– How did you end up in Russia?
– In America, I worked for a certain company where I had to do a lot of travelling. I practically lived on aircraft. And then I came across a vacancy in Pepsi – they wanted a managing director in Yekaterinburg – and thought: “Why not? I’m so tired of all this travelling!” I submitted my application and they accepted me. My responsibilities included building up a distribution network, building factories and introducing Western business standards.
About Paul Sofianos
He is an American of Greek origin. He has diplomas in economics and political studies, and also a doctor's degree in jurisprudence – in commercial and naval law. He helped found the drinks-producing company Mistic, which was sold to the Triarc Corporation in 1994 for more than $100,000,000. He has been in Russia since the mid-nineties. He held the post of managing director in Pepsi in Yekaterinburg, and then in the American-Russian investment fund Delta Capital Management. He joined the boards of directors of several Russian and international companies, in particular Sun-Interbrew, CTC Communications and Saint Springs Water. In 2004, he founded the company ProLogics. At the present time, ProLogics is a group of companies specialising in logistics, transport shipments and outsourcing, bringing in third parties to carry out work in the Russian Federation and in Central and Eastern Europe. Paul Sofianos holds the post of Chairman of the Board of Directors of ProLogics, and also of the public company Work Service S.A. (WSEP, Poland).
I remember one morning in 1995 when I woke up at 4.30 and had to travel by car from Yekaterinburg to Tyumen. That is about 300 km. I looked out of the window, it was snowing, and I found the contrast amazing: a big step up in my career and here I was in Siberia. But that’s how it was.
Sorting out the business was not without its problems, but I worked with enthusiasm. And I liked Russia more and more. Now I think of this country as home. Maybe my Greek origin had something to do with it, or the fact that I had travelled a lot, but I felt part of Russia. I might add that in long-ago 1995, my American friends and relatives failed to persuade me to change my decision and not to go such a long way away. Though on the whole, I do not find that foreigners have a strictly negative opinion of Russia. I myself am always willing to talk about the country I’ve moved to, and to recommend it as a place to live and do business.
– You mentioned problems in sorting out the business. What difficulties did you encounter in your work at that time?
– It was very difficult to find Russian specialists with sufficient professional knowledge and experience, capable of taking decisions, taking on responsibility and managing business processes. I realise now that the absence of these qualities was due to the general situation in the country in the nineties, not knowing what tomorrow would bring. The absence of any social guarantees also influenced the taking of business decisions. Although, from an academic point of view, Russians have always been well educated. We have had nuclear physicists and surgeons working for us as managers. Real intellectuals! But they didn’t have enough business experience. However, from 2001 onwards, the political situation eventually, gradually, became more stable. People carried this stability over into their professional activities, which helped them have a successful career. For me as a manager, it is very important that a working colleague should be confident about tomorrow, should not doubt that the business would be a success, and should be able to rely on the business owner.
Margarita Tyazhova, Head of Sales and Marketing at Hays company:
– For a mass of objective reasons, Russian education in the field of business, commerce and management still lags behind the West, which undoubtedly slows down economic growth and also creates problems with selecting high-quality personnel in the regions. However, Mr. Sofianos rightly comments that today, all the conditions for the development of business to international standards have been created in our country. Our experience shows that up to now, the demand for Western top managers remains high in those spheres and industries which are just beginning to establish themselves in the Russian market – retail trade, advertising, the media and technology.
Since the end of the eighties and the beginning of the nineties, many Western companies which think their own model of doing business, with some adaptations for the Russian market, is the only acceptable one, have opened offices in Russia. Over the past 10 years, quite a few professionals have appeared in Russia with experience of working in international corporations in production, logistics, finance etc., and their way of thinking hardly differs from that of their Western colleagues. This is not yet the case in all regions, but Rome wasn't built in a day.
– How long did you work for Pepsi?
