The FINANCIAL — From July 2009 Dhabi Group, founder of KOR Standard Bank, took the decision to staff the Bank with Georgian management. “Foreigners need time for adaptation to the Georgian market and we simply have no time for that,” explained the representative of KOR Standard Bank.
The FINANCIAL tried to find out whether the nationality of managers defines the success of the company and what foreigners need to adapt to when starting working in Georgia.
David Lee, General Director of Georgia’s largest mobile communications company MagtiCom, told The FINANCIAL that it took him probably a month to understand that there were no specific problems with his work.
“I was made very welcome by the staff of Magticom and the customers. Georgian traditions mandate hospitality so that is not an issue,” David Lee, General Director of Georgia’s largest mobile communications company MagtiCom, told The FINANCIAL.
According to U.S. Securities and Exchange Commission Magticom entered into an employment agreement with David Lee, on April 1, 2006, pursuant to which he is employed as Vice President of the Company’s Georgian Operations, with the exclusive duty of serving as General Director of Magticom, Ltd. He is based in Tbilisi, Georgia. Pursuant to his employment agreement, Mr. Lee is entitled to an annual base salary totaling $230,000. As its General Director, Mr. Lee is an employee of Magticom and receives a salary from that company.
The employment agreement also provides for certain payments and benefits that are intended to compensate Mr. Lee for his overseas posting. Company shall pay Mr. Lee $1,500 per month to cover housing and living expenses, reimburse Mr. Lee for medical insurance, and reimburse Mr. Lee for one round-trip coach class airline ticket between Tbilisi and London every three months. Additionally, the Company will pay or otherwise offset Mr. Lee’s personal tax obligations in respect of compensation payable pursuant to his employment agreement in Georgia, plus the costs of making any tax filings or returns in Georgia.
 Based on the strong performance by Magticom, Ltd. that was achieved during 2004 and 2005, the Company paid Mr. Lee a $505,500 cash bonus. This bonus was paid retrospectively and had not previously been communicated to Mr. Lee with targets set in advance of 2004 or 2005.
Magticom paid Mr. Lee an $18,655 cash bonus in consideration of Magticom’s 2005 performance pursuant to a Magticom bonus program, which paid bonuses to all Magticom employees based on achieving or exceeding earnings targets set forth in Magticom’s annual business plan.
“I have worked in many countries: America, Europe, Russia, the Middle East and the Far East and in telecommunications customer requirements are the same the world over. Customers want excellent quality, the latest technology and for the company to listen and care for them,” Lee says.
“I don’t believe that Georgians can more easily adapt to the execution of business in the country than foreigners. Actually Georgians have never been strong in management”, says David Narmania, CEO of Caucasian Institute for Economic and Social Research. Â
“That may have been improving lately but we are still far from the ideal. In KOR Standard Bank’s case the reason for changing the management team was down to other things. It could have been that the head of Dhabi Group was not satisfied with his CEOs work, but for me the more realistic possibility is simply that they need more close relations with the Georgian Government. Accordingly they chose a person who can easily negotiate with the Government. Especially since there have been cases of the Government starting to massively fine companies and increase pressure on business,” says David Narmania.
“The ethnocentric approach of only Georgians working in Georgian business is definitely not right. Adaptation to a foreign market is an individual experience and very complicated decision to make. There are lots of industries that do not need customization. For example products that are for regular consumption which do not need special approaches. Usually an organization is a complex system. I also cannot approve of the example of a certain Kazakh company appointing only Kazakhs to run their business in foreign countries,” Akaki Kheladze, Doctor of Graduate Studies at Caucasus University (CU), told The FINANCIAL.
Kheladze states that the geocentric approach is the best way to run business.
“That means looking for the best representatives all over the world. For example, when a French company starts business in China, it might appoint Canadians for its top management, and for control, employ Georgians. This is the best approach to business. We know lots of examples of successful companies in Georgia which are ruled by foreign managers. Accordingly this argument is less acceptable. Meanwhile many companies staffed with Georgian nationals also succeed in their business. So taking into account the existing cases of companies we cannot conclude that the achievement of business is solely up to the nationality of its managers,” Kheladze says.
Lee says that it took him probably a month to understand that there were no specific problems with his work and that Magticom was a world-class company with an excellent local reputation for quality.
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“Georgian managers are more focused on the technology and the product and less focused on sales, marketing and HR than say Western European or American Managers,” Lee notes.Â
“But all good managers need the same qualities: leadership, honesty; the ability to communicate and motivate, and knowledge of the business. I have found Georgian employees to be intelligent and highly focused,” he adds.
From 1978-87 Mr. Lee was a Lieutenant Royal Navy Fleet Air Arm, UK. From 1987-90, he worked for KPMG UK, a leading provider of professional services, which include audit, tax, and risk advisory. He was qualified as a Chartered Accountant. 1990-94 – Divisional Manager Mobile Telephony, in TeleYemen Ltd, Yemen. 1994-98 – CEO Cable and Wireless Sakhalin Ltd, Sakhalin, Russia. In 1998-00 – Regional Director South East Asia, Cable and Wireless Ltd, Singapore. 2000-02 – Regional Director Metromedia Ltd, UK. 2002-04 – DGM Comstar Ltd, Moscow, Russia. From 2004 till now – General Director Magticom, and from 2008 – President American Chamber of Commerce.
Narmania says that when starting business in Georgia foreigners need to adapt to the local environment. ”That means paying taxes, additionally paying money when the Government asks it from you, visiting when the President wants to meet with you and so on.”
“Foreigners need to adapt to the Georgian environment otherwise they will not be able to work. Leading businessmen are frequently having to compromise, even if it is not necessarily something they approve of. Businessmen make compromises so as not to become bankrupt, and to avoid facing additional problems,” Narmania mentions.
Today we often see cases of threats made by the Government to businessmen. I do not believe that businessmen need to involuntarily start financing the Government. For example last year the association of young lawyers investigated the case of construction processes of an East-West road. The company responsible for the construction of the highway was company Zimo. Research found that the company is voluntarily transferring GEL 100,000 to the National Movement. Why should the company have such a desire to start financing any political party, especially on such a large scale?”
“Why would a pharmaceutical company desire to finance a free canteen? Especially when the people who use the canteen are not even those able to buy the medicaments sold in the pharmacy. Many illogical things take place between the Government and businesses. Until conducting business in the country becomes civilized, civilized business will not start investing money in our country. That’s why Georgia does not manage to attract investors from civilized countries. Even when we hear that some companies are registered in western countries, behind the faces of those companies stand Cossacks or Russians,” he notes.
Written By Madona Gasanova
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