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Keys to the kingdom
Written by: John Letzing
Photo by: Vojtěch Vlk
The transfer of top management posts
from expats to locals has been a difficult process. Find out what's
behind the controversy and surplus of hard feelings.
WITH HIS FIRM gaze and commanding tone, Radomír Sabela is the very
image of leadership. As a Czech in the top spot at an international
firm (CEO of Philips CR) Sabela is fairly extraordinary, and has
become something of a doyen among local execs, a credible figure
willing and able to proffer blunt criticism of the quality of local
contemporaries. When Philips built a new display factory in Hranice
and placed ads looking for mid-level executives, the meager response
was disheartening. So Sabela spoke up, and struck a chord with the
media. "The phrase I used was that it was complicated filling
the second tier (of management) with good Czech managers,"
relates Sabela. "Why? Because they are not that mobile, they
are not going to take a risky position in a new organization, and
they are scared of an international environment. And this should
That Sabela's criticisms are shared by many international firms
here is obvious when glancing at a current list of their top people
- from directors of telecom operators to department store chains,
the names are resoundingly foreign. Even when a company has been
operating here for the better part of the past decade, such as Unilever
(established in the Czech Republic in 1992), the manager is more
often than not an expat. This presents more than a few unsettling
questions. A decade after the demise of socialism, what are the
factors still holding the local talent pool back?
Philips' main man in
the Czech Republic, Radomír Sabela, could easily take
on a side job as a motivational speaker. The CEO has
these recommendations for locals looking to break
into top management posts:
Be decisive: do not hesitate, just decide.
Be flexible. This means flexibility with location,
as well as flexibility with tasking.
Maintain pragmatism. On one side you have training,
on the other is real life. Use feedback with theory,
or you don't have any touch with reality.
More self-confidence. Locals need to believe
more in themselves.
Take the opportunities that present themselves.
Among contemporaries, there are many complaining they
can't achieve success in the local market. But there
are opportunities for those who want to take risks
- to enter a difficult environment in order to learn
Be ready to work - people still prefer to have
weekends and holidays to themselves, but you have
to sacrifice this time, at least at the beginning.
Go for international exposure as soon as possible,
for at least two to four years. Go, learn, try, and
get back here!
Asked why they haven't localized the top spot, Unilever spokesman
Ladislav Červenka responds that the firm's policy "is not simply
to substitute internationals with locals." At the same time,
he also points out that Unilever has, worldwide, "one of the
smallest percentages of expats in top management." So what
rates the Czech Republic as an exception? It's not necessarily a
deficiency in local talent; Červenka says the firm has sent numerous
Czechs out to management positions abroad, including one former
director now at company headquarters in Holland. Most likely, the
major concern is that placing a Czech in charge in a Czech environment
will subject that person to the temptations of a developing market
that relies, to an extraordinary degree, on personal relations and
networking. Ideally, there should be no national boundaries in management.
As Sabela quite succinctly puts it, "mature management is international
management." Unfortunately, an excessive number of Czechs feel
otherwise. Many seem to consider time in an international firm as
hazardous survival in occupied territory, and their position vis-a-vis
foreigners as one of chronic victimization. If this mentality prevails,
locals will continue defining themselves in opposition to foreign
colleagues and bosses and hinder their own and their company's potential
by clinging to national pride. Rather than accept criticism of these
tendencies from outsiders, some have been known to take personal
offense and circle the wagons. George Tesař, a Czech-American consultant
and marketing professor, recently published an article in Ekonom
that excoriated the skills of a certain unnamed company head in
Brno. The manager, recognizing himself in the harsh description,
immediately contacted Tesař and offered to "take care of him"
next time he dared come back to town. Such inflated emotional reactions
are not confined to locals. Václav Klaus' "Czech way"
economic policies, involving voucher privatization to friends and
contacts who squandered money and potential, made international
businesses feel particularly insulted and put them off the idea
of going local. As Gerald McDermott, a former economic advisor to
the government now teaching at the Wharton School of business in
Philadelphia, says, "the whole voucher experience left a bad
taste in the mouths of foreigners - they got burned. And the Czech
Republic still ranks as one of the most corrupt in the region. This
makes foreigners very wary about allowing their Czech counterparts
to take more control."
Hiding behind a nationalist veneer to do business the "Czech
way", though still prevalent, is untenable - globalization
is not a trend, it's reality. And the only culture that matters
within corporations is a particular firm's corporate philosophy.
