California. Management. Review. Can American Management Concepts Work in Russia? A Cross-Cultural Comparative Study CMR129. Detelin S.

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1 CMR129 S u m m e r V o l. 4 0, N o. 4 R E P R I N T S E R I E S California Management Review Can American Management Concepts Work in Russia? A Cross-Cultural Comparative Study Detelin S. Elenkov 1998 by The Regents of the University of California

2 Can American Management Concepts Work in Russia? A CROSS-CULTURAL COMPARATIVE STUDY Detelin S. Elenkov Russia, a country with a rich culture and a history filled with dramatic turning points, is once again in the midst of far-reaching changes. In what some describe as one of the greatest natural experiments of our time, Russia has introduced a series of sweeping economic and political reforms. 1 According to the opinion of Archie Dunham, president and CEO of Conoco (a major investor in the sizable Russian oil industry), Russians... have made incredible strides toward a market economy in an extremely short time. 2 There has been an unmistakable upturn in the Russian economy, with falling inflation, a stabilization of the ruble, bottoming-out of the factory output, and rapid privatization of state-owned enterprises. 3 Moreover, Russia has offered Western investors an enormous wealth of natural resources, advanced technology in some critical areas, highly skilled scientists, and almost 150 million potential consumers. 4 In the words of Dana McGinnis, president of San Antonio Capital Management, if investors don t get [in Russia] now, they might as well never.... The best buys are available now. 5 Almost weekly, new firms join the existing 116 registered U.S. firms with Moscow-based operations. 6 To assist with the effort of expanding U.S. business in Russia, the U.S. Department of Commerce has announced plans to open several American Business Centers (ABCs) in the country. However, many Americans who have been attracted by the abundant business opportunities in Russia have encountered some serious obstacles. As it has been suggested by a number of studies, the Russian environment is very complex and the Russian culture is significantly different from Western cultures. 7 For example, one experienced international business researcher contends that foreign firms found the [Russian] business environment difficult because the concept of business that Westerners had was very different from the one that 133

3 the [Russians] had after 70 years of a controlled Marxist economy. The addition of cultural differences made for a demanding business climate. 8 Cross-national differences in managerial values are commonly recognized as being crucial considerations in the global marketplace where cooperation and understanding are essential to make effective decisions. 9 Because of cultural differences, many Western business people have left their encounters with Russian managers feeling frustrated by their inability to understand and relate to them. 10 To take full advantage of the opportunities Russia provides, American managers must develop a clear understanding of the differences in managerial values and attitudes between that country and the United States. If values differ significantly between populations, then respective management styles and organizational approaches are also likely to differ. 11 Having gained some insight into the Russian mentality, it would be, then, possible to determine what type of business management would evolve and which American concepts of management and organization would work best in Russia. Six measures that provide insight into cross-national differences and similarities in managerial values have been identified for use in this research project. 12 These are: power distance, individualism as opposed to collectivism, competitive orientation, uncertainty avoidance, political-influence orientation, and dogmatism. Taken together, they can elucidate managerial philosophies of doing business. A Cross-Cultural Study Using a multistage sampling plan, the participants in this study were selected from two discrete populations: managers in Russia and managers in the United States. Considering the demographic specificity of the two countries, I selected the regions surrounding Moscow and St. Petersburg and the northeastern United States to be the primary sampling areas. Surveys were sent to the office of every participant within a two-week period of time in the spring of Complete surveys were returned by 178 Russian managers and 147 U.S. managers. The majority of respondents were male (66 percent). For the total sample, most of the managers had at least a college degree (8 percent). Managers also averaged 4.2 years in their current position and 6.9 years in the organization. Table 1 provides additional information regarding the profile of the respondents. Power Distance Centralization of authority and authoritarian leadership in Russia have a long history. 13 Russian culture, over the centuries, is replete with ruling elites and authority figures who tightly controlled society and suppressed personal freedom. Among these were leaders of the Russian Orthodox Church, tsars, landowners, and the communist party elite. Regardless of who was in control 134

