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. Last Updated: 07/27/2016

Exec Training: More Than a Class Issue

In Russia, a recognized academic qualification in business can be a handy thing to have, especially if it comes from a foreign university.


Just ask Yury Milner, who graduated with a Master of Business Administration from Wharton School in Pennsylvania four years ago, and is now chief executive of Moscow's Alliance-Menatep investment bank. Or Iosif Bakaleinik, a 1992 Harvard MBA who now runs the Vladimir Tractor Factory. Or Konstantin Kontor, UCLA class of '94, the director of research for the Rinaco-Plus brokerage house.


While an executive education may not have acted as a golden key for this trio, it certainly helped to open some doors to high places.


"I wouldn't say [the MBA] was instrumental" in helping land the job at Rinaco-Plus, said Kontor. "But I'd say it was very important."


Unlike in the West, where qualified business graduates are legion, in Russia the supply is clearly inadequate. But few Russians can justify the tens of thousands of dollars required for a foreign MBA.


The shortage of qualified candidates in Russia is exacerbated by the fact that many candidates, once they have graduated from a Western management training program, decide to stay and work outside the country, at least for a while.


The cheaper alternative is local Russian business degrees. A growing number of programs is available locally, offering MBAs and Bachelor of Science in Business Administration degrees. A number of foreign- and Russian-run programs in economics, accounting, finance and management are also available.


But employers and students may be a little dubious about the education some of these new schools provide. And whether it is a foreign or a local business degree, many would question how relevant an academic qualification is in a country with such a wild economy that defies all the textbooks.


The MBA degree has lost a lot of its luster in the West. Criticized for being overly abstract, the degree's cachet has been diminished by the huge increase in the number of educational establishments offering MBA programs. But depending on the school, a qualification from abroad may give more of an inside track in the employment stakes in Russia. The exposure to a Western business climate -- and with it fluency in English, the teaching language of most Western management courses -- are major pluses in the employment stakes.


Although tuition fees are higher and such programs involve sitting on the sidelines of the business world for up to two years, Western programs still appear to hold an edge over their home-grown counterparts.


"The best academic experience is still coming from abroad," said Alan Clack, who works with the Deloitte & Touche/Ward Howell International recruitment agency in Moscow. Clack estimated there are only some 50 to 60 freshly minted Russian MBAs coming each year from the United States onto the job market back at home.


Brian Burnett, director of the professional development division of Ernst & Young CIS in Moscow, said the demand from both Western and Russian firms in the capital and elsewhere for Russian citizens with MBAs is very high.


A Russian coming out of what could be termed a "second-tier" business school in the United States could expect to command a salary of $30,000 to $40,000 a year, Burnett said, and a high-flyer from one of the top U.S. schools might be offered as much as $50,000 to $70,000 per year, especially if that person had some prior work experience.


Even these salaries are below the expectations of some of the graduates, Burnett said.


The high expectations of some new MBAs was also remarked upon by Clack of Ward Howell International. "As in any country," he said, "an MBA does not automatically guarantee the job of one's dreams."





One of the most high-profile Western-educated executives in the Russian banking community, Alliance-Menatep's Milner, 34, epitomizes the new class of Russian bosses -- trained abroad and now working in top jobs for Russian companies.


Milner in fact went to the Wharton School -- known for its expertise in banking and as the alma mater of junk-bond genius and then jailbird Michael Milken -- much by accident. "It was rather close to where I happened to be living in the U.S.," he said. A theoretical physicist by training, in 1990 Milner became the first Soviet citizen to study at Wharton.


He commented that the MBA education had given him two skills that are still scarce in Russia -- financial skills in understanding balance sheets, and an appreciation of what can realistically be expected in business relations from foreign, and particularly American, business partners.


When he graduated, he had a rare qualification for a Russian, and his career has benefited considerably since -- he went on to work for the World Bank before jumping back into the private sector at Menatep.


Milner believes that the "opportunity cost" of being out of circulation in Russia during this period was a high one. Nevertheless, once out of Russia he decided to stay and work in the U.S. for three years before he found what he considered the right opportunity back in Russia.


He said he would give newly graduating Russian MBAs the same advice: Stay on in a Western country afterwards for two to three years to gain job experience. "These are just the people my firm is trying to recruit," he said.


Gennady Jilinsky, 28, a Russian who graduated a year ago from France's INSEAD, one of Europe's premier business schools, is following Milner's advice. Having worked in Moscow for Western companies before entering business school, he has subsequently moved on to Procter & Gamble in Geneva, where he is an assistant brand manager.


