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Feature: February 19, 1997
Shirt-Sleeve Ambassadors
Retired Execs Aid Free Enterprise in Developing Nations
By Marvin Zim '57
Officially it's called the International Executive Service Corps, or IESC-an army of mostly retired business executives who travel the world to nurture capitalism in developing countries. It shares with the Peace Corps at least two similarities: it operates on a volunteer basis, and its focus is international. Otherwise, IESC volunteers are typically about 40 years older than their Peace Corps counterparts (the average age is 67) and whatever they may lack in youthful energy, they make up for in experience.
Unofficially, at least a few of its volunteers continue to refer to the IESC as the Paunch Corps, the name perhaps inevitably bestowed upon it at the time of its founding, in 1964. In the ensuing 23 years, the Stamford, Connecticut-based nonprofit organization has sent its volunteers on more than 19,000 missions to 122 nations (last year, nearly a thousand went to some 50 countries). They have contributed to the economic emergence of South Korea, Taiwan, Chile, and Singapore, among other international success stories.
From its beginning more than 30 years ago, the IESC has profited from Princeton ties. The late Frank Pace '33, a former CEO of General Dynamics who had served as Secretary of the Army, became the IESC's chief executive officer shortly after its establishment by Congress. Pace guided the organization for the next 18 years, putting in place its basic procedures and structure.
The IESC works directly with foreign businesses, not governments, and locates clients through a network of 65 field offices in 49 countries. Its funding comes from a variety of sources, including the U.S. Agency for International Development, foundations, and corporations, but every client must contribute to the support of its volunteer consultant. To keep assignments focused, they last no longer than 12 weeks (six is average). Every volunteer drafts a statement of objectives within 10 days of arrival on the job, and the effectiveness of each mission is evaluated in a closing session with the client, volunteer, and the IESC country director.
John P. Birkelund '52, the chairman of the investment-banking firm of Dillon, Read, has chaired the IESC board for the last three years, a period when the organization has focused most of its efforts on helping businesses in the former Soviet bloc. The IESC, asserts Birkelund, "is the most valuable foreign-aid program we have. We're bringing entrepreneurial and managerial experience to countries at the grassroots level." Under his stewardship, it is also recruiting municipal executives to advise city officials in the former Soviet Union. (One pressing issue is taxation. Cities that once got virtually all their revenues from the central government now need advice on raising funds from local sources.)
Many Princetonians work as IESC volunteers, and the Class of 1947 has set a goal of adding 250 of its members to the IESC's roles by the class's 50th reunion, in June. Following are the stories of seven alumni who are living the university's 250th-anniversary ideal of "Princeton in the nation's service, in the service of all nations."
Since retiring as a vice-president for sales and marketing at Pan American Airways in 1993, Walter Elsaesser '46, of Stamford, Connecticut, has been lending his expertise on behalf of the IESC. His effort to help develop tourism in former socialist or communist countries has been a learning experience for him as well as his clients as they struggle with the often rocky transition to a market economy. He was recruited to assist in the privatization of both Air Bulgaria and Air Zimbabwe, but executives balked at his recommendations to cut fat from payrolls. In Russia, he worked with a former Intourist hotel in Volgograd (the former Stalingrad). After the employees became part-owners of the hotel, many assumed its property was theirs for the taking and that they could eat for free in the dining room. At the request of the manager, Elsaesser twice addressed the staff on the limits to private enterprise.
In Latvia, he saw how a government policy born of resentment toward its former Soviet rulers hurt a down-at-the-heels spa in the resort city of Baldone. Before Latvia broke away from the USSR, most of the spa's guests had been Russians, on whom the Latvians have since imposed high visa fees to discourage them from entering the country. Elsaesser estimated it would take $7 million to $9 million to put the spa in good working order, but without a customer base it was difficult to raise private capital, and the government lacked funds to help.
Of all his IESC clients, Elsaesser believes that the one with the most potential is the Ukrainian city of L'viv, which has 15 museums, an opera house, and dozens of elegant old buildings. While on assignment there last year, he drew up a list of ways to increase L'viv's attractiveness to tourists. Among them: post directional signs that use the Roman (rather than Cyrillic) alphabet, place more restrooms near attractions, repair the cobblestone streets, spruce up the airport, and launch an advertising campaign in key European cities. Many of Elsaesser's proposals have yet to be implemented, but he remains optimistic about the future of a city whose "historic beauty" he compares to Vienna's.