4 TABLE 1. Profile of the Surveyed Managers Russian Managers (N=178) of the country, the population was subjugated to the values and behaviors of the authority figures. Among the clearest evidence of the unequal distribution of power in the Russian society was the Table of Ranks instituted by Tsar Peter I in This system, which determined status and privileges in society according to 14 ranks, remained in effect until Power distance is, in essence, associated with the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally. 15 This represents inequality (more versus less) defined from below, not from above. It suggests that a society s level of inequality is endorsed by the followers as much as by the leaders. In addition, power distance explains the degree to which decision making is centralized in a country: the larger the power distance is, the more likely it is that power will be centralized. Power distance can also be associated with autocratic behavior. 16 Highly centralized control in all areas of life in Russia was strongly reinforced during the years of communists rule, with one-person leadership being mandated by Lenin in 1923 as the guiding principle of the whole socioeconomic system. Even after the break-up of the Soviet Union, power and decision making are typically centralized in Russia. According to Keith Rosten, power in Russian organizations is concentrated in the hands of the general director, with little influence in the decision-making process on the part of middle managers. 17 Daniel Bollinger s study of the Russian system of management has also placed Russia among the countries with high power distance. 18 In comparison, management research has indicated that American culture is characterized by low to moderate power distance. 19 Individualism versus Collectivism In Russia, self-accomplishment has been closely associated with achieving the objectives of social collectivism. 20 In the traditional Russian society, individuals who showed signs of making themselves better than the group were viewed with suspicion and contempt. As a result, individualistic traits were considered to be socially undesirable and destructive for group harmony. People who strived to be better than the rest were seen as taking away the rightful share of others. 21 Russians who attempted to isolate themselves or excel beyond the group s American Managers (N=147) Age: Sex: Male Female Type of Organization: Public Private

5 expectations were usually criticized and attacked to bring them back to the group s level. 22 Individualism describes the relationship between individuals and the collectivity which prevails in a given society. It is reflected in the way people live together. 23 In some cultures, individualism is seen as a blessing and a source of well-being. In others (e.g., Russia), it is seen as alienating. In countries with an individualist mentality, the company does not get involved in the personal lives of its employees. In a country with a more collective mentality, employees expect their firm to take care of them like a family does. In Russia, individual success still arouses feelings of envy in many people who hold the deep-seated belief that the wealth and achievements of others are gained at the expense of those who have less. As a result, many Russians feel resentment rather than admiration for people who earn more, even if the material success is obtained through hard work and legitimate means. 24 Negative attitudes toward individual initiative are so deeply ingrained in the Russian mentality that many Russians who want to realize their ambitions feel pressure from two sources public scorn and their own guilt from violating the values they were raised with. 25 In contrast, Americans have been found to place high value on individualism, personal freedom of choice, and individual initiative. A number of studies have, notably, indicated that the United States is characterized by high individualism. 26 Competitive Orientation Russia has generally been viewed as a culture that has traditionally emphasized values of solidarity, close personal relationships, and care for the weak. 27 According to historical observations, centuries of serfdom followed by 70 years of communist dictatorship have prevented Russian people from developing a sense of assurance. In a society where enterprise managers have never felt masters of their destiny, they could not be expected to have acquired a sense of assertiveness. Writers such as Dostoyevsky and Gogol have depicted Russians as pessimistic people who saw life as gloomy and hopeless and beyond their control. The Russian entrepreneur has been portrayed as an oppressed, heavily taxed, powerless individual at the bottom of society. 28 Competitive orientation has been presumed to vary between two extremes: masculinity and femininity. Masculinity is an assertive or highly competitive orientation, and its inverse, femininity, is a non-assertive and caring attitude toward others. During the communist period in Russia, managers self-confidence took a severe blow from poor quality and reliability of products they produced. In addition, Russian managers had much of their drive suppressed by the egalitarian 136

