partnering with russia's new entrepreneurs: software tsarina olga kirova

~ Pergamon European Management Journal Vol. 15, No. 6, pp. 648--657, 1997

© 1997 Elsevier Science Ltd All rights reserved. Printed in Great Britain

P I I : S 0 2 6 3 - 2 3 7 3 ( 9 7 ) 0 0 0 4 8 - 0 0263-2373/97 $I7.00 + 0.00

Partnering With Russia's New Entrepreneurs: Software Tsarina Olga Kirova DANIEL McCARTHY, Northeastern University, Boston

SHEILA PUFFER, Northeastern University, Boston

ALEXANDER NAUMOV, Moscow State University

This article focuses on a Russian woman entrepreneur who established a very successful software firm under license from an American software company. The case illustrates a

" ~-" productive and successful :~iiii partnership between a

.~iii::~: Western company and a .:!!!ii~ ~j-i-.:.. new Russian entrepreneur.

~:;-;~-~:: Recent developments in :.~.,4.¢~t.~ Russian entrepreneurship i ~ are reviewed, and the ...~,, • ,a..,.?.

~'.'?~ .P selection of Russian entrepreneurs as business

" partners is evaluated. The American company is described briefly, followed

~i~.: :%~!~iiii!i!iiiiii~: by an in-depth discussion of ~,F ::ii~iiiiiiiiiiiiiiiiiiii~:. its Russian partner and

.......:..:.::.:::::" ~ii::iiiiii::~:: founder, Olga Kirova. Z.:.:~-:.? .v . -

Conclusions and interpretations are offered on

choosing the right Russian partners, assessing : their personal values, objectives and leadership

skills, being a good Western business partner, and considering Russian women as business associates. © 1997 Elsevier Science Ltd

I love business like a w o m a n can love a man. (Olga Kirova)

648 European Management JournalVo115 No 6 December 1997

PARTNERING WITH RUSSIA'S NEW ENTREPRENEURS: SOFTWARE TSARINA OLGA KIROVA

Recent Developments in Entrepreneurship in Russia

Entrepreneurial behavior has been developing rapidly in Russia and is seen by many as the cornerstone of the new market-oriented economy. Recent estimates put the number of small start-up service and manufacturing ventures at over 400,000 by 1995 (Raisner, 1996). All are new organizations formed since the late 1980s when President Gorbachev promoted perestroika or economic restructuring and ushered in a series of laws allowing various types of private ownership. In 1987 the Law on Cooperatives and the Law on Individual Labor Activity legitimatized small-scale private enterprises, but ambiguities and restrictions abounded. The Russian Federation Law on Private Property of 1991 provided a stronger legal basis for various forms of private holdings which resulted in over 110,000 privately- owned enterprises by the end of that year. Most were small-scale activities and two-thirds were engaged solely in trading and financial operations (Pravitel'stvennyi Vestnik, 1992). Still, a high degree of uncertainty in the social, political and economic environments limited the opportunities for the new entrepreneurs. It was clear by that time, however, that a major resurgence of entrepreneurship had taken hold in Russia (McCarthy et at., 1993).

All Entrepreneurs Are Not Alike

Many Westerners are likely to believe that they understand Russia's new entrepreneurs. In many respects they do, since they share attitudes of entrepreneurship and risk taking, as well as a drive for results. Yet, problems can arise when Westerners assume that Russian entrepreneurs share their understanding of a market economy and business practices. Given limited experience with the still emerging market system in Russia, however, new entrepreneurs sometimes hold misconceptions about business that can lead to problems and misunderstandings.

Typical characteristics of new Russian entrepreneurs include an opportunistic style, risk taking, and sometimes a short-term profit orientation. The creativity and innovation exhibited by many are frequently seen as the engine driving the emerging market economy. Yet, the often unbridled view that some have of the market economy, which still lacks many institutional guidelines and constraints prevalent in the West, sometimes leads to reckless business decisions.

These new entrepreneurs come from diverse backgrounds. Before the market economy began to emerge, some were members of the technical and cultural elite in academic and research environments, while others were students and youths with virtually no work experience in the centralized economy. Others came from the shadow economy or black market. Still others had been employed in State enterprises and ministries.

This latter group of entrepreneurs, such as the CEOs of the Menatep, Alfa and Most Groups, have acquired ownership of various privatized companies and maintain strong ties to the government and former Party apparatchiks (Galuszka and Brady, 1996). As leaders of these new giant conglomerates, they exercise enormous influence over large numbers of new entrepreneurs in many companies.

Selecting Russian Entrepreneurs as Business Partners

The mid-1990 re-election of Boris Yeltsin, with his commitment to a market economy (Capell, 1996), and the continuation of the second phase of the country's privatization program, have combined to attract more investment and Western business interests in Russia (McCarthy and Puffer, I995). Western business persons, even when recognizing that all Russian entrepreneurs are not alike, must be selective in choosing partners for their Russian business ventures.

