"I want to grow with the company"
"Metafrax Group" is completing the implementation of the project on the introduction of the target management model for the holding. Group-wide divisions, including the Strategy and Investment office have been launched as part of the Management company. We have spoken with Evgeny Gavrilov, the Deputy Director of Strategy and Investments of "Metafrax Group", about the specifics of the work of "strategists", the necessary professional qualities and his personal journey in the profession.
- Evgeny Igorevich, please tell us, what is your responsibility?
- There are two divisions in the structure of the Strategy and Investment office – the Strategy and Development Department and the Investment Management Department. The Director of Strategy and Investments and I have joint responsibility for both areas, but according to an internal agreement, I primarily oversee investment and project management.
- How does this affect your scope of activities in the Management Company?
- The main task of the strategy is to go beyond the limits of the annual budget process. A forecast for sales, prime cost, commercial expenses, financial result etc. is formed as part of the budget campaign for the next year. The task of the investment management department is to "extend" the budget table "to the right" and understand what will happen in the next three to five years. We make a forecast for the implementation of investment projects - how much resources they will consume each year and where we will get the money to fund them. If we do not have enough of our own resources, then we will turn to financiers to understand the Group's ability to raise funds. And if we "hit the ceiling" of our debt capabilities, we will look inside our investment portfolio and set priorities.
Currently, there will most likely be a period to look for priorities, instead of an aggressive financial strategy, when you can borrow more to open more projects. Setting priorities within the portfolio is both a mathematical and a creative task. We look at today's decisions with consideration as to what they will lead to in three to five years. By changing something in this model, we check whether we will face problems later, or vice versa, whether we have missed any opportunities due to excessive caution.
- You mentioned the parameters that may determine the possible resolution of an investment project. Could you please name the parameters that are relevant for "Metafrax Group"?
- There is a classic area in economics, which is corporate finance. Nothing has severely changed in the set of investment evaluation indicators for fifty years. These are return on investment, simple and discounted, net present value, internal rate of return, cost efficiency of invested capital, etc. These are a dozen universal indicators that are used for any projects. "Metafrax Group" is no exception.
- Does this mean that the main parameters are used?
- Yes. They are all intuitive even to financial non-professionals. But this is a classic approach for a normal period. It is difficult to calculate everything under conditions of external challenges and crises. The fact of the matter is that during a forecast of assumptions about asset behaviour in the future, we rely on past experience. We put sales volumes, prices, resource consumption, taxes, logistics tariffs and its itineraries into the model to get a cash flow forecast. In times of crisis, it is necessary to approach the evaluation in a more creative way. The greater the uncertainty of the future, the less suitable we find the analysis of the past. We are currently in such a period.
In addition to calculating the return on investment, the overall benefit for the Group is just as important for us. It can be integration with existing products, when we get yet another processing stage for the products that we manufacture. Or country integration. For example, when we develop a channel, which is new for us, to a new region of the world with one product, then it will be possible to talk about expanding the portfolio, offering other products for shipment to the same region. There may also be competence integration. For example, we have competence in certain types of resins - why not look at resins in other industries? If we go back to financial indicators, the discounted return on investment period is in demand at "Metafrax Group". An indicator such as the discount rate is used in order to calculate it. This is the "cost reduction rate" of money in future periods, almost like inflation. The higher the rate, the cheaper our future income is in relation to today's "expensive" expenses, the longer the return on investment of the project will be. We have developed our own method for calculating the discount rate, which is not a common occurrence for individual companies.
- Considering all of the above, what do you need to be able to do in order to become a strategist?
- This is a difficult question. I do not know a ready-made training program. I know what skills you need to have in order to have the opportunity to succeed in strategy.
The first is a good knowledge of Excel. Most of the information that will be required for analysis is collected and stored in the form of databases. Generally, this is a huge table that goes down by tens of thousands of lines. If you don's know how to process it with the use of special operators and formulas to quickly get the necessary indicators, it's unlikely that there will be any result.
Secondly, you need to understand corporate finance - there are incomes and expenses, there are investments, there are cash flows. There is a logic for building a financial model that will calculate all these standard forms from a set of given assumptions. It would be good to be a bit of an accountant in this matter. And even better - to directly understand exactly how an accountant at a particular section will enter the numbers into 1C before they come out as a report. The same knowledge will be useful for post-investment monitoring as well, so that the principles of obtaining planned and actual indicators shall match.
Thirdly, a person must have an understanding of marketing with regard to market research. It is necessary to be able to obtain information on customers, competitors, suppliers, technology holders from open and, sometimes, closed sources. Speaking about closed sources leads us to the fourth point - being a communicator.
It is important to know everyone, to communicate with everyone, both inside the company and outside. To go to conferences, exhibitions and preferably talk there. It is important to be able to build relationships with representatives of other industries, with other companies, in order to receive their expert evaluation. It is one thing to form a hypothesis based on open data, and another is to get confirmation from several market experts.
- Speaking about your journey, how did you come into strategy?
- I have been separately gaining all these competencies throughout my life, but in very specific areas. "Metafrax" gave me the opportunity to connect them.
