INSIGHT INTO TAIF

TAIF, a major group of companies, is considered as very secretive, and Albert Shigabutdinov, its CEO, readily admits: «We are that way. Our golden rule is not to publicize any ideas that we haven't implemented yet». He knows that empty promises don't pay and that a premature disclosure of future plans heralds unfair competition and subsequent bureaucratic quagmire

INSIGHT INTO TAIF

Keeping their cards close to their chest works miracles for TAIF: one ambitious project after another, they make their envious competitors despair of ever catching up — and spread nasty rumors. One such gossip got national publicity: allegations were made that TAIF was actually controlled by Radik Shaimiev, son of the President of Tatarstan. Some papers ran articles offering «compelling facts». The whole story unraveled, not so surprisingly, at exactly the time when the President was running for re-election. Shigabutdinov says: «Since this political bias was so obvious, we sued the perpetrators in court for defamation of character».

The truth is that Albert Shigabutdinov, one of the founding fathers of the company, is the one who calls all the shots. Over the years, he built a team of trusted and dynamic managers and together, they made of TAIF one of the undisputed leaders of Tatarstans economy. Our story of the company would therefore never be complete without the story of the man himself, and it would be only appropriate to begin it with a telling heading. In the Soviet days, it would have been something like «How they hardened the steel»; but those days are gone, and we thought of a different theme.

INITIAL ACCUMULATION OF CAPITAL

Put simply, envy is the lot of people unable to fulfill their cravings. The stronger their desires the more these people become aggressive towards those who know how to get what they want. Not so long ago, when big fortunes and miserable failures finally became realities in this country, Russia was swept by raging envies. The miserables were moaning: «Where did they get all these riches? They must have gotten their dirty hands on public property, there is no other way!» These complaints would have been normal coming from the old and the sick that cannot compete for a place under the sun that is shining over the market economy. Disappointingly, more than a few perfectly healthy men, who had the urge but would not dare to venture, backed them. Today, there arent as many of them still complaining. People have come to understand that nature did not make all of us fit for fortune seeking. They also learnt to see the difference between those who were indeed pillaging public property and those who succeeded without eyeing it, building their prosperity from scratch.

Which is probably an overstatement since all up-starts had something. In business, machinery, buildings and money on bank accounts are not the only useful assets. There are less material things that are of no small import either: entrepreneurship, managerial and administrative skills and experience, and the list can go on and on. But we should go back to our story and its principal, to where all things human start — our mans childhood.

Albert Shigabutdinov was eight and living in his native village when he learnt his first basic lesson of life, that sometimes, it takes a lot of strong will and determination to achieve a goal.

In the spring of that year, he and his friends went to watch the ice breaking on the nearby river. Water was freezing cold, but boys being boys, sure they got all wet. And from there, they wandered through the surrounding forest, so beautiful in this time of year with clearings drying up quickly from the melting snow. The air was warm, and the ground cold, but young Albert, drowsing under the sun, felt so tired that he lied down to have a nap anyway. Next morning, he had a bad fever and could not move his legs. After a week of unsuccessful attempts at helping him, parents took Albert to the hospital. Doctors diagnosed his case as aggravated rheumatism. Thanks to treatments, he recovered enough to walk again, but the illness did not go away completely. Albert was sent to a rehabilitation center, first in Tatarstan, then to Yevpatoria, on the Black Sea coast. As he was sending him back home, his doctor advised Albert to get some exercise, with caution. Forget about «caution», Albert wanted to have his good health back, and fast. From then on, two or three hours of football or hockey on ice, depending on the season, constituted his daily routine. As he was joining eighth grade at school, rheumatism was over, but a rheumatic condition persisted. Undaunted, he added skiing to his program and at long last got his clean bill of health two years later.

Grueling though these years of slow recovery may have been, Albert always pursued other interests too. He had many passions: technical drawing, painting, mathematics, you name it. He was particularly excited by mathematical problems that required solutions spread on a dozen pages. He also got into radios and learnt to repair old sets and to assemble transmitters. But this required some parts which had to be bought. His father, chief technical manager of the local collective farm, helped him out. He arranged for his farm to put in Alberts custody, from time to time, a few calves or lambs, so that the boy would feed them and look after them, to return them later when they were to be sold. With the money he made, Albert bought the spares he needed. He also bought a tape recorder and, when he was 14, a motorbike. Then his father gave another little boost to his ventures by buying him a chainsaw. That meant a new source of income. In Alberts village, all houses were burning wood for heating, and each house needed up to three truckloads of wood per winter. Soon, he had a long waiting list of households asking him to come and cut their wood; they were quite happy to pay him a dollar per cubic meter. He said later: «I was working so hard then because I hated asking anyone for anything».

