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Learning to swim in a torrent or how to manage a Romanian private firm |
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Paper presented at the international workshop "Privatization in the East Europe" Kristiansand Norway 1991. I keep the original version, with only small sidenotes. It is so easy nowadays to learn to swim. A teacher will explain you everything you have to know, and you run no risk, a friendly hand will rescue you when you are in trouble. It is quite different if you accidentally fall in a quick mountain river and you have to save your life; only your instincts will guide your wild erratic movements, you are allowed very few errors and you can get no rest when you get wounded or feel exhausted. That's the image I have in mind when I think of a Romanian entrepreneur, looking back at the experience my partners and me lived since April 1990. Our little economic game started several months after the Romanian revolution. Our team was formed from people working in the field of computers: a researcher in a research institute, I mean me, a production line manager in a factory, and, the third one, a professor at the Technical University, dean of the faculty. We all took part rather actively in the Upraise in Timisoara in December 1989, and we were all full of enthusiasm and confidence in our future. A gift from the Norwegian firm Agder Data, four XT computers, gave us the necessary equipment, so in April 1990 we formed our company, one of the firsts in Timisoara. We started very aggressively and risky, though compared to what we are now in, it was a child's game. We used well the fact that we were the first on the market and we supplied computers and accessories. We organized 8 series of computer courses. We started to write application programs for some customers. And we made some good profit that we invested immediately in equipment: a small truck, a good computer etc. Our turnover in 8 months was the equivalent of 220 years of my income as a research engineer, my previous job (which proves mainly how low is a researcher's income). Though we are a small company, we are not completely unknown. Our name "3C", was mentioned in several newspaper articles, local radio and even national TV program, together with a German firm Markt & Technik. We said we were successful. But it was like being happy to be afloat in a boat full to the rim with water. We lived in a body that was economically very, very ill. The last years or the tyranny meant for many almost forced labor, the incentives to work were very low, and the productivity was small. After the Revolution, in the turmoil of events, people worked even less. Though the government, to get credit for the next elections, gave one more free day weekly, paid all salaries in full, and even gave salary raises to many workers, all these for a smaller production. After the elections, in June 1990, "the miners" came to stop the demonstrations against the regime, and this led to a stop of all international support. (Miners from several regions of Romania were brought to Bucharest where they repressed with extreme brutality any bud of a democratic society, through beating and even killing. Retrospectively, we know that this was a huge manipulation of former communists in their desperation to maintain power). Then a series of events followed, all bringing insecurity for individuals, and the real productivity fell down to incredible levels. All state enterprises were given economic independence; the big ones were split into smaller ones. The prices were allowed to change to reflect the expenses, in fact a price raise of incredible proportions. All prices are now 2-4 times as before, but there are extreme examples of 20 times raises. There is also a financial blocking. There are enterprises that cannot pay their debts because they have no income, and so a long chain of unpaid debts is formed. For our private firm all these changes had not such a big influence, because of the way the socialist enterprises paid their investments. They simply got all the money from upper levels, with no correlation with their financial results. The end of 1990 was in fact a boom for selling imported computers, everyone had money that they knew they will lose at the end of the year, and the offer of local producers was almost non existent. We had our first alarm signal when a big auction was held in Timisoara, for locations for private companies. Our company is located in the heart of the town, a flat in an inside yard. In April 1990 when we started, it was easy to get such a flat, unrepaired for more than 20 years and uninhabited for 4-5 years. We paid a very small rent (350 lei/month, about $30). One year later, a central location proved to be very valuable and an adjoining flat was rented at auction for two millions lei for 3 years (56000 lei/month). There are strong rumors that the other rents will be raised too and in this case we'll be bankrupt overnight. Another major impact on our money income had the salary negotiations in the state enterprises. The salaries are now allowed to be negotiated between workers and the management; all workers want big salaries to counter-balance the price raises. But the majority of enterprises cannot pay higher salaries, they don't make so much money, it is a problem to pay even the former salaries. The answer should be managerial actions to improve productivity, new ideas, firing those who don't work hard enough. This is hard to realize, because managers have a very insecure position (in Romania we have an authority crises), they know they could loose their jobs very easily (if the workers do not want them anymore), so they don't take decisive measures like firing people, which will create them lifetime enemies. So, now, they cut any other expenses like investing in computer programs, to preserve as many working places as possible. Under these circumstances we were forced to admit that our activity was not secure at all. We need to make much bigger profits to face unforeseen events and to pay higher salaries to the people working with us. And this, in a momentary drop in computer programs needs, where we had