1. DOING BUSINESS IN RUSSIA: CROSS-CULTURAL FOCUS

2. Questions to discuss
Russian business culture: Soviet traditions and post-Soviet challenges.
Why Russia is not Finland?
The “enigma” of Russian managerial style.
Leaders and leadership in contemporary Russia.

3. How to avoid judgments while collaborating cross-culturally?
Artifacts and
Behaviors
Watch
Ask
Norms and
Values
Apply
multiple explanations
Basic assumptions

4. Not yet in Russian…
Geert Hofstede

5. Geert Hofstede Individualism /Collectivism Power Distance
Uncertainty Avoidance
Femininity / Masculinity
(Long / Short term orientation)

6. The Finnish Culture according to Geert Hofstede
Power distance (low, index 33)
Uncertainty avoidance (average, 59)
Individualism (high, 63)
Masculinity (low, 26)
Similar culture with Switzerland, Germany, Austria

7. Russia
Hofstede G. Cultural Constrains in Management Theories. Academy of Management Executive, (1), 1993, pp
Based on secondary sources:
national statistics,
sociology
phylosophy,
history,

8. Russia
Alexander Naumov. Hofstede’s dimension of Russia //Management, 1996 – 3. (Хофстидово измерение России).
Field-study in , 300 (250)
respondents: business people,
administrators, professors and
students of business schools.

9. Russia Individualism 50 41 Masculinity 40 55 Uncertainty Avoidance 90
Orientation
Russia/ Hofstede
Russia/ Naumov
Individualism 50 41
Masculinity 40 55
Uncertainty Avoidance 90 68
Power Distance

10. Why Russia is not Finland?
Orientation
Russia/ Hofstede
Russia/ Naumov
Finland
Individualism 50 41 63
Masculinity 40 55 26
Uncertainty Avoidance 90 68 59
Power Distance 33

11. Finland and Russia comparative analysis

12. Swiss experiences in Russia
Introduction
Project overview
Phase I : Market research, Evaluation Companies
Phase II: Business Travel, Russian Partnership Company
Phase III: Establishing Partnership and Joint Venture
Cross-Cultural Analysis
Summary
Outlook

13. Project overview
Market: Cleaning, smelling and maintaining consumer goods.
Goal: Find russian family-owned company for a partnership (Joint- Venture, License, Export, Import)
Involved Companies:
Swiss Company - family-owned, middle-sized enterprise, swiss-owned, Russian OOO in St.Petersburg
                              
                              

14. Products Bluing in-tank Bluing Rim-Blocks Limscale Remover
                                                                                                    
Liquid Rim-Blocks
Bluing in-tank
Bluing Rim-Blocks
Limscale Remover
Deep Clean WC Tabs
Toilet Limescale Remover

15. Phase I: Market research, Evaluation of Companies
                              
Market research (May-June 2004)
Russian Business Style
Feedback
Evaluation, Shortlist
Telephone interview
Appointment
Preparation « Business Travel »

16. Phase II: Business Travel, Partnership Company
Russian Culture, life and behaviour
Moscow, St.Petersburg
Consumer Market
Pricing, Export, Import
Supermarket
Moscow: 5 companies
St.Petersburg: 3 companies
Managing Director (65), Swiss
Vice-Director (40), Swiss
Managing Director (30), Swiss

17. Phase II: Business Travel, Partnership Company
Expectations:
Improvisation?
Infrastructure?
People on-time?
Robbery?
Eating?
Services?
Mentality?
Background: Image of Russia in Switzerland
                                     

18. Cross-Cultural Analysis
Company 1:
University
German education
Too late
High power distance
Company 2:
Pokerface
Pricelist
Building
Transfer pricing
«Russian Business»
Company 3:
Private life
Hierarchy
Man/Woman
Employees
Language
                               

19. Cross-Cultural Analysis: Joint Venture
Interested
Belgium/Russia
Transfer pricing
Enterpreneurial esprit
Organization
Transparent
Openness
Prospect
Employees involved
Personal support
BusinessCulture
Husband/Wife/
Friend
Employees involved
Time invested
Sympathie
Language: English,French