This yearning for independence also shaped his choices after he graduated from school. His father wanted him to get a diploma in agriculture so that Albert could come back and have a good job in the village. This wasn't meant to be, and until his recent death, his father was often grumbling: «I was hoping my son would be good for our district, but you failed me!» Shigabutdinov Srs second best choice was for Albert to go to Leningrad, where he had old friends teaching at university. This could have been a possibility, but Albert did not like the concept of those friends of his fathers being there to help, just in case. He definitely wanted to be accepted and appreciated on his own merits not because he was somebodys protHis mother, a woman of integrity, helped to instill this attitude into him. She was teaching Russian language and literature at his school and, at his graduation exam, gave him a 4 instead of the maximum 5 that he had got in all other disciplines. He said she had ruined his cum laude certificate. She retorted that a written commendation was not so bad either.

He ended up at the Aviation College of Kazan. His father had no friends there, mathematics and radio were high on the list in the curriculum, and before being admitted he had successfully won a contest in which only one applicant out of five had a chance.

By being an eager participant to all sorts of extra-curricular activities, Shigabutdinov was quickly singled out as a leader and was soon elected president of the students self-governing body. After the first year, he immediately enrolled into the Colleges summer jobs program that allowed students to earn some extra-money. They were usually sent as teams of manual workers to construction sites faced with shortages of manpower. It was hard work, but the higher than average wages they got made it worthwhile. Shigabutdinov showed his skills, and by summer 1974, he was not anymore another anonymous hand, but the commander of one such team assigned to Nijnekamsk. He was responsible for the team and for all the administrative matters. And his wages were growing too. Hard work was earning him independence once again. He said to us: «My wife and I, we met when I was still a student, and she recalls that we used to eat out almost daily. Mind you, at the time, a dinner for two cost five or six dollars, so we could afford it». Asked where else did he spend the money he made, Shigabutdinov answered: «I did not want to envy others. I made sure I could afford all the same things that kids from rich families had: a recorder in my room, a TV set, nice clothes».

His graduation paper made quite an impression, and Shigabutdinov was offered to stay at the College as a researcher. His first salary was nothing much, slightly above 100 dollars, but he kept on leading students construction teams in summers and thus had sufficient extra-income. Then one day his team of 300 students was assigned to the construction site of an entire collective farm, an important pilot project sponsored by the government of the Soviet Union; 6000 hectares of arable land and a village were to be put in place. Authorities, including the minister of land development of Tatarstan and the local Party administration, closely monitored the progress. Eventually, these officials and the directors of the government agency — Tatplodoovoshprom — which was to administer this facility, offered to Shigabutdinov a permanent job on the new farm. They promised good salary, a company car and an attractive package. He was impressed and tempted. He said to us: «At that time my father was quite ill, for two years he could barely move, and his treatments were expensive. I also had to help my mother, my two sisters and my brother. All in all, the extra money I was making in my off-hours was not enough. So I went to see my boss at the College and told him that I had this offer and that I could not afford to turn it down. He did not want to let me go, but he sympathized with me and authorized my resignation. He told me: If you ever want to come back, I'll be happy to have you again».

Thus Shigabutdinov switched from scientific research to agriculture, or rather to construction, supplies and sales, which fell under his responsibility. For the next five years, he was going to be deputy director, chief of constructions, etc, etc.; an exciting period in his life, but also one during which he learnt another important lesson of life.

