Thomas Stansmore - interview (Faces and Cases)

- Good afternoon! My name’s Anna Shcherbiy. That’s an issue of Faces&Cases podcast and we’re talking about marketing, PR and business. Today our guest is Thomas Stansmore, General Manager of EMG, Emerging Markets Group. Good afternoon, Thomas.

- Good afternoon, thanks for having me.

-Thank you. Please, tell us more about your current position and your company. What kind of services do you provide?

- Well, I’m the general director of Emerging Markets Group, as you said. We specialize in outsourced accounting, tax, legal and audit services.

- Something very serious for me.

- It’s very serious in a lot of ways, yes. We work primarily with foreign companies operating in Russia and we stand between them and the Russian tax authorities. That’s our primary speciality. We represent our clients before the Russian state bodies.

- Yes, it means that you know Russian government and Russia as a country very well. So lets talk. How did it happen that you came to Russia and what did you do firstly here? Was it something connected to consulting or maybe something else?

- Well, perhaps indirectly… It was too many years ago that I care to admit, but I came here back when I was still in law school with a group of American lawyers who were interested in studying Russian law. So I came over here for about 3 or 4 weeks studying Russian law in St Petersburg and Moscow. And we had numerous guest speakers. While I was here I became very good friends with a gentleman named Valery Medvedev from Soyuz Patent and he and I became quite good friends and through him I was able to work out an exchange program, whereby I could come back to Russia and study for about a 6 months' period and I did an internship for Soyuz Patent for about 6 months. In return my friend Valery came back to the States. He and I were room mates during our Intellectual Property Summer Institute through the University of Franklin Pierce in Cincord, New Hampshire.

- It's very nice. But I also know that you first worked in Moscow and then you moved to St Petersburg. Do you feel any differences between these two cities?

- There're some differences, yes. But the truth is, I'm the foreigner in your country. So I think that may be we also have different types of rivalries in the United States, New Yourk and Boston, for example, have similar types of rivalries at sporting events. But at the end of the day we are all Americans and at the end of the day you are all Russians. Yeah, there're some fine details of differences, but all in all, I think people are people wherever you go.

- Ok, that's nice. So you headed St Peresburg office of Deloitte & Touche and now you are the General Director of EMG. You must possess a profound experience in management, not just in you subject matter. Have you felt any change in business operations in the past 5 or 10 years?

- Well, I think people who have been in business for as long as I have are pretty much survivors. Well, we're going through a crisis now but this is nobody's first crisis. All of my friends have been through crises too. It sure keeps things interesting and exciting, I think. But it also provides opportunities. Opportunities to reinvent yourself, opportunities to offer services in other areas, opportunities to polish your skills and stay sharp.

- Do you think people can start their business now, during the crisis? What can help them?

- Sure. Someone much wiser than myself once said that a definition of insanity is when you keep doing the same ting again and again and expect a different result. What people need to keep in mind now is that you need to be aware of what you're good at, you need to be aware of how the world is changing around you and you have to be able to adapt to it. I think these crises have a much more profound impact on large organizations. My company is about 30 people, which is a nice solid size, but we are not huge. And I think we are the right size, where we can be flexible, we can move into different spheres. For example, audit services I mentioned. Those are relatively new to us, we've been doing that for only 3 years. However, I do not have any auditors on staff, all my auditors are either accountants or lawyers first, who have then gone on and got their audit certification. I think that puts us in the position where… Well, you see, as accountants we've always been subject to audits and so we've had auditors coming to audit my clients for years now. And never, never have the auditors told us anything that we did not already know. Typically, audits are treated as a commodity that people have to have in order to satisfy statutory regulations but with very little intellectual input behind it. Because we are acoountants and lawyers that make up the audit staff we can actually provide advice that might be new to the client.

- Yes, it's really serious and very important. And now I'll ask a question that is very important for PR and marketing specialists in consulting sphere. How do you promote your company, on your own or with the help of an agency? And which marketing or PR tools do you use for promotion?

