Ukraine’s giant state-run defense production concern UkrOboronProm is to shed 40 percent of its senior management, cutting the number of administrative staff from 286 to 180 under its new structural optimization strategy.
UkrOboronProm’s press service on March 29 said that the concern’s four-member Supervisory Board had given final approval to an order making the staff cuts signed the day before by the company’s director general, Pavlo Bukin.
“In the course of the optimization, the necessary functionality will be retained in order to ensure (the execution) of all tasks assigned to the concern,” the press statement reads. “The funds saved will be allocated to introducing new research and design activities.”
“The optimization is aimed at increasing the quality of management of industrial and marketing processes, laying the grounds for forming sectoral clusters and making the innovational advancement of the concern’s enterprises more active.”
Bukin promised to make top management cutbacks shortly after his appointment as the concern’s director general on Feb. 21.
In a follow-up interview on Feb. 27, the new UkrOboronProm head told the Kyiv Post he was ready to “take unpopular decisions” about the concern’s structure, including shedding “a substantial part” of its top administrative staff.
He said having 286 top managers in the holding company of over 130 of Ukraine’s state-owned defense companies, some of which have been idle for years, was excessive.
“On the one hand, this prevents us from offering competitive wages to high-profile specialists,” Bukin told the Kyiv Post. “I look at those numbers and see space for optimization.”
The concern’s press service added in its March 29 statement that the optimized top management would be formed on the lines of a cluster-based model of industrial management, which UkrOboronProm’s leadership has been promising to introduce since at least October 2016, though with no tangible results so far.
The concern’s production assets were to have been restructured into five specialized industrial clusters producing armored vehicles, aircraft, ships, high-precision weapons, and radar equipment.
As part of his plan of future actions for UkrOboronProm, Bukin in late February said he was starting to build the “administrative skeleton” for the reformed structure of the concern, a goal he promised to complete by the end of 2018.
Should he be successful in dividing the concern into sectoral clusters, Bukin would achieve only the second goal in a long to-do list of required reforms at UkrOboronProm that have been proposed since 2014. They include corporatizing the concern and turning it into a modern public joint stock corporation, following an in-depth international audit.
So far, the UkrOboronProm’s leadership has succeeded only in launching an independent Supervisory Board in early 2018, although only with a minimum quorum of four out of five envisaged members.
Concerning the international audit, UkrObronProm in November 2017 launched a tender to procure strategic, operational, technological, financial, and judicial auditing services at a total cost of Hr 130 million ($4.8 million).
On Feb. 21, UkrOboronProm’s Supervisory Board approved the contracting of Baker McKenzie, Grant Thornton LLC, DLA Piper Ukraine LLC, The Boston Consulting Group, LLC Dentons Europe, Ernst & Young Audit Services LLC, PJSC Deloitte & Touche USC and Roland Berger as consulting companies to fulfill the audit through June 30, 2020.