Although some Russian entrepreneurs fit the negative stereotype of the flamboyant 'nouveaux riches' who made their fortunes in the chaotic early days of the transition, most are sincere and hardworking. 'US companies should be aware of popular prejudices about Russia's new commercial class, and not let themselves be bound by them in evaluating prospective business partners' (Raisner, 1996). For example, some Westerners may be wary of people like the wealthy 25-year-old entrepreneur, Andrei Volgin. Yet, through his company, Adamant, he is rebuilding Russian factories with a $7 million investment fund he created. His philosophy appears to exemplify positive aspects of both the old and new economies. Says Volgin: 'We are working for Russia; we love to make money' (Filipov, 1996).

Important factors in selecting desirable business partners are the mindsets and values of the potential Russian partner as well as those brought by the Western business person. Guidelines to assess these factors are provided in two recent articles (Puffer and McCarthy, 1995; Puffer, McCarthy and Zhuplev, 1996). The case of Russian entrepreneur, Olga Kirova, and her partnership with the American firm, Sterling Software is a good illustration of how selecting the right partner can lead to business success in the still-turbulent Russian environment. She and the company she founded provide the focus of this article.

Olga Kirova and Sterling Software

Sterling Software Corporation, a California developer of integrated financial software founded in 1984, achieved over $60 million revenue in 1995. The company, an independent, publicly-owned firm, develops and markets integrated financial and information management software systems to thousands of customers worldwide

European Management JournalVo115 No 6 December 1997 6 4 9


including AT&T, Barclays Bank, General Electric, Goldman Sachs, Occidental Petroleum, and Voest Alphine. Sterling utilizes a direct salesforce as well as over 1,000 authorized dealers, distributors, systems integrators, and software consultants. Strategic partnerships have been formed with major hardware and software vendors such as IBM, Digital Equipment, Hewlett-Packard, Sun Microsystems, and Microsoft, as well as with large consulting firms such as Arthur Andersen and Price Waterhouse.

Sterling's product family consists of over twenty modules that can be utilized independently as single- user systems or integrated with other modules on a LAN (local area network). The company has concentrated on extending its product line from single users to LAN- based products targeted at small businesses, as well as intelligent client/server company-wide software systems for international organizations.

Sterling entered Russia in 1994, and within a year Russian sales had become five per cent of the company's total. These impressive results have been due primarily to Sterling Russia's founder and president, Olga Kirova. Russian born and raised, and American educated, she negotiated to become Sterling's exclusive distributor in Russia and the Newly Independent States (NIS), and attracted a team of more than 60 highly motivated and capable professionals. Both sides understood well that together they could take advantage of opportunities in Russia's rapidly developing business sector by combining a sophisticated and useful product line with extensive knowledge of customers and market conditions.

Sterling Russia

Olga's company, Sterling Russia, is the exclusive distributor of Sterling's software products in the countries of the former USSR. Sterling Russia translates, develops, customizes, and sells Sterling's software to more than 60 Western and Russian companies including Mercedes Benz, Polaroid, and Soyuzcontract. With annual revenues topping $3 million as of mid-1995, it had offices in Moscow and St. Petersburg employing 66 people. All were Russians except for one American, Olga's husband and partner, Douglas. Kirova claimed to have the brightest people, with most having Russian PhDs. Management's average age is 30. In their prior careers, some had been high-ranking communist party members, physicists, theoreticians, or linguists, like her husband. Her deputy, Anatoly, age 50, was a student under the Nobel laureate, Andrei Sakharov. Now that Russia has a decentralized economy, Kirova noted, these people can use their intellectual capacities at Sterling. 'There is no money to be made working in universities, and everybody here makes a lot of money. We find great ways to play with the high technologies and make money with them'.

Products, Services, and Opera t ions

In mid-1995, the Russian company was offering a dozen of Sterling's 20 products, which they had translated and 'localized' for the Russian market. The centerpiece of their offering was a general ledger package which, like the other products, could be offered individually, or integrated with other Sterling products to provide clients with a complete financial information system. Financial modules included, among others, General Ledger, Accounts Receivable, Foreign Currency, and Payroll, in addition to several Manufacturing Resource Planning (MRP) systems. By 1996, Sterling had converted from DOS to Windows, a must in order to stay competitive, but a factor in pushing costs higher.

Speaking in rapid, fluent English, Olga described her company: 'We are similar to the Big Six accounting firms. However, in many ways we are a lot better. We provide better value. Our company is very profitable and well-regarded. Our customers include Procter & Gamble, McDonald's, Motorola, Colgate-Palmolive, Polaroid, and Caterpillar. We also have Russian companies such as Soyuzcontract and Renaissance Capital, an investment bank. All of this was set up in little over a year, and now we are a dominant force in Russia. But my deputy, Anatoly, jokes that if we really want to make money, we should throw away all consultants, put some cases of vodka in here, and turn into a vodka warehouse'.

