FIFTEEN YEARS OF BUILDING PERFORMANCE

IN CENTRAL EUROPE
Steven J. Kelly, CPT M. Mari Novak, CPT
Anna Cermáková, CPT

The past 15 years have been quite a tumultuous ride for those involved in performance
improvement in former communist Europe. This article traces the case of a boutique
performance consultancy, KNO, whose American principals landed in the former
Czechoslovakia at the onset of the “velvet revolution” in 1991. We analyze progress through
the lens of three 5-year cycles against dimensions of investor focus, infrastructure, employee
mindset, business relationships, and performance services treated in the context of the changing
political and economic times.

IT WAS A HOT DAY in July 1992, the sun streaming
through the bolted windows of the 15th floor of the
Presscentrum high above the Danube River in Bratislava.
The view of the Hrad (castle) across the cityscape was mag-
nificent, despite the 98+ degrees in our “air conditioned”
one-room, three-desk office. For the third time, our fax
machine, using one of our three prized (usually) working
phone lines, was trying to disgorge a 10-page communiqué
without jamming or dropping the signal again. Formerly
the large communist media center, this building was the
only one in the city with large numbers of phone lines
(previously monitored 24/7 by the secret police).
Jump ahead 15 years to June 2008. On a quiet street in
the old town, we sit in comfortable refurbished offices, a
breeze blowing through the hallways. Dozens of emails
dump into our network stations hourly, streaming effort-
lessly through our satellite connection. Mobile phones
ring at various desks; our fixed line rings only occasion-
ally. Although the building still does not have air condi-
tioning, like all the old brick offices, the double windows
open and fans circulate continually. There is a beautiful
garden in the rear courtyard with flowering roses and a
table for lunch breaks.
It has been quite a ride for the two American entrepre-
neurs who moved to Czechoslovakia on a business adven-
ture during the turbulent spring of 1991. Our firm, KNO,
is a boutique service provider founded in the United
States in 1979. Our focus is working with medium- and
large-sized clientele to increase business productivity
through improvement of work processes and develop-
ment of staff skills. We anticipated that with the end of
communism in Central Europe, this would be a critical
need and a growing market segment. This was in fact
true, although needs took much longer than we expected
to transform to a market.
During this decade and a half, our modest initial capi-
tal investment, combined with hard work and reinvested
profits, has grown into two thriving businesses in
Bratislava and Prague, zero outstanding debt, and an
invigorating future for the founders and our Slovak and
Czech equity partners.
TRENDS IN 5-YEAR INCREMENTS
As we reflect on this successful but bumpy journey, we
find observable characteristics that reflect three 5-year
cycles of business activity in Slovakia. Although this arti-
cle places a focus on Slovakia, these observations, in fact,
hold for most of the post communist countries recently
joining the European Union (see Figure 1).
The three 5-year cycles of business activity in Slovakia
are as follows:
• Early transition 1991–1996
• Stabilization and growth 1997–2003
• Joining greater Europe 2004–2008