Dick Matthews '46, of Vero Beach, Florida, and George Scurria '57, of Cambridge, New York, have also consulted in the former Soviet Union. Matthews, who spent most of his career in marketing with companies such as Procter & Gamble and American Home Products, helped a Russian electronics maker develop a marketing plan for hearing aids, and he has counseled Latvia's biggest consumer-products company. In its heyday, the Latvian firm boasted annual sales of $85 million. Unfortunately, it had derived the bulk of its income from sales in Russia, and revenues plummeted 75 percent after the breakup of the Soviet Union. It desperately needed to improve its marketing in the Baltics and make inroads in the West. Matthews assisted in a review of its products and suggested ways to enhance their appeal. One result was a dramatic upgrade in the quality and packaging of one of its shampoos. Drawing on his own professional contacts, Matthews put the firm in touch with potential distributors in Sweden and Norway.
The IESC sent Scurria, a former senior vice-president and treasurer of ITT, to southern Ukraine to advise a Ukrainian machine-tool company in the early stages of going private. Once on the scene, he discovered an ambivalence about the adjustments ahead; understandably, employees were loath to give up guaranteed jobs, free child and medical care, company-sponsored housing, and paid vacations at a company facility. But however reluctantly, most saw that they had no option but to move forward. Four other Ukrainian firms were making similar products, and they would all have to compete on the basis of price and quality. Although the company had plenty of production experience, its managers knew next to nothing about procurement, marketing, or finance.
Scurria recognized that attracting foreign investors would be key to the firm's future. But Ukraine had yet to enact a foreign-investment law, so he had no way of knowing what kinds of investments it might permit. He also found it nearly impossible to discern the company's cost structure, since its accounting procedures followed no western model. Scurria worked with the top executives to develop a game plan for the company's survival. "I did what I could under the circumstances," he says. "In these situations you have to be prepared to be flexible."
John Peacock '46, a retired AT&T executive living in Round Pond, Maine, thinks of himself and other IESC volunteers as "shirt-sleeve ambassadors" to the developing world. He has been working for the IESC since 1991, when he advised Chile's newly privatized phone company on restructuring. As a former manager involved in the splitting up of AT&T and the Baby Bells, he had a wealth of experience in such matters. After examining the Chilean company's operations, he made three recommendations. One, to realign the responsibilities of senior management, was approved, and another, to automate certain work functions, was implemented in modified form. His third proposal, to consolidate the marketing operations of the company's six subsidiaries, was rejected. "The experience I had at AT&T was good background but not always applicable in the Chilean environment," he says. "You have to be very conscious of the constraints that exist, both financially and in terms of skill level."
His next assignment, in 1994, took him to Almaty, the capital of Kazakhstan, to help a former government telephone company set up a long-distance satellite service. The problems were formidable. He discovered that the company's executives had no experience managing a business in a free-market economy. The government was new and in flux, and regulations governing the fledgling telecommunications industry shifted with the political winds. The country's infrastructure was virtually nonexistent, so that if equipment failed, getting a truck or plane in with a repair crew would be a major undertaking.
Undaunted, Peacock helped his client draw up a business plan to support an application for a $4 million loan from a consortium of European banks. The plan was also used to solicit funds from the U.S. Department of Defense, which under the Nunn-Lugar Act makes grants to countries that have dismantled their nuclear weapons; DOD came through with $5 million. In addition, Peacock coached the firm's executives in operational and business basics, and he developed a list of functions they had to perform, from making financial projections to scheduling maintenance. "My clients were technically capable," he says, "but desperate for information on how you manage a telephone company."
Last fall, while on his most recent assignment, Peacock served as a consultant to an Egyptian manufacturer of electronic goods, including components for telecommunications. The firm, which in the past had relied overwhelmingly on military contracts, wanted to upgrade the technical quality of its products and shift its focus to the civilian market. It had an ambitious goal of tripling its sales in five years, but Peacock recognized that many of its managers had only a superficial knowledge of their products and customer requirements. To fill this void, he organized a course that met three days a week, coached senior executives on a one-to-one basis, and accompanied its representatives on a number of sales calls.
His experiences in Chile, Kazakhstan, and Egypt were all different, but each gave Peacock deep satisfaction. "I felt I made a contribution," he says, "and it gave me the opportunity to stay involved in my profession."