She continued: 'We don't anticipate a lot of Western competition in this market because it is expensive to support'. Sterling, in fact, lists among its customers several American Big Six accounting firms including Arthur Andersen, KPMG, and Price Waterhouse. Although such companies could be potential competitors, Olga created cooperative alliances with them. A senior manager from one Big Six firm stated in an interview that Sterling's MRP system is one of the best software systems for manufacturers and could be integrated with a company's financial system.

Olga's contract with Sterling US was signed in April 1994, shortly after her baby was born. When negotiations began, Sterling US had a staff of 30, down from 150 due to a drastic downsizing. Olga said: 'There was this crazy turmoil around the time the contract was signed, when Sterling US went through a major upheaval'. She explained that a serious problem had been discovered in the way orders were recorded. Senior managers, including the founder, were forced out, and the staff was slashed drastically. Kirova's contract was signed by the new CEO. At first, she said, they regretted it, and tried for almost a year to renegotiate it. In a complete turnabout, the original five-year contract was extended to ten, due to Sterling Russia's excellent performance. As further recognition of the growing importance of Sterling Russia, the American corporation's CEO visited Moscow in mid-1995 to meet with Olga and her team.



Like the Big Six, Sterling trained clients in various accounting methods. According to Olga, some of the Big Six 'hate' Sterling. Do they compete or cooperate? One Big Six firm, she said, 'loves' Sterling, while another 'hates' them, because consulting is their niche and Sterling is in it. Sterling had to consult, she explained, in order to move their product in this new market. But she added, 'Now I think there is an equilibrium where we all know our place. We all work together'.

Olga likened the company to an anthill of busy, hardworking employees: 'Twelve man-years of localization went into this product to modify it for the Russian market. Ten programmers support fixed assets, payroll and localization, and materials requirements programs, while twenty people work in language translation. Other people support program maintenance, while a consulting department looks at the product from an account's perspective. What task anyone is working on at a given time is hard to say: everyone has his or her own project. Everything is tested in-house, and there are no beta sites. The office is quiet. Some work at home. Working at home is encouraged in an effort to reduce office overhead. It is an expensive office, with 160 square meters in St. Petersburg, and over 300 square meters in Moscow. The company is currently recruiting in St. Petersburg and plans to expand the workforce there to 20 during 1996'.

spoke it to my grandmother. I couldn't speak with Americans, and I wouldn't speak to Russians, so I spoke mostly to dictionaries'. She gave herself a fifty-word-a- day quota. Within a year she was accepted into the industrial engineering program at Northwestern University in Chicago.

After graduation, Kirova went to work for Motorola Corporation, first in industrial engineering, then in strategic marketing. While working there full time, she obtained an MBA through the evening program at the University of Chicago. She then moved on to a Big Six firm as a management consultant. Her mentor at Motorola, the vice-president of the international division, was upset at her decision to leave Motorola. 'We paid for your degree', he said. 'And we are trying to promote minorities. So why are you leaving?' She brought this question to her former professor who told her that 'the University of Chicago grads give smarts, not loyalty'.

Russian culture is not as

casual as American

culture

The programmers did not have the casual appearance that is common to programmers in the US. At Sterling they are required to dress in a business-like fashion. This reflects a cultural difference as well as being for the clients' benefit. Russian culture is not as casual as American culture.

'Business is love and hate', she says. As an example, Kirova talked about her time at one Big Six firm in

Moscow where she was Director of the Information Technology Group after leaving another Big Six firm. Her job was to oversee the development and promotion of a product line that later competed

with Sterling. She was hired when the project 'was nothing more than two people and a signed contract'. According to Kirova, her new boss told her: 'Don't worry if it doesn't work out'. He had hired her because she was a good candidate for the position, speaking English and Russian as well as having a background in both marketing and accounting. She took the division from 2 to over 70 people, and oversaw its growth to become one-third of the Company's revenues in Russia.

Olga's Background and Business Experience

Olga Kirova was born and raised in St. Petersburg. Both her parents were engineers, and her father was also a musician. They gave her a fine education, sending her to music school to become a professional musician, a pianist like her father. She felt the field was too competitive, however, and dropped out. Yet, the years of training helped her in many ways. She recalled that during that time she was studying a lot and working hard. She became very goal-oriented, and remained so. She was 18 when she and her parents left St. Petersburg for Chicago. Kirova knew very little English, but that soon changed. Continuing her story in fluent English, she explained:

'I'm very goal-oriented, to the point of obsession. My father says that I am more like a train, because I don't see anything outside, just my goal. So when my goal was to study English, it was to study English. I learned it quite fast, not because I'm so talented, but because I was studying like crazy. I told all my Russian friends that I wouldn't speak Russian to them anymore, and I only

It was 'love and hate' at that firm. 'I didn't get along very well with my bosses because I'm very blunt and very straightforward. I'm like a train in a lot of ways. That's my advantage and it's also my disadvantage'. Olga admitted she was not always politically astute, and that it was more important to her to make her sector successful than to get promoted. Her boss told her that she needed to learn to manage upward because she would go over his head and also spend over budget. 'I did whatever it took', she stated bluntly.

