Conducted by Sona Grigoryan and Hovhannes Atabekyan | Yerevan, April, 2011
VivaCell-MTS by various standards possesses leading positions in Armenia. We asked VivaCell-MTS General Manager Mr. Ralph Yirikian to kindly share the valuable information on the Company's experience and its management system with us.
What were the major challenges faced by VivaCell-MTS in the establishment phase? What stages has the Company passed through?
Quality labor force recruitment has probably been the most crucial challenge. The main dilemma was whether to recruit foreign or local specialists. The critical issue with the foreign workforce would have been their unawareness of the local environment even with the possession of international experience.
I believe that an employee should comprehend the work environment very well, along with the local traditions, mentality, socio-economic situation and market segmentation. Thus, from the very first day onwards, VivaCell-MTS made a decision to trust local specialists, particularly, recent graduates. We needed to create a young workforce and teach them a new and unique work style, novel thinking and approaches which were not yet formed in Armenia by then.
Now we are very happy and proud that VivaCell-MTS is in leading positions in the telecommunications market not only in terms of technology and innovation but also by the management culture. Since the very beginning we have designed such a culture where our employees are not merely staff but also family members. Together we strive to nurture and strengthen our family. Our family has been built on several pillars of core values. From the start, VivaCell-MTS has endeavored to use these values on every step at work. This starts from the lowest employment position to the highest, i.e. the general manager.
Our management culture opposes the 'seal-led' management thinking. Governance is not implemented through mere instructions or signing orders. The foremost essence of management is to serve an example to others. It starts from the general manager's position and descends by 'educating' the rest who should always look up and follow.
Initially, VivaCell-MTS had just one family member – myself. Afterwards, the Company expanded, and nowadays, our family consists of around 1,200 members. Certainly, VivaCell-MTS underwent a variety of changes. We have done considerable work on our internal procedures with them being improved and new ones being formed. Generally, the economy, the market and the socio-economic situation are constantly subject to changes. Hence, our internal regulations should always comply with those developments; and we have guided our family members to be flexible and ready to changes.
How did the change among the shareholders reflect on the corporate management system?
Previously, VivaCell-MTS had one 'color' shareholder if it can be described so, meaning that there was just one school of thinking. When the shareholders changed, two differing schools of thinking emerged represented by two shareholders. The largest shareholder, MTS Group typifies the Russian/Eastern European mentality. The other with fewer shares represents the Lebanese, Middle Eastern and Western mentalities. Hence, the mindsets of two continents were merged giving birth to the rich mix on the basis of which our experience was extensively enriched. The latter enabled us to review our internal procedures, develop business processes and allocate greater importance to the use of strategic thinking.
Annual strategic business planning, currently, is embedded at VivaCell-MTS. The first phase for the following 3-4 years is the strategy design. This is proceeded by our other management tool, i.e. business planning, followed by budgeting. Via the use of another management tool each quarter we analyze and evaluate our previous forecasts. In parallel, the Company compares its revenues year-on-year or benchmarks with the previous year's budget. Herein, costs and other Key Performance Indicators (KPIs) are juxtaposed.
At the same time, there is a range of some other tools used to add to efficiency. Thus, VivaCell-MTS has a few working KPIs via which we can measure the performance of our family members in the framework of the corporate strategy, business planning and budget.
Recently, we have come up with another interesting tool – the cross-functional KPI. That is, various areas have been set collective indicators, aiming for the creation of united responsibility. The latter will facilitate everyone to know that he/she is part of the implementation of the overall Company strategy. Of course, there are also other tools that we use such as the annual performance appraisal.
Are there any variations among management systems on different corporate levels?
There is a management alliance on MTS Group level where VivaCell-MTS harmonizes certain strategic directions with the MTS Group general strategic philosophy. On VivaCell-MTS level, once a year we evaluate the staff performance. A quarterly bonus plan assessment has already been put into use according to which the Company needs to achieve certain KPIs stated in the budget by the quarter end to enable our family members get bonus payments. There are also functional KPIs related to a specific functional strategy. And finally, we use personal KPIs.
KPIs are more complex in the upper levels and are gradually moderated with regard to the departments', divisions' and subdivisions' heads. If the Company achieves the most important budget indicators, i.e. revenues, costs, etc., a certain portion of the bonus is already secured. For the workforce on the lowest levels, this implies a nearly full bonus fulfillment.
