Interview with Petr ŠMÍDA, Chairman of the Board of Directors, Alfa Bank (Moscow, Russia)

Interview with Petr ŠMÍDA, Chairman of the Board of Directors, Alfa Bank (Moscow, Russia)

Date: 18.9.2012

Company: Společnost pro strategické řízení, inovace a podnikatelství, o.s.

Mr. Smida will be speaking to the International Strategy Forum the SEARCH FOR LEADERSHIP AND EXCELLENCE:: COPING WITH THE GENERAL ELECTRIC AND ALFA BANK CHALLENGES & OPPORTUNITIES. More information on the forum can be found at www.ssrip.cz .

You went from being the head of your own entrepreneurial venture to being a part of one of the largest and most hallowed corporate structures in history when MultiServis was purchased by GE. Many entrepreneurs feel swallowed up, or neutralized, when they become a part of a bigger organism. What was your experience?

I liked it. Iguess the proof is that Istayed much longer than the required period stipulated by the purchase contract: Iworked for GE Capital from 1997 until 2003. There was really nothing like GE at that time. You hear about company culture and tradition all the time, but Ican tell you that GE has such a strong environment and a tremendous approach to getting the process right that you are constantly put in a position to learn. You are always asked to test what you just did, to examine if you got the best result possible, whether you could do it better next time, if you could find a new opportunity or squeeze just a little more inefficiency out of the process.

And, of course, being part of GE exposed me to the big world- especially the last years with them when Ilived in the US and worked globally across 40 countries. For a business guy such as me who had spent all their early time behind the Iron Curtain, this was like joining The Beatles. Iknow Jack Welch gets both praise and criticism, but Ican tell you that internally he was great in terms of leadership. He managed by the laws of nature, and he created so many opportunities for people through both organic growth and acquisitions; there were always some interesting and empty positions somewhere.

I remember my first set of meetings in Japan after Ihad been given my first global responsibility. Here Iwas in one of the major markets of the world, sitting at the table with a bunch of “subordinates” who had much more experience and qualifications in their country than me. What was Ito them? What was the Czech Republic to them? Ilearned very quickly that the most powerful question to ask the team was what they do not know rather than what they know- after all, they are likely going to spend a lot of time telling you precisely what they know. Asking them what they do not know opens many interesting subjects, and creates a space to learn. It may sound really trivial, but getting people to talk about what they do not know opens people to thinking and discussing.

Six Sigma and similar methodologies help to create shared tools and terminology. That, together with shared values, creates the trust you need for the global organism to function, especially an organism as huge as GE. Sometimes Six Sigma is viewed as an impersonal tool of efficiency and management control, but it is much more than that. It creates and sustains a culture. Some companies do not realize this, and abandon the system if it does not bring effect immediately. At first, it can lead to a few not so productive changes, but, if you keep at it, you get necessary skill and critical mass of support for the change you need to succeed. That mass of support helps create shared values up and down the business organism. Then the whole company aligns itself to new, improved, and sustainable standards.

How much time did you spend on strategy as CEO?

A lot of time. The CEO has four tasks that cannot be delegated. The first is strategy. The second is hiring and managing, andleading, key people. The third is handling the relationships with shareholders and stakeholders. The fourth is communicating to balance the organism.

When Iwalked in the door of newly created GE Capital bank in 1998 in Prague, Ihad a vision but Idid not know enough about banking to devise a good implementation strategy. That was why Iinsisted that Iwould be able to bring some experienced international people that had those skills with me. Here is a lesson – hire for your weakness. After a few weeks Igot my first feedback. It was not good news: my guys were very frustrated. They told me that Iwas telling them where we needed to get, but they expected me to tell them how to get there. It was a huge lesson for me: you can have a great vision of what you want to do, but you have to tie that vision to persuasive directions and concrete steps… the how. Ican tell you that Idid not sleep for a couple of nights after this. It made me really think in great detail about what our competitive advantage was, and how to communicate it internally and externally. Because without a competitive advantage, you should not compete. That is the key to a strategy. You can have great ideas. You can have a great vision. But if that vision does not carry a well-communicated competitive advantage, then you have a fundamental problem.

In 2003 Imoved to Russia to become the CEO of Alfa Bank, the largest privately owned bank in Russia. All four things you cannot delegate applied again. Fortunately, we developed a distinct competitive advantage at Alfa Bank and this made it easy to communicate what success should look like and how we could get there. It was centered around minimizing customer time and maximizing customer convenience. When we translated this advantage into solutions, Alfa Bank became known as technological leader in banking in Russia. It then became a matter of designing of processes that would take us on the best path to success. And it would not be possible without shared values and appropriate service oriented culture. Alfa bank was named Best bank in Russia from 2007-9. Imoved back to Prague at the end of 2008 and Icontinue to lead Supervisory Board.

Designing processes is part of aligning how people in the organization think...
Yes. Another question that is important to ask is how does success look to key leaders. Once you have that answer from them, you should ask how does success look to their boss. You can get a good indication of how healthy the business organism is by comparing responses.

Many people would argue that the way to align all the answers is by expliciting assigning tasks and constructing detailed job descriptions.
The job of the CEO and management team is to translate the high-level strategies into concrete tasks. An employee who only receives high level strategy will feel lost; on the other extreme, a detailed job description defining the box a person works in most often demotivates them. This is not a good way to encourage engagement and creativity.

That is why Ithink process management is such a good way to run a systematic business. Process management focuses more on the final outcome and your regular employees can be process owners. Ialways use the analogy of a family shopping for food for the weekend. Let us say this shopping is a task for the son. One way to do it is to design a complex system from the top. You can set a certain budget, draft a list of things to buy, designate the shop to buy them, and, if you wanted real precision, you could plan which bus and at what time your son should take. The problem, of course, is that such a system is very rigid, and will soon break down. What if the shop does not have bread that day? Or what if the bus line changed ? And by creating such a complex process, you may simply ignore disruptive events. What if an internet store opens up?

Process management instills flexibility in the way how to get there. You measure success by interim and final results and outputs, the process itself gets adjusted based on those real data.

As concerns the detailed job descriptions, Iremember when Ifirst got to GE Capital, Iwas curious about the organizational structure. Iwas told that company did not have a written organizational chart, but that everyone had clear responsibilities for certain results. That is the way… to describe responsibilities and make them measurable… and charge people with finding the ways. Ithink that is how GE has retained its creativity despite its massive size.

More information available at www.ssrip.cz/en

Petr Šmída