Wojciech Balczun On Why He Agreed To Head Ukrzaliznytsia

We visited Wojciech Balczun, the winner of the competition to head the Ukrzaliznytsia public railway company, in Warsaw. We learned about his Ukrainian ancestors and asked if he was ready to fight hard to implement reforms and not just work for a good salary.
Ihor Hoshovskyi 27 April 2016 09:53

Dressed in sneakers, jeans, a light jacket over a blue T-shirt, Wojciech Balczun, 46, leaves his beautiful house in the woods on the right bank of River Vistula, gets into a white Mini Cooper, and drives to a Warsaw hotel to meet with us. His communication style is pleasant and extremely democratic but business-like. Absolutely nothing about him betrays his status as a rock star. His long hair, which is gathered into a ponytail, and a multi-colored rope on his wrist are the only signs of his creative personality. Balczun is a master of reincarnation. Sitting before us is the man who turned the loss-making PKP Cargo rail freight carrier into a profitable company and the European Union’s second largest in in terms of cargo turnover after DB. He is one of the top 20 anti-crisis managers in Poland and he clearly understands the standards that need to be introduced on Ukrainian railways in order to bring Ukraine closer to Europe. However, he and his Chemia rock band are due to play a rock concert in a concert hall in Warsaw in five days.

His ability to interact effectively with a large audience was very useful to him at PKP Cargo. Balczun was able to speak in front of local trade unions, which are notorious for their recalcitrance and rage since the days of Solidarnost. It is said that he personally toured regional offices of the company to persuade its employees that the only option for the railway was painful restructuring. The trade unions protested against this but eventually agreed. Balczun also wants to discuss what needs to be changed at Ukrzaliznytsia and how to change it with trade unions firstly. This is certainly a great idea, but it is not so easy to find a proper trade union that is not in anyone’s pocket in Ukraine.

"Yes, I am not a typical representative of the so-called white-collar workers or people who walk around in suits and ties for 24 hours,” Balczun said. “I have my life hobby, which has never affected the quality of my work in the field of business. I am who I am. However, I will definitely not be talking about music at Ukrzaliznytsia but only about business, the interests of the company, and hard work to enable Ukrzaliznytsia to function better."

Balczun asks us how many people on the current board of Ukrzaliznytsia speak English. It is evident that this concerns him. However, he nods satisfactorily upon finding out that German citizen Stefan Hofsaess, who does not speak Russian and is only just learn Ukrainian, has already been working there for half a year. "Well, for Germans, Cyrillic is generally an abstraction. Poles, of course, have a head start here," the former head of PKP Cargo says, smiling.

We traveled by car from Kyiv to Warsaw to record this interview because traveling by train is more expensive and inconvenient in terms of travel time. However, we were stuck on the boarder for 11 hours. This story surprised Balczun. "How is that even possible?" he asks. It seems he will have to ask this question repeatedly when he starts working in Ukraine.

If the government approves you as the head of Ukrzaliznytsia, can you promise that the Kyiv-Warsaw train will transform from a “smugglers’ train" into an affordable and convenient means of transport?

Of course, I would like to solve the problems of smuggling and corruption quickly. When I joined PKP Cargo, I found that many of its employees were involved in various corruption schemes, and we solved this problem over time. However, I always say that I do not want to play the prosecutor. I am a manager and I should create a system that can replace the pathological processes in the company in a natural – perhaps even evolutionary – way.

How?

Through implementation of various relevant procedures, a system of external controls... People are weak beings who can be restricted only through such procedural solutions. This may be unexpected to some people, but I will say that we should not think that one can wave a magic wand in such a giant company like Ukrzaliznytsia and all the pathologies will disappear immediately. There should be a change of mentality, employees need greater solidarity with the interests of the company and the state, and they need to feel that their company will lose the money if they do something wrong... These processes will take many years. However, it is very important for the system that has been built to constantly become stronger and automatically cancel out the propensity toward corruption.

Do you believe that Ukraine will join the European Union?

I would like that very much. It is obvious that the European Union has a lot of its problems and shortcomings, but there is no perfect system in the world. At the same time, membership of such a union allows a country to achieve more than it can achieve alone in a peripheral position somewhere. Using Poland as an example, I will say that the type of deep modernization that took place here after the accession to the European Union is a huge restructuring of the country in absolutely every aspect of its operation.

You are a manager with a very good reputation in Poland and in the EU as a whole. Why are you interested in the opportunity to work in Ukraine?

It seems to me that Ukraine is a country that is very close to us in terms of mentality and culture, and we have common roots. Even my ancestors are from western Ukraine. My grandfather, who was a lawyer, was born in Rohatyn, and all his ancestors were also from there – from the Ivano-Frankivsk region.