Her job was important to her. She was making a lot of money, and had more loyalty to her project than to her position. Her contract was not renewed. 'After that', she said, 'the project fell apart'. She recollected that her boss told her: 'I'm letting you go, and I'm sorry because I know this project could fall apart without you. I have to go on, and you make me look bad'. Kirova was philosophical about having been fired. 'It's a business case', she said. She had also been fired from her job at another Big Six firm. She viewed the culture there as resembling the culture at Sterling in that both had very smart people, but the former had the atmosphere of a

European Management Journal Vo115 No 6 December 1997 6,5 1


private club, according to Kirova. 'It's hard to get into, and once you were in, you were still being watched. Everybody hated partners, but they all worked hard to become partners, because what else is there for them?'

Olga's Business Philosophy and Management Sty le

Olga talked of her feelings about business: 'I love business. It is what I've done all my life. I'm very good at it. I don't want to retire, I don't like taking vacations, I don't like to travel, I don't like buying expensive things. I like being among my friends doing business together. I like being around people a lot smarter than me. I get a kick out of it. That my deputy, Anatoly, was Sakharov's student makes me feel great'.

Olga explained how she saw her role: 'I'm a manager. I just like to give advice. I even go home and give orders. But people like me because I give clear instructions and they can get things done in the right way, and I compensate them for that, not just in money but also in good words'.

Kirova said that the people at her second Big Six firm were hard workers, very bright, quality people who got things done. The people who fired her are her role models. She works now much as she did in the Big Six firms. The projects are similar, and she is still involved only in organization and administration, and not technical issues. 'I administer things and people, that's what I do. My life is very interesting and the decisions that I make are very interesting. Business to me is not all just rational, it's the expression of my talent. I do what I feel like, you know, so I really don't have a choice. In addition to that, at the time, I was finishing up my PhD in management at Moscow State University, and I was pregnant, so the whole experience was really interesting'.

Continuing her story, Olga said: 'I was trying to finalize the contract with Sterling, for an exclusive license for all of the former USSR, which is really an amazing contract with excellent terms. I was carrying a baby at that time and not telling Sterling about it, because that's not a good thing to do. You know, here is a lady who is going to have a baby and she wants a five-year exclusive contract for the territory of the former USSR. They would never give me a contract, so I didn't tell them. And I would not go anywhere where Sterling's customers could see me. It was my secret'.

Kirova feels she knows what her strengths are: 'I am a manager. There is no question about it, because I don't want to know the programs, and I don't know technology. I love to use what I learned from Paul Schumaker, a professor at Northwestern University, because he told me about general management skills and wrote about them in his book, How to Make Decisions. So I would say that I'm a professional general manager. That's what I do. Whenever I want to do something, I hire people. Even the business plans are prepared for me.

I don't work by myself, and can't even work on Saturday by myself. But I coordinate, and I manage the process and this is why our company has been so successful. I am just a coordinator. And I also solve problems'.

Of her personality, Olga noted: 'It's very aggressive. Therefore, it's sometimes better to have somebody else tell a customer he screwed up - somebody softer. That's why I have a team of people, and I become more of a background person. I do marketing, but really what I am best at is strategy. There is no question about it - strategy, general management, and organization are my strengths'.

According to Kirova, the success of Sterling was not based solely on the fact that they had better products. 'It's the quality in whatever we do'. She relied on what she had learned at the University of Chicago, and a few favorite texts, especially in psychology. She mentioned Stephen Covey's book, The Seven Habits of Highly Effective People, which she has read 'a million times', claiming, 'It's simple. It's great for any culture'. Psychology of Flow, written by a University of Chicago professor, was another. 'He talks about quality. He says: "Do whatever you do with quality, because quality improves our lives. Always finish projects. If you start, you finish. If you promise, you deliver". It's my bible'.

Olga explained how this approach applied to her business: 'So what's the niche for us7 What's our strategic advantage? It's the quality. The quality of people. We pay people a lot more money, we pay people more than the Big Six. It's the quality of relationships, the relationships that are formed and the respect that people have for each other, because this is more like a universi,~y. That is not me naturally, this is something that I learned. It's the quality of treating the customer with dignity. This is what you really should do. What these books say is that everyone around you should benefit. That's really my goal. Everyone around me should see a positive impact. I am very lucky that I can make other people's lives better - customers, colleagues, employees, and family'.

As far as strategic planning is concerned, Kirova stated simply, 'When I have time, I work on strategy'. After a brief pause, she added: 'I make time when I need it'.

