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Comrades in capitalism: volunteer CEOs advise local firms.

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George Kats: "You know you're doing something good."

Martin Smith: "You have to produce what people want to buy."

Duncan Naughten: Demonstrating "in the nicest way" the need for change.

While many retired captains of industry keep busy playing golf, the stock market and amusing their grandchildren, some crave the opportunity to put their accumulated business expertise and wisdom to work in building capitalism in the ex-soviet bloc.

The EBRD's TurnAround Management (TAM) programme offers them just such an opportunity. Over the past decade TAM volunteer business advisers have helped 1,000 fledgling, often ailing enterprises in the EBRD's 27 countries of operations and Mongolia. The programme has been supported thus far by €64 million in donor funds.

Through TAM, former CEOs, directors and senior managers of world-class companies help their eastern European, Russian and Central Asian counterparts to sharpen their competitive edge in these new, market-driven economies. The programme's success is impressive. Turnover at firms helped through TAM has risen by 15 per cent on average. Independent evaluators rank 80 per cent of TAM projects as satisfactory and above.

Captains of industry not ready to retire

After long years running some of the world's most successful companies, one would suppose these former bosses would want to stay home and reap the fruits of their labour. Instead, they visit faraway assembly lines producing bandages and baby nappies (diapers) in Hungary. Or they test the fluffiness of bread in Romanian bakeries. Or they travel to distant parts of eastern Russia in search of new TAM clients.

Why do they do it?

"It certainly isn't for the money," says Chris Walker, managing director of the TurnAround Management Group (TMG), which runs TAM. "They contribute their time and experience to this programme because they are trying to help people improve their standards of living."

"We're not doing it for the money," confirms George Kats who has advised TAM projects in Romania and Hungary. "When you come to a certain point in your life, you want to know you're doing something good for the world."

Mr Kats, a Dutch national, has over 30 years experience in marketing and senior management. He has been general manager of important pharmaceutical companies such as IRGI France, DHV España, Solvay Duphar BV and Duphar Laboratories. He's known in the trade for turning around loss-making enterprises so they become profitable, modern ventures by using marketing as an engine for growth.

"As advisers, our ultimate objective is to provide the companies with the necessary tools to manage on their own in the future," Mr Kats adds. His dexterity extends to fast-moving consumer goods: making and selling Western brand name products such as Band-aids and Vick's Vaporub.

Keep it simple

TAM took Mr Kat's expertise to Hungary, where he worked with a manufacturer of bandages and other cotton-based medical care products. He advised the Hungarian company's CEO on packaging and marketing and encouraged him to begin with simple adjustments and avoid worrying about complicated marketing tools involving statistics and polls. "You have to keep it simple. You can't expect inexperienced marketing teams to suddenly understand sophisticated marketing techniques."

Mr Kats confesses to being a "convinced European" who sees eastern Europe as part of a united Europe. "So everyone should help them get to the standards needed to be a part of the EU."

The EU accession process confirms the need for TAM services as local companies have to get into shape to face larger, foreign competitors. Martin Smith, one of the first people interviewed for a TAM project, discovered this first-hand during his initial TAM assignment in Romania which is expected to join to EU later this decade.

Produce what consumers want to buy

"After the revolution in 1989, Romanian companies didn't know about market economy concepts," says Mr Smith, from the United Kingdom. "They didn't know that you have to produce what people want to buy." Of his first visit to a bakery of 800 employees in Bucharest, he recalls "it was very old-fashioned. They produced rock-hard loaves of bread that took 24 hours to make." Mr Smith brought with him over 30 years experience in business management, particularly in the food industry. He was managing director of BOC Distribution Services, a major food and textile distribution business.

"I told them they needed to think about making softer breads and using different types of flour," he says. "You have to demonstrate, in the nicest possible way, that they have to change."

Mr Smith produced an information system to let the bakery manager track daily production, sales and distribution. "This helped him deduce which products were profitable and which were not." He also introduced other simple changes like better techniques for leavening bread. As a result of Mr Smith's advice, the enterprise began making biscuits and different kinds of bread.

"It's nice to see progress," he admits. "I shared my knowledge and enjoyed seeing the manager's reaction when the business perked up. And I've broadened my mind in areas I thought I'd never be interested in again." Mr Smith currently works in TMG as director of finance and administration. He controls the programme finances, records the fundraising successes, and oversees the smooth running of the 3,000 strong database of TAM experts.

Matchmaking skills with needs

Duncan Naughten's 35 years of experience in international business plays a slightly different, yet pivotal, role in the TAM family. Mr Naughten, a chartered accountant with extensive experience in finance and mergers and acquisitions, is a TAM team country coordinator for Russia. He matches Russian enterprises in need of TAM services with senior industrial advisers (SIAs) such as Messrs Smith and Kats.

Local chambers of commerce and Rotary clubs help Mr Naughten identify potential TAM projects. "But most of the work comes from RO contacts," he explains referring to the EBRD's Resident offices in its countries of operation. Mr Naughten also has key contacts of his own, including consultants with whom he has previously worked.

Mr Naughten had never been east of the Urals before joining TAM. Now he is setting up projects across Russia, in Novosibirk, Ulan Ude and Magadan. He interviews managers of potential TAM companies during relatively short initial visits. "The judgment which comes from experience and age, coupled with the methodology TAM has developed over the last 10 years, allows me to assess the viability and suitability of the enterprise [to become a TAM project] very rapidly and accurately."

"I was looking for something to do and financial management consulting was not fulfilling enough. I'm doing the most useful, practical job. It's certainly the job I've enjoyed the most," he concludes.

TAM at a glance:

• TAM assists enterprises of mostly 50-1000 employees

• Enterprises that have benefited from TAM assistance employ 750,000 workers and have an aggregate annual turnover of US$18 billion

• The TurnAround Management Group (TMG) administers the TAM programme and Business Advisory Services (BAS), which works with local consultants and has reached 2,392 enterprises

• As at 31st January 2003 TAM had received €64 million in funding from the following EBRD donors: Austria, the Balkan Region Special Fund, the Baltic Technical Assistance Special Fund, Belgium, Canada, the Central European Initiative, Denmark, Estonia, the European Union, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Mongolia TC Fund, the Netherlands, the Nordic Council of Ministers, Norway, Portugal, the Russian Privatisation Centre, Spain, Sweden, Switzerland, Taipei China, the United Kingdom and the United Nations Development Programme.

Contact: TurnAround Management Group

27 May 2003