Cram Course for Russian Plant Bosses

The four visiting Russian businessmen from the Saratov Aviation Plant had agreed to wedge an after-lunch interview into their hectic stateside routine last week. As the hour of translated give-and-take drew to a close, one of their American hosts slipped a note down the table to the questioner. In block letters, it read, “Five minutes.”

The Russians, the message pointedly reminded, had a 2 p.m. session on the “Role of Board of Directors, Voting Procedures,” one of a weeklong series of rigorously scheduled meetings designed to instill as much Western business thinking as the visitors could absorb.

The session was being held at the East Coast headquarters of the La Jolla-based Science Applications International Corp., a high-tech research and development corporation and one of the country’s most successful employee-owned companies.

So fervent are SAIC founder J. Robert Beyster’s beliefs that in 1986 he formed the Foundation for Enterprise Development, also based in La Jolla, specifically to encourage employee stock ownership programs.

Under the auspices of Stanford University’s Center for International Security and Arms Control, SAIC and the foundation have taken a special interest in the Saratov plant. They hope it can be a model for other Russian businesses struggling to reinvent themselves as Western-styled corporations.

But it’s going to take some major luck.

While the new Russian federation careens toward the goal of a market economy, large defense-oriented companies like Saratov are in an exhilarating free-fall.

Having gained its independence from the former Soviet Union in January 1991, the workers collective is now struggling to maintain that freedom under a wobbly new government--and be commercially successful too.

The Saratov managers are trying to retool their plant for consumer goods and sell civilian aircraft, which still don’t meet certification requirements set by the Federal Aviation Administration. There’s no banking system, no central stock exchange. But there’s plenty of caution and fear of the unknown.

Perhaps the biggest obstacle is the new government itself. It seems eager to take back some of the ownership control it lost in recent years and is making privatization as difficult as possible, according to John A. Battilega, a SAIC vice president.

The Russians are actually reacquainting themselves with their American advisers, many of whom earlier this year spent several weeks in Saratov, a city of one million about 500 miles southeast of Moscow.

The Americans held forth on free-market economics, accounting principles and stock valuation techniques, while the Russians described the perilous balancing act they found themselves in--and their determination to prevail.

The visit to McLean was designed to focus on the specific problems identified in Saratov and prepare the Russians for a June meeting back home when bylaws will be presented to the worker/owners to transform the plant into a Western-style corporation.

Even if the organizational change is approved, the Saratov plant will have no real legal standing. It is inventing itself as it goes along, imagining itself as it wants to be.

Exciting, yes, but high anxiety too.

“As we get down to the nitty-gritty issues, the emotions swing from exultation to despair,” said David Binns, an associate director of the Foundation for Enterprise Development. “We hear the same questions over and over, but they’re being posed with increasing sophistication.”

The round-table discussions last week ranged from financial management to stock plan administration, from employee benefits to charter and legal document review.

Of course there was time for dinners at restaurants, a dance production at the Kennedy Center for the Performing Arts, and the nearly obligatory visit to the Smithsonian’s Air and Space Museum.

Although the Russian businessmen seemed stereotypically stern-faced during an interview, Binns said they were positively garrulous in the business seminars.

“Glasnost has really kicked in,” Binns said. “They’re holding nothing back.”

Victor Gorbunov, whose role with Saratov would be similar to chief operating officer, was upbeat about how the plant was performing as a workers collective.

“Productivity has increased 36%, and there is no significant resistance to the new order,” he said.

“We are hopeful that we can be the model for hundreds, maybe thousands of Russian businesses. But, as socialists, we had little experience (in market economics) and are encountering some of the same problems that faced (former Soviet satellite countries) in Eastern Europe.”

Saratov’s greatest needs, said Gorbunov, are for information systems and computer-assisted manufacturing technology. Also crucial are Western organizational models so that the company’s “flow chart” can be restructured.

But, as Battilega pointed out, the whole country’s flow chart is undergoing dramatic change.

“In such a complicated economic transition, we think employee-owned companies have a better chance of survival. They allow the companies to solve their own problems, are able to cope with a lack of (private business) infrastructure, and would be able to cooperate with U.S. companies.”

A third visit is planned by the American group to assist the June bylaws vote. By then the relationship with the Saratov Aviation Plant will be nearly over.

Both sides are optimistic that the company will endure, and that somehow the plant’s 13,000 production employees will keep their jobs. But much depends on the successful transplanting of Western procedures and concepts.

Gennady Kotchetkov, director of the Center for Conversion and Privatization in Moscow, said the sharing of Russian and Western concepts is not always precise. Working as interpreter, gadfly and linguistic middleman, Kotchetkov often suggested alternate words and phrases to ensure that both sides were talking about the same idea.

“Yes, they need software,” referring to the computer variety, “but they also need software,” tapping his head with a sudden grin.