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How to improve your business…

Published: April 10, 2013 | 7:36 am
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by Maia Edilashvili

Having someone point out exactly what you are doing wrong and what they think you can be doing better, is never easy to take. Business advisory services are all about building a relationship with a company based on trust and mutual understanding, to the point that an otherwise complete stranger, the consultant, will not be afraid to tell you directly the truth however painful.

The success story of a metal production company based near Tbilisi is a clear illustration that even though this process is challenging, correct management, combined with hard work and a willingness to listen, will always pay off. Thanks to the Business Advisory Services (BAS), a programme offered by the European Bank for Reconstruction and Development (EBRD) and funded by the European Union through its Small and Medium Enterprises (SME) Flagship Initiative for the Eastern Partnership countries, the company has obtained a quality certificate and increased its production efficiency, tripling its sales within few years.  A journalist of the EU Neighbourhood Info Centre visited the company to find out more.

“We’ve started to feel more motivated. And now that we are better organized, our workload doesn’t seem so heavy anymore…” says Vakhtang Vakhvakhishvili, a 24-year old shop steward at the metal production company Monoliti, commenting on the changes introduced by the company in its effort to obtain a quality certificate.

“In the past, the production of one ton of metal would take two hours, now this has been cut down to 45 minutes,” explains Gocha Tsulukidze, Director of Monoliti, adding: “A new organisational model has been introduced; last year’s sales tripled compared to2010.”

Monoliti has been on the market since 2007. It imports raw materials and sells the end products – rebar, welded wire mesh, bends and hooks, wire rod, gold wire – to a Georgian company, a wholesale distributor of building materials. InGeorgia, most construction companies use homemade reinforcements with no certificate of origin. “We purchased a new machine by the end of 2010, but despite the upgrading of the equipment, we still needed to change something in  the organization of our work. We also started  reflecting on how to introduce the certificates of origin, because foreign clients were asking for them,” recalls Tsulukidze.

While searching for information on the internet, Monoliti’s management came across what turned out to be excellent opportunity: the BAS programme, or Business Advisory Services, an EU funded programme developed by the European Bank of Reconstruction and Development (EBRD).

Almost 700 small projects started in Georgia

Between 2004 and 2007, Georgia’s Gross Domestic Product (GDP) saw an annual average growth of 10.5%. This figure fell back to just above 2% in 2008 and following negative growth in 2009, the economy bounced back and grew by 7% in 2011, following more or less the international trends. Georgian economy is thus already connected to the international market. However, like many other post Soviet countries, Georgiahas yet to grow into a full-fledged market economy, with what is commonly seen as the backbone of an economy – strong Micro, Small and Medium sized Enterprises (MSMEs). In fact, the share of small and medium sized businesses to GDP stands at a modest 15%, compared to some 60% in EU Member States.

Launched in 1995, the BAS service assists Micro, Small and Medium size Enterprises in a wide range of areas including market analysis and planning, partner search, reorganisation, computerized manufacturing and production systems, energy efficiency and environment, as well as quality management and certification. Currently, BAS is supporting around 600 projects in 25 countries in Southeastern Europe,Russia,Mongolia, Central Asia, theSouthern Caucasusand the South East Mediterranean (SEMED) region.

But how does the programme work? Local consulting companies go through a qualification process in order to join the BAS database. When an enterprise applies for assistance, the BAS team helps it find the most appropriate consulting company from their database, which then assists the firm in identifying its business needs and providing the required recommendations. The cost of the service is covered jointly by BAS and the beneficiary.

Severian Gvinepadze, the BAS Georgia National Programme Manager, says that BAS offers a flexible grant, ranging between 25 and 70% of total cost, with a maximum amount of €10,000.

“Our goal is to create successful examples,” he says, adding that companies in rural areas receive more funding than those based in the capital.  Since 2003, BAS Georgia has received a total of €6 million in donor funding from the European Union, the Early Transition Countries (ETC) Fund, EBRD Shareholder Special Fund,CanadaandTaipeiChina. In total, 698 projects were started inGeorgia, engaging more than 180 consultants.

Increasing competitiveness

In the case of Monoliti, the project’s cost was €12,300, half of it covered by BAS. Despite having new technological equipment, there were malfunctions in the production and sales area, and a need to improve personnel management practices. It took around one year for the company to introduce the required recommendations, but in December 2012, Monoliti was able to obtain the ISO 9001-2008 quality certificate, the international reference for best practices in quality management.

“The advice from the consultants concerned the ‘production culture’ in general, starting from the workers’ outfit and behavior, and ending with how to deal with the workforce,” says Temur Dzidziguri, Quality Manager of Monoliti.

Thanks to the elimination of overlapping jobs and the introduction of a more structured approach, the company was able to increase production efficiency. The work was redistributed among the workers in a new way. The reduction of waste and the increase of product output have led to cost optimization. Products are now labeled with a special tag containing a short description. The company has become more competitive on the local market and more appealing to local and foreign construction companies.

Building a ‘consultancy culture’

The secret to a successful advisory project is for the company to be open-minded. According to Jaap Sprey, Head of the Regional Programme for the South Caucasus and Turkey, the beneficiary must be willing to take advice from consultants, especially given that the countries of the Southern Caucasus are only just starting to build a ‘consultancy culture’.

“Businesses are not used to getting somebody from the outside having an opinion on what they should be doing. So building a relationship with the company is an essential part of the work,” he says.

 

One year after the grant’s payment, BAS staff evaluate the progress achieved by the beneficiary companies. According to the national statistical office, the turnover ofGeorgia’s construction sector in 2011 nearly doubled to approximately €1.5 billion from around €800 million in 2010. With these positive dynamics in mind, Monoliti’s owners have high expectations.

“A time will come when construction firms will be unable to work without holding quality certificates for building materials. So we have taken a big step forward,” Tsulukidze said.

Picture by AFP©EU/Neighborhood Info Centre 

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