Could a Veteran Executive Save Your Company?
These three articles,
all written by Lad'ka Bauerová,
are reprinted from The Prague Tribune, April 1998.
Some would argue that
the foreign advisor is bizarre force - and none more so than the case of
veteran executives who request to be posted overseas from the U.S. to put
their experience to good use. With careers spanning some forty years, the
veterans have few points to prove when they come to the Czech Republic -
unlike, some say, expat experts who bulldoze Czech companies and whose
behavior is a source of tension. We look at the foreign advisor - expat or
expert - and assess his role in Czech business.
In 1990, the
air-conditioning and ventilation producer Janka Radotín was an industrial
dinosaur with low productivity and 2,000 employees. Today, its workforce
is down to 300, productivity has quadrupled, and the company has formed an
$8 million joint venture with the largest manufacturer of air-conditioning
technology in the world, Dallas-based Lennox Corp. The new enterprise,
called Friga Coil, will open by the end of next year in Prague 5 Radotín,
creating 300 additional jobs.
According to Janka's
general director Martin Roman, the company's turnaround is due in large
part to the input of Ray Robbins, a retired American executive whose three
monthly visits helped the company more than any commercial consultants
they had hired in the past.
“One month of his stay cost us the same amount
we had paid those consultants for one day,” Roman says. There are many
Czech firms that need professional advice, but, in a market where resources
are scarce, most business consultants are inaccessible. While lack of
finances remains an unsurmountable obstacle for most firms seeking
improvement, some firms like Janka have found a solution: Hiring veteran
executives who come to the Czech Republic as volunteers, sharing their
expertise with local businesses. Carefully selected to match their
clients' needs, the former CEOs often help to turn moribund companies into
viable market players.
“We were lucky to get an
expert who had had a 50-year-long career in our field. He had gone through
all positions from design engineer to CEO,” Roman says. He explains how
this experience helped Robbins establish a good relationship with the
company's employees and win the trust of managers and workers alike: “He
always treated everyone as his equals. One of his greatest contributions
to the firm was that he taught us how to treat our staff.”
Like other volunteers,
Robbins was recruited by the International Executive Service Corps (IESC),
an association of retired American executives with branches all over the
world. Based in Connecticut, the IESC database registers over 13,000
former CEOs from various fields willing to volunteer in countries with
developing economies. The retired executives usually find out about the
program via their friends and colleagues. Upon contacting the IESC, the
applicants receive an exhaustive five-page questionnaire to complete.
After their references are thoroughly checked, they undergo an interview
with a field associate - a senior volunteer who already completed a number
of assignments. The applicants are only added to the database after
passing the interview. After that, all they can do is wait.
Since opening its Prague
branch in 1991, IESC has brought approximately 130 experts to the country,
helping more than 120 Czech businesses and institutions, including
ministries and public service offices.
The IESC had been financed
by the American government through the USAID program. But when the support
ended in 1995, the cuts forced three out of the four largest volunteer
agencies to shut, with only IESC remaining. Dusan Çechvala,
project manager, explains that IESC had been able to find alternative
funding from the Charles Stuart Mott Foundation, which financed a total of
30 projects during the last two years. He says the most expert-hungry
industries are heavy machinery, chemical producers, banking, textiles and
glass makers. Çechvala adds that, with the Mott funds running low, the
company's focus is slowly shifting to more solvent companies whose budget
allows additional expenses for consultancy services. “Still, we are
incredibly cheap when compared to any consultancy company,” Çechvala says.
“Our advantage is that the experts are volunteers who don't earn any wages
as such. The average cost of an IESC expert will be somewhere between six
and nine thousand dollars.” So far, the local companies pay for the
selection process and the experts' room and board, which on average runs
to around Kc 110,000. Every volunteer gets a monthly allowance of Kc
25,000 (in Prague Kc 30,000) from the company, which should cover all
their expenses, including food.
No points to prove
“Our experts had had their
careers at home. They had nothing to lose here,” observes Hana
Obrusníková, former director of Citizens Democracy Corps (CDC), which shut
down after the withdrawal of USAID. “They were relaxed and could afford to
be completely honest with the local managers. ... This might not always be
the case with professional consultants who, after all, are making money,
so they have to comply more with their clients' wishes,”
Like IESC, her team in
Prague provided volunteer advisors for firms throughout the country.