– Two years. After I had completed my contract with Pepsi, I began to look for new opportunities – in Russia. And I found a job in an oil company. This organisation also had problems with the lack of suitable people. It was necessary to create a structure in which the managers themselves could take the day-to-day decisions within their field of responsibility, and also to introduce a system of business planning and structuring. In fact, like the last time, I was concerned with optimising the business to bring it up to Western standards. Then in 1998, the default occurred in Russia, and a business crisis broke out. This was the most difficult period of my life. To tell the truth, I felt somewhat tired of Russia at that time, and decided to leave. I wanted a change. So I accepted an offer from the Polish firm Hortex, which produces frozen food products and juices. They needed a man capable of carrying out a radical reconstruction, which meant reducing the number of employees from 100,000 to 20,000. But 50% of the production was in Russia, so I was constantly travelling between Poland and Russia, developing the business in both countries.
– So in effect, you didn’t leave Russia at all?
– That’s true, more or less. But in 2001, before my very eyes, Russian managers and entrepreneurs began changing rapidly. They became more and more successful in adopting the Western system of conducting business, they learned to work not just for today, but for the long term, and they introduced the financial standards which are accepted in the West. At last it became easy to work with Russians.
But in 2001, Russian managers and entrepreneurs began changing rapidly. At last it became easy to work with Russians.
– Why did you open your own business?
– Because I realised that Russia was the best place for it. Before starting up your own business, in Russia or anywhere else, you need three things. Firstly, you need experience and a clear understanding of your business. Secondly, you have to see the business risks clearly and know how to minimise them. And finally, you have to have a thorough understanding of the basic business processes. I had all these, and I also had an excellent team of professionals, whom I trusted completely. So we founded ProLogics – a transportation and logistics company, operating all over Russia.
– In which year did this happen?
– In 2004.
– Why transportation and logistics, when before that you had been working with a producer of food and drink all the time?
– But that aspect of it was just what I had been doing: transportation and logistics, optimising these business processes. So I knew the business very well, and the Russian economy was on the rise, and the market was growing rapidly.
–What resources did you have at your disposal then? How many people were working in the company?
– We began purely as a forwarding firm. The team was only 10 people, we had one garage. But the business grew rapidly. Soon we came to Moscow, and now we are a fully-fledged transportation and logistics company. We have warehouses in Nizhni Novgorod, Moscow and Kazan, a fleet of more than a hundred towing vehicles carrying 20 tonnes of freight, and 125 trailers. By 2014, we plan to expand the truck fleet to 250 vehicles and to open three more warehouses in various cities. Our company Work Service finds jobs for more than 30,000 people every day in Russia, Poland, and Central and Eastern Europe.
Vladimir Solodkin, "SPSR-Express":
– Since the 2008 crisis, express delivery has been actively developing along with the Russian economy as a whole. This market segment continues to show 25-30% annual growth, and this level has been maintained for several years. The reason lies in the active growth of internet trading throughout the world, and particularly in Russia. For all the pluses of express delivery and the daily improvement in client proposals, this method may not always be profitable. For example, the carriage of electronic equipment is not at all profitable – the shipping costs eat up all the profit. But clothing, footwear and cosmetics shops are constant clients of ours. I don't see any significant minuses in our market as compared to Western ones. The only difficulty is with exporting goods abroad from Russia, because the big international players have their own networks there. But on the other hand, the absence of such a facility causes Russian companies to go the last mile in diversification, and select their partners more carefully.
As a result, we often manage to work more quickly and to a higher standard. Therefore, de facto, we do not have a monopoly of Western players dominating the market. One must not fail to take into account that Russia is a vast country with a complex and insufficiently developed infrastructure. Therefore, we are always ready to deliver freight to serious logistics companies by air, using air carriers (who also have serious limitations). But in Europe, they often get by with land transport alone. Nevertheless, there have been major international players in the difficult but profitable Russian market for many decades now.
– How many clients do you have, and who are they?
– We have about 60 clients, including very large ones, such as Lukoil, OBI and IKEA.
– How did you find your clients?
– At first, mainly through personal contacts and commercial business networks. Over my working years, I have made many useful business contacts, and we made use of this. Then our marketing section began ringing round various bases – “cold-calling”. We also work with call centres.
– Who invested in the startup?
– It’s a private company, there were no outside investors. We still have a joint venture with our Polish partners, Work Service S.A. (WSEP). It went public in 2009. We are the biggest shareholder in this company, which is registered on the stock market.
