The FINANCIAL — Ernst & Young Georgia is celebrating its 20-year jubilee this year. We took this opportunity to talk to Ernst & Young’s former and future leaders.
Mr. George Bazgadze was a founding partner of the Georgian Consulting Group (GCG) and was Ernst & Young’s Country Managing Partner in Georgia from 1 January 2003 till the end of 2012. Currently Mr. Bazgadze retains a role as a Senior Advisor to Ernst & Young in Georgia.
Q. Mr. Bazgadze, you were a pioneer in introducing professional services to Georgian market, could you please remember how it all started?
The early 1990s was one of the most difficult periods in Georgia’s contemporary history: civil war, political instability, a national movement associated with nationalism, chaos in transitioning to a market economy, etc. Nevertheless, everything was new and one had to be a pioneer when starting any initiative or business. After returning to Georgia from management studies in the USA, I found that most of the foreign advisors involved in technical assistance projects, as well as those few foreign investors exploring investment opportunities in Georgia, were like “blind cats” running from one ministry to another to gather information or try to make sense of the then rudimental laws and regulations. So, with my partner Constantin Lusignan Rizhinashvili we decided to establish Georgian Consulting Croup (GCG), whose mission was to help navigate inbound ventures through cultural, political, business and legal challenges in Georgia's fast developing emerging market.
Q. What do you think were the major factors which contributed to the success of GCG, and how did GCG manage to establish a legacy when so many other companies vanished without trace?
The first mover advantage was certainly a factor that helped our success. But more importantly, we were fortunate to have created an excellent team of young and talented professionals who were principally responsible for the growth and market leadership of our historic practice. GCG, at different times, included foreign practitioners and had close cooperative relationships with leading international firms, investments which enabled access to professional and cultural training for our team. The high standards of delivery and professional ethics which we abided by helped us to forge our reputation as a leading professional advisory firm in the country. Most of our partners and colleagues are part of the legacy team, while some have pursued individual and successful careers elsewhere in Georgia or abroad.
Q. GCG was the first professional services firm to establish alliances with leading international firms. At different times GCG worked in an alliance with PriceWaterhouse, Andersen, and from 1 January 2003 it combined its practice with that of Ernst & Young. Merging with Ernst & Young inevitably meant foregoing many of the freedoms enjoyed by a privately held firm and becoming subordinate to the global corporate culture of a much larger organization. Now, 10 years from that date, how would you evaluate the decision to merge with Ernst & Young?
In hindsight, this was a very timely and correct decision. We realized that Georgia's market would soon be open to international competition and wanted to ensure we were the first to enjoy the benefits of a global platform – through training, secondments and career opportunities. Building on our strong local reputation, at the time we led the trend yet again by facilitating the arrival in Georgia of the first of the Big 4 firms.
Q. There are varying opinions as to whether Georgia should listen to international advice and draw on foreign experience, whether or not we should be open to foreign investments and even take-overs. Could you share your position on the importance of openness to the outside world, and on the risks and benefits of foreign investments?
There are so many possibilities in Georgia that are unexplored and new. All of them could be replicated with some adjustments to the local situation. Foreign investments remain crucial as they bring to the country the knowledge and ethics of doing business, which are needed in this part of the world. It is also crucial for Georgia to make much better use of the opportunities that it has in re-engaging with the Russian market both inbound and outbound.
Q. As a final remark, 2012 was a year of significant changes for Georgia. It seems that significant changes were made at Ernst & Young, as well. What is our outlook on the future of the Georgian economy and where do you see Ernst & Young in the future?
Despite many challenges on the road to the future, Georgia is definitely moving forward. This progress could have been greater, had we managed to instill some continuity in economic and political policies of changing administrations. I wish there were more continuity and less dependency on change in the political environment. Indeed, 2012 was the first year that the government was changed through elections and I hope this precedent will continue in the future. EY has to be part of this positive process of openness and contribute its international experience and knowledge to the success of the community.
Mr. Ruslan Khoroshvili started with GCG in 1999 and became the first Georgian audit partner in a Big 4 professional services firm in Georgia. Throughout his career with Ernst & Young, he has worked in various locations outside Georgia, including Moscow, Almaty, Astana, Bucharest and others. In late 2012 he was appointed Country Managing Partner for Ernst & Young in Georgia.
Mr. Khoroshvili, you have taken over the leadership of a firm in quite an unstable economic and political situation in Georgia. The situation is further aggravated by instability on a global level, both economically and politically. It’s hard not be intimidated by these challenges.
From the declaration of independence in 1991 up to today, there have been very few periods, if any, when the Georgian economy and political situation could have been characterized as stable. Georgia is a developing country and the development process is inevitably characterized by rapid changes, dynamic environment and swings in political and economic tastes. If one is to conduct business in Georgia, one has to be ready for such mood swings. Unfortunately, the same is increasingly becoming true for the global economy. The days of stability are a thing of the past, and I don’t see them coming back anytime soon. There is no place in the leadership of today’s businesses for people intimidated by change. Having said that, I must stress that assuming a leadership role in Ernst & Young is a responsibility which I do not take lightly. Achieving success is a complex task, but our people, our experience and our global firm instill a confidence that we will continue to be a success.