TAMING OF THE SHREW

Where construction is big, so is the money involved. And big money always inspires big passions. So it did not come as a much of a surprise — even though it is still not clear what exactly triggered the events — when authorities started to receive complaints about «wrong appropriations of funds» at the farm. The resulting audit lasted six months, joined at some point by the district attorneys staff and by officials from the Interior. It was followed by another audit from the farms governing administrative agency. Inspectors even ordered that trenches be dug, dozens of meters of them, to measure the basement and to see whether the amounts of cement spent in reality matched the figures in the old financial statements. The final verdict was that all accounting had been done impeccably. The report sounded more like a commendation (Shigabutdinov keeps a copy of it for the sake of good memories.) He was nevertheless held responsible for two violations. One had to do with the old tradition of celebrating the beginning of work in the fields, the completion of sowing and the end of harvesting. Those celebrations meant in reality free drinks and food for everyone. In the farms bookkeeping, however, by some strange subterfuge, drinks and food took the form of working gloves, buckets and tools. In his capacity of director of supplies and sales, Shigabutdinov, unaware of the magical transformations that were going to follow, signed routinely respective release forms and payment orders. He says: «I am well aware today that to keep books in order, each and every document is important; but at the time, I thought nothing of it».

The second violation happened because of the celebration of the Womens Day on the 8th of March. Such was the desire to make good presents to the farms women, that Shigabutdinov authorized personally a payment from the farms budget for the purchase of nice sets of porcelain. This was indeed a violation since the then existing rules said that any use of funds from the farms budget, other than under the annually approved allocations, had to be sanctioned by a maze of higher authorities.

When they learnt that these payments had been made «to the detriment of state assets», farmers put together their own money to pay the necessary compensation. Shigabutdinov got nevertheless reprimanded: an order came to downgrade him for two months to the rank of master of works. He found it unfair and submitted his resignation, but the director of the farm refused to accept it and instead, sent him away for a month on a holiday, promising to look into the matter upon his return. When this moment came, the director talked Shigabutdinov into accepting another month of vacationing. Thus the prescribed two months penalty elapsed. But Shigabutdinov was too deeply vexed to forget, and insisted on quitting because, as he said, he was not the kind of man to change his decision.

He found a job in Kazan, where he was put in charge of overseeing construction and maintenance of new and existing shops in one of the citys districts. Again he was going to have an edifying experience. There it goes as told by Shigabutdinov himself: «There was in the governments auditing committee one smart cookie of a guy, whos spent his lifetime there. He got it into his head that I should build him a dacha. I say to him: How am I supposed to finance it? And he says: Oh, you know, you can inflate your other costs under this item, and then that one. And so on. I tell him: No, I won't do that. I'd rather give you money from my wages, but I certainly won't cook my books. OK, he gets the message, and then all hell breaks lose. I had nothing but investigations and audits on my back, prompted by complaints. That smart cookie, hes is an old guy now. I met him once, and he told me, very proud of himself, that if it weren't for him, I wouldn't be the big businessman I am. I asked what made him think so. He said: «Because the heat was on against you, from all quarters, and you learnt to stand it; I taught you that».

YOU ARE ON YOUR OWN NOW

Before he set sail on the high seas of free market, Shigabutdinov had one last salaried job at the Fisheries Group of Tatarstan where again he was deputy director in charge of construction, supplies and sales. At that time, perestroika was already going full steam, and various market-oriented reforms had been introduced. Conscious of their potential for the performance of the group, Shigabutdinov offered twice to the CEO to use the new rules and lease from the government all available assets. This would give them operational independence and maximize their profits. But his boss wouldnt dare, fearing the demise of Gorbachev and an abrupt return to the old times. Shigabutdinov tried once more, agreed to discuss the matter after a while, waited until nothing happened and then finally resigned to become head of the Kazan Group of Foreign Trade, of which he also happened to be the founder. To put together a reliable core team of managers he carefully selected trusted people whom he knew well through 10-15 years of joint professional experience. There was business aplenty, more than one could handle. There were shortages of everything, in Kazan and everywhere in the country. Unable to buy cigarettes of any kind, crowds of angry smokers were blocking tramways in the streets; Kazan Group imported into Tatarstan enough tobacco to guarantee sales for the next three years. It supplied the republic with sugar. It also brought in six thousand passenger cars, road building equipment and new trucks for fire brigades. And it ventured into exports and imports of technologies and know how.