6 principles of the traditional Russian society and the stifling bureaucracy of the centrally planned economic system. 29 In comparison, the United States has been generally found to be in the group of countries with moderate to high masculinity. 30 American culture has also been commonly associated with a pronounced orientation toward interpersonal competition in almost all spheres of life. Apparently, a change along the competitive orientation dimension towards American managerial values could be considered beneficial for Russia, a country that is in a process of a large-scale transformation to a market economy and to more competitively oriented managerial behavior at all societal levels. Uncertainty Avoidance Numerous observers have recorded the Russian need to control uncertainty. 31 Since the beginning of the Russian centralized state in the fifteen century, policies and procedures for virtually every aspect of organizational life were dictated by officials in the central government. 32 Compliance with rules was rewarded, while taking risks was discouraged and often punished. 33 Uncertainty avoidance deals with a society s tolerance for uncertainty and ambiguity. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, and different from usual. Uncertainty-avoiding cultures try to minimize and control the possibility of such situations by strict laws, rules, and security measures. On the opposite side, uncertainty-accepting cultures seek to have as few rules as possible. Daniel Bollinger s study has concluded that Russia is a society whose institutions seek to create security and avoid risks. In this society, the highest priority is placed on protecting past results, rather than on taking risks in an uncertain future. 34 As far as the American culture is concerned, Geert Hofstede has placed the United States in the group of countries characterized by moderate to low uncertainty avoidance. 35 Political-Influence Orientation The importance of political influence, informal arrangements, and personal connections for successfully conducting business in Russia has been pointed out by a number of scholars. 36 In particular, an earlier study reports that in Russia nepotism is rampant, rewards are not tied to performance, efficiency is not measured, and emphasis is on loyal, right-thinking employees. 37 To be successful, upwardly striving managers in the former Soviet Union had to direct their ambition toward service to the party, as their entire future depended on political factors, including party membership, protection, connections, and loyalty to superiors. 38 One of the most researched and tested measures of an individual s willingness to use political power is Machiavellianism. 39 Dealing with a company 137

7 within a high Machiavellian culture may require greater reliance upon contacts while dealing with a low Machiavellian company may permit using fewer negotiations. Machiavellianism is also considered an indicator of a manager s preference for following the formal authority structure or for using more circuitous means of influence. Under Communism, there were so many meaningless and often contradictory laws and regulations governing business activity that managers had to become adept at circumventing them in order to meet the unrealistic goals assigned by central authorities. 40 This was a widely accepted practice and even central authorities looked the other way, since it was not considered a serious violation, but simply a pragmatic way of doing business. According to the findings of a popular study on Russian managerial behavior, the new Russian entrepreneurs have also adopted an attitude of doing business by resorting to political influence and circuitous means of achieving their objectives. 41 As a senior Russian government official generalized: There is a peculiar Russian mentality.... [A Russian man] sees a law and instantly thinks of ways to maneuver around it. This is just a tradition. 42 David Holt and his colleagues have suggested that Russian managers are more likely than American managers to use political power and informal influence. A recent study on managerial values in the United States, Hong Kong, and China has also implied that the American culture is not characterized by a high degree of political-influence orientation. 43 Dogmatism Dogmatism refers to the degree to which a person is not flexible or open to new ideas. Highly dogmatic managers tend to reject new ideas with the philosophy that if the old ways were good enough for my predecessors, they are good enough for me. 44 Highly dogmatic individuals may be less tolerant of new ideas introduced by other cultures. Moreover, a dogmatic manager may be a literal follower of company policy. A prior study on managerial attitudes and behaviors in Russia suggested that Russian managers systematically place high value on tradition and habits, reflecting high respect for established social norms. 45 On the other hand, David Ralston and his colleagues proposed that the American managerial mentality is characterized by low to moderate dogmatism. 46 Description of Survey Results Using a sequence of statistical tests, 47 cross-national differences and similarities in managerial values were examined along the aforementioned culturalvalue dimensions. The comparative analysis between the United States and Russia indicated that significant cultural differences exist between managers in these two countries. American managers are more individualistic than their 138

