The difference, according to Sergey Vorobiev, founder of the consulting company Ward Howell, is that predicting what the future holds for Russia and the entire world is much more difficult.
For a business lunch with Vedemosti, Sergey Vorobiev chose Goodman Steak House in the shopping center on Novinskiy Boulevard. He works nearby, in the Krasnaya Presnya district. “I usually order filet mignon here,” Vorobiev says, “and this time I’ll order, as soon as the waiter arrives.” He orders his steak medium rare, with Goodman sauce and pepper. It’s hot outside. Perhaps that’s why he immediately orders a large grapefruit juice and “tea with ginger,” to finish. “We’re out of ginger,” laments the waiter. “Then with mint,” Vorobiev retorts. I limit myself to two pitchers of cucumber lemonade.
We agreed earlier that one of the topics of our discussion would be the situation in the executive search industry, in which Vorobiev has been working for over a dozen years. But that’s nowhere near where we start. Almost 16 years ago, Vorobiev was lucky enough to be one of the founders and inspirations of Club 2015, an informal association of businessmen dedicated to creating development scenarios for Russia up to 2015. As 2015 is only a few months away, it would make sense to assess their work.
“We are lucky to be living out all three scenarios”
“Club 2015 was created as another cell of civil society: in 1998, we gathered what we can conditionally call ‘the best pupils of the capitalist economy,’ who reacted to the default, to the perceived collapse on 1998, by devising coherent scenarios for Russia’s development up to 2015,” Vorobiev explains. He names businessmen Andrei Arofikin, Pavel Teplukhin, Ruben Vardanyan, Sergei Nedoroslev, Vladimir Preobrazhensky, and the former Minster of Energy Vladimir Lopukhin among the club’s most active participants.
At that time, it seemed to them that the future vanished somewhere. “It was distinguishable up until that moment, and then was suddenly buried in the sand,” he continues. “And how can you build business without a future, a long-term outlook? After all, a standard strategic approach implies movement along a chain: world, country, industry, region, my company, me. But here it is completely unclear what is happening in the country, and what will happen next. How do you build something here? Consequently, we collaborated to somehow impact our own future, so that it would appear again.”
Preobrazhensky, who prior to joining the club worked as the vice-president of Inkombank (the bank didn’t survive the financial crisis), was the one to suggest writing down future scenarios. Vorobiev says Preobrazhensky had some “out of the box” ideas, some original scenarios for Russia and sociological data. He declined any payment for his work. After three months, Preobrazhensky had written a working procedure, and the businessmen created a scenario group: roughly 100 people from different industries of business (according to Vorobiev, they invited everyone “except bandits and fascists”). Another six months were spent on the actual scenarios – positive, neutral, and negative.
The benchmark for all of the scenarios was children. “In a positive scenario, our children could reasonably choose our country as a place to live, having had the opportunity to live wherever they desired,” Vorobiev says. He had different names for this: “A hippopotamus, who himself chose to escape the swamp,” “grass, breaking through the asphalt,” “government reform.” Or, a social contract: everyone begins to negotiate with each other, the result of which is the construction of a Russian government that stands on three pillars – government, business, and civil society – which ensures stability. “We just – both then, and now – have one clearly defined entity under the name of ‘government.’ And so far there have been no delineated entities for business and society,” Vorobiev says.
The neutral scenario is like a tale of lost time: everything is moving along, possibly even in the right direction, but more slowly than it should. This could be for a variety of reasons: not enough determination, the Dutch disease, whatever. “The result of this scenario: it’s better to let our children go where they can live more dynamically, while we stay behind – what else can we do, we’re already accustomed to it.”
And, finally, the negative scenario is the revival of imperial ambitions. “We called this ‘the last straw,’ or ‘the nail in the coffin,’ or ‘the last imperial shot,’ enumerated the Ward Howell president. It’s characterized by a return to the old. Back to paternalism, back to the empire, back to cries of greatness. This scenario quickly ends in economic ruin and, possibly, the collapse of the country. For those that don’t want to participate in this, it’s better to leave with your children.”
The development report of the positive scenario was done by Denis Dragunsky, the neutral by Aleksandr Gelman, (author of plays about good socialism), and the black future was answered to by Aleksandr Kabakov. “We reached our goals, the scenarios turned out great, and in 15 years we were lucky enough to live in all three,” Vorobiev summarizes. “At the beginning we vigorously bounded into the positive, up until about 2002. Then we went into nothing, the tale of lost time, and the last year or two, maybe, we’re prancing along the border with the black, because the elements of ‘imperia complex’ and calls for ‘forward to the past’ are present, and this concern can’t be overlooked.” The authors’ forecasts and scenarios were well-received. And all three scenarios were realized.