Philips, for example, is a world unto its own - the Philips way
is the only way. By becoming as much a Philips employee as a Czech,
Radomír Sabela fit the company's needs perfectly. By his own admission,
this is at least partly why he became the successor (in 2000) to
Jaap Aardse, and is the first Philips CEO here to be local. An important
expression of Sabela's dedication to company above country has been
a willingness to travel. Not many Czechs are willing to move a mere
80 km away, much less six time zones away. Most simply refuse to
wriggle free of the lattice of friends and social connections that
support them. Which, ironically, will limit their opportunities
right here in the place they refuse to leave. Sabela, for his part,
worked his way up ladders around the globe by taking posts in locations
as remote as South America and Asia.
Coupled with mobility, there must also be patience. What Sabela
meant when he cited a lack of volition among locals "to take
a risky position in a new environment" is that many refuse
to submit to a system where promotion is only guaranteed by tangible
results. Granted, the first tier of management at Philips' Hranice
tube factory is almost entirely made up of international managers;
only the second tier was opened to locals. The problem, as Sabela
pointed out at the time, was that Czechs took this as an affront,
and virtually ignored the opportunity. "Why should we take
orders from foreigners in our country," thought many candidates,
without taking the time to reason that proving themselves in a lower
level would likely mean eventual promotion to the next; it should
be noted that Czech managers are reaping the benefits of patience.
Many who were once, in the words of Gerald McDermott, "mere
window dressing," are now taking on substantive roles in decision
making. McDermott acknowledges that presently, at firms such as
Volkswagen (German)-owned Škoda Auto, "it has improved... they
(Czechs) are clearly running day-to-day operations, even if Volkswagen
frequently asserts itself."
case of Baťa
Ah yes, Bat'a. Ask the average person in the street and they'll
say the footwear company is as Czech as a plate full of dumplings
- the fact that Bat'a is now based in Toronto is not common
knowledge. Tomáš J. Bat'a went into exile after the German
occupation in the late 1930s, and some years on the communists
nationalized his Czech factories. Fortunately, he had many
other international branches with which to keep the company
going. When Bat'a resurfaced here in the '90s, it brought
with it a corps of international managers with up-to-date
know-how. It was a bitter irony of the post-socialist world
that an old Czech treasure would require the expertise of
foreigners. This changed in July of 2000, when Michal Jánský
took over from Bengt Gunnarsson in the role of General Director
for Bat'a in the Czech and Slovak Republics. The first local
to run the legendary company in its modern incarnation, Jánský
is in charge of all retail and manufacturing operations (he
worked his way up over the course of the last ten years from
his initial position as a buyer). Asked if he felt he represented
a trend of young Czechs taking over at international firms,
Jánský says, "if we're talking about top positions only,
Czech managers have not yet been able to get there, to a significant
extent." One of the few and the proud, Jánský owes much
to Bat'a's training programs, held both here and abroad, as
well as contact with the firm's experienced international
managers. That contact remains a benefit to this day: "We
still take advantage of outside experience," says Jánský.
"Our manufacturing division in Dolní Němčí is run under
the leadership of my colleague from the UK."
A global outlook, locally
The benefits of localizing management are undeniable. The same social
bonds that tend to hinder growth here can, in healthy doses, be
used for positive gain. There is a local "boys' club",
as one Czech manager puts it, and in order to get into the club
and utilize its advantages, one must not only speak the language
well (as many expat managers do not), but be keyed into the culture.
The degree to which the Czech business world is dominated by a boys'
club is debatable, though most invariably rank it high on the list,
somewhere between Japan and Russia. "We're a very 'high content'
culture," says Rostya Gordon-Smith, director of HR consulting
firm People Impact. "Japanese and Czechs are high content,
while Americans and English are low content. In a high content culture,
the personal relationship - who you know - plays a very great role."
Expat managers, who may come from environments like the US, where,
as Tesař says, "companies look at the person as a resource,
not as a part of some system," may find it difficult to operate
in such a cozy nest.