8 TABLE 2. t-test for Difference in Cultural-Value Means U.S. Russia t df Power Distance * a 317 Individualism * b 317 Uncertainty Avoidance * a 317 Competitive Orientation c 317 Political Influence * a 317 Dogmatism * b 317 * p<.01 a The Russian managers indicated endorsement of a significantly larger power distance, uncertainty avoidance, and politicalinfluence orientation than did their American counterparts. b The Russian managers scored relatively low on individualism and dogmatism.these results also differed significantly from the higher, overall, American scores. c The t-tests did not show significant difference in competitive orientation between the Russian and American groups, both exhibiting relatively moderate scores. Russian counterparts and the managerial culture in the United States is also characterized by lower power distance, uncertainty avoidance, and politicalinfluence orientation than in Russian managerial culture (see Table 2). On the other hand, no significant difference was evident between the two cultures in terms of competitive orientation. Russian managers also scored significantly lower on dogmatism than their American counterparts, although the difference between the two group scores was not very large. This suggests that there is a cultural basis for the possibility of a successful transfer of American management concepts to Russia. Managerial Implications The survey results point out significant differences between Russian and U.S. managerial cultures: namely, in terms of the prevailing relationship between individuals and collectivity; the extent to which the less powerful members of organizations and institutions accept and expect that power is distributed unequally; tolerance for uncertainty and ambiguity; and orientation toward the use of political influence (especially through resorting to informal contacts and pressure tactics). These results are consistent with findings reported in other articles on cross-cultural differences between the United States and Russia. 48 In addition, the survey found an important similarity between Russian and U.S. managerial values in terms of competitive orientation. This finding is in line with Avraham Shama s observations which indicate that Russian managers... have been quick to recognize the effects of such economic forces as inflation, uncertainty, competition....likewise, they have been quick to respond, for example, by restructuring,... developing more competitive 139

9 strategies, increasing promotions and sales force, and seeking foreign investors. In these respects, Russian management behavior resembles Western management behavior. 49 Apparently, a major reason for this cross-cultural resemblance is the internal motivation of Russian managers to attempt to adopt Western management approaches. However, one of the biggest obstacles to the cross-national transfer of managerial knowledge is that concepts of management and organization developed in a certain part of the world often presuppose cultural values that may be counter to local traditions in other countries. In such cases, the original company policies have to be adapted to fit the local culture in order to lead to the desired effect. 50 The growing U.S. business involvement in Russia, therefore, requires a closer look at the ways of implementing familiar American management concepts in the context of the Russian culture. These concepts encompass leadership styles, motivation approaches, performance appraisal systems, systems for strategic planning, and organizational configurations. Leadership Styles Leadership involves envisioning the future, coordinating the development of a coherent mission for the organization, overseeing the development and control of company s products and services, and providing a motivational climate for employees. A typology of leadership styles can be established by crossing countries power distance ratings and individualism ratings. Figure 1 provides specific information about the typology of leadership styles in this study. Power distance scores, representing the degree of inequality endorsed by the subordinates in each country, are displayed along the vertical axis. Individualism ratings, describing the relationship between individuals and the collectivity, are exhibited along the horizontal axis. As noted, Russian managerial culture is characterized by high power distance and a strong collective mentality. In Russian culture, employees expect an autocratic leadership style, which is offset by the support given to subordinate s families. Therefore, the American concepts of leadership that advocate participation in a manager s decisions by his or her subordinates (small power distance) and that presuppose the confidence and independence to negotiate with one s boss (high individualism) are incompatible with the large power distance/low individualism of Russian managerial culture. Leadership styles are also affected by a country s political-influence orientation. The leadership style of U.S. managers reflects the textbook norm: fact-based rather than intuitive management, and fast decisions based on clear responsibilities rather than the use of informal influence and personal contacts. However, this style of leadership may encounter some problems in Russian culture, which is characterized by a significantly higher degree of political-influence orientation. Intuitive management (rather than stressing facts) and the use of political power (rather than following clear organizational procedures) are the decision-making approaches which could best fit the Russian mentality. 140

10 FIGURE 1. Leadership Styles LOW PDI HIGH * RUSSIA Legimitate Power Reward Power Referent Power USA Expert Power * LOW IDV HIGH * The dividing points between LOW and HIGH have been established by dividing the highest country value recorded by Hofstede (1980) by two. In order to achieve successful results in the post-perestroika era, leaders in Russia must create a vision, know their followers, motivate and encourage employees, and build consensus among diverse groups or individuals. Many Russian managers do this by wielding their power. 51 John French and Bertram Raven s social power framework can be used to develop a deeper understanding of effective leadership in the context of the Russian culture. 52 According to their classification, categories of power include: legitimate power: power based on formal position and authority in an organization; reward power: power to bestow recognition (tangible or psychological) upon followers; expert power: power obtained through the exercise of specialized skills and knowledge; 141