In the Soviet days, local products were exported by special agencies of the central government. When they collapsed, together with the USSR, Kazan Group came to the rescue of the manufacturers. When barter became the only form of trade throughout Russia, or close to it, the government and the leaders of the oil industry of Tatarstan retained Kazan Group to organize sales and exports of oil against hard cash. These were the heady days of new ventures and demanding work. Men had to learn as they went, hardened by the experience. Shigabutdinov spent the best of his time studying documents and textbooks about taxation, accounting and economy, traveling around the world and learning business practices and international law. But as soon as it became possible, more substantial training was arranged for new recruits. Shigabutdinov strongly believes that proper qualifications of a company's personnel are essential for its operation: «When you've got good professionals, nothing is impossible. They are your main asset. Most of the managers of our companies started at the Kazan Group. I chose them myself, and I am happy about my choices. They are all very professional, each in his own business. There is no limit to what a man can do when given a good chance to show his potential. Our policy is to always give them this opportunity».

OAO TAIF, a public company, was registered in 1995 to meet new challenges. Economy was gradually adopting free market rules and practices, companies were being privatized, shares and stocks and bonds were being more and more in use. All this needed to be handled properly through the use of appropriate tools. A stock exchange was becoming a necessity, and TAIF was established to help to start it and to attract capital that would make it work for the benefit of Tatarstans industries. Owned jointly by Tatar government, local private shareholders and Kazan Groups partners from the US, TAIF was something very new in Tatarstan. It quickly achieved results: Tatarstan got its own depository and register of shares, and special law firms, auditors and brokerages dealing in stock exchange.

The government of Tatarstan also asked TAIF to help big local companies in putting together credit lines, portfolio financing and other forms of investment these companies needed for their development.

In 1997, TAIF ventured into a new area by becoming an associate of OAO Nijnekamskneftekhim, one of the biggest chemicals manufacturers of Europe. As originally designed in the Soviet days, this group of factories was manufacturing intermediate products, and one of its major problems was that its unit of primary oil refinement was lagging behind. TAIF leased the unit from the group and soon increased its output to the units maximum capacity of 450 000 tons of ethylene, as against the 150 000 tons it was producing before. This was an all times record. Today, TAIF has a subsidiary in Nijnekamsk — TAIF-NK — and it is teaming up with Nijnekamskneftekhim and Tatneft to build a new state of the art oil refinery that will be the first of its kind in Tatarstan.

Efficient communications were as important for TAIFs business as they are for the economy in general. TAIF needed them badly and decided to start its own telecommunications business — TAIF-TELECOM, that built the very first network of GSM standard in Tatarstan. Today, operating under the brand name of Santel, it covers almost all of the republics territory and has some 150 000 users. The next target is to increase the number of users to 500 000 and to bring prices charged to customers down to the level of those of standard landlines.

TAIF is also in the housing business. When a Presidents Fund for the Elimination of Derelict Houses was established in Tatarstan, there was still little hard cash around and trade was mostly all about barter. Because of that, many companies that were willing to contribute to the Fund had only their own products to offer. TAIF was singled out to help the Fund raise cash through sales of these goods. It secured a loan of 20 million dollars in the West, passed on the money to the Fund, and then repaid the loan using its income from subsequent sales of goods. At the same time, TAIF was put in charge of supplies for the construction sites run by the Fund. Shigabutdinov had mixed feelings about it: «It was such a pain, I can still remember the frustration. At the time, we had only 150 people working in our company, and yet we had to bring in 120 000 tons of cement and 60 000 tons of metal parts. We were stretched to the limit! Only to see how our efforts were being wasted because of the inefficiencies and shortcomings of the subcontracting companies. I realized that the only way to get rid of this mess was by starting our own construction company.» Thus Meta-TAIF came into being and soon, it completed the building of the first two houses under the Funds program. To this day, experts believe that these houses are the best, in terms of quality and efficiency of construction. Ever since, TAIF keeps on building for the Fund. And it expands into new areas.

CREDO

At TAIF, there seems to be no end to new projects. Is this company too ambitious? Why does the management crave new challenges? We asked Shigabutdinov: «What counts most for you in business, the achievement or the excitement of doing it?» He said: «Like so many other people of my age, I grew up with the belief that our country was the richest and the best in the world. Yet with time, when I started to travel and when I saw that people in the West were living better, I realized that it was not totally true. But I remained strongly convinced, like they had taught me when I was a child, that Russia was still the richest, and that therefore the potential was there for our people to live as well as, if not better than in the West. Our workforce is sufficiently skilled and well educated, we've got everything we need to achieve it. So if we don't do it, who will?»

Petr MIKHAILOV