Bruno Le Ciclé
Of course, the degree to which a parent company would even want
their executives in the club is sometimes difficult to gauge, or
control. Having a manager in too deep can be destructive. Bruno
Le Ciclé, CEO of Nestlé Czech Republic, acknowledges a need to bring
locals on board. He boasts that currently a number of his direct
subordinates are Czech, and that "the proportion of Czechs
will increase over time." But his criteria, as with many other
international players, is that a local must get out of here and
spend time abroad before he or she can be fully trusted. Andrea
Colantoni, a recruitment specialist in Prague, says that his clients
are making a stronger effort than ever before to pull locals into
their management. "All in all, I think they (international
firms) have been reasonably successful in exchanging their expatriates
for locals," avers Colantoni, though he adds a word of caution:
"I say reasonably, because I am convinced that some companies
made a trade-off between cost and performance, while others decided
to take a calculated risk."
One glaring hindrance to developing local managerial talent has
been the education system. The theoretical approach of most Czech
university business programs leaves much to be desired - "it's
a sort of classical education that isn't focused on anything,"
says Tesař, who is currently scouting potential local partners for
a new MBA program. He cites a lack of initiative on the part of
major Czech universities to get involved with on-site, nuts and
bolts training. "Like Charles University - they're a very traditional
school. We had a meeting with one of the faculties and they came
right out and told us, 'we don't do applied research'...meaning
basically, 'we don't like to get our hands dirty, and working directly
with companies is unacceptable'. Every university in the West works
with companies, but here, they don't."
Rostya Gordon-Smith points to an educational deficiency that goes
deeper than the university level: "If you put together a 27-year-old
Czech manager and a 27-year-old manager from abroad, they might
look the same, they might wear the same Hugo Boss clothing,"
she says, "but the foreign manager has a great advantage, because
since kindergarten, he's worked on team projects, he's learned presentation
skills, negotiation skills, and how to talk to people. Our education
system doesn't cater to future business people. It caters to future
technicians and academics." Instead of leaders, the system
breeds employees who frequently lack soft skills, which include
more nebulous qualities like leadership and charisma. "To be
honest," says Sabela of his Czech peers in management, "even
after ten or eleven years, there is not enough leadership skill."
For an HR specialist like Gordon-Smith, there is a specific term
for what's missing: Emotional Intelligence. "With Czech managers
there has been a great stress on IQ, and on the technical side,"
she says. "Most of these people don't have emotional intelligence...which
means being able to emphasize a good self image, and to have resonance
and influence over people." Because it's generally agreed that
things like soft skills and emotional intelligence are formed at
an early age.
Petr Hermann, at 29 years of age, is a good example of the future
of Czech management. A regional director with Schneider Electric,
he oversees the technical outfitting of major greenfield projects,
including the new Toyota Peugeot Citroe¨n Automobile plant in Kolín.
For years, says Hermann, hope for Czechs to climb the corporate
ladder at his French-owned firm seemed dim. "In the past, my
Czech colleagues and I were a bit afraid that management would always
be purely international, and that we'd have difficulties being promoted,"
he says. Hermann adds that now things are changing, and he strongly
believes that since Schneider began more aggressively transferring
accountability to locals, it has benefited.
- the decisive factor
Of the numerous foreign banks
operating in this country, only a few are doing so under Czech
managment. What are the pros and cons of having a "local"
"Banks like Citibank and ABN Amro are global banks.
Their policy calls for appointing people to management positions
who are not citizens of the countries where their branches
are located," explains Radovan Vávra, Komerční banka's
former general director, who was recently rumored to become
the new CEO of GE Capital Bank in Prague. Howewer, both Vávra
and the bank's representatives denied this information toThe
Prague Tribune. Vávra claims that if the foreign bank appoints
a local manager, there is a risk. "At least in so-called
developing markets - in Latin America or eastern Europe,"
he says, explaining that a bank director might act as a national
economist. His greatest loyalty would be to his native land
rather than to his parent bank, and he says that the "loyalty
factor" was the reason for the management change-over
in KB after it was privatized by Société Générale of France.
"When someone buys a bank, he wants to control it through
people whose qualifications are supplemented by many years
with the firm, because banking is about trust," notes
Vávra. The loyalty of KB's current French management is buttressed
by tens of years spent with the company, something no one
in the Czech Republic can yet offer.
It's not unusual for a new owner to replace the Czech management
with foreign managers following privatization. When Erste
Bank of Austria took control of Česká spořitelna in 2000,
it named American Jack Stack as its general director, and
Austrian Gernot Mittendorfer as his deputy. After two years
there are still about 40 expatriates working at the bank.