However, she says, the cooperation hasn't always been easy. “Lack of trust
and suspicion against anything new still prevails in this country,”
Obrusníková says. “And, of course, the language can create a real
barrier.” She recounts the most common problem volunteers encounter when
they come here: local managers don't spend sufficient time with the
experts - and on occasion refuse to provide the information necessary to
carry out the assigned task. As a result, she says, the volunteers feel
isolated and bored.
But this hasn't been the
fate of William Kirkland, an IESC volunteer who worked for the Prague firm
Strategoinvest. Tall and sinewy, the retired investment banker runs up
several flights of stairs to his office every morning and teaches his
Czech counterparts about morale. “Mr. Kirkland is indefatigable. You think
you've talked to him for 10 minutes, and then you look at your watch and
realize you have been speaking for two hours,” says Vladislav Svoboda, the
company's director of corporate finance. Kirkland came to Prague to advise
the firm on how to proceed with Initial Public Offerings (IPOs). “He
teaches us to look at [the companies] through the eyes of western
investors,” Svoboda says. He explains that it prefers to look for
investors abroad, because the Czech public has very little faith in this
form of investment. “Our capital market is in diapers; it doesn't work the
way it is supposed to,” he says. “Adequate financial resources are scarce
in this country. Money is expensive and the usual 20% interest rates are
lethal for most local businesses,” he says. Kirkland agrees with Svoboda's
analysis. “Here you do not have an active liquid trading in shares,” he
says. “The market does not provide information for bankers about the value
of the companies.” Still, the retired banker who previously volunteered in
Russia, and Zimbabwe marvels at the determination of the locals: “Of all
my past assignments, this company has had the highest level of
sophistication,” he says.
The biggest problem
The volunteers agree that a
major problem in Czech companies is poor internal communication and the
managers' inability to delegate responsibility. “The local management held
very long and incredibly time-consuming meetings, where very little got
done,” says Jerome Brown, former vice president of Alabama-based
steelworks Drummond Inc., who is assisting the management of
in North Moravia. He advises the company's CEOs chiefly on
time-management and communication. Brown says he thinks most of the
problems come from bad organization creating a lot of room for
misunderstanding. “I see a great need for restructuring here,” he says.
“With that, you establish simpler organization where information takes
shorter routes. They didn't feel their communication was good enough and
wanted to improve it. That's why I am here,” he says with a smile.
Tadeá Kufa, vice chairman of the board in
praises Brown's ability to identify
problems right away and his willingness to solve them. “Czech companies
need to get their priorities straight. We tend to deal with the easiest
tasks first and postpone the more important stuff,” he says. “These
experts come and don't really understand Czech, but they know right away
that a lot of time gets wasted on trifles,” Kufa says.
organization seems to be a thorn in the side of most Czech firms. koda
Plzen is yet another example of a factory that recently hired an IESC
volunteer to help them with restructuring one of the divisions, koda
Energo, which was recently formed from five separate divisions. “The basic
organization here tends to be more complex,” says Peter Gomm, who came to
koda Energo as a volunteer early this February. “[koda Energo] has whole
departments dealing with organization, something I have never seen in the
West.” Gomm is also advising the company management on possibilities of
forming joint-ventures with foreign partners.
Like it or loathe it, it
looks as though the foreign presence is here to stay. And if any of the
company's experiences above sound a little familiar, you could do worse
than hiring a veteran for the job.
Hitting the right note: the role of the expat expert at Bass Cr
In the beginning, we were
very much advisors - working alongside the locals. Bass then took control
in 1994 when it acquired a 55% stake in Staropramen and people were placed
in line positions. Eventually, the advisors were integrated. At this
stage, we're not looking to replace Brits with Brits - we're looking to
identify the right person for the job. Having a Czech is important,
although it could be people of other nationalities.
A question of leadership
One of the biggest problems
for myself - and many other expats - is mastering Czech. Of course, you
can get away with it through translators and interpreters. It takes about
18 months to two years to converse comfortably socially, and three to four
years to conduct business in Czech. At that stage, you might be able to
have a sensible business conversation, but it's not enough to make a
sensible business decision - so what's the point? This hurts your
effectiveness by 20-30% - because you can't lead if you can't talk.
It's especially hard to
keep your temper under control. You have to be patient, you have to
explain and try to build consensus. But in fact, there's lots of telling
to do. It's a tell culture, not autocratic in the sense that it's
dictatorial - but it's also not just telling, it's telling how. Of course,
one could counter this by saying that they've come a long way in eight
years. … But there is [still] a lack of understanding regarding what the
job's about and what [Bass'] expectations are … Although there is a
tendency here for people to make excuses, some are learning to be
proactive, learning that's OK to make mistakes. That in itself most Czechs
can't understand, which inevitably builds up frustrations …
There are three things
Czechs care about: buildings, beer and girls - I'm not sure in what order.