- You studied at Voronezh State University. What was your major?
- "Accounting, economic analysis and audit".
- This means that you received competencies of a strategist, which you have mentioned before, at that university?
- Yes. Knowledge of accounting is a steep upgrade for any position, it gives a systematic understanding of what is happening in the company. The title of my master's thesis is very close to what we are doing now: "Economic analysis and audit of forecasted financial information". I immediately caught onto this topic. It has always been interesting to me – to not just forecast, but to also evaluate the quality of this forecast. Back then I used the international auditing standard titled "Verification of forecasted financial information". We have taken most of its verification procedures into our current regulations for the evaluation of investment projects.
- Where did you work before joining "Metafrax"?
- There are external consultants, for example, the former "big four". While in consulting, they provided services in various industries: oil and gas, metallurgy, agriculture and others. But they always stood "on the side". I, however, often acted as an internal consultant, I was a project manager within companies. Generally, I came for a long difficult task of implementing changes: the introduction of management accounting, budgeting and management reporting, the introduction of project management and project portfolios, the synchronization of corporate finances with business process management.
Management accounting was the first major area. My most daring project was to separate business units in the holding in the food industry - I did so at the age of 23, having almost no resources. I was too young, I had no experience, and I didn't know it was impossible. Today I wouldn't take on such a task without having a good budget, because now I know all the risks. Then I resolved similar tasks as the financial director in the structures of such companies as "TH "KOPEYKA", "GC "Zarechnoye", "Belgorodskiy khladokombinat".
The second area was the implementation of project management. Here I acted as the head of the project office that implemented it. Two companies in which I implemented project management are "Accent Development" and "Osnova Group" - which subsequently provided the market with excellent project managers. There were also smaller projects related to business process optimization and private asset management.
- Which project stands out to you?
- Number one is the Hampton by Hilton portfolio of hotel projects. We were first to bring this brand to Russia, simultaneously creating a precedent for signing a strategic agreement with the Board of Directors of Hilton Worldwide. And the project management system created by us has surprised the experienced technical director of the international network. They didn't believe us, but we opened the first facility ahead of target. In second place is a project that has remained on paper so far, but which impressed me with its scale - a business plan for creating a private satellite city, with all commercial infrastructure. The main point of the project was a unique complex consisting of a university, museums, technical park, art park, office and retail property. It was necessary to develop the project in such a way that investments in the city would pay off for a private investor.
- How did you get into strategy in manufacturing industry, in chemistry?
- Manufacturing industry has always been interesting to me. My mother was the chief accountant and financial director of a tire factory, which I had seen since childhood, I had a university internship there. As such, it could be said that the love for industrial production, for the scale, was "learned at mother's knee". But I've never thought specifically about gas-to-chemicals. Here is the case, in which the theory of "six degrees of separation" has already worked on the second one. And at the right moment too, when I had one big project coming to an end, and I was starting to look around. I asked my acquaintance to keep me in mind. Apparently Levon Armenovich Garslyan, the Director for Strategy and Investments of "Metafrax Group", addressed her with the same request and she introduced us. In September of 2021, I went to work for one of the Group's companies – "Metadynea". But we started our joint work six months before the official start, I was involved in the project for creation of a Management company, I fully participated in meetings related to investments and project management.
- You have another area of work – interaction with educational institutions. Could you please tell us about it?
- We have already spoken about the fact that there is no ready-made recipe on how to become a good strategist. This is a concurrence of different competencies and talents, so our personnel search tasks are disliked by HR managers - they cannot be set very clearly. Dialogue with universities is a good alternative to an open search in the market.
We have chosen several universities for ourselves, to which we come both with one-time workshops and with full courses. As of today, these are the Higher School of Economics, Financial University under the Government of the Russian Federation, RANEPA, "MEPI" Nuclear University. The interest of universities is understandable - their teachers simply do not have such experience and practice. And we do, plus we know how to explain it well.
Our interest is, firstly, in promoting the HR brand of the Group. It is very difficult to convey it for this audience if you do not come in person. We come with presentations and interesting showcase of information and draw attention to "Metafrax Group". Students commit the brand to memory, learn about our projects, interesting people and ambitious tasks. Secondly, we immediately look for potential employees. We come, generally speaking, to the 3rd-4th year of bachelor's degree or to the masters, and discuss internships, announce this opportunity. If you liked someone personally, you can come up and talk right away, exchange contacts.
- You recently had a promotion, you have moved to the Management Company to the position of Deputy Director of Strategic Development and Investment. How do you see your progress in the Group of Companies?
- This was not a surprise, two years ago we have already discussed the tasks in the structure of the Management Company that was being created, and for the last year we actually worked on them. For me, "Metafrax Group" is primarily very comfortable human-wise. The nature of the relationships that exist in any office of the Group motivates me personally. I want to go to work, go on business trips, communicate with colleagues. Secondly, the Group is currently undergoing the process of becoming a classic holding. The tasks that will appear during this formation in the coming years are familiar to me. I want to walk this path and grow with the company. I am interested.