Getting international business experience was and remains his key aim, Jilinsky said, though he would not exclude returning to Russia and working for a Russian firm in the future. Most of his contemporaries who have taken MBAs have stayed abroad, he said, though many are involved in Russia in their work.


Sergei Riabtsov, a senior associate in investment banking with Renaissance Capital, echoed the importance of experience with both Western and Russian business cultures to gain a competitive edge.


Just as his own firm represents a blend of Western and Russian staff and experience, Riabtsov said that "generally the most valuable people are those with experience in both economic and financial environments ... those with Western training but not switched off from the processes [taking place] in Russia." Riabtsov, who holds his current position at the age of 24, gained his exposure to Western business not through an MBA degree but through working for a Western investment bank in London and New York.


Vladimir Tractor Factory's Bakaleinik, too, gained real-time experience in the West. After graduating from Harvard Business School he put in a short stint with the World Bank in Washington before returning to his previous employer in Vladimir, where he is now chief executive. Bakaleinik, however, is from a slightly older generation -- he was 40 when he graduated from Harvard in 1992 -- and the decision where he would work was not his: His tuition was partly sponsored by a Russian ministry.


Bakaleinik believes that a foreign business education is highly relevant to rescuing Russian industry. "It is very relevant," he said, "especially now. We more or less have a market economy, and [hence] running a large company in one [such economy] is like running a large company in another country."


But Bakaleinik hasn't singlehandedly saved the factory -- regardless of the expertise he has been able to bring to his work, the Vladimir Tractor Factory remains in dire financial straits, he said.





Taking a MBA degree abroad is a big investment. The intensive year at Paris' INSEAD costs around $50,000 with living costs taken into account. American schools can be cheaper -- from around $30,000 a year -- but the courses there are normally two years rather than one.


Though Russians are not eligible for some of the loans customarily offered by business schools, a host of loan and scholarship schemes have been launched, some with Western aid money, others linked to guarantees from development banks, including one backed by the European Bank of Reconstruction and Development which encompasses loans for attending INSEAD.


Those who do not want to take two years out, or cannot afford the big investment to go abroad, now have options at home.


These include full-time courses at Moscow State University and at Moscow's Plekhanov Institute, the Moscow Economics and Statistics Institute and the American Institute of Business and Economics, and at the Institute of Finance in St. Petersburg.


Among the leading choices is the Bachelor of Business Administration program at Moscow State University. Moscow State's BBA program, which opened in 1993, takes four years and costs $3,000 a year. There is an evening-only course for those already with a relevant degree, which takes two years and runs $1,500 a year.


Moscow State University, or MGU, launched its postgraduate MBA program last year. With only 25 participants or so on each of the courses, the numbers are small compared with American business schools. Surprisingly, there are only about two applicants for each place, said Oleg Vykhansky, the director of the business school, something he attributes to the relatively high fees. However, students who do well in the entrance exams study free.


Another popular Russian program is offered by the Moscow Economical-Statistical Institute in the Matveyevsky region, which offers a 1 1/2 to 2 year advanced certification program in economics.


The American Accounting Program, offered in conjunction with Moscow State Linguistic University, is an intensive, one-year evening program, said the program's academic director, Paul Kindlon. Student fees for the program range from $2,000 to $5,000 and are judged on a case-by-case basis, Kindlon said. The program, taught by five American professors who themselves hold MBAs or Certified Public Accountant certifications, is "equivalent to the first year of a two-year MBA program," he said.


A number of Western universities also offer business administration courses in Russia. Touro College from New York City, for instance, has a campus in Moscow which offers a BS in Business and Management degree, and will from this September offer an MBA specializing in international banking and finance in cooperation with Dowling University, also of New York. This latter course will take only one year with classes in the evening, said Paul Murphy, the vice rector for academic external affairs and development. But prices are high -- the MBA will cost $8,000.


And popular among Western corporations in Moscow are graduates of the American Institute of Business and Economics, a private educational institution located at Moscow State University. The school offers certificates rather than MBA degrees, but members of the business community hailed the rigor of the program and the quality of the program's graduates.


"The graduates of that program don't have a lot of trouble finding jobs," said Holly Smith, director of Moscow's office of IREX, the International Research and Exchanges Board.





In spite of the recent blooming of executive training options here, standards in business education in Russia are in general not considered top notch. "Up to now there has not been nothing comparable in standard to the best schools abroad," said Ernst & Young's Burnett.


A major problem in expanding business education in Russia, according to MGU tutor Doug Coulter, is that there are not enough qualified teachers. Coulter, who was formerly a senior lecturer at Harvard Business School, is one of the few Western faculty teaching business in Russia and considered somewhat of a missionary.