– What is your company’s position in the market now? What are the turnovers?
– We are firmly in the first five as a logistics company, and also in the top three as an outsourcing and outstaffing company in all the markets in which we work. We expect to reach the half-billion dollar mark this year. You see, apart from logistics and transport services, we also offer outsourcing and outstaffing services. This line of business began as an auxiliary one, but with time, it too has come to produce a good income.
– Do you only make shipments within Russia?
– Yes, we decided not to work outside Russia. The Russian expanses are quite enough. But we offer outsourcing and outstaffing services in Russia, Poland, and Central and Eastern Europe.
– You founded your company in Russia almost 10 years ago. How has the situation in the country changed in that time from the point of view of running a business?
– For the better. The situation in Russia fully guarantees business stability. Tremendous changes have taken place in the country, and the economy continues to develop rapidly. For me as a businessman managing people, this is extremely important.
The situation in Russia fully guarantees business stability. Tremendous changes have taken place in the country, and the economy continues to develop rapidly.
– In your view, how do the specifics of the Russian business environment compare with, for example, the American? How would you develop such a project in your homeland?
– If I were starting a business in America, everything would be quite different. On one hand the competition there is much greater, both in outstaffing and in logistics. On the other hand, there are huge numbers of tools helping you to develop, and a very saturated business environment, with many players. Yes, the competition is weaker in Russia, but here there is in effect no system, for example, for training personnel: how they should work with clients, how to take decisions and so on. One specific of the Russian business environment is that much attention is paid to personal relationships, in the good sense of the term. Russians only want to do business with people they trust. The result is that a client from abroad, coming to Russia, expects his problems to be solved by Western methods, not realising that many of them do not work here.
– What would be your advice to Western entrepreneurs intending to start a business in Russia?
– They must examine the local situation. You can’t bring ready-made business decisions from the West without making sure that they will work here. One of the most difficult problems for our business is precisely to select for foreigners the decisions most in accordance with Russian reality; we have many Western clients. It can be even more difficult to convince the client that the way we suggest is best. This is exactly what we teach our work colleagues. In this respect, certainly, it is more difficult to do business in Russia. But Russians learn quickly, and we have no more than 10% ex-pats working in the company, the rest are all local.
You can’t bring ready-made business decisions from the West without making sure that they will work here.
And another thing. You have to understand that Russia is not a “quick buck” market. Maybe it was once, but it isn’t any more. Russia is a complex country. And if you are an entrepreneur, you have to pay taxes and salaries, and you have to take care of your staff and of course your clients. Just as in the USA or anywhere else in the world.
– How much do your fellow workers cost you, in comparison with the West?
– In key positions, we pay managers more than we would pay in the West. Otherwise, the level is virtually the same as in the Western market (I am of course excluding countries in crisis such as Greece or Spain, where salaries are much lower). The average wage for line personnel (drivers, for example) is 25-30% lower than in big cities in the USA, but not lower than in Western Europe. We are proud of the people who work for us. Many of them have been with us for several years, and the core of the team even longer. I have now been with my commercial manager, for example, for almost a quarter of a century. I try to give people the opportunity of taking decisions independently. If Big Boss takes all the decisions himself, he isn’t as “big” as all that.
– Western entrepreneurs running a business in Russia usually advise their colleagues to acquire Russian partners beforehand. Is this an essential condition?
– Not at all. Take me, for example. I have never had a Russian partner. But what is essential is to have a Russian colleague on the staff who can help you with the various local nuances. It isn’t easy to find such people, but business is never an easy matter anyway. And you have to respect the country in which you are living. Learn the language. You don’t have to speak it fluently, but you do have to understand what is being said, in my opinion.
– Are there problems with visa extensions? Where is your family living?
– I am working on an international visa, which is very easy to obtain. You don’t have to go away anywhere, all the formalities are completed in Moscow. My family lives in America and Greece. Although the level of education in Russia is very high, I do not send my children to a Russian school, because they are already in their final year. But of course, Russia is not unknown to my family, and for me, Russia is my second home.