerning
only the HR consulting field.
6.2. Changes in Use of External HR Consultants
The second set was and is conducted by the Centre for
European HRM at the School of Management, Cranfield
University, in the UK. Cranet surveys were conducted in
the 1990s and again in 2003 and 2005. In this subsection
of our paper we rely on a subset of the 2005 Cranet data-
set—external service providers.
Table 4 provides data on the significance of typical
areas of external consulting providers’ practices in six
Eastern European countries (including all analyzed coun-
tries), and all 32 European and Non-European countries.
The total international sample comprises 7952 elements,
of which 864 respondents are from Eastern Europe.
The studied samples show great similarity in training and
development being the HR function where external pro-
fessional providers have a robust presence every- where.
More than 85% of the responding organizations in all
three samples stated that they used the specialist ser-
vices of training firms. External providers are also used
by organizations in all three samples (at a rate of about
70%) when HR information systems are configured and
developed.
In the other HR fields surveyed it can be seen that the
use of external professional providers is higher in the
Table 3. HR Consulting 2008.
Items BulgariaCzech R. Hungary Poland RomaniaSlovenia
Total Turnover
of MC
(million €)
97 475 315 324 460 265
MC as% in GDP0.29 0.32 0.3 0.09 0.34 0.71
HR Consulting
as% of MC 5.5%8.8%5.0% 12.9% 7.0%6.5%
Sources: FEACO (2010). Survey of the European Management Consultancy
Market. 2009-2010. Brussels: FEACO and Primary research by the authors.
Table 4. Typical areas of external consulting providers.
Use of external professional providers (%)
Country(ies) Payroll Benefits Pensions Training and developmentWorkforce reduction, outplacementHRIS
Hungary 45.20 48.40 37.00 86.20 45.20 78.70
European 45.80 47.50 35.60 86.20 10.00 69.10
European 59.20 64.00 67.30 88.60 57.10 74.30
Source: Primary research by the authors and Cranet (2006). International Executive Report 2005. Cranet-Survey on Comparative Human Resource Management,
ranfield: Cranet-Cranfield University. C

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
310
Empirical Experiences
total sample than in the Eastern European one. The larg-
est differences may be found in the areas of pension ad-
ministration (nearly 30 percentage points) and downsize-
ing and workforce outplacement (almost 20 percentage
points).
Nearly half of the Eastern European organizations turn
to external providers when developing, running and
managing pay and benefits systems. In the area of payroll,
the difference from or the lag behind the frequency of
use in the total sample is not significant (only 5 percent-
age points), but it is remarkable in the area of benefits
(nearly 15 percentage points).
According to our studies, the increasing use of external
providers is the most typical at organizations rooted in
the Anglo-Saxon culture 20. In all HR fields surveyed
it can be seen that the use of external professional pro-
viders is higher in the private sector of the all surveyed
countries sample than in both samples of the public sec-
tor and the private sector of Eastern Europe countries
Table 5.
The total sample comprises 5443 private and 1944
public companies and institutions from 32 countries. The
Cranet database was adjusted to exclude nonpublic and
non-private institutions (1041). The Eastern European
sample includes 647 private and 160 public companies
and institutions from the previously mentioned six coun-
tries. The studied samples show differences with the pre-
vious comparison in pension administration. Eastern Eu-
ropean Public Sector samples are slightly higher than
Eastern European Private Sector samples. The last survey
of IPMA-HR (2006) highlights an emerging trend. More
and more public sector organizations try to replace tradi-
tional distributed HR operational models and build up
shared-service or outsourced services.
It was also observed that whilst the organizations that
had large HR departments had decreased the use of ex-
ternal providers, the ones with small personnel depart-
ments had increasingly turned to such specialists. The
smallest organizations rarely or never use external pro-
viders.