He has been teaching at MGU for five years, and in 1993 helped organize the Management Development Association, an organization dedicated to training business school teachers. It claims 250 members from 65 different schools and institutions in Russia and meets twice a year for seminars and training.


"Given the difficulties," says Coulter, "it's remarkable how management training is developing. There has been a sharp rise in students: Theses are getting more and more sophisticated, and students are more conversant in the International business picture than ever."


But business training in Russia is not to date necessarily well-tailored to employers' needs. According to Alexander Naumov, an associate professor and head of MGU business programs, the MGU course is heavily focused on accounting, "because that's what the Big Six [Western accounting companies] want."


However, Julie Cameron, an executive concerned with training and recruitment at Big Six accounting firm Arthur Andersen in Moscow, said the experience of her company was that neither this nor any other university course in Russia really provided detailed accountancy training.


"Most graduate accounting qualifications are actually [programs in] economics," she said. "In Soviet companies people were generally employed as economists and bookkeepers."


Arthur Andersen, which recruits 30 to 50 young Russians a year for its auditing and other departments, has not to date taken anyone from the Moscow State BBA or MBA programs -- the most common source has been the MGU economics department, the Plekhanov Institute and from the Foreign Relations Institute, said Cameron.


To help insure that future accountants receive training that meets Big Six muster, Arthur Andersen and four other of the Big Six accounting firms -- Ernst & Young, Price Waterhouse, KPMG and Coopers & Lybrand -- are assisting MGU in setting up a joint MBA and Master of Science in Accounting degree. Based on a course run for many years at Northeastern University in Boston, and aimed to introduce those without any undergraduate exposure to accountancy, the course will be run separately from the current MBA program and will be open to all undergraduates.


MBA courses in the West aim to prepare students for the corporate world, not just equip them with specific skills. Developing company loyalty, and in particular a capacity for teamwork, are principal aims.


"Trust in the office is one of the core ideas in American management techniques," said Coulter. "I try to discuss these differences in class with my students. I'd like them to be aware.


"Russians tend to look at American business as the ideal and we'd like to show students an ideal model, but I'm afraid that in reality America isn't the paragon of perfect business ethics."


Coulter said his Russian students tend to develop very different business strategies in case studies, the core of MBA teaching, than their Western counterparts.


"The case may be foreign," said Coulter, "but the solutions that students come up with are 100 percent Russian. They're usually more short-term. We focus more on hard structure stuff like equipment and location rather soft structure like issues like personnel and organization."


Jo Bissada, a professor of entrepreneurship at INSEAD, said he was impressed with the capabilities of the candidates who gathered in Moscow last winter to attend a presentation of his school's program.


"At least 50 percent have the caliber to attend one of the top 10 business schools," he said. "They are very motivated and very smart."


But, he noted, many were too free-spirited for corporate culture. "Some are too much of entrepreneurs to work well in corporate groups -- not enough discipline," he said.


Indeed, many of the most talented could be better off in today's Russia as individual entrepreneurs than entering into the MBA world, which for a majority of graduates leads to a corporate career. Many of the new young generation of Russian businessmen have academic backgrounds in physics or a technical discipline and no formal business training at all. And the big opportunities of the last few years have been in setting up companies to serve as yet immature markets, not in getting settled into corporate career ladders.


To date, the majority of Russian MBAs have wanted to take a career in a Western business. Coulter said many of the MGU graduates now work for American companies, though a considerable number have gone to Russian banks. In many cases the choice of an American company is not because of the money: Clack of Ward Howell points out that in some areas Russian companies pay more than Western ones.


Russian companies have yet to show a great deal of interest in recruiting graduates from business courses. Part of the reason for that may be that, among many Russian companies, old habits die hard: Hiring is still often carried out through a network of friends and family.


"Instead of looking for someone who is qualified you would opt for someone who is close to you, someone who is loyal," said Coulter. "But that can backfire if they don't do their work well."


Nevertheless, Coulter says attitudes toward candidates with business training are beginning to evolve. After an initial enthusiasm when the first business training in Russia began to get going in 1991, interest dropped off in the period when big profits were to be made in currency speculation and other trading. Now Russian banks are demanding more management training from their recruits, he says, and the interest is coming back.


Clack expects there to be a big increase in the number of business graduates, particularly those who have taken such training in Russia. "Management courses are springing up around every corner," he said. "But we won't feel the market effect for a few years."





-- Jeff Grocott and Dan McKinney contributed to this report.