Davis Spencer '45, a retired former owner of a machine company in Natick, Massachusetts, arrived in Kazakhstan a year after Peacock to help a steel fabricator and a shoe manufacturer through the pangs of privatization. As he quickly learned, "In many ways, the Kazakh companies have the same problems that U.S. companies have. But the problems are complicated by their lack of understanding of marketing and the profit motive, as well as a crude accounting system. It turned out to be a very pleasant challenge."
The needs of the steel fabricator, located in Almaty, proved relatively straightforward. It wanted advice on which of five new products it should market, and Spencer recommended that it go ahead with two (fabricated steel piping and a line of welding electrodes). The problems of the shoe maker were another matter. Since going private it had used up all its working capital, so it could no longer buy raw materials or compensate its employees, who had not been paid for six months. Spencer helped the company to restructure its crushing debt load (some of which was compounding at an annual interest rate of 340 percent) by borrowing from local banks at lower rates and by applying to the Central Asian Enterprise Fund for a $2.5-million loan; he played a leading role in writing the business plan that accompanied the application. At Spencer's urging, the company also upgraded its plant by obtaining used equipment from an Italian shoe manufacturer in exchange for a third of its equity.
Bringing in Western partners is often the best way for a former communist manufacturer to acquire capital and expertise. Don McCuaig *59, who has an M.P.A. from the Woodrow Wilson School, has worked for the IESC in Hungary and what is now the Czech Republic. A former financial vice-president for Exxon in Europe who now lives in San Antonio, Texas, he went to Prague in 1992 as part of a team helping companies to privatize by selling equity to western firms. "It was essentially an investment-banking job," he says.
In reviewing each company, McCuaig and his colleagues had to tackle some thorny issues. How many employees would be laid off? Who would be responsible for liabilities? How much money would the new partner pump into it? Complicating matters was the lack of capitalist experience on the part of company managers. "They knew next to nothing about marketing," says McCuaig. "Their accounting methods were unsophisticated, and they didn't understand the role of profits in any normal sense." During his three-month stay in Prague, McCuaig closed two deals, with a dairy firm and a maker of sausage casings, and others he worked on were completed later. "I felt we made a very important contribution," he says. "There is no way these deals would have been put together as quickly as they were without our help."
In the 11 years since Dawes Walter '47 signed on with the IESC, it has sent him and his wife, Berni, to Asia, Eastern Europe, and the Middle East on a variety of assignments that draw on his experience as a retired government- and public-relations executive for Conoco, and as a former owner of an executive-counseling firm.
In 1985 he advised chambers of commerce in the Philippines on improving their effectiveness through the creation of speakers' bureaus, newsletters, and a business-news radio network. Three years later, in Jakarta, Indonesia, he helped establish a career counseling center at the country's largest private university. As an emerging Asian Tiger, Indonesia was moving from an economy in which most people got their jobs through family connections to one in which the best and brightest were recruited by multinational firms. But the Indonesians, whose culture discourages assertive behavior, were often too modest and retiring in job interviews. Walter coached the students on interviewing techniques, briefed them on the kinds of questions they might be asked, engaged them in role playing, and put psychology majors to work critiquing practice interviews. Once the counseling center was up and running, he brought in General Electric, American Standard, Colgate Palmolive, and several other international firms for recruiting sessions.
In 1991 and again in 1994, the Walters journeyed to Bulgaria. On their first visit, Dawes developed a fund-raising plan for the Center for the Study of Democracy, a new organization whose 24 scholars were documenting the country's transition from communism. He tutored its leaders in fund-raising techniques and helped them to win grants from the World Bank, the U.S. Agency for International Development, and the Soros Foundation. Berni, meanwhile, worked as a volunteer teacher at the English Language School in Sofia, the capital. She set up a pen-pal exchange between students there and at the middle school in the Walters' hometown of Southbury, Connecticut.
"It's hard but rewarding work," says Dawes, speaking for both himself and his wife about service as an IESC volunteer. "The key is reducing what you know to a level that others can understand and absorb. It's a form of give-back."
Harry Berkowitz '55, of Norwalk, Connecticut, spent two years in the IESC's home office matching volunteers with overseas assignments. As he recalls, "We were asking people to close up their homes, find someone to take care of their pets, and go off to a strange land where they didn't know the language. And they would come back ecstatic about their experience."
Marvin Zim '57, who lives in Washington, D.C., wrote about middle-aged entrepreneurs in the April 17, 1996, PAW. For more on the IESC, contact its headquarters, at P.O. Box 10005, Stamford, CT 06902 (203-967-6000; fax 203-324-2531).
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