our best knowledge and experience. But, if you see a bear in a wild forest, you don't say, "I don't have enough experience in running", you simply run for your life. We too said that we must find what the market really wants, no matter what our previous experience is. For weeks we discussed a lot of possible development lines: a private university, a private hospital, a newspaper, an editing house, dentist praxis, a transport company, a distribution network. For every such idea we discussed with a lot of people and we made a lot of inquiries. In the end we decided to open a car repair workshop and a pizza and ice cream center. First of all we got a two years loan under very favorable conditions from friends in Germany. For the car repair workshop we bought a piece of land with a house on it, situated on the main road to Yugoslavia. The house had nearby the remnants of three garages, stumps of vertical walls like the one in the movies with bombarded cities. In one month they were completely rebuilt, and in another month the four mechanics will start to repair cars. We also want to sell spare parts for cars, if we find a supplier. Our fast food center that we decided to make, has much more problems. We have a pizza oven and an ice cream, machine, but there are many other things to get: two refrigerators, sugar, aromas, and wafers. We have to learn to produce that high quality ice cream that one can eat in the western countries, using local raw materials for production or how to preserve the fruits used for taste. We have also to completely rearrange the place where the center will be and this will take 2-3 months instead of one as we hoped. It is easy to describe facts. Unfortunately, the juice of it, all the excitement, the fears and hopes, the frantic work from morning till night, is much more difficult to transmit. What are our future plans? First of all, to finish what we started. The car repair workshop and the fast food center should work, we must find good administrators for them and we will transmit them almost all-routine responsibilities. In the same time we will continue our work with computers, having in mind the market that will exist in 6 months or one year from now on. Enterprises cannot continue to work only for paying salaries, they will be forced to use computers to increase their productivity, as it is the situation all over the world. The change will be slow and gradual, and we must exist actively on the market. In all our plans we assume an active cooperation with western companies, not only as business partners, but also as a major source to learn from. In the last year we made several trips abroad and we established many contacts. Norwegian firms made possible our start. Cooperating with German firms we found out not only how serious we should be, what errors to avoid, but also how tough business relations can be. We established contacts with many computer firms, trying to convince them to have their name on the Romanian market with small investments, always on the ready to catch the big fish. We also count on the new law about foreign investments that is the most advantageous law for foreigners in all the eastern countries, giving plenty of guaranties for our possible partners. Our cooperation with western companies is not always very easy. Our way of thinking and of taking decisions could seem completely crazy to a western manager that is accustomed to plan everything, to study extensively the market, prices, competition etc. A western manager is like the general who makes the strategy for the new battle, according to a set of well established rules. We are more like the soldier in the front line, who also has a set of rules, but their validity is very limited in an uncontrollable surrounding. Only your intuition tells you if your next step will be on a mine or if you have to duck or jump when you hear the hiss of a bomb. It is obvious that the number of generals killed in action will be proportionally much smaller than that of soldiers. So it is better to base your decisions on sound planning than on your intuition. Unfortunately, the stability or your environment dictates the choice of your method. And ours is far from being stable. Se we can actually choose only between doing nothing or using our intuition to continue the rudimentary planning allowed by our conditions. Psychologically, the price paid for the lack of stability is very high. The time spent to take a decision, to analyze all alternatives is rather long. Once the decision is taken, the toil is not finished. There are so many hidden nooks and crannies that were not lighted, all filled with danger and fear, and their presence will continue to prod you all the time, when you eat, when you walk, when you talk with friends, even when you sleep. All the spare moments that you get in a day with too many hours of stressing activity will be stolen from you by the presence of the menacing ghost. Under these conditions it is quite normal that you sometimes ask yourself very intensively: "WHY?". Why ruin your health, finish your day with burning eyes and headaches, why neglect completely your child and have only sometimes the happiness of half an hour with her, why renounce at the cornucopia of spiritual wealth of this world? Is it money? Mainly yes, I'd like to have a living standard of an ordinary human being in Germany or Norway. Thou, if this would be the most important thing in my life I would emigrate to a rich country, which allows immigration, like USA, Canada, South Africa, where I could make more money and have the advantage of a stable system. The real answer is hard to define even to me, maybe it is my strong desire to achieve something in this life, maybe the small seed of divine creative power that exists in everyone has felt the warm spring winds and wants to get roots, after so many years of winter. And we want to give this seed a chance, as long as winter will not come again too soon. Dorel Jurcovan May 1991 P.S. The ending of my article reflected my deep worries at the time that the dark forces could bring us back to where we were once. Fortunately for us, the fears didn’t materialize. Still in 2007 the ghost is here among us. |