Kirova claimed to get bored with very complex problems. She said she is much better at a lot of very simple things, the types of problems she solves every day. For example, she came up with an idea of calling customers to ask when they were planning to pay. She explained: 'Administration is a very important thing because a business is a system. If you don't collect from a customer, you have a bad system, so you'd better work on your collectibles'. Kirova, however, no longer made those calls herself.

She also trained her marketing coordinator in what she termed the 'Chinese torture' method of closing a sale. When a client is close to a purchasing decision, the

6.52 European Management JournalVo115 No 6 December 1997


marketing coordinator calls every two hours to ask if the order had been approved, and if the responsible manager had seen it and signed it. If there was a problem in any part of the system, Kirova decided how and by whom it would be addressed.

When asked if she considered herself a leader, Olga responded without hesitation: 'Absolutely. The company is like a child, it grows up with your values, and the values of the environment. You'll always see yourself in it. This company is me. I'm a general manager. I'm a good manager. When the company needs other personalities to manage it, I walk away. I hire people who are smarter than me. The company, like a baby, needs a life of its own. In many ways I'm like Steve Jobs was to Apple, a charismatic leader. People remember me because of the way I talk, and that's an asset. That's why', she concluded, 'I could not be a consultant, because a consultant has to listen, and I don't just listen. I have ideas of my own'.

Attracting and Developing Quality People

Olga recruited her staff initially from universities, and through friends and word of mouth. She also took some people with her when she left the Russian office of a Big Six firm. As the business grew, she added more formal recruiting methods including advertisements, a relatively new approach in Russia. Not forgetting her talented husband, she added: 'With Douglas I was lucky'.

Regarding the types of people she sought, Olga explained: 'I hire people myself and really try very hard to find a spot for them. I'm looking for smart people. I'm not talking about skill, but about attitude. Like some Big Six firms, we hire talented people, train them, and let them develop skills. There are definite skills demanded, such as programming and accounting. And as for marketing, it's a sophisticated product, so you need someone who is more of a psychologist.

'Anatoly and Douglas are the smartest. They are founders along with me. Douglas is a tinkerer by disposition, but not training. He speaks well, and with his tinkering he has investigated technical aspects, so we ask him to explain the program to the customer. He handles customers really well. He will not go into a lot of technical detail, and gives them an overview. He has psychological insight. For more detailed information, he sends them to Anatoly who will take them deeper into it. Then the customer gets an office tour, and during that time, my management style is not to speak, but let others speak. It's like a theater. Different people have different roles. The impression that we're trying to make is that it's not a one-man company; the customer gets a whole organization of very talented individuals.

'There is always a spot here for smart people, but there is also a spot for people who are not so smart. In a lot of ways I'm one of those. I'm more of an executor. When discussing which way to go with a high-end product and

the technical people are talking bits and bytes, my response to them is, "Don't confuse me. I'm getting a headache! Just decide. See which choice we as a company should take, and then tell me, because I will help you push it through". When the smart people get bored, they can move to another department.

'There are different roles for different people. A woman customer from Volgograd wants older salespeople. Victor can help such customers. My marketing manager, Ivan, is younger and looks very Western. He was a professional translator, so he handles Westerners. I greet them from a high level perspective. I just come and say hello, ask how they are, and give my level of energy and leave'.

Working With Westerners

Kirova had hired some Westerners whom she later had to fire. She insisted that she hates firing people, and tries never to do so, but the Americans just didn't fit in. 'They are different', she believed, 'because they are raised as part of a system that works for the consumer. It's too easy. When I am in the States, it's almost like I'm bored. There is no challenge. You go to the store and everything is there for you. An American who comes to Russia is lost. In the States, the people are so much a product of this beautifully developed system that when they come here, they are absolutely lost'.

She recalled how she had gone to the United States without any English or any money, and had been a good student, but not the best. She succeeded there. 'You come to Russia; all you have is a problem, a challenge, but look where I am now. Do you think an American could do that, coming here to Russia? I don't think so. What I've achieved, a lot of Russian immigrants have achieved'.

Olga elaborated on the conditions she believed cause such different attitudes: 'The Russian system is lacking things like shopping malls and service. Here in Russia, just learning to survive, that's the challenge, the ultimate challenge. The system is much more complex here, and because of that, this country has not advanced as much as America. There, you are a little piece of a big machine that is very beautiful. Here, you have to do so much in order to achieve the same thing. We at Sterling add value because we are a lot closer to Western service'. Still, Olga insisted that Russians are good and strong. She has supported her country against a lot of negative press: 'Russia has been through hell. Its values were cut, undermined. People were told Communism was bad and stupid; not that that's wrong, but it's part of the problem, the way Westerners treat Russians. They've been downgraded even in their own eyes'.

