by Gerry Blackwell

(reprinted from London magazine, September 1991)

Scott Hellofs and Paul Fitzgerald are a couple of enterprising young guys with a lot of blat. No, it's not a misprint. Blat is a Russian word. It means (approximately): The ability to wield influence and make things happen.

Canadian business people are going to need blat in spades if they hope to exploit the opportunities offered by emerging East Bloc markets. Hellofs, 28, and Fitzgerald, 29, found that out the hard way while organizing an unlikely educational aid program in the Soviet Union.

In May, Project U.S.S.R. sent 26 University of Western Ontario MBA students -- including Hellofs and Fitzgerald -- to Leningrad and Moscow to teach aspiring Soviet entrepreneurs and state company managers the basics of western business practice. Thanks to their trailblazing work, another group will go next year.

Organizing an innovative project of this magnitude in the crumbling and fantastically bureaucratized Soviet economy took persistence, flexibility--and, of course, blat. "We knew it would be the toughest place in the world to get a project like this going," says Hellofs. " And it was. "

The scheme, a brainchild of Hellofs, earned him an International Leadership Award, granted for the first time this year by the Graduate Business Foundation, an association of top-ranked business schools in North America and Europe.

The seed was planted a year and a half ago when Hellofs heard Dr. Henning von Hassell, then the West German Consul General to Canada, speaking on the tribulations of uniting East and West German economies. One of the biggest problems, von Hassell said, was the lack of business acumen in the East. That started Hellofs thinking.

"I had also heard, " he says, "that something like six percent of the 2,000-odd Soviet-western joint ventures started in the last few years have survived." This, Hellofs says, is mainly because of a lack of business understanding from both perspectives.

It took some doing to convince the UWO School of Business Administration cadres that the project Hellofs had in mind was feasible. For starters, they couldn't believe students would be willing to give up their time and pay good money to go to the U.S.S.R. He convinced them by collecting -- in one day -- commitments from 40 who said they'd jump at the chance.

But the project didn't really get off the ground until Hellofs came back to London last September for his second year in the MBA program, and hooked up with fellow Albertan Fitzgerald, also in his second year. They convinced the university to let them run the project their way under the aegis of the student International Business Club--with the influence of the internationally recognized business school behind them.

The idea was to crunch into one month an abridged version of UWO's introductory business course, which teaches the basics of finance, accounting, general management and marketing. Professor Chris Alvinson, who teaches the course, helped develop the four-week curriculum and also accompanied the students to the U.S.S.R.

"A similar approach had been tried and worked in China," Fitzgerald says of the curriculum. "so we assumed the Soviets would be at about the same level. The only thing we added was a module on joint ventures."

Toronto lawyer Edward Belobaba, an expert in Soviet-Canadian business relations, introduced Hellofs and Fitzgerald to the Leningrad-based International Centre for Enterprise Development and its powerful boss, Victor Efimov.

That was the start of a roller-coaster ride for the two organizers. They travelled to Moscow in January to meet Efimov--and had their first lesson in the importance of blat.

Efimov was in Leningrad, 500 kilometres away. Could they get a ticket for the Leningrad train? Not without waiting in line for nine hours. Could they get a flight then? No way. Unless maybe they flew out to Helsinki, Finland, and back to Leningrad.

Then Efimov stepped in. Within a few hours a first-class car was ready to transport Hellofs, Fitzgerald and another larger delegation of Canadian business people to Leningrad.

When they did finally meet, Efimov "bought in," as Fitzgerald puts it. The ICED would take the UWO students to teach business for four weeks, and pay all their in-country expenses.

As an added bonus on that first trip, they also met Marina Kalinina, an influential professor at the State Academy of Management in Moscow, who was destined to play an important role in Project USSR.

"At that point," says Hellofs, "it looked like everything was going very smoothly. "

They went home and set up a rigorous committee procedure to select teachers from among their fellow students. Out of 103 applicants they winnowed a short list of 50 and interviewed them all. The most important criteria was cultural awareness and sensitivity, says Heliofs. "We wanted people who had travelled outside North America and western Europe -- travelled, not just visited. We wanted people who had learned a second language as an adult, had been through hardship overseas and could roll with it. In short, we wanted very flexible people. ''

The successful candidates would pay $1,500, which covered their airfare, administrative costs and insurance policies -- including political-risk insurance. Lloyds of London calculated there was a one in 40 chance that someone would end up in some sort of mishap, says Fitzgerald.

But by early March the project was on the rocks--for quite different reasons than political instability in the U.S.S.R. Efimov was reneging, despite signed letters of intent. Now he only wanted three student-teachers, and only to teach three-day seminars, not the full four-week program.

Hellofs decided not to accept the Graduate Business Foundation award while the project hung in the balance.

Meanwhile, Fitzgerald, back in the Soviet Union at Efimov's invitation to announce Project USSR at a business conference, scrambled to find new Soviet partners willing to buy into the original scheme. It was Kalinina who delivered them. Efimov, in the end, was shamed into renewing at least part of his commitment.

Fitzgerald went home a wiser man, with a shored-up but quite different project. It would now be spread over Leningrad and Moscow, and involve several additional Soviet partners--all of which added immeasurably to the logistical headaches.

Did the near debacle make him cynical about dealing with the Soviets? "No," says Fitzgerald. "You just have to find the right partner--one who understands the west for starters.

"But I'd never put stock in any kind of contract. If I looked somebody in the eye and shook their hand, then I could feel confident. Marina [Kalinina] never signed anything with us. But we'd developed a personal relationship with her. "

Despite the ups and downs, the project was a great success. The over 250 Soviet students represented a broad cross section of Soviet society: factory workers, managers, accountants, politicians, single mothers, even some young college students. They all filled out evaluation forms, and all said the experience was beneficial.

Some were at first sceptical that the young Canadians could teach them anything useful. "But the most sceptical in the end were the program's biggest proponents," Hellofs says. "Many of them came to us with joint-venture proposals. And many were crying when we were leaving, and giving presents. It was really beautiful."

The Project USSR participants are passing the joint-venture proposals to companies here that they think might be interested. Planning for Project USSR 1992, meanwhile, is already underway. As for the two original organizers, they're out of the loop. Fitzgerald is planning to go back to the Soviet Union in September, though, to begin a one-year contract to teach at a Moscow business school and do some marketing consulting for various Soviet firms.

Hellofs may be back in the Soviet Union as well. He's working on setting up a western-run business school in Moscow to provide executive seminars for Soviet managers.

Project USSR only scratches the surface of what's needed in the Soviet Union. "The Soviets are in for a very rocky future for at least the next two or three years," Fitzgerald says. "They desperately need western aid and technology. And we can't afford to let the country further destabilize. But more importantly, there are tremendous opportunities there for Canadian business.

If they have the right blat.

Gerry Blackwell is a freelance writer based in London, Ontario.