Performance Improvement, vol. 47, no. 10, November/December 2008

©2008 International Society for Performance Improvement
36 Published online in Wiley InterScience (www.interscience.wiley.com) • DOI: 10.1002/pfi.20038
In the remaining narrative, we outline some of these tran-
sitions. As a service provider, KNO works with many of
the top companies in Slovakia. So, our commentary views
the larger business environment from the context of a ser-
vice provider.
Our areas of analysis are as follows:
• Investor business focus
• Infrastructure support
• Employee mindset
• Business-to-business (B2B) relationships
• Political/economic arena
• Performance services
These are, of course, treated in the context of the chang-
ing political and economic context. We believe these
observations apply to most small- and medium-sized
(SME) service start-ups in Slovakia during this period,
although we provide an American influenced viewpoint
in this discussion.
As Certified Performance Technologists (CPTs) and
practitioners of performance improvement approaches
for several decades, from the beginning our idea was to
work with both international joint ventures and local
start-ups using human performance technology (HPT)
methodologies. Using both the 10 standards of our pro-
fession and the systematic approaches to discovering per-
formance gaps, we felt that there might be great value to
companies changing from planned economies. In fact,
this was quite true. However, it took time and much
energy both to orient our clients to the benefits and to
build up local professional HPT staff capabilities.
EARLY TRANSITION PERIOD
(1991–1996)
There were many entrepreneurs with small business start-
ups after the fall of the communist regime. Some, like us,
loaded 15 duffle bags onto an airplane with a fax, old IBM
PC, and heavy 110/220 electric transformer. Others came
in with corporate support, found useable office space, and
bought equipment from Austria or Germany. And, of
course, there were the local professionals who found ways
to spin off former state-owned assets into their own pri-
vate business operations.
In the early transition years, the entire focus from
investors was on start-up and survival. This meant hiring
inexperienced young staff (as the former communist
acculturated middle-age generation was mostly written
off), with good language skills, and training them to do
the job. A great deal of energy was spent in transferring
new concepts and terminology.
When we took on an early 5-year project with General
Motors to establish their Opel dealer network in Czech
and Slovakia, we quickly found that the most basic con-
cepts of sales and marketing had to be redefined in the
Slovak language. There was no word for salesman in
the Western sense, only the word for a counter clerk seller.
At the time, people bought new cars by paging through
a binder of photos of cars. You paid cash upfront, didn’t
worry about color or accessories, and hoped the car would
show up in a few months. And test drives were major
obstacles at dealers. They did not want any customer to
actually get in a car and drive it. Why would they need
to do that?
Working with production plants and factories was
another challenge. Moving management to a profit- and
market-driven motivation required complete changes in
orientation. Under the central planning system of com-
munism, factories produced to a plan. There was no con-
sideration of what happened to these products after
manufacture. They were put on trucks or rail and simply
disappeared. It was seen as best to build up high costs to
provide jobs and community support (nurseries, holiday
hotels, canteens, special schools) as part of the normal
overhead. The most successful executives had taken
these approaches, but now this was seen as wasteful and
nonproductive.
Approaches to production targets were also obscure.
The famous example of the toilet paper shortages in the
Soviet Union makes an illustrative case. Paper factories
were given production targets by gross weight (tons of
finished products). It was soon determined that the pro-
duction of heavy cardboard made it much easier to meet
goals than lightweight tissue. Thus a continual surplus of
cardboard boxes and empty toilet stalls.
At the same time, no one knew what to pay for various
jobs. Wages were low, and new foreign investors were
crazily inflating salary (and housing!) values through
ignorance. Prices seemed very low compared to Western
standards, with average wages at about $150 a month
(now they are already up to $1200). Early on, we teamed
up with then Coopers & Lybrand to develop a country-
wide participatory salary survey that provided executives
with hard data for staffing compensation decisions.
We included interviews with CEOs for each participat-
ing company and provided high value information on
evolving human resources practices. Given the rushed
and informal environment at the time, this 50/50 partner-
ship with Coopers, which ultimately built up to 120
multinational firms and thousands of revenue, was based
on a handshake agreement! Until KNO sold their half
when the Pricewaterhouse merger occurred 10 years later
in early 2000, there had been no written contract.
Performance Improvement • Volume 47 • Number 10 • DOI: 10.1002/pfi 37
 FIGURE 1. KNO: BUSINESS TRANSITION CHARACTERISTICS IN THE CENTRAL EUROPE
MARKETPLACE, 1992–2008+
Infrastructure was weak. Government red tape was
stupendous and in transition. It took 6 months to register
a company through the courts. The expectation was that
some “consideration” would be provided to the judge to
speed things along. Basic quality office supplies, reliable
phone lines, or support services were nonexistent.
These were heady times, especially for the new hires
brought into these growing firms. Because of decades
of suppressed demand, it was truly a seller’s market.
Consumers were excited to purchase these new offerings;
incomes were beginning to rise. Given this market