Russian Women in Business

Olga noted that virtually all women in the Company held professional positions. 'There are more young women attending college in Russia every year. Women

European Management JournalVo115 No 6 December 1997 6.53


can't do heavy physical work with their bodies, but their minds are just as good as men's. However, they are different and they bring a different perspective'.

To Kirova, a business is like a family. 'I think that because I'm a woman, I look at it like a mother. I just like to take care of it. To a man it might be more like sports or a competition. I think it's good to be a woman in this business, because I have a different perspective'.

Sterling's office in St. Petersburg was run by a Russian woman whom Olga considered 'incredible:' 'Irina is the sharpest person, a very good manager'. The dozen staff members Irina hired worked together very well, and had gone to the Moscow office for training. Kirova believed that Irina probably wouldn't be as effective if she worked for her directly, because Olga would overprotect her. Instead, Olga often went to St. Petersburg on weekends to talk with Irina, whom she valued as a good friend as well as a business colleague.

Olga wears formal business attire because early on she had read that it helps women to be taken seriously. She has found this to be especially true with Russian clients who 'don't expect a woman to be in charge'. Once a client meeting with her and Anatoly shook Anatoly's hand and said about Kirova, 'what a pretty girl', obviously not realizing that she was the CEO.

Personal Values and Objectives

Perhaps Olga's remarks seem casual, but she loves her work so much that she takes all aspects of it in her stride. 'I work here because I like it. I don't need to work, I have enough money to retire, but what am I going to do with all this energy?' She recalled that when she was fired from a Big Six firm, she was pregnant and didn't need to work, so she went back to school for her PhD in management at Moscow State University. She tried teaching for a while, but discovered that university life was not for her. 'It's very complex. You have to concentrate'. She added: 'I like to teach, but not in a class'. What she likes is the feedback. She said she needs to ask questions because that process aids her professional growth.

expect a woman to be in charge

The setting at Sterling, she said, is almost perfect for her. 'I like my job, and I like being a manager. I don't necessarily like being an owner in a lot of ways, because in Russia right now that is like running around the streets with a big diamond ring. I really don't like having

things, and I actually live

Russian clients don't quite poorly. I like making " ' " money, but I don't like

spending it, almost to the extent of it being a sickness'. She explained: 'I like what Stephen Covey talks about,

being principle-centered. A person should be centered on good values rather than being attached to their car. My three-room apartment is okay for Russia, but by American standards, you would be shocked'.

Similar situations had arisen in previous jobs at Big Six firms in Moscow. For instance, she would sometimes be asked by people to make photocopies for them, unaware that she was the project director. On another occasion while working there, an important Russian client team came to the office. Officials from the ministry of international affairs were standing around talking about the product, saying how great it was. When Olga, then 30 years old, was introduced as the project director, 'their jaws dropped. They stopped talking business and began assailing me with personal questions: "Why did I speak Russian so we l l /Who was I married to? Did my husband work in the company?" It confused the process', she concluded.

She is philosophical about this problem. 'I am a practitioner. I play by the rules, not set them'. So when new Russian clients come to Sterling, she avoids being introduced to them. If necessary, she is introduced simply as 'an expert from Chicago'. She prefers not to let the client know that she is in charge, because Sterling can't make the sale, or it takes too long. She felt that outside the US, being a woman in business is a definite disadvantage, even though it's only one of the parameters. Still, Olga admitted that being a woman could sometimes be an advantage: 'A woman can employ emotion to motivate the men around her'.

To Olga, the whole company 'is just a project which I'd like to tie up and package like a present so that it's all done, like my PhD. So the company should not be an end in itself. When I think about my life, it's just another successful aspect of it. Sometimes I think how I'd like to sell the company and become financially independent - but I already am'.

To help with household activities Olga had a live-in nanny and a housekeeper, and planned to hire more help, possibly a driver and a cook. 'My babysitter thinks my baby is her baby. I call her Mama Marina. Her job is more important than anyone else's because she's raising a human being. She does things I can't because I'm not patient enough because of all the problems in the company. Sometimes I come home and say, 'Keep me away from the baby. It's not a good day for me'. I love my baby. I love watching her. I like seeing her being very happy and very healthy. I really love her a lot, but I can't do a lot of things with her'. In terms of future goals in her personal life, Olga stated that she wants her child to get an exceptional education, to learn several languages, go to music school, and visit places like the Hermitage museum in St. Petersburg. 'In other words, I want her to have everything I had as child and more'.

When asked if she would have another child, Olga said flatly: 'No, I won't'. She elaborated: 'And the reason is



because it's just too much for me. It's just too big a responsibility. Maybe if my husband was more involved with the baby. But right now all of that is on me. Sometimes people around me just rely on me too much because I do all this'. It is a project, like everything else in her life, including having a baby. 'Even my baby is a life-long project who has to be well-managed.

