I have a dream: to make philanthropy in Russia professional, powerful and systemic

Date: April 2014

Source: SPEAR’S Russia, #4 (37)

Following his exact plans, in 2014 Ruben Vardanyan has reduced his involvement in business while devoting more time and effort to philanthropy. Implementing his projects are the family foundation RVVZ (foundation of Ruben Vardanyan and Veronika Zonabend) and IDeA Foundation (Initiatives for Development of Armenia), where the investment banker has provided the order and austerity of major financial firms. A prominent task going forward is building the philanthropy industry in Russia and across the whole post-Soviet space.

It turned out that I always knew exactly what I wanted in life and saw my future. I always knew I wanted to change the world; I like the possibility of being a normal person doing business or living in a country where some things are not normal. Hence it was very important for me to find some kind of meaning, measured not only in money or official titles. And here people’s trust became very important. I consider it a great joy to persuade very influential and quite varied people to participate with me in particular projects. This provides strength.

I see how much can be done collectively, and most importantly, the results of my work are visible. This is another serious driver. And lastly, I consider my work a very important element of stability. I want my children to have the opportunity to live here, and I believe I can help our country become better.

My greatest competitive advantage is that many people trust me. Of course, I can tell them that I have completed projects, and they are not just dreams. When giving money, people understand it will be spent on the actual project, not on operating expenditure. In this regard it is more comfortable for donors, which is like additional points in a game, and I’m happy to use these to do what I do.

Initially, projects we were willing to help were chosen emotionally. The 1990s saw a catastrophic situation with orphanages, and we provided help. People came and told their stories, and we became involved. With time we realized you cannot embrace boundlessness and you have to concentrate on a limited number of projects. Since the 2000s we have started working more systematically, although at times mistakes were made and are so to this day. We simply understand philosophically that nothing is perfect. You cannot just get mad at someone and for that reason do nothing more. And yet there is another viewpoint: I paid all my taxes and can ensure fulfillment of my obligations before society – protecting the sick and indigent, protecting the elderly. Why should I have to spend additional money while the government can remain ineffective? My task is to receive the maximum profit for shareholders. And then let each one spend their money as they want – it’s a question of culture. Such a theory likely has every right to existence as well.

The lack of a precise appraisal system is another problem, involving different aspects. One question: how much money to give and for what. Another: whether managers can effectively handle money. Third: how to measure success and build rapport with donors so they understand how effectively a given fund or organization is working. You gave money, yet when the information will reach you as to how it was used is unclear. And then, how to measure the performance of particular projects? Some fail to provide instantaneous effect, and the effect sometimes isn’t measured by how many receive help. There are projects which, at first glance, seem successful, yet it then emerges that they solved one problem, but not another one. Alas, implementation percentages of any projects in Russia are very low. Russia is littered with dug and abandoned “pits”. It happens all too often that projects are started but not finished; there’s no thoroughness in realization. In Russia, where major qualitative, fundamental changes are needed, the effectiveness and evaluation of activities should become primary: how to regard the results, should the budget be deployed or not, to complete the project on time or later but with a better result? Of course, doing everything independently gives an advantage, since you work as an entrepreneur. In this regard my task and that of my wife Veronika is to fuel the process and make it more effective and professional, as is customary in commercial businesses. Here there’s considerable scope for work.

There are personal foundations, for example the family ones, and collective ones, accumulating contributions of numerous donors, and corporate philanthropic foundations. The question lies elsewhere. Foundation managers are limited by mandate; they must operate as per exact instructions so as not to be accused of merely spending money. Every foundation has its own mandate and business. In this regard the manager operates according to a previously written script, yet life is much richer and more diverse. Hence in my model I am more flexible. The IDeA Foundation has many endeavors; we receive money from numerous people who sense their involvement with our projects. We convey something very important to donors: all of their money to the last kopeck goes to the project. Unfortunately, the issue of distributing funds raised has become a big problem for many Russian foundations. For example, a charitable dinner frequently costs as much as is raised in donations. As a result, everyone came for dinner, money was raised, but in actuality a very small percentage goes to charity. In this sense, our model is transparent: all of the donors’ money goes to charity rather than towards operating costs.

In Russia, charity is usually perceived as very emotional, a spiritual upsurge of the desire to help or preserve something. Hardly anyone thinks about the managerial aspect of such activity. Yet here, as in any serious business, robust infrastructure is needed. The correct CRM, correct bookkeeping, correct IT – all this must be constructed no less professionally than in any commercial structure. Russia has many outstanding people, artists and doctors among them, who want to help. Beneath their names money is raised and the story promulgated. Friends and relatives of such people often become involved. Unfortunately, it does not turn out very well or professionally for them. Moreover, many who work in philanthropy are guided by the principle, “I receive little, so I work as much as I can”. Still worse is when crooks and adventurers sneak into the process. Such stories end with disappointment and the sense that you spent money, time and effort on something unnecessary. At the same time, any management is a headache for creative people, since this entails enormous limitations and systematicness. We are trying to create a mechanism that exists in the West whereby all operating functions are outsourced. You can just utilize the services of an outside organization. The chief virtue of such a model is that the bookkeeper, informational systems and everything else are already provided, while you engage in philanthropy as much as you want. At Troika Dialog, and then, following the Sberbank merger, at Sberbank CIB, we helped and still help the Podari Zhizn (Gift of Life) Foundation, the Konstantin Khabensky Foundation and “Artist”. We mainly participate through managerial experience and pay for the work of specialists whom these funds either were unable to hire themselves or considered unnecessary. I have a dream: to make charity in Russia professional, powerful and systematic.