11 referent power: power based on the follower s personal liking or admiration of the leader; and coercive power: power to obtain compliance through fear of punishment or sanctions. Considering the high power distance as well as the strong collectivist and pronouncedly political-influence-oriented values in Russia and taking into account that the Russian leadership style is dictated by subordinates expectations, legitimate power and referent power are the most effective sources of influence for Russian managers. However, successful management in Russia will become increasingly dependent on the ability of Russian managers to effectively exercise reward power and expert power. Undoubtedly, Russian leaders who wish to have a major impact on their organizations must promote a shared vision and work to stimulate their subordinates. Training and education can provide and/or enhance the knowledge and skills Russian managers need to fulfil their leadership responsibilities effectively and efficiently. The training of Russian executives should include project management, communications, teamwork, problem solving, and other educational issues that affect managerial effectiveness. Motivational Approaches A typology of motivation patterns can be obtained by crossing the individualism value with uncertainty avoidance, as shown in Figure 2. Motivational approaches are mapped out along the individualism axis (x) and the uncertainty avoidance axis (y). As noted, the United States is an individualist culture with low uncertainty avoidance. The high individualism score implies that Americans have a calculative involvement in their organizations. 53 This explains the popularity in the United States of expectancy theories of motivation, which see people as pulled by consciously expected outcomes, rather than pushed by unconscious drives. In contrast, the Russian managerial culture profile shows a much lower individualism score and a much higher uncertainty avoidance value. For this culture, a sense of belonging and security are the strongest motivators. Russian managers may, therefore, be expected to respond positively to motivational approaches that emphasize benefits to the collective. In other words, motivational policies in Russia would be more effective if they focused on group benefits, reinforcing the importance of team contributions. Although some awards may be given to certain employees on the basis of individual performance, most awards should be allocated among members of specific work teams on the basis of group performance, in this way reflecting Russia s high collectivist values. Since motivational approaches focused on the individual are not likely to be eliminated, it is recommended that they be tied to development and mastery of work-related skills. 142

12 FIGURE 2. Motivation Approaches LOW IDV HIGH * Awards for Mastery of Work-related Skills USA Employee Relations Policies RUSSIA * LOW UAI HIGH * The dividing points between LOW and HIGH have been established by dividing the highest country value recorded by Hofstede (1980) by two. In addition, managers in Russian companies can motivate employees through good employee relations policies, which could include employee empowerment, recruiting employees who are capable of handling empowerment, providing adequate training and education, and keeping workers informed of opportunities for participation in solving critical problems. To be sure, these motivational approaches can succeed in Russia only if they are implemented cautiously and systematically. 54 It is worth noting that some prior studies did not find employee empowerment useful in obtaining productivity gains in Russian factories. However, the Russian employees included in those studies were not provided with adequate resources and encouragement, nor were they trained in culture-specific empowerment techniques. Empowerment can generally be viewed as vertical teamwork between managerial and nonmanagerial personnel. This way, empowerment can be consistent with the high collectivist values exhibited in Russian organizations. It can also build confidence in workers by showing them that the company trusts their 143

13 ability to make decisions on their own. It may also generate commitment and a sense of pride. It can also give employees better experience, with which they may be able to advance their careers. Moreover, empowerment is important because it can significantly improve organizational performance. A number of principles are involved in successfully implementing the concept of employee empowerment. 55 First of all, empowerment should be done sincerely. It must be backed up by actions that reinforce mutual trust. It cannot be done superficially. Employees should also have access to information about the business and its performance. Information about the employees department or other subunits is particularly necessary, as this is the level of performance that they can affect. Taking all these considerations into account, training and education are an important responsibility for Russian companies that adopt employee empowerment. Such efforts also require acquisition of new knowledge and skills, such as problem solving, interpreting and using data, meeting customer requirements, process analysis, process simplification, waste reduction, cycle-time reduction, error-proofing, and other issues that affect employees effectiveness, efficiency, and safety. In particular, training and education programs in Russian organizations should include formulating decision rules consistent with the prevailing cultural norms as well as providing role-playing scenarios, which are excellent ways of teaching employees not only technical skills, but also problem-solving skills. Another way to improve motivational approaches in Russia is the inclusion of hard currency in the motivation package, either in monetary form or in consumer goods obtainable only with hard currency. This can protect employees from the high monthly inflation rate in Russia. The practice of allocating hard currency goods is also consistent with Russia s high uncertainty avoidance values. By giving financial awards on a monthly, quarterly, and annual basis for achieving a variety of targets, Russian organizations can systematically improve their human resource management. Gain-sharing, profit-sharing, and stock ownership are among the financial-reward systems designed to create an incentive for employees to be involved in performance improvements. The advantages of garnishing systems include: a greater number of new cost-saving ideas, higher levels of teamwork and cooperation, and improved communication between labor and management. In essence, these plans are also designed to motivate employees to improve their productivity through more effective use of labor, capital, and raw materials. Typically, the current level of group productivity is weighed against an established base level. The emphasis is on group productivity as opposed to individual work improvements. This would be especially effective in the highly collectivist Russian culture where employees can be expected to show a natural tendency to work together to accomplish a particular objective. 144