'My whole life is projects', asserted Olga. And apparently it always has been. Speaking of her marriage, she noted that, after dating Douglas for three months, they got married. It was she who proposed. Getting married was her project. At the time, Douglas was on his way to Australia for six months, and told her to wait for him. She gave him an ultimatum, and he didn't leave. 'I think he's very lucky', she said, 'because he's with me. I think people around me are very lucky'.

Olga emphasized that she loves Russia and loves to speak Russian, and often traveled to St. Petersburg where she keeps an apartment overlooking the Palace Square and the Admiralty. When asked how she could enjoy living in such an unstructured country while her life was highly structured, she clarified without any hesitation: 'You are talking about life and I am talking about me. I am projects, I am structure. I am the leader. I take the unstructured environment and I make it into structure. This is why I add value. There was nothing here before, and now Sterling Russia is the number one distributor'.

Future Plans

Olga outlined a near-term goal for Sterling as well as a three-year outlook, including the possibility of giving up some ownership of the company. 'Our near-term goal is to move from $50,000 to $150,000 in implementation services revenue per customer. In terms of moving geographically, we are discussing it and we would like to see 150 sites throughout Russia. Also, we would like our products to be sold through distributors that are Russian companies. Our company is all Russian, with the exception of my husband, who also loves Russia and speaks the language fluently. Our product is expensive, as it is sold at American prices. People will pay such prices here because it has more features than competitors, and is recognizable to Western financial institutions who lend at much lower rates than Russian banks'.

Kirova also outlined a three-year outlook. According to her forecasts, a good scenario would see Sterling as a dominant force in mid-range accounting software in the $20,000 to $60,000 price range, with distributors throughout the former USSR. In three years, she predicted it would be the number one company with sales of at least $5 million dollars. This could happen, according to Kirova, because Sterling Russia employees worked hard and had a good service-oriented approach. There was also some discussion regarding the possibility of expanding into Eastern Europe, but Kirova said she didn't like to travel. She felt she could conceivably go to Warsaw for short stints, but her home was really in

Russia. Of course, if they were to expand into Poland, she could send others.

She and her husband were the sole owners of the company, and intended to retain majority ownership. Nonetheless, they had begun looking for other investors. Kirova felt it would be prudent to give up some ownership and increase capital, but the business was hers and would stay that way, at least for the foreseeable future. As to how others would obtain part ownership, Olga said that she and her husband were discussing the issue, and that it had to be done right. She wanted to ensure that the people instrumental in building the business would have early access to part ownership through stock options, or shares which would likely be sold first within the company. Up to that point they had been working on operational issues, but recently she and Douglas had begun talking to investment banks.

'I would stay as a manager', she added, if other owners came on board. 'I'd like to have a job with this company. I'd like this company to be a lot bigger than me and to go public one day. I'd like it to be another Microsoft'.

Conclusions and Interpretations

Choosing the Right Russian Partner

Western companies entering Russia, with the possible exception of large, experienced multinationals, will often do so with a Russian partner. Choosing the right partner is critical. Some companies will be fortunate enough to find a talented and energetic entrepreneur like Olga. Since she is completely bicultural and bilingual, communication problems between the two partners were reduced, and Sterling gained credibility with Russian and Western customers as well as with local employees. As the unfortunate experience of Sterling Russia's American employees illustrates, it can be extremely difficult for outsiders to thrive in the turbulent and unstructured Russian environment.

In addition, fundamental trustworthiness, such as Olga exhibited, is an essential quality in a Russian partner. Experience related to the specific business is also very helpful, such as Olga had in the accounting software field, which facilitated the customizing of products and services for the Russian market. Further, Olga's ability to utilize a network of reliable Russian contacts had proven to be an invaluable asset in attracting employees and customers. All these qualities have made Olga Kirova a seemingly ideal business partner for Sterling US, and provide a starting point for choosing a Russian partner.

Assessing a Partner's Personal Values and Leadership Skills

The desirable attributes described above as being important in choosing a Russian partner can usually be

European Management JournalVo115 No 6 December 1997 655


verified with some effort. Yet, values, objectives, and leadership style are equally as important over time, but may be more difficult to assess in the early stages of a business relationship. In-depth discussions can be useful in uncovering these highly personal attributes. Olga's personality was such that she spoke openly about these often-sensitive topics. Many potential partners, however, would likely be less candid. Values, personal objectives, and leadership style will strongly influence the decisions and behaviors of prospective partners, as well as the reactions of others to them. The success of an enterprise over time will depend heavily upon these attributes, and Western partners will likely not be present during most of the company's daily operations. They should not, then, neglect to assess these personal attributes of prospective partners as early and thoroughly as possible, and decide whether there is a good fit with their own characteristics.