“It seems to me that Ukraine is a country that is very close to us in terms of mentality and culture, and we have common roots"

It turns out that you are returning to your ancestral homeland

I am proud to have such a chance… It is a great professional challenge for me. It is not just about money.

How many times have you been to Ukraine?

Twice. The first time was sometime in 2008, when I started working at PKP Cargo. Then, I visited Odesa as part of an official government delegation. Well, now, in Kyiv at the beginning of April.

Are you ready not only to work, but also to fight for reform of the Ukrainian railways?

It seems to me that reform is the expectation of the Ukrainian government and that it is in the interest of society for an enterprise such as Ukrzaliznytsia to change just as the entire country is changing. If we are talking about transforming your country into a modern state, into a country that meets Western standards, that is not possible without similar changes in the operations of state-owned companies. Everyone should understand that under the current conditions, it is impossible for the railways to continue functioning under the current system, which was created decades ago under completely different economic realities.

We went through exactly the same process in Poland. I understand that the company is a de facto monopoly and a kind of "state within a state" and that it will defend this position. However, if Ukraine wants to change, then the railway market will also have to change.

Ukrzaliznytsia should be reformed. It is a very difficult process, and the challenge is huge. These changes should take place in the obvious and well-recognized interest of Ukrzaliznytsia itself. This is because everyone that works in a modern, well-modernized company will have the best working conditions and remuneration.

What will Ukrzaliznytsia gain from these reforms?

Ukrzaliznytsia has a huge need to attract investment in modernization of rolling stock and infrastructure. The changes should be aimed at generating higher margins and revenue, which can be used to cover these needs, among other sources of funding. We need to generate more money and not spend everything but invest it in development. As a result, we should be able to provide the best services to passengers and the best rolling stock to freight shippers and thus enhance our own competitiveness. Every company should be guided by this philosophy.

The current situation at Ukrzaliznytsia is very similar to the situation at PKP Cargo in 2007. The company was not customer-oriented, but it is necessary to care about customers.

Have you received guarantees of implementation of your reform from the government?

Guarantees were generally taken out of the discussion. I was told that there were specific expectations. It is obvious that the head of the railway must have political support (as is the case in every country). Nothing can be done without this. I would not embark on this mission if I had no guarantee of such support.

The government should develop its own position to enable it to stand behind us (this applies not only to Ukrzaliznytsia, but also to large enterprises headed by foreign managers) and create conditions that will allow us to introduce these difficult processes. However, I believe that the success of these processes will also depend very much on the type of communication that is established within the company. Will my aides and I be able to convince employees and trade unions that these changes should be achieved through joint efforts?

It will be very difficult to establish communication within the company itself and hold adequate dialogue with trade unions of railway workers…

I understand that it will be very difficult. However, I want to assure you that there will be no unilateral imposition of my vision and I will not be offering only criticisms. Primarily, I want to establish dialogue and possibly discover many positives from the existing experience of Ukrzaliznytsia. I am convinced that within Ukrzaliznytsia there also good practices created during the many years of its history.

When it comes to such a gigantic entity as Ukrzaliznytsia, no magician can come in, wave a stick, and change everything within a few months. Many of the fundamental processes that need to be implemented within Ukrzaliznytsia are processes for many, many years to come. Therefore, I will strive to achieve the so-called quick effect based on the positive aspects of the company’s current operations: what can be changed quickly to achieve results in specific areas for both customers and employees.

You do not think that Ukrzaliznytsia’s employees may not accept a rock star at the head of their company

I am not a typical representative of the so-called white-collar workers or people who walk around in suits and ties for 24 hours,” Balczun said. “I have my life hobby, which has never affected the quality of my work in the field of business. I am who I am. However, I will definitely not be talking about music at Ukrzaliznytsia but only about business, the interests of the company, and hard work to enable Ukrzaliznytsia to function better.

"Primarily, I want to establish dialogue and possibly discover a lot of positives in the current Ukrzaliznytsia experience"

Do you plan to perform concerts in Ukraine?

I do not assume that this will be possible as long as I am the head of Ukrzaliznytsia. I absolutely do not want to combine them. It is excluded. Nevertheless, we will definitely be very pleased to play a concert in Ukraine when my mission at Ukrainian railways ends.

What will be Wojciech Balczun’s first three steps as the head of Ukrzaliznytsia?

At this moment, I do not possess full information about the real state of affairs in Ukrzaliznytsia. Therefore, the first step will be a kind of audit to determine the actual situation there. Then, we will prepare a plan for improving the economic situation there in the short term. I will not be able to do that myself, so another step will be to attract people to create the appropriate command.