Nearly half (48.9%) of the respondents in Hungary
claimed that they had increased the use of external ser-
vice providers in the field of training and development in
the past three years, Table 6. The importance of external
consultants has increased in the fields of benefits, redun-
dancy, workforce reduction and outplacement, and HR
information systems to a smaller extent than in training
and development, but approximately by the same rate
according to roughly a quarter of the respondents. The
survey, however, also revealed that more than half of the
organizations did not use external specialists in fields
outside training and HR information systems.
6.3. Empirical Evidences on Changes of Use of
Consultants at Hungarian MNCs
The third set was a primary study of multinational com-
panies in Hungary, conducted by the authors, a total of
42 MNE subsidiaries were surveyed in 2004 and 2005.
We chose large corporations that―within somewhat
varying time frames―had gone through the five steps of
development (privatization/firm establishment, firm re-
structuring/development, learning & development, slow-
down and stabilization). An important selection criterion
was that participating firms should come from several
nations, including large European countries, the USA,
and from other regions. We contacted 50 subsidiaries,
and 42 participants accepted our invitation. Of these,
forty participants were legally independent companies.
The remaining two were divisions of another company.
The selected sample represents almost 5% of the large
Table 5. Typical areas of external consulting providers in private and public sector comparison.
Use of external professional providers (%)
Sectors Countries or regions Payroll Benefits PensionsTraining &
Development
Workforce reduction,
outplacement HRIS
Eastern European
countries 46.8 49 35 87.7 38.6 68.2
Private sector
All surveyed countries59.3 65.9 67.3 88.9 57.3 73.5
Eastern European
countries 42.7 43.1 37.9 80.1 40 70.4
Public sector
All surveyed countries58.1 58.2 66.2 86.8 54.7 75.3
Source: Primary research by the authors and Cranet (2006). International Executive Report 2005. Cranet-Survey on Comparative Human Resource Management,
Cranfield: Cranet-Cranfield University.

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of 311
Empirical Experiences
Table 6. Percentage changes in the use of external HR providers in the Hungarian sample.
HR areas
Payroll Benefits Training &
Development
Workforce reduction and
outplacement HRIS Pension
Increased 6.5 26.9 48.9 24.7 29.8 4.3
Decreased 1.1 n.a. 7.5 2.2 n.a. 2.3
Same 37.6 21.5 29.8 18.3 48.9 30.4
Not used 54.8 51.6 13.8 54.8 21.3 63.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
n.a. = not available
Source: Primary research by the authors and Cranet (2006). International Executive Report 2005. Cranet-Survey on Comparative Human Resource Management,
Cranfield: Cranet-Cranfield University.
multinational subsidiaries operating in Hungary.
One of our research topics was to analyze changes in
areas of consulting in light of firms’ development. Con-
sulting is widely used among MNEs’ subsidiaries in
Hungary, with staffing ranked as the top assignment,
followed by training, Table 7. Outsourcing is still in an
immature phase in Hungary, although rapidly gaining
ground. Big American and Western European MNEs
have traditionally relocated their business services to
India. “But India is not the only destination of substantial
outsourcing work. Firms in the CEE region perform sup-
port work for payroll, HR, architecture and engineering
as well.
6.4. Client and Consultant Relationship under
Changes
Since changes in regimes, consulting linked to privatiza-
tion, firm restructuring and development has been de-
veloping significantly in all countries. HR consulting has
undergone significant development in the region. During
the past decades the relationship between consultant and
client has changed significantly in Eastern Europe as
well. Within traditional consulting the client and the
consultant were not equal partners. The consultant, espe-
cially Western consultants, knew much more about the
methods and processes than the client who employed
him/her. In the meantime, however, managers and pro-
fessionals made up for this shortfall.
After the recession of the early 1990s the major clients
of consultancy services had become more sophisticated
buyers on consultancy services. Before consultancy firms
set the price for their services, but due to the entrance of
new, smaller firms on the MC market and due to the atti-
tude change of clients to consultancy firms, on the MC
market there existed excess supply of management con-
sultancy services. That resulted in emerging influence of
clients in the process of setting consultancy fees and pro-
ject prices 3.