Each year with a new budget, VivaCell-MTS considers possible changes in the framework of corporate functional strategy. However, all the above-mentioned are just processes, mere instruments, and are not sufficient if the Company management does not serve as an example for all corporate levels. Governance denotes constant quest for changes. Any company must always be aware of latest corporate governance culture developments around the world.
How do you provide that cognizance?
Various conferences are held where management new approaches are discussed. The latter are also offered by specialized consulting companies. In addition, the achievements of foreign successful companies can be followed. In this context, the Company's management's attention to the corporate core, i.e. the labor force is vital. Regardless, the tools and approaches put into practice, no company can succeed without taking into account the weight of the workforce. It can be claimed that VivaCell-MTS has thrived not for the reason of the general manager possessing exceptional skills but rather because the staff, i.e. the family is colossal. Our employees have always been in the focus of the Company's attention, and, mutually, they have placed VivaCell-MTS in their focus of attention.
I truly believe that the general manager should act like a cleaner with regard to the cleaner, like a department head with regard to the department head and like a minister with regard to the minister. This philosophy must be applied on every step so that everyone learns and follows.
Nowadays, management tools continuously augment. How do you maintain a balance between using too few and too many tools? Is there a specific central tool or platform that assembles everything and enables more systematic use?
In international practice, the emergence of new management tools is frequently intended solely for sales and making money. Therefore, the companies and especially, the managers should always be alert. They should not necessarily adopt all the available tools. Particular environment, customs and people's psychology should be born in mind. In addition, the tools must be refined to a certain extent. Here, flexibility plays an essential role. The Company must be prepared to undergo changes if necessary. Nonetheless, the latter must be rendered properly to the workforce, not hastily or forcibly. Generally, the management should initiate the changes from itself.
I believe that work and human core values shape the most far-reaching management tool. In the Company environment they act as catalysts and keep our corporate engine going. VivaCell-MTS has 11 core values which jointly represent a fundamental asset, namely respect. Sadly, these days, it is largely absent in the public and private companies in Armenia. The general manager and the cleaner are equal in everything apart from responsibility. When the general manager enters the premises and greets Arevik, Tatevik or Armen, it is not a mistake to smile to them again in a few hours. This is a sign of respect and part of the corporate culture. This is going to be determinant when the management wishes to apply new governance tool – it will be instantly accepted by the employees.
Mr. Yirikian, you made quite valuable observations on the incessant changes in management tools worldwide. Did the latest global economic crisis give rise to definite changes? Virtually all companies modified their range of management tools – did it also touch VivaCell-MTS?
Undoubtedly, the crisis impacted everyone. VivaCell-MTS undertook some measures to ensure that the pre-determined budget targets are attained throughout the recession. Prior to taking any steps, the Company held internal meetings with its workforce and provided some clarifications, presented some comparisons. Afterwards, VivaCell-MTS launched the implementation of certain measures to get to ‘safe haven’. We also reduced our costs and delayed what possible.
Most companies primarily think of firing workers during crisis, however, this was not the case at VivaCell-MTS. We kept all our employees as the latter are our most valuable asset. Nevertheless, we told them not to anticipate salary rise at the end of the year but just bonuses. In this way, VivaCell-MTS managed to save some funds and maintain the bonus system to encourage its staff. In the same breath, we conserved the various forms of compensations to our staff and diminished marketing and some production expenses. In addition, we started to examine our suppliers’ quotes with greater care. All this was intended to preserve our profitability on the same level or even enlarge it as pre-planned in our budget.
Mr. Yirikian, how do you manage to integrate your daily activities in your long-term strategy? For many companies this is an enormous problem. They talk about strategy and massive goals of long-run but barely bring it to everyday use.
Our strategy lies in what we want to achieve throughout the working year. VivaCell-MTS defines certain aspects in its general strategy, for instance, to boost its subscribers’ number, to grow in the internet market, etc. The execution methods of all these become our sub-strategy directions which in their turn act as functional strategies for some departments. In this way, several areas are bonded with each other, and a number of KPIs are defined which contribute to the fulfillment of the broad strategic goals.
KPI is not spontaneous. The KPI of VivaCell-MTS general manager is put by the head of the MTS Group. Nonetheless, prior to the final decision, there is a KPIs list from where it is possible to choose. VivaCell-MTS does the same for its department and sub-department heads.
Mr. Yirikian, what role is entitled to leadership in the effective management of a company?
Lead by example. This approach is the most transparent and accurate. I believe that not only the general manager but also every single responsible person like a judicious parent must serve as a right example to the others.