action, and the chance for quick promotion in growing
38 www.ispi.org • DOI: 10.1002/pfi • NOVEMBER/DECEMBER 2008
firms, young managers grew overconfident in their abili-
ties that were not matched by experience or facing a
tough marketplace.
The American government, along with other coun-
tries, was providing steady support to Slovak and Czech
business through USAID project and training monies.
KNO was subcontracted to design and implement
numerous, often U.S. delivered, professional development
programs, thereby helping to accelerate the efforts of
hundreds of Czech and Slovak entrepreneurs.
Business relationships were fluid. It was easy to get in
to see the decision makers as structures were still flat.
In the B2B service areas, there was still limited competi-
tion, and prices mirrored closely to Western European
ranges for high quality. Although needs were great, the
market demand was focused on the basics: good supplies,
basic skill training, reliable service.
All of this was occurring against the backdrop of the
break up of Czechoslovakia at the end of 1993 and
the investment slowdown during the years of Nationalist
populist Premier Meciar; it was unclear of the future
direction of the nation.
STABILIZATION AND GROWTH
(1997–2003)
The movement of these years had investor focus on build-
ing market share and revenues. There was the restruct-
uring of the financial sector, and many diverse smaller
investments poured into the country from many nations.
After the previous reliance on expatriate senior man-
agement teams, Central European professionals were
moving into areas of significant responsibility. With the
initial start-up pains over, the attention of management
was on developing standards of services, both internally
and with customers.
During these years, KNO worked with such firms as
Shell, Opel, DHL, Levi Strauss, Citroen, McDonalds, and
Eurest to roll out mystery shopping and customer service
programs. Customer feedback was used to direct training
efforts, refinement of work processes, and innovative
strategies. At the same time, companies started to build
up management capabilities, more sophisticated sales
models, and professional staff and supervisory skills.
Infrastructure was slowly improving. Mobile phones
were introduced; email slowly moved from experimenta-
tion to replace the fax. Many competitors moved into the
business support sector, with higher quality and broader
offerings. Large investments were placed in internal infor-
mation technology (IT) networks. A collaborative ap-
proach formed as clients and suppliers worked together to
devise solutions. Although more hierarchy was apparent,
decision makers were available for important project
consultations.
With employees during this time, there was a certain
loyalty and only moderate turnover among staff. Salaries
were more stable, generally growing along with inflation.
New western methods were being introduced into offices,
especially the collaborative approach beginning to over-
take the former tendency of managers to keep informa-
tion secret, as a source of power. Even with these growing
experiences, there was still a sense of lack of career orien-
tation among most employees. In a number of cases,
clever employees with 2 or 3 years of experience and
transfer know-how, high expectations, and a tolerance for
...under centralized planning,
there had been no inflation
and rather close ranges of
salaries. Bus or subway
drivers earned more than
medical doctors, as it was
felt that they had greater
responsibilities for group
safety!
risk left the start-ups to set up competitive shops. Many
failed, but a few built sustainable ventures.
This stabilization period was influenced by the political
and economic climate. Business-friendly policies and lower
taxes were promoted by the new government, thus attract-
ing wider sources of investment. At the same time, people
were acutely aware of social and living problems, especially
outside the large cities. Even though the salaries were rising
quickly in the cities, in the countryside the economy was
more stagnant, with many retirees still under former com-
munist originated pensions of $50–$75 a month.
During the 1960s to 1990s, under centralized planning,
there had been no inflation and rather close ranges of
salaries. Bus or subway drivers earned more than medical
doctors, as it was felt that they had greater responsibilities
for group safety! In any case, doctors and teachers were
over populated because the education system was at a
high level and these professions were turned out in high
numbers.
JOINING GREATER EUROPE
(2004–2008)
In the current period, the focus of investors and execu-
tives is oriented to gaining competitive advantage while
strongly controlling costs. Most of the major players are
now in the market, so new entries face a steep and expen-
sive slope to build market share. There has been a heavy
weight of specialization in the automotive industry in
Slovakia. For top management, the emphasis is the
regional centralization of many functions, with some
firms locating these in various capital cities in Central
Europe. Many Slovaks and Czechs have taken the top
Performance Improvement • Volume 47 • Number 10 • DOI: 10.1002/pfi 39
management jobs. Emphasis in many firms, especially the
joint ventures, is on building stronger internal cultures
focused on shared values across Europe or globally.
This has been reflected in the mix of KNO service
demands. While still maintaining an emphasis on job
skills and standards, there is a growing emphasis on indi-
vidual approaches, which includes mentoring executives,
coaching managers, and using assessment centers and
other tools for individual career development planning.
Client investment focus includes refining strategic vision
and building stronger teams and broader projects to
extend global company values deeper into the workforce.
Infrastructure is now at a high level. Much communi-