Being a Good Western Partner

Russian companies must also gain from a partnership in order to make the relationship work over the long term. Sterling US was able to provide Olga with a proven product line which could be adapted to the Russian market, as well as with marketing assistance. The product had credibility among Western customers, including the influential Big Six American accounting firms which operated in Russia. It also provided the opportunity for Russian companies to offer financial statements in a Western format which might facilitate raising much-needed capital. Also, the 10-year license agreement with Sterling US gave Olga's company an exclusive distributorship that allowed her to plan for long-term growth. Sterling US took the risk of a long- term licence, but the relationships established during tough negotiations, as well as Olga's strong early performance with Sterling Russia, gave Sterling's US management the confidence to extend the license. And the visit of Sterling's CEO to Moscow further solidi- fied the importance of the relationship in the eyes of Olga and her Russian team. It is important to note Olga's pride in Russia and Russian people. Such understanding, attitudes, and actions have made Sterling US a valuable partner for Olga Kirova and her company.

Considering Women as Business Partners

Just as in other countries, women who have the right experience, values and objectives, leadership style, and

networking ability can often make excellent business partners. However, many negative stereotypes and obstacles in Russia continue to block opportunities for women in business (Puffer, 1994). For instance, although she handled them very well, Olga's many uncomfortable experiences demonstrate the difficulties women face in business. Yet, Olga has shown that, with talent, experience, and persistence, women can be very effective. She herself chose a woman to head Sterling's St. Petersburg operations. This pool of potentially valuable partners should not be overlooked by Western companies when entering Russia.

Note

This article is based on interviews with Olga Kirova and others. Her name, the company, and all individuals have been disguised. The authors gratefully acknowledge the assistance of Ms Lyn Liberty in transcribing taped interviews.

References

Capell, K. (I996) Go East, intrepid investor. Business Week, August 5, p. 88.

Filipov, D. (1996) Voices of Russia: five profiles of new entrepreneurs, The Boston Sunday Globe, June 9, pp. I, 32, 1996.

Galuszka, P. and Brady, R. (1996) The battle for Russia's wealth. Business Week April I, 50-52.

McCarthy, D.J., and Puffer, S.M. (1995) 'Diamonds and rust' on Russia's road to privatization: the profits and pitfalls for Western managers. Columbia Journal of World Business 30(3), 56--69.

McCarthy, D.J., Puffer, S.M. and Shekshnia, S.V. (1993) The resurgence of an entrepreneurial class in Russia. Journal of Management Inquiry 2(2), 125-137.

Pravitel'stvennyi Vestnik (Government Review) (1992) January 22. Puffer, S.M. (I994) Women managers in the former USSR: a case

of 'too much equality?' In Competitive Frontiers: Women Managers in a Global Economy, eds. N.J. Adler and D.N. Izraeli, pp. 263-285, Blackwell, Cambridge, MA.

Puffer, S.M., and McCarthy, D.J. (1995) Finding the Common Ground in Russian and American Business Ethics. California Management Review, Vo]. 37, 2, 29--46.

Puffer, S.M., McCarthy, D.J., and Zhuplev, A.V. (1996) Managing Mindsets in a Changing Russia. Business Horizons, November-December, 52-60.

Raisner, B. (1996) Russia's New Commercial Class. Bisnis Bulletin, May, 3.



SHEILA PUFFER, Northeastern University, College of Business Administration, 325 Hayden Hall, Boston, M A 02115, USA.

Sheila M. Puffer is Professor of International Business and Human Resources at the College of Business Administration, Northeastern

University in Boston, and an Associate at the Davis Center for Russian Studies at Harvard University. She has published widely on motivation, leadership and Russian management. She has co-authored or edited a number of books including Business and Management in Russia (Edward Elgar, 1996), Management Across Cultures (Blackwell, 1996), and The Russian Management Revolution (M.E. Sharpe, I992).

DANIEL McCARTHY, Northeastern University, College of Business Administration, 3 I3 Hayden Hall, Boston, M A 02115, USA.

Daniel ]. McCarthy is The Philip R. McDonald Professor of Business Administration at Northeastern University in Boston. His previous

experience includes President of a public high technology start-up company and manufacturing positions at Johnson & Johnson. He has taught strategic management and high technology management in over a dozen countries. He has published numerous articles in these fields, with an emphasis on Russian business and management. He is co-author of four editions of Business Policy and Strategy (R.D. Irwin, I987).

ALEXANDER NAUMOV Moscow State University, School of Business, Vorobievy Gory, Korpus 2, Room 489, Moscow, 119899, Russia.

Alexander L Naumov is Deputy Director and a Professor in the School of Business at Moscow State University. In addition to numerous articles and cases, he has co-authored or edited books including Behind the Factory Walls: Decision Making in Soviet and US Enterprises (Harvard Business School Press, I990), Management: People, Strategy, Organization, and Process (Moscow State University Press, I995), and General Management Cases (Moscow State University Press, I990).

European Management JournalVo115 No 6 December 1997 657

partnering with russia's new entrepreneurs: software tsarina olga kirova

Documents