Clients now expect consultants not just to simply
transfer the knowledge and documentation related to
given HR methods and procedures, but also to develop
an organizational capability that enables the company or
public institution to efficiently apply the tools imple-
mented, when the consultant’s assignment is finished.
Table 7. Changing topical utilization of external consultants (n = 42), Hungary, 2004-2005.
Research phases
Ranking of topics assigned to
consultants Transition & Learning Economic Slow-Down Steady-State
1 Staffing Staffing Staffing
2 Salary Survey & Salary ManagementTraining and development Training and development
3 Training and development Salary Survey & Salary ManagementOrganizational culr
4 Job and person profiling HRIS Salary Survey & Salary Management
5 Organizational cultu Internal Communication HRIS
Source: Primary research by the authors.

Management Consulting in Human Resource Management: Central and Eastern European Perspectives in Light of
312
Empirical Experiences
The new era creates new opportunities both for tradi-
tional consulting (facilitating change, implementing pri-
vatization) and for new (cross-border, intercultural) con-
sulting.
7. Conclusions
In the introduction of this article, we pointed out that
management consulting has been a knowledge-intensive
industry, and we turned our focus on the Eastern Euro-
pean Region, where management consulting has been
undergone significant transformation from the political
changes to 2008. (We would like to highlight that at cer-
tain parts of the article we gave insight on the effects of
the financial crisis, thus our analysis basically concerns
the time period until 2008.)
In this article we demonstrated the most substantial
aspects (e.g. privatization, appearance of multinational
corporations, development of public services and ad-
ministration, the accession to the EU etc.), that have sig-
nificantly influenced the evolution of management con-
sulting in the six referred Eastern European countries
(Bulgaria, Czech Republic, Poland, Hungary, Romania
and Slovenia). (Comments of the authors: we did select
those six Central and Eastern European countries because
upon our pre-research we found the most similarities in
the MC evolution among the given counties.)
We set the point in this article that function of HR has
started at least as “deep” as management consulting in
the six altering countries analyzed. We gave impact on
the substantial transition of HR consulting that has been
possessed in the referred countries in the last decades.
We also stated that the multinational companies played
an important, pioneer role in the transition of HR. These
MNCs did employ high ratio of HR consultants. The HR
transformation had been introduced at big national public
organizations as well. In scope of national statistical data
we denoted the appearance of the New Public Manage-
ment HR methods in this field. With regard on the acces-
sion to the European Union the number of assignments of
HR consulting had dramatically increased.
Thus these concerns were not due in case of the
SME’s HR practice.
We recognized deep changes in the client-consultant
relationship. The working process and relations of HR
clients and consultants showed serious modifications
resulting from the increased HR knowledge of clients
and from the implications of new interventions of the HR
practice. Consultants also did recognize that general so-
lution picked up from the shelf of global HR consultan-
cies had not been successfully applicable for the long
run.
Finally let’s quote a statement of the Czech President,
Vaclav Havel, made back at the beginning of the 1990’s:
“In Central and Eastern Europe everything is possible but
difficult”. If we keep this in mind during our assignments,
our consulting activity will be successful in this region as
well.
7.1. Limits and Further Plans of Research
As we have said earlier, trying to process the HR practice
of the region from a historical point of view may turn out
to be a difficult bit. We were and are aware of the indi-
cated difficulties but if we don’t even try, we won’t see
what we have achieved and where it is necessary to carry
out further research. Within the framework of a new re-
gion-wide research project, we plan to examine the role
and function of consultants in changes of HR functions,
knowledge transfer and practical applications of HR, and
the historical evolution of these factors, at the subsidiar-
ies of the international companies settling down in Hun-
gary and the Eastern European region. We try to find
answer to the question how these functions and practical
applications have adapted amidst the turbulent economic
changes of the past years by involvement of management
consultants. Our future aim is to extend our research on
analyzing the effects of the financial crisis on the Eastern
European Management Consulting industry.
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