cation is immediate and decentralized through mobile
phone conversations and email. There are now excellent
supplier networks, although costs are escalating quickly.
More companies move to the Web for promotion and IT
solutions. There is now ample credit with many financial
players in the market and greatly reduced regulatory
requirements for business transactions.
In business-supplier relationships, there is a greater
reliance for outsourcing. Supply chain management mod-
els have been adopted. Originally developed for efficient
purchasing of commodity supplies and equipment, pur-
chasing departments are applying them wholesale. This is
particularly destructive in the areas of professional ser-
vices where access to decision makers is almost forbidden.
The result is that complex customized service projects
must be proposed and bid in a vacuum against a procure-
ment mentality that is interested only in squeezing out
costs, rather than calculating returns on investment.
The growing numbers of companies, and the increas-
ing need for qualified staff, has had an impact on
employee mindsets. Loyalty to the firm is quickly evapo-
rating. Professionals in all functions are moving between
jobs very quickly, sometimes yearly. There are overly high
expectations with younger graduates from schools—
everyone expects to start as a manager with high pay but
no experience. This situation is stressed by open borders
and the ability of the most competent to work everywhere
in Europe.
Both Czech Republic and Slovakia have joined the
European Union (EU). Slovakia is just months away from
the common currency. There is a high expectation of bet-
ter times, but also with a fear of unknown impacts from
greater inflation and European demands.
PROJECTING TOWARD THE FUTURE
(2009+)
The maturing marketplace in Central Europe will place
great emphasis on productivity and effectiveness to
40 www.ispi.org • DOI: 10.1002/pfi • NOVEMBER/DECEMBER 2008
achieve company goals. There will be a strong competitive
struggle to gain or maintain market share. Along with the
benefits to be gained, there will be both internal and
external risks for all varieties of firms.
Given the high turnover of staff, companies face a real
danger of loss of continuity and know-how. There is a
great expense of constant rehiring and training. These
constant changes ultimately impact the ability to main-
tain standards and values. Standards of performance
offering value drive customer loyalty and revenue
growth.
This risk is compounded by the move to outsourcing,
using commodity-oriented supply chain methods to pro-
cure complex highly professional services as if they are
computers, office furniture, or boxes of copy paper. The
resulting contracts are likely to be generic, low-quality
solutions, with diminishing supplier interest in deepen-
ing relationships and achieving strengthening durable
outcomes.
These aspects play out in a global environment of cur-
rent economic and financial crisis. With Slovakia so
dependent on the automobile sector, any significant slow-
down in European demand may be felt here exponen-
tially. There is great concern whether the financial crisis
originating in the United States will be exported to
Europe with greater impact. In the short term, there has
been a definite tightening of credit in the banking sector
with a resulting reduction of more leveraged growth.
At the same time, there are extremely supportive fac-
tors building to a prosperous future. There is a greater
emphasis on talent management and new diverse man-
agement teams of multiple nationalities bringing great
experience into the market. Communications are lower-
ing in cost and exponentially increasing in capability and
potential. Exports are growing in volume, and tax treat-
ment has remained favorable.
At the highest levels, shareholders and supervisory
boards are becoming strongly results oriented, looking
for advantages to build competitive edges with clear
returns for their investments. It is a time of great poten-
tial and challenge, as Slovakia grows into an even stronger
player in the European economic arena.
As we look at HPT’s future in these former Soviet
Union countries, there is a great demand for systematic
performance approaches. The wording and description of
these methods are critical, as there is much communist
baggage still connected to translated English words such
as performance (former loose communist interpretation
by workers was “work harder, no more rewards”). Still,
managers at all levels are gaining experience and looking
for ways to achieve the higher results demanded by share-
holders. There is much work to be done.
Related Readings
Cermáková, A., & Kelly, S. (2008, April). Pulling victory from
defeat: The Slovak Finance Ministry builds a performance system
from the bottom up. Paper presented at Performance
Improvement Conference, New York City.
Kelly, S. (2006, November). Solving complex organization prob-
lems: The evolving role of human resources. Paper presented at
American–Slovak Chamber of Commerce Regional HR
Conference, Bratislava.
Kelly, S., Novak, M., & Cermáková, A. (2004, September).
Behind the former Iron Curtain: Introducing performance
improvement to a transitional economic culture. Paper pre-
sented at ISPI Europe Conference, Lisbon, Portugal.
Kelly, S.J., Novak, M.M., & Cermáková, A. (2005). Behind the
former Iron Curtain: Introducing performance improvement
to a transitional economic culture. Performance Improvement,
44(6), 20–25. [DOI: 10.1002/pfi. 4140440606.]
Novak, M., & Kelly, S. (1996, May). The transition to competi-
tiveness: The effectiveness of human resource interventions in
Central Europe. Paper presented at IFTDO Conference, Cairo,
Egypt.
Novak, M.M., & Kelly, S.J. (2007). Performance issues in inter-
national donor-funded development: A starting point for the
HPT or PI professional. Performance Improvement, 46(1),
33–39. [DOI: 10.1002/pfi.037.]