Q. Since you mentioned success, how do you measure success and what would you say is a distinctive quality of Ernst & Young which sets it apart from the competition and contributes most to your success?
Although Ernst & Young is much more than simply an audit company, still all our activities are mainly aimed at helping build a better working world by creating trust between various players in economic process. Trust is a very fragile matter which takes years to build and only seconds to break. Ernst & Young is a global organization with offices in more than 140 countries and a trust in our global brand is built by each of those offices acting locally. Therefore, to me, success is building and reinforcing Ernst & Young’s image in Georgia as a trustworthy business advisor of the first choice. I think today we are in such a position, but maintaining trust is almost as hard a task as obtaining it. Therefore, we work very hard every day to maintain the highest standards, which are expected from us by our clients, by society at large and by our global firm.
There are many things entwined in our corporate culture and our global organization which set us apart from our competition, but if I had to single-out one factor it would be our emphasis on people and the investments we make into their development. Inclusiveness is an important part of our people culture. Every year we hear news that Ernst & Young has received national or global awards for being a most gay-friendly employer, or most equal-opportunity employer and so on.
Unfortunately, and especially in Georgia, such awards are often the subject of humor, but for us they are very important because segregation does not stop at sexual orientation – it is usually followed by gender, skin color or physical disabilities. Ernst & Young employs more than 170,000 people from more than 140 countries. In order for all of them to have equal opportunities and for all of them to contribute to our common goals, inclusiveness is the foundation on which our people culture stands. This is what allows us to provide local professionals with international experience, thus investing in their development and building a vital global organization.
Q. Speaking of investing in local professionals, Ernst & Young is a popular choice for business school graduates starting a career in Georgia. What would be your message to current graduates?
My message would be to apply for any job opportunity at Ernst & Young. Our selection criteria are tough and our working environment is challenging. However, I believe that our firm gives the best career start for young professionals seeking a future in finance positions. But career opportunities in our firm are not limited only to entry-level finance positions. Whenever you join, however long you stay, the exceptional Ernst & Young experience lasts a lifetime.
Learning is a continuous process at Ernst & Young. All our employees are challenged to develop professionally, to obtain certifications, to listen and to engage in trainings. We are committed to giving our employees international experience through short and long term exchange programs, permanent mobility solutions, opportunities working on international engagements, etc. As an example, currently our people work in New York, NY, Tulsa, OK, London and Istanbul, and we already have a commitment to second additional people next year to Istanbul and various other locations in USA and Europe.
Ernst & Young is where future leaders of finance and management are made.
Q. Jubilees are usually associated with celebrations, events and maybe some changes. What should we expect from Ernst & Young in 2013?
There are indeed many changes which are in store for 2013. I will just give a list without going further into details, but we will inform the public about each one of these in more detail when the time is right – 2013 will see the roll-out of a new global strategy for Ernst & Young; some changes in the brand presentations are expected; Ernst & Young in Tbilisi will relocate to a modernized office, and others.
You noted correctly that there is no jubilee without celebrations. We are planning a commemorative event which will take place later in 2013 to mark our 20 year anniversary in the Georgian market.
Q. Quite an impressive year you have ahead! And also, as a final note, I would like also to ask you the same question about your view on the changes in the economic policy of Georgia and its long-term effects?
Economic policy is, to a large extent, a matter of a taste. There are different economic theories and all of them have pros and cons. There are no right or wrong answers. However as history shows, socialist countries were not so successful in building strong economies. Liberal economies have clearly proven to work better. Although the declared policy of the previous administration was libertarian, and although unprecedented progress was made over past 10 years, both in the economy and in society at large, some of the decisions made were clearly outside the boundaries of a liberal economy. Numerous cases of property right infringements, increased government meddling in the private sector and an insufficient degree of independence for the judicial system were major hindrances of economic development under the last administration. The new government has started to cure these ailments and already has shown some progress. But, the idea of government’s involvement in the private sector seems to have retained popularity, as evidenced by plans around sovereign funds and health insurance. The problem with the government’s involvement in the private sector is that governments are never as efficient in running a business as private owners are. In addition, after entering a specific segment of the economy, a state-owned enterprise usually renders all other players uncompetitive and drives them out of business, permanently damaging the sector. Another area of potential trouble in the economy is social programs, which seem to have more popularity with the new government than with the previous one. Despite their deemed immanent positive impact on the population, social programs have very little impact on long-term economic development. As Margaret Thatcher once said, ‘The problem with socialism is that eventually you run out of other people's money’.
Building a strong economy is a process of trial and error. There are no ready solutions and solutions which work for everyone. In this process our success, as with any country, will depend on our ability to maintain continuity in the policies which succeed and to swiftly identify and modify policies which fail. So far, we have achieved a lot and there are developments in our country which are far ahead of our region. There are sufficient geopolitical, economical and social preconditions for us to succeed and we will succeed, and I am sure Ernst & Young will have a significant say in this success.
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