Name: Linda M. Randall, Ph.D.
Position: Associate Director of The Institute for International Business at the University of Rhode Island, where she has a concentration on the Russian economy. Randall is also an Assistant Professor of Management at URI.
Backround: Chase Manhattan Bank, 1978-80, Banker’s Trust, 1982-85, Teachers’ Insurance, 1985-88, and University of Rhode Island, 1993-present
Education: Swarthmore College, Swarthmore, Pennsylvania, Bachelor’s Degree, 1978; Harvard Business School, MBA, 1982; University of Massachusetts Amherst, Doctorate, 1993.
Age: 42
Family: Single
Residence: Providence
PBN: Explain the mission of The Institute for International Business?
RANDALL: The general purpose of the institute involves two things. The first is to develop students’ interest in anything that has to do with international, whether it is international exchange or international business. It is for business students to learn languages, cultures and the issues of globalization. The other thing is to develop the faculty to get them interested and educated in all things international.
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What sparked your interest in the Russian culture and its economy?
When I was in the banking industry we weren’t doing research or investments into Russia, but I was very much interested in looking at areas in the international market and places where investors really haven’t bothered. By the late 1980s, Gorbachev was basically dismantling the Soviet Union and Communism so I became very intrigued by what was happening as a possibility. Also, another driver: While I was an undergrad I studied the Russian language and was very much intrigued with the culture, history and literature. I wanted to tap into what I really loved, which was Russian. Also there was the fact that I saw Russia as a new market to focus on.
Describe your first experience in Russia?
My first visit was 1990 while Gorbachev was still in power. I visited Russia, Ukraine, Belarus and Uzbekistan. I went there to see if this was a potential place to do research and about developing business in that area. In 1990, there was a tremendous amount of curiosity and desire by the ex-Communist, the Communist, the people who were the dissidents wanting to very much break loose from the Communist era and wanting to break loose politically and economically. They wanted to be open to the West.
A lot of doors opened for me in terms of getting into the factories, visiting the enterprises and talking to the directors, which is the equivalent to the CEO. I probably saw from 35 to 40 companies. I got a sense of where they were and what they needed.
At that time what were some of the glaring differences between Russian businesses and American businesses?
The businesses were very large monopolies and they had a lot of old obsolete equipment. It was as though any economic or technological investment stopped in the 1960s. The infrastructure was very poor. The most striking thing was that the managers there were not able to make decisions on their own. The government made all of their management decisions. Their biggest questions for us were how does one do a strategic plan, what is marketing, how does one determine what decisions to make that will help to market the products, how do you export and how do you make decisions.
What kind of business training did they receive?
The training for managers was basically more technical and engineering oriented. There wasn’t the need for looking at the bottom line, profit margins. It was mostly volume or production based. All you wanted to do is get that quota of automobiles, or coats, or radios, or whatever. That is what they had to do.
How has it changed in recent years?
Today there is a split. You still have the large enterprises around and some of them have tried to spin off smaller ventures, to try to tap into the market economy. A good number of the large enterprises still have the old equipment, the obsolete equipment. They are beginning now to understand the issues of marketing and profitability. They have met with a number of Westerners and people from the East, Koreans and Japanese, so they have become acquainted with a lot of the terminology.
What they are lacking is the resources to upgrade infrastructure and develop a better quality product. Because of the political and economic turmoil, or chaos, that has put a damper on foreign investment in Russia.
You also have a lot of smaller entrepreneurial enterprises. They seem to operate to what we are accustomed to. They are usually people under 40 years old, who understand marketing or advertising.
You have said in the past that organized crime is an obstacle facing the economy in Russia. Can you describe its role?
It plays a very big impediment for Americans or other Westerners who want to invest there. Organized crime, which the Russians call the Mafia, has a large role in the economy and most definitely in regards to retail and distribution of consumer goods. They have a very good hold over it. The Mafia are the ones who are basically saying if you want your business and you don’t want anything to happen to it pay us a certain amount of money.
What is being done to stop this?
The law enforcement either isn’t capable of handling them, because it is such a large organization, or a number of law enforcement officials get payoffs. The Mafia offers protection, security and collects ‘taxes.’ In essence it’s a shadow government for businesses.
Do you have an example of what steps the Mafia has taken if a company chooses not to pay up?
One of the people I was working with, an automobile dealership, was told by organized crime that we see you are doing really well selling your German cars here and we want to up the amount of money to take. The guy said no, that is not the case, I really don’t have the total amount of cash that you are saying. That night when the dealership closed, the Mafia returned with these large trucks and rammed through the door. They took his entire inventory.
I’m developing a business program at URI in which there are a number of programs set up for (the Russians). We had an accountant faculty member over to teach a course as part of the program. All the students were accountants or executives for a number of businesses in Russia. What came about or what was finally exposed from this course with the chief accountants was that they keep three books. One set of books for the government, one set of books for the Mafia and then the true set of books. There is a movement of not revealing to the Mafia what your true revenues are. They wanted to know how Americans do that. The faculty member said that is usually something that we don’t teach in our courses. They were disappointed that the professor did not teach them maybe American methods of keeping three books.
Then why would anyone from outside of Russia want to invest there? When will there be a good time to invest in Russia?
Right now Russia is going through a financial and political crisis. I would recommend for anyone to wait and see who is going to become head of the government. Yeltsin is ill and he has been struggling in terms of governing the Russian Federation. The government that is set up has to do at least two things.
One is work with the international community to stabilize their currency. The second thing would be to stay on a course where they keep their economy open to the global market place. Meaning they stay open to allowing foreign investment or for goods and services to go back in forth. If those two things happen, Russia has tremendous natural resources — oil, gold, uranium and timber — and also has a highly educated population. Companies can tap into a low-cost, highly skilled labor force.
Obviously relations between the U.S. and Russia have improved, but do you think resentment toward the U.S. still exists?
When Gorbachev started to dismantle the Soviet Union and Yeltsin came in there was a sense that the U.S. and the international community was going to really assist in their pursuit to move to a democracy and a marketing transition. Both of those things have been very disappointing to them. Some Communists are back in the legislature and there has been a rise in nationalism. A small percentage of people are saying they want to go back to the old ways. Some of the frustration is being vented toward the U.S. and the international community. Maybe that we didn’t give enough or the monies never got there. There is a questioning of the U.S. and their role, or lack of a role.
What is the most important lesson learned by U.S. businesses concerning what has happened in Russia?
A lot of people were hoping that the change from going to a Communistic community to a market community was going to occur like that. In no time. The first thing that the U.S. business community needs to know is that to move something from one to another system takes decades. The second thing that the business community needs to take in regards to Russia is that it is not necessarily the big enterprises that are the safe havens in terms of dealing with Russia in terms of investments.
It’s more the medium size companies, where the younger generation exists. They are the ones that have a much better sense of how to deal in more of a market-like economy and in a lot of instances have international experiences.