The club continued to exist, because part of its mission is to promote the launch of the positive scenario. As it turned out, while in the process of writing programs for social and economic development up to 2010, the government was in need of such work, and used best practices from each scenario.
“We were as active as possible, created think tanks, went to the Secretary General of NATO and discussed security, told him that it’s not necessary to move towards the East, because we’re somehow not afraid of anything, it won’t turn out well – because the wrong forces will become antagonistic, and it will be difficult to engage in a substantial knowledge-based economy,” recalls Vorobiev. But the activity gradually amounted to nothing: “As far as we matured. That, and dominant forces manifested themselves independently, and having an influence over them became more and more difficult.”
I ask Vorobiev to compare the situation in 1998 with the present time. “From my perspective, the situation in terms of tension is very similar,” Vorobiev notes. “Simply put, when you’re seeing something not the first time in your life, everything becomes dull. A small, but significant ‘but.’ When we wrote scenarios in 1998-1999, we had several reasons to assume that Russia was located in a relatively stable exterior world, that wouldn’t spring any global surprises on us, with the exception of the trends that we understand and consider to be stable. Understandably, the world moves in the direction of a knowledge-driven economy; it’s understood, that it moves towards globalization. We believed that we were so involved in it, that there wasn’t anything special about it. And the level of uncertainty in Russia is significantly higher than in the surrounding world.”
Besides, Russia is now significantly more and more deeply integrated into the surrounding world, a world with a higher level of freedom and mutability. Therefore, Vorobiev continues, to shape this picture will be significantly more difficult. Do we need such an exercise? “If we happen to find enthusiastic 30-35 year olds with wide eyes, no fear, then let them do it. We’ll gladly participate here and there,” he notes.
Where the effective managers are
“What is the charm of the moment?” Vorobiev asks. We’re finally approaching the topic he’d like to discuss. In Vorobiev’s opinion, a demand has emerged for operational efficiency. As they said to him in one of the major oligarch groups, “Sergey, the investment-glamour capitalism has ended.” This means that the principle of “poke it with a stick – it’ll grow,” doesn’t work any more, he comments.
“Operational efficiency is a heavy enough process, especially if, as another client said, you’ve already been squeezed dry,” continues the Ward Howell president. “And there is still the interplay between price and quality. What do we have on average? It’s uncomfortable to even talk about. Have you seen the road from Moscow to St. Petersburg? It’s not even a road. It would be better if it weren’t even there. Not long ago one of the bureaucrats speculated to me. He thought long and hard, and concluded why we don’t have roads. We are not, one could say, nomads. We live a long time in a place. So for the bureaucrat, he saw a deep, necessary reason as to why we didn’t have roads. Then, of course, there is the traditional ‘so enemies can’t approach.’ And at the same time – ‘so that the government doesn’t find you!’ Otherwise they’ll take you into the army for 20 years.”
About this, Vorobiev is certain: it’s all about goal-setting. “If you are building something so that there is a road, and in the process you steal a bit, but there will be a road, then that’s not so bad overall. But if you’re building something so that you can steal, then there won’t be any road at all,” he asserts.
“Where in Russia can you assemble the experience of all of these people who are competent in operational efficiency?” I ask Vorobiev. “It’s difficult to find them,” he agrees. “It’s like with charity: if you talk about charity a lot, then it is likely to be perceived as some sort of PR. So, managers that understand operational efficiency aren’t very PR-like. That’s why it’s difficult to find them. They should systemically grow within their organizations, because if a manager frequently moves from one area of work to another, then you don’t notice if he’s been useful or not. So, you have people who, long ago, 3-5 years ago, became trapped in their industries and quietly learned something. And then you have national champions, who dream of world laurels. And not just Magnit, who achieves high workforce productivity, by world standards. There are also those that understand the difference between efficiency and effectiveness: efficiency is that which reduces what you have to expend, and effectiveness is how to achieve maximum results. And this means that there exist in Russia companies that operate in a competitive, multi-dimensional world. A lot of them? Not really. But they exist. And this is the foundation of our client base, including state-owned companies. And new ones are appearing all the time. Even now.”
According to Vorobiev, the same effect occurs in small countries, such as Finland. “When you immediately understand, that you can’t keep your place within Finland’s framework, you begin to set your sights on the entire world. In the end, you’re either global, or nothing. Because sooner or later, the global network approaches and absorbs you,” he says. “We have a large enough market, monopolistic enough, but not tough enough to adequately prepare companies for fair global competition. Fortunately, such companies exist. Though, I’d like there to be more of them.”