Although the rest of the seven top managers are Czechs, they
tend to be international experts. For example, board member
Karel Jan Jeníček studied in Karlsruhe, Germany, and before
joining Česká spořitelna he worked as Member of the Board
at Bank Austria Creditanstalt in Ljubljana, Slovenia.
Zdeněk Pasák, human resources director for management search
company Madsen & Taylor, opines that large banks like
Česká spořitelna will gradually work on replacing most of
their foreign experts with Czechs. "Long-term, foreign
managers are too expensive," he says. "Their stays
in the Czech Republic alone could almost cover for Czech managers
salaries." He adds that the Czech Republic has enough
experts of comparable quality. Some foreign investors choose
Czechs for management positions from the start. Their motto
is that "you will stay in management as long as it's
good for the bank's business." Typical examples are Pavel
Kavánek of ČSOB, Kamil Ziegler of Raiffeisenbank, and Petr
Šmída of GE Capital Bank. According to Veronika Sodomková,
human resources director for GE Capital Bank, Czech managers
have advantages: they can communicate with employees, and
they know the cultural and political environment and ramifications.
In such instances, while a Czech manager would be responsible
for implementing policies, the home office would continue
to rule on such things as how fast the company grows and on
any new acquisitions.
While the talent of youthful hires should be lauded, there are
two problems: youth lacks experience, and the social effect of predominance
of kids often fresh out of school can be unsettling. In practice,
anyone with a few gray hairs tends to be cast aside to make room
for more fortunate and polished upstarts. Tesař, when conducting
management training sessions, sees the rift up close. In one session
on B2B marketing, "half the group was under 35, and the other
over 40," he recalls. "And those two groups couldn't even
communicate...there is a conflict here." The ire of elders
is often warranted; as Gordon-Smith points out, the young often
garner favor for little more than being young. "I mean, how
much experience can they have?" she asks. "Being a great
manager doesn't only require knowledge or leadership skills. You've
got to go through milestones in your career - you fall on your face,
learn from mistakes and continue on. And young managers don't have
that." Accordingly, it will take a good amount of time before
Hermann and contemporaries breach the top tier. Given that they
continue to progress at the rate that they have.
There are real concerns inherent in the current model. What might
be good for breeding young management here may simultaneously be
disastrous for the social fabric. Young execs with international
training, and what are typically viewed as "western" habits,
may feel successful, but often are also made to feel like foreigners
in their own country. And one of the most glaring deficiencies of
Czech managers - their reluctance to commute long distances - could
also endanger traditional stability if changed. Even if they do
manage a seamless transition to increased mobility, the ultimate
test for young locals will no doubt be whether they can avoid submitting
to the cronyism and encumbering faux-nationalism that's plagued
the preceding generation. If they can look beyond their identity
as Czechs, and see themselves simply as successful managers, the
issue of localizing management here and all of its associated social
tension will certainly become a part of the past.
We vote for us
The organization Comenius annually issues a ranking of companies.
But while its "Czech 100 Best" purports to be a
genuine consideration of merit, in reality it's more of a
popularity contest. "It's just sort of the Czech inner
circle congratulating itself," says one local analyst,
adding, "you see the same thing in western Europe, but
the effects are more extensive here." Meaning, less is
done here to distinguish "100 Best" honorees from
companies that are actually, from a numbers point of view,
the best performers. Unfortunately, local management has been
prone to buying into the scam and taking part, thereby allowing
themselves to be viewed as individuals who would sacrifice
integrity in exchange for cozy relations with fellow Czechs.
The 100 Best is but one example why international companies
hesitate to place these local managers in charge of their
operations. A Comenius employee reached by phone, who preferred
to remain anonymous, described the voting committee: "half
of them we know personally, others we receive their data from
partner companies." While companies technically don't
have to pay a fee to crack the 100 Best, anyone, according
to the employee, can contribute to the fund that supports
it and show up at its gala fe^te to sip champagne and press
the flesh. The employee concedes that social contacts play
a decisive role in voting. "When you ask someone who
is the 100 best," he says, "of course they may think,
well, Škoda cars are the best, but I don't work with them,
so why would I vote for them?" Examples from past lists
where "who you know" has had more influence than
"what you know" abound: of the highest-ranked 25
firms in the 1996 list, five filed for bankruptcy within the
next few years, including Chemapol (#4) and Vitkovice (#23).
Of course there is IPB Bank, which garnered a 2nd place ranking
in 1999, a year before it imploded and nearly drag-ged the
country's GDP down a full three to four percentage points