14 FIGURE 3. Performance Appraisal Systems LOW POL HIGH * Indirect Feedback Approach RUSSIA Methods Based on Work-team Performances Task-analysis Goal-setting Self-appraisal method USA * LOW IDV HIGH * The dividing points between LOW and HIGH have been established by dividing the highest theoretically possible values by two. Another way to effectively motivate Russian employees would be to use rewards supplied by the work itself. It is a common knowledge that a welldesigned job makes work truly rewarding. Both job enlargement (horizontal expansion of the job to give the worker more variety) and job enrichment (vertical expansion of the job duties to give the worker more responsibility) would be well-accepted in Russian organizations. Taking into account the relatively low dogmatism shown by the Russian respondents, these motivation approaches which would increase the possibility of Russian employees experimenting with new ideas appear to be consistent with important cultural norms in Russia. Performance Appraisal Systems A typology of performance appraisal systems can be obtained by crossing countries political-influence ratings with individualism scores. This is demonstrated in Figure 3, which uses political-influence ratings, displayed along the vertical axis, and individualism values, projected along the horizontal axis. In general, American systems for performance appraisal assume that employees 145

15 performance, seen as an important organizational criterion (a low degree of political-influence orientation), will be improved if people receive direct feedback about what their superior thinks of them (high individualism). 56 For example, some of the most popular American performance appraisal techniques include: task analysis, in which the superior appraises employee performance by using responsibilities listed on the subordinates job description as basic appraisal criteria; goal-setting, in which the superior and subordinate analyze the subordinate s successes and failures; and the self-appraisal method, which requires the employee to appraise his or her own performance. 57 The conventional goalsetting performance appraisal process typically involves a manager or supervisor evaluating the work of a subordinate for a given time period. Objectives for that period of time (typically for the year ahead) are set unilaterally or jointly by the manager and his or her subordinate. At the end of the review period, the manager is supposed to sit down again with the subordinate to examine job-related accomplishments, strengths and weaknesses, and/or personal characteristics of the subordinate. However, in collectivist cultures such direct feedback may destroy the harmony that is expected to govern interpersonal relationships. It may cause irreparable damage to the employee s self image and ruin his or her loyalty to the organization. In countries such as Russia, feedback is much more effective if given indirectly for example, through the withdrawing of a favor, or via an intermediary person trusted by both the superior and the employee. This approach to performance appraisal would work best in the Russian culture since it is characterized by such a high degree of political-influence orientation and low individualism. In addition, performance appraisals in Russia would be most effective, if they were based on the objectives of the work teams that support the organization. In this respect, they could act as a diagnostic tool and review process for team and organizational achievement. The performance appraisal process can also be a motivator when it is developed and used by the work team itself. Furthermore, a greater emphasis should be placed on performance appraisal by peers and customers. To be sure, this would require the collection of factual data for analytical purposes. Moreover, the necessary performance appraisal skills can also be nurtured through training and education, focused not only on sophisticated statistics and new technologies, but also on the philosophical importance of the performance appraisal process. Strategic-Planning Systems As illustrated in Figure 4, a typology of strategic-planning systems can be established by using two cultural dimensions political-influence orientation (the vertical axis) and uncertainty avoidance (the horizontal axis). Strategicplanning systems have largely been created in the United States (reflecting its below-average political-influence orientation and a low uncertainty avoidance 146