At least 3-5 years will elapse before everything begins working.

Likely not rather than yes, as each has its own history and specifics. The same British Charities Aid Foundation (CAF), operating in Russia, strongly differs from the “parent” foundation, because every place has its own particulars and hence management. In the post-Soviet space, this infrastructure will perhaps take root, but should hardly go further.

One such area is education. I was in England and spoke with a very serious bank involved in philanthropy. I was told that over the past 10 years businessmen from the post-Soviet space in one way or another became donors to various British schools for one billion pounds. Obviously, this addresses the question of exchange – people are ensuring that their children study in good schools. And yet, this vividly shows that we are underfunding our education. Other problems, in my opinion, receive insufficient attention. For example, the issue of the disabled – their place and role in society plainly should be greater – as well as the elderly and veterans. They remain alone and require care.

I decided that I want to spend the majority of my time and money on education. In this area, it must be said, many people work, for example Herman Gref, Dmitry Zimin and Vladimir Potanin. Unique projects exist, and there are people unknown to me successfully doing their work. Evident today is an acute shortage of venues for discussing issues relating to philanthropy and inheritance, conducting research, and sharing experience and mistakes. This is why at Moscow School of Management SKOLKOVO we set up the Wealth Management and Philanthropy Centre, which I consider a very important endeavor. The Centre engages in the topics of inheritance as such, inheritance of business, philanthropy and wealth management – this is the correct venue, where a lot can be done. More broadly, our foundations have precisely formulated three goals. The first is to construct the philanthropy industry; that is, attempting to foster regulation, infrastructure and special mechanisms giving rise to various opportunities to participate in philanthropic initiatives both in Russia and across the post-Soviet space. Second, as was already said, is education – in Russia, Armenia and across the world. I am certain that here, at the world level, there will be a powerful convergence of various projects, an exchange of important ideas. Third is social entrepreneurship. A social-entrepreneurial project already exists in Armenia – the Tatev cableway, where capex is philanthropic, while opex is the independently generated revenue. I consider this an important topic, evidencing the creation of new mechanisms for measuring success. People should view this not only as commercial, but also a societal story. Because bare capitalism is an unsightly thing. If only money controls society, then we have to bow to the golden calf? Not our values.

Russia has several systemic problems. First, even the most long-standing foundations are hardly old, while no conclusions may be drawn, nor systemic approaches substantiated. A critical mass hasn’t been reached. Second, to this day the notion of philanthropy is murky and encompasses completely dissimilar areas of activity, wherein you create good, while the formats vary. People’s heads contain a hodgepodge of patronage, sponsorship, philanthropy and social entrepreneurialism. Besides individual, there also exists corporate philanthropy, relating to social responsibility. Additionally, there exists a quasi-taxation system, when people engage in philanthropy at the behest of government officials – a compulsory part of business. Hence you get a mixture of everything on the planet: either we speak about philanthropy relating to calls from the administration, or about corporate philanthropy, or individual philanthropy, when you assist those you personally know, or about reactions to specific catastrophes, or about systemic work. Many topics converge in a pile, so each speaks about their own. The lack of a single conceptual space interferes with forming a professional, long-term approach to philanthropy. For example, people say to me: “Ruben, you do not work in philanthropy. Philanthropy is very simple. You gave money to a church yet get involved with nothing, or you gave money to a sick child – that’s some philanthropy. And when you build a school where parents pay thousands of dollars for their children’s education – that’s not philanthropy”. I cannot understand why. The international school in Dilijan generates income, yet I as an investor will not be repaid my investments. That is, the money I gave to build the school is an expense never to be compensated. Moreover, I realize that if the school begins to earn money and finances itself, that’s even better. What if I suddenly run out of money? People fail to understand this.

I don’t think so. People want to do what they like, rather than what they’re forced to. True, by means of philanthropy some address, among other things, GR-issues. For example, if they know the governor’s wife supports something and is involved with something. Unfortunately, all this exists, especially in Russian regions.

It’s growing. There are very good examples. At Troika Dialog, people raised money for specific initiatives, and the company doubled the amount. Hence you both motivate people make decisions and select an area of activity, and you support this area itself. The challenges facing corporate philanthropy are partially the same as in individual philanthropy, and partially different. Of course, this involves the question of correctly allocating costs and resources, plus one must ensure that people are doing work not formally, but in reality. At the same time, however, a large portion of corporate philanthropy is collective, which is certainly a plus.