20. Define Joint-Venture: Outlook
Products
Production
Import/Export
Staff
Marketing
Investments
Registration
Agreement
CIS

21. Phase III: Building up Partnership and Joint Venture
Second Meeting in
Switzerland
Decision making process “Joint Venture” agreed
Agreement doing a “Due Diligence” of the Russian company

22. Due Diligence Process Moscow based international auditing company
Background information over “Detective Agency”
Preparation about “Russian Business Behaviour”
Preparation of the second business journey to Moscow

23. Phase III: Russian Business Behaviour
Personal Relationship with customs, local government, bureaucrasy as part of business success
Personal trust and relationships inside (employees) and outside (network) of the company
Differences between written law and law in reality
A business agreement is mostly a paper for the court

24. Phase III: Russian Business Behaviour
Short term business perspective and of ROI
Managament of Surviving (informal company structure)
Hierarchical organization of Russian company (Boss, family on the key position, to control cash- and material in- and outflow)

25. Phase III: Russian Business Behaviour
3 different and changing Accounting Systems: Internal, official (Russian Tax Codes), for controls of bureaucracy
Usual 20% legal business, 80% unofficial business for small and middle sized business
Decision-making process: emotions, feelings

26. Phase III: Swiss Business Behaviour
Personal Relationship, Personal trust, References and law framework
Law is enforced through court system
Low-context about written contracts
Long term business perspective, ROI

27. Phase III: Swiss Business Behaviour
“Old” Europe with well established market system
Matrix organization (production and country organization) Project Management
Transparent Accounting System (IAS, US GAAP)
Black market encompasses about 7% of Swiss GDP
Decision-making process: formalized, standardized

28. Phase III: Result of Due Dilligence, Outlook of project
                   
                   
Phase III: Result of Due Dilligence, Outlook of project
Formal result of “Due Dilligence”
Way to establish “Joint Venture” instead of black cash (Dividends)
Russia side not willing to make black cash “transparent”
German/Swiss company stop negotiating process in Moscow

29. Phase III: Result of Due Dilligence, Outlook of project
Russian side did not fulfill promises, not ready to be transparent
Future is uncertain…misunderstandings between Russians and Swiss
German/Swiss mentality?
Next steps?

30. Next steps?..

31. Geert Hofstede Village market Family Well-oiled Pyramid machine
Small power
distance
Weak
uncertainty
avoidance
Family
Large power
distance
Weak uncertainty
avoidance
min
Uncertainty avoidance
Well-oiled
machine
Small power
distance
Strong uncertainty
avoidance
Pyramid
of people
Large power
distance
Strong uncertainty
avoidance
max
min
Power distance
max

32. Geert Hofstede RUSSIA Family Village market FINLAND Well-oiled machine
min
Uncertainty avoidance
FINLAND
RUSSIA
Well-oiled
machine
max
Pyramid of people
min
Power distance
max

33. WELL-OILED MASHINE (Germanic)
Decentralized decision-making
Narrow span of control
Specialist, technical competence
Top management team
Organized by function
Compartmentalized
Coordination through routines and rules
Throughput control

34. FAMILY OR TRIBE (Asian)
Centralized
Paternalistic
Loyalty
Generalist
Strong social versus task roles
Personal relationships
Social control

35. TRADITIONAL BUREAUCRACY «Pyramid of people» (Latin)
Centralized decision-making
Coordination at the top
Less delegation
Analitic ability
Informal relationships
Elitist (power and authority)
Input control

36. The meaning of organization
System of tasks or social system?
System of
relationships,
Networking,
Social positioning
Instrumental,
functionalist view
on organization

37. Fons Trompenaars Egalitarian vs. Hierarchical
(a) Leader is “a kind of father”
(b) Leader “got the job done”

38. Fons Trompenaars “get the job done”
EG RUS CHI JAP SWE IT UK USA FIN DEN NOR GER

39. Fons Trompenaars Person vs. Task orientation
The main reason for having an organizational structure is so that everyone knows
(a) who has authority over whom
(b) how functions are allocated and
coordinated