16 FIGURE 4. Strategic Planning Systems LOW POL HIGH * USA High-impact Planning Industry Structure Analysis Production/Market Research Indirect Feedback Approach Decision-making Outside of the Formal Structures Flexible Planning Approaches RUSSIA * LOW UAI HIGH * The dividing points between LOW and HIGH have been established by dividing the highest theoretically possible values by two. societal norm). In addition, these systems have been developed in a particular socio-economic setting: competitive capitalism, political stability, overall economic expansion, and a relatively low degree of intervention by the government. Strategic planning, as practiced in the United States, is typically a lowfrequency, higher-impact approach to strategic thinking. 58 It involves a number of policies through market research, production/operations research, and industry structure analysis, for example to raise the odds of success and get the biggest effect from each strategic thrust. The Russian managerial mentality is characterized by a high degree of political-influence orientation and pronounced uncertainty avoidance. The socio-economic setting in Russia is also drastically different from the socio-economic environment in the United States. Hence, the strategic-planning systems of Russian companies would be more effective if they focused on flexibility and short-term feedback and if they provided for the possibility to make strategic decisions outside of formal strategic-planning structures. 147

17 What may be necessary in Russia is strategic improvising involving the continuous, intense firing of strategic thrusts in an established strategic direction. Management teams in Russia should consider consciously resisting the development of detailed policies and procedures. Strategic planners in Russia might also benefit from practicing the theory of the small win. Their goal would then be to accumulate maximum understanding about a rapidly changing business environment as quickly as possible, by making low-cost, fast-paced, successive approximations. This strategic management approach can create a lot of advantages for businesses in Russia. In general, strategic improvising promotes both flexibility and action-oriented responses. Action in the strategic improvising process is a source of real-time information. It provides ongoing feedback about where the strategic thrust is going, and it suggests the next steps for keeping it going in the right direction at the right speed. Individuals and teams can prove the values of their ideas through action and experimentation, not through elaborate plans that may not realize their initially stated goals. In addition, strategic improvising possesses a built-in basis toward behavioral solutions: it promotes the empowerment of individuals and teams, and it responds to the shift from routine to nonroutine organization of work. 59 Moreover, when multiple teams, on multiple levels, initiate actions in the same direction, they can generate more ways to learn about more things. Flexible, high-frequency strategies in which all groups of employees are turned in the same direction may also have the advantage of making it easier for teams to learn from each other. Obtaining new information is a commonly recognized way of reducing uncertainty. Thus, flexible, high-frequency strategies appear to be consistent with the high uncertainty avoidance of the Russian managerial culture. Organizational Configurations The typology for organizational configurations again uses a combination of individualism/collectivism and competitive orientation. In Figure 5, individualism ratings are displayed along the x axis, while competitive orientation scores are projected along the y axis. The Russian managerial culture, characterized by low individualism/high collectivism and a moderate competitive orientation, is predisposed to more group-oriented and competitively oriented managerial approaches and configurations. Accordingly, work teams and intraorganizational strategic alliances can be expected to enjoy success in the context of the Russian culture. Work Teams A team is a small number of people with complementary skills who are committed to a common purpose, a set of performance goals, and an approach to which they hold themselves mutually accountable. 60 Teambuilding is a 148

18 FIGURE 5. Organizational Configurations LOW COM HIGH * 0 Work Teams Interorganizational Strategic Alliances USA RUSSIA * LOW IDV HIGH * The dividing points between LOW and HIGH have been established by dividing the highest country value recorded by Hofstede (1980) by two. concept in which trust and effective communication are necessary to achieve success. Successful teambuilding amounts to identifying and solving interpersonal, departmental, and procedural problems within the organization, thereby making it possible for employees to work cohesively and effectively. The goal of teambuilding is to push decision making down to the lowest possible level. This is an entirely new concept for many Russian employees, and nothing in their experience has prepared them for it. Obviously, they need training. They may consider developing the problem solving and interpersonal communication skills needed in order to be effective team members. 61 Furthermore, a working team in Russia would be more successful if some of the top managers were included in it. In the context of the high power distance Russian managerial culture, a team cannot function without their personal, sincere, and constant involvement and active participation. A team effort can allow many problems to be resolved early in the production process in Russian companies. Teams also 149