I will need people burning with ideas of changes on the railways, who will believe me. From my experience, I remember that PKP Cargo also did not want to change, but there were people inside the company who wanted to reform it and this succeeded. By the way, among them were professionals who had worked there for 20-30 years until them. Therefore, I am not saying that only young professionals will come and that only they can see what is best. For me, it is very important to find within Ukrzaliznytsia experts with a detailed vision of the functioning of the company, who know its weaknesses and strengths very well. In Poland, I was able to create such a pool of experts who reformed PKP Cargo under my leadership. I believe it will be possible to find such people who are very passionately interested in changes in Ukrzaliznytsia.

What will Ukrzaliznytsia look like in 2020 with Balczun as its head?

In 2020 (and that is actually not far away in terms of global business processes), I would like to see Ukrzaliznytsia improve its financial results, become profitable, and become a company that will begin the huge process of modernization of its infrastructure and rolling stock to enable it to take advantage of Ukraine’s strategic location (in terms of transport corridors) and its access to Black Sea ports and the European Union’s borders.

What do you think about the so-called “New Silk Road” and the train that Ukrzaliznytsia launched on the trans-Caspian corridor in January, bypassing Russia?

Currently, I know very little about the economic aspect of the organization this route. I know that an experimental train was sent on a fairly complex route. I have considerable experience in working with Chinese partners on organization of railway traffic between Poland and China, which goes directly through the territory of Belarus and Russia. I understand that the New Silk Road is an alternative. I think that if it is organized based on economic calculations that allow us to give the customer a competitive advantage – because it is the customer that decides whether to transport its goods in this way or not – then there is reason to believe that it will work. The policy of China, which wants to have as many alternatives as possible in terms of railway links with Europe, is also important here.

Do Polish exporters not want to have such an alternative?

Everything from Poland currently goes through the traditional route – through Russia. It is inefficient when a train travels loaded in one direction and returns empty. Currently, our trains already travel loaded in both directions. However, Polish and European entrepreneurs in general are also eyeing an alternative route. It seems to me that the most effective route for Ukraine could currently be from the Illichivsk port to the Baltic States, with a branch to Sławków in Poland (which is clearly used insufficiently).

Ukrzaliznytsia must become an active player in attracting capital investment in modernization of railways. This will involve strengthening both the infrastructure of Ukraine in general and adaptation of the New Silk Road to the European logistics system. This is of great strategic importance.

What do you think about the project to build a European-gauge railway line to Lviv?

As the head of Ukrzaliznytsia, I will primarily by an exponent of Ukraine’s state policy. Of course, I will present this idea if it is decided during discussions that this is in the interests of Ukrainian railways.

I can assure you that this corresponds to its interests. What is next?

Then the issue moves to the plane of financing this project. There is potential to obtain funds for this project from Western banks and the European Union. I think that a high-speed link between Lviv and Krakow or Warsaw and further to Europe is desirable, but your government and Poland must accept the relevant investment proposals. On my part, the task will consist of preparation of a high-quality investment project and the ability to service it. Of course, money will not fall from the sky. However, the issue of modernization of Ukraine’s railways to European standards can be attached to numerous European projects. However, it is important to understand that for the European Union, it is important for Ukraine to first create the legal conditions for operation of Ukrzaliznytsia based on European standard (competitiveness on the market, free access to infrastructure, tariff policy, etc.). 

Is it possible to apply the experience of reforming suburban rail in Poland to Ukraine?

The railway in every country has its own specifics and it is necessary to do what corresponds to its interests. Poland's experience in reforming its suburban railway has both positive and negative results. Not everything was successful.

In Poland, many self-sufficient operators were created (created from scratch with new infrastructure) and they are operating perfectly in the developed industrial regions. However, a company called Przewozy Regionalne remains with the old rolling stock. It operates in those provinces that do not have the resources to create new passenger transport operators, where passenger transport volume is small. As a result, Poland now has a huge problem involving what to do with this company because it is impossible to liquidate it. 

Such operators cannot operate everywhere but only where their services will pay off. Therefore, I do not know whether the Polish experience should be applied to suburban transport in Ukraine. In Ukraine, it may work around Kyiv, possibly in some industrially developed regions and cities with populations of at least 1 million, where passenger traffic reaches the desired levels. What about the remaining regions? Therefore, it may be better to carefully analyze the existing system, eliminate the bottlenecks, and look for sources of funds for modernizing rolling stock because passengers want to travel on comfortable, fast trains.