In the six months since he became CEO at Ukraine’s state postal service Ukrposhta, Igor Smelyansky has made eliminating graft from within the organization a top priority. Part of his broader personal mission is to fight back against a culture of corruption within Ukrainian business, where he says as much as 30 percent of the value of a contract can go toward paying bribes.
Ukrposhta, a sprawling enterprise comprised of some 12,000 post offices and 76,000 employees, is no stranger to being used as a vehicle for unethical schemes.
“We have an IT system here. A foreign system, extremely expensive. Ukrposhta paid over $10 million for it,” Smelyansky told the Kyiv Post in an interview.
“Out of its nine modules, only one works. But on paper everything works,” he added. “Someone signed that paper, and they didn’t do it for free, they got a kickback.”
Smelyansky concedes that his goal of cleaning up Ukrposhta is incredibly ambitious, given that malpractice has penetrated all levels of the company’s hierarchy.
But the former tax consultant believes working quickly is the key to success. As a veteran of doing business in the former Soviet Union, he knows that slow reform gives the corrupt time to figure out how to perpetuate old schemes.
“You have to make changes fast or the defense will kill you. The system is very adaptable,” Smelyansky said.
“It goes from top to bottom. If you are a regular employee and you see that your boss is stealing, what are you going to do? You convince yourself that even if you are stealing, it’s not a bad thing because your boss is doing the same, and his boss, and his boss.”
A clean break with the past
The Ukrposhta CEO believes he can use his position to foster greater transparency in the wider economy. Many obstacles stand in his way; not least the attitude of local companies, which often find it hard to believe he enters into transactions on behalf of the state enterprise without attempting to enrich himself in the process.
This corruption-free approach has won him plenty of detractors.
“You piss off a lot of people,” he said. “A lot of companies just live off the state companies. So you are basically shutting down their business.”
Smelyansky professes to being unfazed by his critics. He has taken steps to protect himself should they try to move against him, including installing 24-hour video and audio recording in his office. Such measures are far from superfluous in a business and political climate like Ukraine’s, where rivals often try to blackmail one another by threatening to go public with comprising material, known in Ukrainian as kompromat.
“If a person has been taking bribes all their life, they will not change,” Smelyansky explained.
“Sometimes they will not change because they can’t. Sometimes they will not change because people will not let them.
“Because if I know that you are taking bribes, and I want you to do something, then I have kompromat on you and I can make you take the bribe even if you don’t want to.”
The Ukrposhta chief has made sure there is nothing in his past which can be used against him. Anyone looking into his history will find nothing but years of properly filed tax returns and an enviable academic and professional record.
Smelyansky argues that his radical transparency has earned him few friends.
“That’s why I think I am probably a difficult person to deal with in this environment. People know I don’t take bribes, including people who hate me. Let them look into my past, what are they going to find?”
Human resources
Safe in the knowledge his position is secure, Smelyansky is determined to push forward with remaking Ukrposhta. Central to his philosophy of change is the need to be surrounded by the right people. That’s why, within his own team, he has done plenty of hiring and firing.
“When I came, I was told I am the tenth CEO in 11 years,” he said.
“Lots of people in the corridors were saying ‘we lived through the tenth, we’ll live through the eleventh.’ A lot of them no longer work here. I’ve changed the team by 95 percent.”
Such changes of personnel at the top of the organization represent only a small fraction of the thousands full- and part-time staff who are employed by Ukrposhta. Far from replacing everyone, Smelyansky acknowledges that if the company is to be overhauled, then everyone will need to learn to take more responsibility and show initiative.
Achieving such an outcome will be tough given a culture within the state sector where the majority of decisions – both big and small – are made by executives. Lower-level workers, meanwhile, tend to have small salaries and little or no authority.
“In general, when you work at state-owned companies, it’s much safer to do nothing than to do something,” Smelyansky told the Kyiv Post.
“Because when you do nothing, you can’t get penalized and there are many laws and procedures which help you do that. When you do something, you’re subject to risk straight away.”
Plan of action
Doing nothing, however, is the last thing on Smelyansky’s mind. He is focusing both on updating the services currently offered by Ukrposhta whilst also seeking to expand the business into new areas.
Earlier this month, he signed a memorandum of cooperation with Ukraine International Airlines to increase cross-border postal deliveries and, in time, he hopes to win support from investors like the European Bank for Reconstruction and Development to build modern, automated mail sorting facilities.
In the meantime, talks are underway over new legislation which would clear the way for Ukrposhta to offer financial services. If the initiative gets the green light, Smelyansky believes it could transform post offices into “centers of civilization” in rural parts of the country.
But given Ukrposhta’s status as a state-owned enterprise, putting a potentially ground-breaking idea into practice is an uphill battle. Whereas private sector competitors like Nova Poshta and Meest Express are able to make decisions relatively quickly, every move made by Smelyansky and his team is subject to myriad oversight from government ministries and agencies, often bordering on outright interference.
“If our competitors need to buy a truck, they’ll buy it tomorrow. For me it probably takes three months at least because I have to go through the official tender procedures,” said the Ukrposhta chief.
“There’s lots of oversight from any possible agency you can imagine. Tax, Finance Ministry, the State Security Service, you name it.
“I’m trying to convince them it’s a regular business enterprise and they should treat it as such.”
A new direction
In spite of these obstacles, Smelyansky will shortly reach a milestone on the path to transforming Ukrposhta. On March 1, it will be officially announced that the company has changed its management structure to those of its publicly traded, private competitors.
The state will retain its stake for the foreseeable future, however.
“We want to create a company which is transparent in terms of corporate governance and which will have an independent board,” Smelyansky said.
“My goal is to make this company profitable and attractive,” he added. “Then, whatever the government decides, it’s up to them, not up to me.”