19 make a lot of sense in organizations devoted to comprehensive managerial and technological changes. Interorganizational Strategic Alliances Interorganizational alliances are arrangements that employ resources from two or more existing organizations. Sometimes referred to as hybrid organizations, these interfirm linkages range from informal relationships between structures to the actual creation of a formal organization (as in an equity joint venture). Because hybrids draw on the capabilities of multiple organizations, they offer a wide range of solutions to deal with such problems as organizational inefficiency, resource scarcity, and so forth. A major characteristic of interorganizational alliance building is the attempt to reduce or avoid environmental uncertainty: the larger the degree of uncertainty, the greater the tendency to pursue such interfirm arrangements. 62 Strategic allies can also contribute product designs, R&D and production facilities, developed marketing and distribution systems, and knowledge of the different markets they serve. They can ensure that products get to the market more quickly and more effectively, particularly where products need qualified support to meet local regulations. This way, interorganizational strategic alliances appear to represent flexible and effective configurations, consistent with the specificity of the Russian managerial culture. In fact, some of the most successful Russian organizations have already shown inclination to form strategic alliances with both domestic and non-russian partners. 63 For example, Yakovlev, a leading Russian aerospace company, has recently concluded a joint R&D agreement with AlliedSignal Air Transportation Avionics Division and the Moscow-based National Institute of Airborne Avionics Equipment (NIIAO). Both Yakovlev and AlliedSignal have considered NIIAO a valuable partner that can contribute its extensive experience in developing civil avionics and space electronics systems to the joint project. In fact, AlliedSignal and NIIAO have established American Russian Integrated Avionics (ARIA), a joint venture focused on the development of a low-cost integrated avionics suite (glass cockpit) with an advanced flight management system. According to the opinion of industry experts, the ARIA-designed glass cockpit costs at least 30 percent less than similar Western systems. 64 One aspect of the joint R&D agreement is for ARIA to develop a new type of flight management system for use when satellite-based navigation becomes dominant. AlliedSignal is working on the hardware characteristics of this system while Russian software engineers are building on their experience with a flight management system for Ilyushin, another Russian aerospace company, to develop the software. In a similar case, Microdin, a company controlling 150 smaller organizations (in retailing, real estate, banking, construction, jet engines, autos, and trucks), has formed a strategic alliance with Interros, a bank-controlled holding company owning stakes in 23 firms (in metals, food, chemicals, railroads, and 150

20 banking). The combination of these two Russian organizations has created an industrial-financial conglomerate with all the cross-holdings and potential clout of a South Korean chaebol. The main goal of the strategic alliance is to increase competitiveness, spur investments, and upgrade management to European standards. In the process, Microdin has established a distinct corporate style that combines youth with brains, energy, and nationalism. 65 Conclusion Attempts at transferring management concepts to Russia that do not take the values of Russian managers into account have little chance of success. From the viewpoint of international comparative management, this means that any universalist assumption concerning direct transferability of American management techniques is erroneous. However, this does not mean that countries can not learn from each other. On the contrary, looking at business approaches that work in other countries is one of the most effective ways of getting new ideas in the area of management and organization. Because of the increasing liberalization of the Russian society, the growing openness to the West, and the progress in Russian privatization programs, significant changes are taking place not only in the general business environment and the nature of enterprise ownership in Russia, but also in the market orientation of Russian business executives, employees involvement in enterprise management, internal organizational structures, and forms of external corporate governance. These changes, in turn, lead to greater recruitment of entrepreneurial people and Western-style training of Russian managers in market-oriented skills, especially in firms which have become privatized. Moreover, the cumulative effect of these developments is expected to be considerable over the next decade. 66 Thus, it is very likely that major changes will also occur in Russian managerial culture. 67 Similarities in managerial values across nations, the evolution of cultural values of a large number of people in a country, 68 and the cultivation of desirable behavioral reinforcers 69 provide the cultural foundation for cross-national transfer of knowledge to successfully take place. Therefore, certain American management concepts can, and should, be put into practice in Russia. Differences in managerial values between the United States and Russia, however, require that the application of American management approaches in the context of the Russian culture be carried out patiently and systematically. This logically calls for prudence, careful selection, and appropriate adaptation. Notes 1. M. Boycko, A. Shleifer, and R. Vishny, Privatizing Russia (Cambridge, MA: MIT Press, 1995). 151

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