You know, I really don’t like that there is a kind of speculation on the topic of wealth transfer. I don’t like the PR component in the activity of some billionaires. You say you’ll do it? Then do it! Send this money to a foundation. There could be less talk; mere announcements oblige nothing. Dmitry Zimin, for example, actually did it: he transferred all the funds to his foundation and organized the process such that he himself cannot revoke the money. Zimin’s Dynasty is a unique example. Quite regrettably, few know about him and many fail to understand how different this is from the speculative announcements made by several philanthropists.

A very important topic. One must understand that this provides necessary contacts, difficult to secure otherwise. There’s a kind of entry ticket to certain social circles. Thus, many Russian businessmen, when engaging in philanthropy abroad, seek to socialize in the West. Hence they enter a certain closed club or system, and this truly necessitates exclusivity and the possibility of special entry. This is a normal process, which is happening inside the country as well. You also shouldn’t overlook that people, while pursuing their goals, are doing decent business.

Yes, a painful topic in Russia is sport. We spend prolific sums on sport, especially professional. However, it would be incorrect to condemn this, because everyone can spend their money as they see fit. Of course, you can criticize, yet don’t forget that a lot of good exists. It’s becoming ever more important in business not just to make money – it’s also important who you are and how you spend money. We hear and bear witness to scandalous stories while failing to notice many good ones simply because, “Well, what to say of them?” These foundations are calmly working and doing their business; they have limited amounts – standing out is difficult.

In several countries philanthropy is much smaller. Russian entrepreneurs, for example, are willing to donate far more in total than businessmen in Europe. In our country philanthropy is part of life, a cultural tradition; this was so even before the revolution. Empathy, sympathy and involvement always remained important concepts; one may recall the attitude towards mad, indigent and simple people, who cannot be wronged. The Tretyakov Gallery, Pushkin Museum – all this was created with patrons’ money, thus Russia is different from many other cultures, yet comparable to the U.S. The scales and amounts, of course, are different, while sharing the attitude that this is the right thing. Philanthropic traditions are partially due to religion. For example, certain people practicing Orthodoxy believe they can atone for their sins by donating money to pious causes. Russia, in my opinion, is more inclined towards philanthropy than other countries, especially in comparison with the East, where the perception of all this is different.

FAMILY FOUNDATION RVVZ PROFILE

The family foundation RVVZ has two priority areas: education (specifically, in Russia and the post-Soviet space) and initiatives for the development of Armenia, including the development of social entrepreneurship. Conducting this work are two foundations open to participation of outside donors and partners – Scholae Mundi (educational prospects foundation) and IDeA (Initiatives for Development of Armenia). A prospective area of work of RVVZ is developing the philanthropy industry in Russia and Armenia. Furthermore, RVVZ is not limited by these topics and may implement other initiatives – for example, the project to restore St. Panteleimon’s Monastery on Holy Mount Athos in Greece.

All of the projects of IDeA and RVVZ are closely interrelated. This makes possible a synergistic effect from the initiatives implemented. Furthermore, selection and implementation of projects are guided by seven core principles:

• Long-term vision and plan spanning several decades. Major projects of IDeA are scheduled for 10-20 years. Long-term effect is a mandatory and priority condition, and is achieved, among other things, by thorough planning and assiduous implementation of each project.
• Magnitude and emblematic character. Project scale is measured not only by quantitative indicators – total investments, total participants, etc. – but also by qualitative changes of environment due to the implementation of particular projects. In other words, the effect from projects is the increase in living standards in the places of implementation.
• Global scope and collaboration. Involvement and collective responsibility for the fate of projects are one of the crucial principles of the fund’s work. Even though the ideas for many projects of IDeA and RVVZ belong to Ruben Vardanyan and Veronika Zonabend, their “co-owners” are dozens of people and organizations – representatives of the public and private sectors, social organizations, the church, international organizations – donors, etc.
• Multiplier effect. This principle closely relates to that of magnitude and emblematic character of projects, which become catalysts to positive changes in the region of implementation. Project implementation fosters the development of infrastructure, small and medium business, job creation and creating conditions for growth of tourist flows, which ultimately makes possible the country’s popularization in the world and attraction of gifted and educated people from abroad.
• Engagement of local communities and resources in the implementation of projects. We are committed to our projects being organic for those locations where they are implemented. Ensuring local residents’ involvement in projects is one of the key working areas of IDeA and RVVZ. We are certain that the projects will be successful only if the local population perceives them as part of their lives and is personally interested in them, seeking to contribute as much as possible. We are ready to listen to people and to heed their opinions when implementing projects.
• Best international practices and standards for design and realization of projects creating a new local benchmark. The international composition of project participants offering various experiences and knowledge, and having achieved success in different spheres, allows for implementing projects according to best world standards. A no less important component of our projects is conveying best international experience to local specialists.
• Self-sustainable after initial philanthropic investment. Major projects require large-scale investments on the part of founders, the government and partner-organizations. Donors do not expect repayment of their investments, yet they seek to create a model which will ensure the project’s future existence, independent of charitable contributions, or else reducing them to the minimum.