40. Fons Trompenaars Function rather than personality
KUW JP RUS CHI IT SWE USA GER UK NOR FIN DEN

41. Russian managerial style
Leader is the organizer
Management = politics
«Klan» (group) approach to business
Effective non-material personnel’ motivation
Total control of the business cycle
Vertical integration and attempts to influence the state power
Rejection of empowerment

42. Ways to get managerial position
Appointment by the leadership
Recommendation by friends or relatives
Offered by employer
Self-employment
Job ads in mass media
Recruiting agencies
Independent job search
Election by the collective

43. Ways to get managerial position in Russia (AMR 2001. www.amr.ru)
A way to get a position
Under 30
30-39
years
40-49 years
Over 50
Appointment by the leadership
40,5
44,2 52
55,7
Recommendation by friends or relatives
20,7
14,3
12,2
7,61
Offered by employer
16,4
12,7
12,8
Job ads in mass media
4,3
2,4 2
Recruiting agencies
2,6
1,6
0,3
0,6

44. Exercise: candidate: Test
You are the owner of some business, selecting a candidate for a position of director in your company. What procedure would you prefer as a most effective way to select the best
candidate:
Test
Visiting 3-4 night-clubs during one night together.
Inviting him into a restaurant for dinner.
To put him into a business meeting with acting top-managers and watch his behavior.
Invite him to play paintball, or to go into other sports.

45. Career development and long-term personal goals
Become a high-class professional executive
Bring up children and give them an adequate education
Provide for oneself and a family, build a house, buy an apartment
Have leisure time for the family and kids
Travel, visit many countries
Head a large business
Create own business
Go into creativity, music, painting
Take up science, write a research
Create a good family
Live in concert with religious beliefs
Shift to another industry
Leave Russia for abroad
Go in for politics
Leave for another city, region of Russia

46. Long-term goals of Russian managers
What are your long-term goals?
Top managers
Second-level
Medium-level
Become a high-class professional executive
35,1
37,1
33,6
Bring up children and give a good education
28,1
30,2
31,2
Provide for oneself and a family
25,1
39,6
Have leisure time for the family and kids 19
13,3
14,1
Travel, visit many countries
15,6
16,2
16,5
Head a large business
13,9
11,5
7,2
Create own business
8,2 14
9,7
Shift to another industry
1,7
0,7
1,4
Leave Russia for abroad
0,8
Go in for politics
1,3
2,9
1,6

47. Business leader of today and tomorrow (AMR 2002 )

49. St.Petersburg in mid-90s. Z.Sikevich. Russians – image of the nation
Happy to be Russians – 71,9%
National character: kind, hard-working,
lazy, open, patriotic, generous.
Image of a good employee:
“honest, responsible in fulfilling duties”
Image of a good leader:
“responsibility, ability to keep the word, to convince people, to create a team, to make and fulfill decisions, to think strategically”.

50. St.Petersburg in mid-90s. Z.Sikevich. Russians – image of the nation
Attitude towards West
51,5% - “The west wants to make Russia weak and helpless”
28,5% - “The west wants to help Russia”

51. St.Petersburg in mid-90s. Z.Sikevich. Russians –image of the nation
Russia’s future
“To follow the Western way of development” – 41,9%
“To seek and follow the unique Russian way, different form all others” – 44,5%

52. St.Petersburg in mid-90s. Z.Sikevich. Russians – image of the nation
The key ideas to fight frustration and uncertainty:
Harmony (consensus)
Patience
Hope

53. Russian values and basic assumptions.
Attitude towards Environment
US G UK J F, S I, R M ME, A
SEA c
* * * * *
Controlling Adapting
A – Africa, C – China, F – France, G – Germany, I – India, J – Japan, M – Mexico, ME – Middle East, R – Russia, S – Spain, SEA – Southeast Asia, UK – United Kingdom, US – United States
(Adopted by I. Pshenichnikova from Craig Storti. Figuring Foreigners Out. Intercultural Press, 1999.)

