“I would agree to run a state-controlled company strictly for the money, on a management contract concluded with the help of a major law firm, with clear objectives and over a clearly set period of time,” says Ovidiu Wencz who was general manager of cold cuts producer Campofrio for nine years (until its merger with rival Caroli). “It is no doubt an attractive challenge to work in a state-controlled company, but you have to consider the fact that you will work in a difficult environment, where the pressure of not terminating certain contracts which are unfavorable to the company and the pressure of awarding preferential contracts cannot disappear overnight,” Wencz adds.
Wencz would not take a management job with a state-run company for a salary of less than EUR150,000 per year (EUR12,500 per month), because he believes a manager is not paid for his work (as is the case of employees), but for their responsibility and for the decisions that lead to meeting the targets.
“For state-run companies, there is a need for turnaround management, for executives who can make a company work. Withstanding pressure and trying to be ethical means having resources and power,” Wencz says.
The idea of replacing managers of state-run companies with executives that have accumulated expertise in the private sector, which has been brought back into the spotlight by the Government and by representatives of the International Monetary Fund (IMF), would not change the performance of these companies, at least not over the next two years, but the risk is worth taking, even though the process would entail higher costs.
“The major problem is not the difference between the salary of a prospective chief executive brought from the private sector and the employees or the team, but rather whether the new CEO (from the private sector or elsewhere) is given the instruments and the freedom necessary to make the changes. Of course motivating the employees is a very important aspect, but as far as I am concerned, it is not the determining factor,” believes Magda Manea, consultant within human resources group AIMS Human Capital Romania.
There are a few examples of managers who made a name for themselves in the private sector and were then put at the helm of state-run companies and banks: Radu Ghetea (CEC Bank), Ionut Costea (Eximbank), Adrian Baicusi (who left the helm of Siemens to run Transelectrica), and they can provide a picture of what things could be like if the 15 large state-run companies, which include Tarom, Posta Romana postal company and Metrorex subway operator, were be privately-managed.
Ionut Costea, president of Eximbank, earns the highest known salary in the public sector, EUR27,000 per month, which rivals the income of a top private-sector banker, although Eximbank does not boast the same results in terms of assets or profit. He was appointed at Eximbank during the rule in 2009 of the PDL – PSD coalition (Democratic Liberal Party – Social Democratic Party), being the brother-in-law of PSD leader Mircea Geoana, the current Speaker of the Senate and second most powerful man after the president. If he were replaced, it would cost the state EUR800,000, the severance package he negotiated when he took over the position.
Radu Ghetea, head of CEC Bank, has over 30 years’ experience in the banking sector and has been running the state-held bank since 2007, keeping his position because he is supported by the National Bank.
Adrian Baicusi, former general manager of Siemens Romania, who was at the helm of state-run energy distribution company Transelectrica for less than two years, says he finds it hard to believe the performance of state-run companies will change if the shortlist includes names of people who would be politically-appointed.
“In many companies there are constraints, managers cannot make excessive cuts to employee numbers because of the trade unions, nor can they renegotiate existing contracts. Transelectrica was special, it is a strategic company, with very good employees,” says Baicusi, who is currently general manager of security company G4S.
Baicusi ran Transelectrica during the recession years and, after he left his position, Transelectrica had EUR14 million in losses (in the first half of last year) because of the high level of foreign-currency borrowing. In the same period of 2009, the company had made a profit of over EUR2 million.
In order to make management recruitment more transparent, the World Bank recommended a few months ago that head-hunting firms be used. The company that would win such an auction could collect EUR750,000 for the recruitment of 15 managers for the largest state-run companies.
Although talks on the introduction of private management have been ongoing for several months, specialists warn that a management recruitment process takes at least six months, to which another six are added, during which the manager cannot perform because they have to adjust to the company’s processes.
“A manager needs at least two years to show if they can perform or not. Some do, others don’t, whether they are from the private sector or not,” says Alina Popescu, reward manager within management consultancy Hay Group Romania. “I don’t expect there to be any major changes in the results of state-run companies over the next two to five years as a result of management changes, or for them to perform as well as multinationals do,” she adds.
Specialists recommend the government start several pilot projects that would entail bringing private management to smaller state-run companies and see if it gets the desired results.
(English version by Daniela Stoican, Editing by Loredana Fratila-Cristescu)