STEVEN J. KELLY, CPT, has 30 years of diversified experience in the human performance improve-
ment arena. He is a founder and partner in KNO Worldwide, headquartered in Prague/Bratislava
since 1991. In this role, he acts as a consultant to both business and government in Central Europe
and the former USSR to implement human resources and staff productivity strategies. He has a BS in
political science, an MA in human relations, and has been a CPT since 2002. He has earned many
military and academic honors for his leadership and research performance. His visionary perspec-
tive and ability to build a team quickly while eliciting high-quality performance is well documented.
He currently serves on the Board of the International Society for Performance Improvement (ISPI). He
may be reached at Kelly@kno.sk.

M. MARI NOVAK, CPT, has been working in the corporate and donor development arena since an
assignment with the U.S. Peace Corps in the mid-1970s. Her academic record includes doctoral
coursework and dissertation, as well as a master’s degree completed at Western Michigan University.
A partner with KNO Worldwide since 1984, she has spent the last 17 years headquartered in Central
Europe and has been dedicated to working with multinational and local commercial clients going
through political, economic, and social transition. She has visited nearly 100 countries and conducted
projects in almost half of them. She is currently researching both the applicability of performance
improvement in the very different context of development and the effects and value of the social, edu-
cational, and financial changes for women without “ripping the fabric of society.” She may be
reached at Novak@kno.sk.

ANNA CERMÁKOVÁ, CPT, has over 15 years of practical experience in the area of performance
improvement. In her early professional years, after the completion of her PhD in linguistics, she spent
8 years as an educational specialist in comparison studies of Eastern and Western Europe methods.
Since 1993, when she joined KNO in Slovakia, she has worked on or overseen numerous projects to
identify opportunities to improve staff performance and increase the revenues of such companies as
Citroen, Mazda, Globtel/Orange, McDonald´s, Schneider Electric, Citibank, Tatra bank, Slovak Gas
Industry, and GTECH. These projects included upfront assessments to reveal measurable gaps in pro-
cedures, staff skills, and cross-team processes. She developed some of the solutions in close collabo-
ration with the client, consultants, and trainers, and she supervised their implementation as well as
their systematic evaluation. She has also presented at several International Society for Performance
Improvement conferences in both Europe and North America. She may be reached at
Cermakova@kno.sk.

Performance Improvement • Volume 47 • Number 10 • DOI: 10.1002/pfi 41