54. Attitude towards Uncertainty
US SEA I A ME R F, S J
UK G C M
* * * * *
Positive Skeptical
Power Distance
UK US J F A ME, C R
G S M, I SEA
* * * * *
Low High

55. Key to Productivity Source of Status
G R F SEA ME
US UK S C, I M, A J
* * * * *
Results Harmony
Source of Status
G US UK J F, M I A
R C S, SEA ME
* * * * *
Achieved Ascribed

56. Personal Versus Societal Responsibility
Attitude toward Work (Competitiveness)
J US I, C SEA F R
G, UK M ME S A
* * * * *
Achievement Quality of Life
Personal Versus Societal Responsibility
US UK J F R I, M A, C
G S SEA ME
* * * * *
Universalist Particularist

57. Concept of Time Concept of Self
US UK G J F SEA I, A
R S C ME M
* * * * *
Monochronic Polychronic
Concept of Self
US UK F G R J ME M A SEA
I, S C
* * * * *
Individualist Collectivist

58. Russian managerial style
Leader is the organizer
Management = politics
«Klan» (group) approach to business
Effective non-material personnel’ motivation
Total control of the business cycle
Vertical integration and attempts to influence the state power
Rejection of empowerment

59. Ways to get managerial position
Appointment by the leadership
Recommendation by friends or relatives
Offered by employer
Self-employment
Job ads in mass media
Recruiting agencies
Independent job search
Election by the collective

60. Ways to get managerial position in Russia (AMR 2001. www.amr.ru)
A way to get a position
Under 30
30-39
years
40-49 years
Over 50
Appointment by the leadership
40,5
44,2 52
55,7
Recommendation by friends or relatives
20,7
14,3
12,2
7,61
Offered by employer
16,4
12,7
12,8
Job ads in mass media
4,3
2,4 2
Recruiting agencies
2,6
1,6
0,3
0,6

61. Exercise: candidate: Test
You are the owner of some business, selecting a candidate for a position of director in your company. What procedure would you prefer as a most effective way to select the best
candidate:
Test
Visiting 3-4 night-clubs during one night together.
Inviting him into a restaurant for dinner.
To put him into a business meeting with acting top-managers and watch his behavior.
Invite him to play paintball, or to go into other sports.

62. Career development and long-term personal goals
Become a high-class professional executive
Bring up children and give them an adequate education
Provide for oneself and a family, build a house, buy an apartment
Have leisure time for the family and kids
Travel, visit many countries
Head a large business
Create own business
Go into creativity, music, painting
Take up science, write a research
Create a good family
Live in concert with religious beliefs
Shift to another industry
Leave Russia for abroad
Go in for politics
Leave for another city, region of Russia

63. Long-term goals of Russian managers
What are your long-term goals?
Top managers
Second-level
Medium-level
Become a high-class professional executive
35,1
37,1
33,6
Bring up children and give them an adequate education
28,1
30,2
31,2
Provide for oneself and a family
25,1
39,6
Have leisure time for the family and kids 19
13,3
14,1
Travel, visit many countries
15,6
16,2
16,5
Head a large business
13,9
11,5
7,2
Create own business
8,2 14
9,7
Shift to another industry
1,7
0,7
1,4
Leave Russia for abroad
0,8
Go in for politics
1,3
2,9
1,6

64. Doing business with Russians: academic findings and expatriates’ experience
Amrop International Russia – survey of 35 executives ( )
Highly intelligent workforce
Eager to learn
Preference for rigid rules and hierarchical work environment
Fear of making mistakes and expressing opinions

65. Doing business with Russians: academic findings and expatriates’ experience
Tendency to avoid disagreements with boss
Lack of initiative
Teaming does not work

66. Doing business with Russians: expatriates’ experience
Avoid communication errors
Establish personal relationships
Open approach to the environment