- Well, we don't use television, cause it's quite expensive. Our website, that's always a good source. But I think primarily we get our referrals through word-of-mouth, either throught other clients or through different companies that we work with. We have relationships with law firms, we have relationships with the other four big accounting firms or audit companies and through them we get a lot of referrals.

- So your old clients help you to find new clients, right?

Well, yeah. Our current clients are really quite happy with us and we have a very strong relationship with them. I myself learnt an awful lot about accounting when I came here. I don't have an accounting background, I come from legal education and then I studied tax. I think the difference between what I've done in my past lives and what I'm doing now is the difference between talking about something and actually doing it.

- They are two different things.

- Well, the relationship with our clients are much more intimate than any other type of relationship you can imagine between companies. We process our clients' payroll, we know how much they pay their employees. We know if they are making a profit of a loss. We know what their internal issues are, we know what they are struggling with. This is a very high degree of trust that they put into us. We're even on the bank accounts of our clients.

- You know too many secrets.

The accountants know everything and that was the most interesting thing to me when I came – to see the ammount of trust that they actually put into us. I was able to take that a couple of steps further and make some very interesting business models to our clients. One, I don't know if you are interested, but we had a client that was importing dairy products into Russia: cheese, butter, powdered milk. And this company had no Russian employees, not a single Russian employee. I was operating as the executive for general director. Yeah, they had a contract with Emerging Markets Group to be the executive body, so there was no employment agreement there. And one of my accountants was acting as the Chief Accountant. And they used our legal address, we fulfilled all the Russian statutory requirements and all the sales contracts were done offshore, negotiated offshore, I signed the contracts after all the details were negotiated. But they were importing millions of euros worth of product into Russia and selling it quite well. It was a fascinating time. It was a win-win situation for anybody. Any company's biggest expenses are salaries and rent. And we, EMG bore the burden of those. So the company could really concentrate on their core activity, sales, and they did quite well.

- That's a really good case for us and for our listeners, so thank you very much.

- But again in this particular situation the degree of trust they put on us was very high, we controlled all their money.

- That’s nice. So may be you can also share some trends in promotion in consulting that can be observed on global market. May be you can mention them and tell what you do and what you see now.

- Well, to be quite honest with you, there’re some trends offshore internationally that I’ve seen. Where actually even the outsourced accountants are outsourcing the accounting and I’ve seen a lot of companies moving to India to try to consolidate things.

- I like India, it’s warm there, not so cold as in St Petersburg.

- Well, I’ve never been. But the truth is, that those types of trends don’t really work so well in Russia. Russia is actually unique in a lot of ways and that’s big part of my job to explain to our clients why Russia is different. It’s a fascinating culture that you have here, but to be honest with you there’s an awful lot of bureaucracy. And because of that lots of documents need to be signed and stamped, your relationship with your bank is different than it is in other countries, the relationship with tax authorities is different than in a lot of other countries. These are the things that prevent a lot of forward momentum in Russia’s economy.

- So our next question is very logical. Which knowledge and the experience that you got in the American university in Washington you can use in Russia and which in such case no?

- Well, all experience is good experience and it makes you who you are. My own general director, I mean… you learn about how general directors operate from not being a general director and having one, I guess. And I learnt… well, I'm not sure exactly where to go with this question…

- May be you had some cases from your work and your experience that you can share. When firstly you thought that at university you studied it and it had to be this way, but here in Russia you understood that you had to move another way a little bit?

- Well, yeah. When I came to Russia for the first time I thought it would be interesting to capitalize on my intellectual property background and I thought it would be interesting to try to move some of the Russian technologies to the States or help commercialize to a lot of Russian inventions, but unfortunately that prooved to be unsuccessful in a lot of ways. But while I was doing that I also got involved with Deloitte's and I started specialize in tax law.

- Ok, I see. So may be you can share about some more cases, I mean of companies that you work for in FMCG, pharmaceuticals or automobile.