Roughly two and a half years ago Ward Howell started to work in the venture capital industry, and created the Talent Equity Venture Fund. What was the inspiration?
“It’s very simple,” Vorobiev answers. “We had personal experience with the site e-xecutive.ru. And Club 2015 helped the site when we had time. We saw how a community existed offline, and decided to transfer this model online, compensating for what was lacking. And so we became one of the first in the world to create a community that generated its own content. We started to look for a business model. The author and inspiration was Yuri Barzov, who at the time was a partner at Ward Howell. George Abdushelishvili and I, along with other Ward Howell shareholders, were more inspired by angels. But we didn’t have the strength or mind to focus on it properly. We had our first breakthrough, fumbled for a business model, but weren’t able to create the second or third. We didn’t have enough foresight to turn the community back towards recruiting sites, preferably either towards LinkedIn, or towards Odnaklassniki. We did have enough foresight to sell. To this day the site continues to operate on the same level at which we sold it. But we gained personal experience, and in a new turn of events we decided to return to this experience. Rather, as investors, and not as people that believe in their ability to create something brilliant. We invest in projects in the field of managing talent, which we enjoy, and hedge our bets there.” So far everything is going well, Vorobiev asserts: “We’re happy. If we’ve learned anything, it’s that we’re going to take a chance with creating a fund that will raise existing and outside money.”
Vorobiev doesn’t give a precise answer about the company’s own investment: “It’s a decent amount. Quite proper for an angel fund. Not tens of thousands of dollars, a bit more. You know, when you invest in a startup, the amount shouldn’t be very large, but it should be enough. He also doesn’t divulge details of the fund’s organization: “It’s a normal fund, registered under one of the traditional legislations. Our managing director of the fund is Anton Derlyatka. We’ve made 10-12 investments, and we’ll see what happens. We’re still waiting for good news. It’s understood, that with internet-education, internet-recruiting, from the point of view of the employer and the point of view of the applicant, very interesting things happen. For that reason, swarming and swirling will definitely continue; new major companies will definitely appear. At the end of this year we’ll be able to assess how our investment portfolio looks, but realistically the payoff won’t be for another 5-7 years.” In his opinion, the project is interesting not just as an independent business, but also as a platform for implementing technologies found in large corporations, that could make their lives easier.
“Went to Odessa, and left for Kherson”
“Ukraine, time and time again, did not meet our expectations,” Vorobiev answers when asked about the situation in the country where Ward Howell has already had an office for a few years. “When we started doing business in Kiev in 2004, we, like many of the Russian managers we sent there, waited for the reign of meritocracy. One would think, that they don’t have the commodity curse, they’re not prone to the imperia complex, and thus they need to turn and spin. The potential for development in the country is colossal. People are poor, educated, there’s a good climate, good land, people have brains. Let’s move forward.”
Then further in the country it turned out to be like the Soviet song about partisan Zheleznyak, who went to Odessa, and left for Kherson. In Vorobiev’s opinion, the Ukrainian elite shot themselves in the foot using every conceivable abomination: “Literally everyone was knocked out by corruption. An amicable population patiently waited and waited, but was upset, as you would expect. What can you say to government supervision? Under the old system we don’t want to, and under the new, it turns out worse. New dragons come and eat even more little girls. It almost would be better to have the old Soviet bureaucracy in place. But you can’t do that. I want to believe, that upon teetering over the edge, they’ll come to their senses. And then they’ll have a civil society, and liberalization.”
“In general, Kiev in the last 10 years was considered one of the best cities in the CIS for work and life,” recalls Vorobiev. “The climate’s better than in St. Petersburg. The prices were lower than in Moscow, quality of life was calmer. Consumer-based businesses flourished, retail prospered. They didn’t have wealth, they were forced to immediately do a lot of things well, in order to feed themselves.” But now there, according to him, they have “overdone it with the robbery, monopolization, lack of social contract, corruption, and have destroyed old institutions without creating new ones. And the competition they had was similar, to what we have. In Russia the competition is albeit low, but our clans are fighting, and are very tough,” he notes. Well, and finally, the last question, what is better: an already erupting crisis, or the tense expectation of a future crisis?
The answer is basic: do what you have to do, and what will be will be. “I, as one of the leaders of my organization, and as a person who chooses leaders, can responsibly declare: no one needs a restless leader. Sit at home, then, and do something to take away that anxiety! You should go out and tell people where to go. And go, go, go. And then people follow you,” said Vorobiev.