One important thing is that we never told them how to brew beer - that
would have been a problem. “You're the experts,” we said - and indeed they
are. We looked at the efficiency of sales and distribution, engineering
and finance and implemented change. Over four years, I think it's been
accepted. Nowadays we still try to stress how important customer service
is. We tell our staff that we don't have a God-given right to customers
just because we produce great beer. We have to work for them.
Looking back, in our
battles with IPB and Nomura, it may have been easier to have been Czech.
On the other hand, our competitors criticize us for having “an all-Czech
“Consider the scenario: the
Bass office is small and has someone like an executive chairman and an
assistant working there, giving directions to the Czech general manager,
[and] all the operations are controlled by Czechs. But I think this would
be too isolated. I believe we've got the mix right - and eventually we'll
pull the expats out.
Of course, from a local
point of view, there are advantages working for a foreign company ...
learning new skills, opportunities to go overseas … . I have to say that
younger people are just as good here as they are in the UK.
Being realistic, foreign
investors in local breweries are inevitable. Pilsner and Budvar will
likely be owned by foreign hands, but there's less of a problem if they're
not owned by foreign brewers. Nomura is going for Radegast and Pilsen -
but they're not brewers, so they seem OK.
As for salary
discrepancies, Czechs understand that British people have alternatives and
that they bring a marked contribution difference. As long as this
added-value is demonstrated, they don't mind too much. Having said that, I
did have to explain to 200 people why salaries for the British are so
high. The reason is that they bring skills.”
Çokoládovny's bridge over troubled water
We faced a potential
problem a few years ago of tensions between expats and foreigners in that
there were 30 expats [not only in top management, but also in middle
management positions or functional specialists]. I stress a potential
problem, as now we have only 15 expats in those kinds of positions. We
have actually managed to replace lots of people with locals.
Our ultimate objective is
to replace five or six of them by the end of 1999. We will retain about 10
in the future, and they can be any kind of expats - with a company as big
as Çokoládovny, a big company for its shareholders,
we have a role to play
in terms of training. We no longer need to be assisted by foreign
managers, and people from our sister companies of Nestlé and Danone come
to be trained here.
It's a crucial role of any major company.
I admit that there were
tensions at the beginning. A few expat individuals stormed in after
privatization and they imposed their own working style, without being able
to listen or communicate. I was born here [but spent 25 years in Western
Europe and the United States] and I really came as a cultural bridge. I
had been working abroad and I believe I was hired precisely to overcome
the problem. My job was to make things change to a market-oriented way of
working - and to give the local people a chance to be part of our
More than half of our top
managers are local, and that's taken about four years since privatization.
It's evolved quickly: We explain what the shareholders want, and that's
much more effective coming from a Czech. It's acceptable, and prevents
them from arguing, “It doesn't work here.”
Another advantage of being
a cultural bridge is that I can listen to Czechs: to their proposals, and
to their ideas for new products or marketing schemes. The majority of the
time, these suggestions are absolutely valid.
Reasons to retain expats
In my view, these fall into
two categories. Firstly, if they're good professionals in their field.
Local people recognize this immediately. Secondly, one should keep expats
on if they're excellent communicators, passing on invaluable training and
know-how. It's no good hiring those in the top of their field who simply
At Çokoládovny, one major
condition for employing expats is that they learn Czech. Not all succeed …
but some are absolutely impressive. We also help expats to understand the
local culture, organizing events like a traditional Moravian pig-killing
two years ago … things that they would never come across in their expat
Salary discrepancies are
not a source of friction. There's really not a significant difference;
it's not high at all. This is particularly true for young expats who come
to be trained here - they're definitely under the same conditions as
locals. Of course, we do help with things like housing costs, because
they're much higher for expats.
But remember, Çokoládovny
is big by even Nestlé and Danone's standards.
We've overcome a priori the
prejudice against Central and Eastern Europe. Expats here are given
responsibilities they would not have in their own country. For example,
there's a very impressive 34-year-old Frenchman who's been working here
for a couple of years. Imagine, when he was just 32, he was running a
factory of over 600 people.
On the other side of the
coin, locals realize that expats have to bring added value; they won't
automatically be in the top positions in the company. There are really no
bad feelings - except when people are no good.