- Well, our clients are from a large variety of backgrounds. We do have some sellers of commercial goods, construction goods, manufacturers. We have a company that leases a shopping center complex. So, really there's no speciality. From an accounting point of view accounting is the same for all of them. If it's software developement or if it's a lease of commercial estate, it really doesn't make any difference.

- And I know one really interesting fact, that you have your own course of lectures ''Business in Russia'' that you deliver in Higher School of Management, St Petersburg. Can you give us more details on this? It's very interesting.

- Well, there are different things I do, but yeah, these things are interesting and sometimes I give some lectures at some of the other business schools in town, just talking a little bit about tax. Some of the students are MBAs who are Russians, some of them are MBAs coming just to visit from the States. So the questions that they have are obviously quite different. But I often talk about the tax environment and I think that the combinality of the two types of lectures is that the Russian tax system is actually very pragmatic. It's well written, well drafted, though by very intelligent people and obviously designed with a purpose. And that purpose is to bring people into the system. You have a low personal income tax rate, you have a very equitable profits tax rate. So it was a very well designed system. Very often the problem is implementation of that. And when it trickles down to the bureaucracy that people have to work with on a daily basis. I think those are the things that sometimes don't do credit to the people who actually drafted the tax code.

- So you work with MBA students or MBA executive or both of them?

- Students, yes, for the most part.

- One more question from our partner, HOP&SCOTCH, the school of English and translating agency. We know that you learnt Russian. So how did you learn it? How often do you practice it?

- Well I started to study, to be honest with you, with a series of cassettes, when I was in school when I learnt that I would be coming on this trip. And I started from listening to that.

- Music or movies?

- Well, this was a language course. But then yeah, Garik Sukachev was very helpful to me to study. Yeah, music is a great tool to learn a language, absolutely. Well, you have to love the music, but then if you let that do the work for you, you'll be much beter off. Then I got a Russian wife.

- So you practice it every day.

- It's probably the most expensive option but …

- But still it's a wonderful option, I may say.

- Absolutely.

- And our traditional question is as follows. Do you have a person that you can call your tutor, who may be played a great role in your career?

- There have been a number of people in my life that have influenced where I've gone and I've mentioned Valery Medvedev, who was a good friend of mine, and he was always somebody I think back on and I learnt tremendous amounts. I guess for the record, another individual I'd like to mention would be Kevin Norville. He was the head of Tax & Legal department at Deloitte & Touche. And I learnt a tremendous amount from Mr Norville.

- That's really nice. May be you can share with us some rules of successful business from Thomas Stansmore?

- You know, rules are made to be broken, to be honest with you. Think outside the box and be afraid to try new things and reinvent yourself, because the world is a changing place and you can't keep doing the same thing again, and again, and again.

- And may be some advice for foreigners who are coming to Russia? What should they expext, what should they be afraid of?

- Well, there's never a bad time to invest depending on what you want to invest in. But before you do anything you should ask somebody who has experience about the best way to go forward. Our best client is someone who comes to us with a blank piece of paper and tells us what they want to do and lets us make some suggestions about how they can achieve their goals. I think very often foreigners come to Russia and they statrt doing things that they have done in other countries and they expect the same types of results. And Russia is a little bit different from other countries and you will achieve those results, but you'll have to do things a little bit differently here.

- And what can you say to these people who are are now local guys or girls and who would like to start their business abroad? Can they come to your company and ask for a piece of advice?

- We are always interested in people who want to set up some kind if business. You mean Russian people who want to invest?

- The ones who have their business here and the time has come for them to start their business abroad. And they need advice and law and tax problems can be one of the first things that they can face. So can they come to your company for some advice?

- Yeah, I'd be happy to try to help someone who wants to expand the Russian operations, absolutely.

- Thank you very much for your time, for your advice, for your stories. It was very nice to hear it and it was a great pleasure for me to meet you. So I wish you good luck.

- Pleasure was all mine, thank you very much. Have a wonderful day.

- Thank you.

Guest of Faces&Cases podcast: Thomas Stansmore