Chapter 1: Employee Engagement is a Key Driver of Modernization and Innovation

Chapter 1: Employee Engagement is a Key Driver of Modernization and Innovation

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EMPLOYEE ENGAGEMENT, CUSTOMER FOCUS AND INNOVATION

This book is about employee engagement and how to implement it successfully in Russia. Employee engagement is about how to achieve a company’s strategic goals by creating the conditions for human resources to thrive and, for each staff member, manager and executive to be fully switched on in their jobs so as to deliver their best efforts in the best interest of the business.

Employee engagement is about how to achieve a company’s strategic goals by creating the conditions for human resources to thrive and, for each staff member, manager and executive to be fully switched on in their jobs so as to deliver their best efforts in the best interest of the business.

Employee engagement is directly linked to the most important organizational principle, something that any kind of organization in all conditions and all times has wanted to implement: focus the attention on serving the external stakeholders, which in the case of a business are the customers first and foremost.

In recent years there has been a growing understanding among the Russian political leadership, most forcefully articulated by Dmitry Medvedev during his presidency, that Russia needs to modernize its economy and decrease its dependency on oil, gas and raw material export revenues by creating a diversified economy based on innovation and high technology.

Under Medvedev’s leadership Russia has embarked on some impressive efforts to implement the modernization program, the flagship of which is the Skolkovo Innovation Center. Skolkovo represents an attempt to create the conditions for innovation and high technology ventures to thrive, as they have done in Silicon Valley in California.

But no amount of investment in special projects and technology – and not even science – will bring about modernization if the investments are not supported by favorable macro and micro cultures where innovations can blossom. The macro culture is the economic climate of the country, determined by its business, legal and administrative practices. The micro culture (or more properly, micro cultures) are the relevant corporate cultures of the firms tasked with innovation. Russia is in dire need of starting the modernization process by first modernizing these macro and micro cultures.

In its quest to develop an innovative economy Russia must first modernize its administrative culture and the corporate cultures of its enterprises.

Modern high-tech countries with vigorous innovative companies were not created or planned by politicians; rather they emerged as products of free societies where people are not restricted in their attempts to find smart solutions for their own and their customers’ needs. In the history of mankind, nobody has yet made an innovation that is not based on a previous application. The first condition for an innovation is therefore that there is an underlying need waiting to be satisfied. The second condition is that there is a profit to be made from innovatively satisfying the need. And the third condition is that there is freedom to do just that.

An individual firm, no matter how innovative it may be, cannot thrive either if there is not a macro-environment, a market that is hungry for new innovative solutions. The government of a country has to create the conditions for a proper market for innovative products and services. If there is no incentive for bringing inventions to the marketplace and no financing for it either, then no innovation will take place. The Soviet Union was a country full of inventions but totally lacking the conditions for innovation. It spent resources on inventions, but did not create any market value out of them. And in 1991, 74 years after the revolution the country, went bankrupt and was dissolved.

Business success, shareholder value and national wealth are created through corporate and public cultures that are capable of innovation and constantly adapt to change. The primary driver of both national economies and individual business enterprises is not, as it has been traditionally thought, capital accumulation, but innovation. More correctly we should say that innovation is what creates new capital, and that old capital without innovation will eventually fade away.

To succeed, the innovative business enterprises of this world have first adjusted their organization models to encourage innovation by cutting bureaucracy, red tape and hierarchy and introduced flexibility, low-barrier communication and efficient execution of decisions. A corresponding change has happened in the countries where these organizations are situated. Countries with less bureaucracy and fewer administrative barriers are those where more of the innovative business takes root. Dismantling the bureaucracy both creates and attracts the innovative business of tomorrow. In favorable conditions, innovation then follows from the competitive race to offer better quality to customers and to make a profit from that.

To adequately understand what innovation is, we should be wary of speaking in this context only of technologies. Innovation is not only about research and development (R&D) of new high-tech products. All firms, manufacturers and service providers need to be innovative in all their business practices. R&D forms, of course, an important part of innovative businesses, but rather than seeing it as the ultimate driver of innovation, we should recognize R&D as the tip of the iceberg of innovative cultures. Innovation in business means many things besides inventing new innovative, breakthrough products. New ideas on how to organize business and business processes are at least as important sources of innovation as technological inventions. Most importantly, in a dynamic corporate culture that interacts with the market, new creative ideas about business processes meet with new creative technology. Most probably the needs of the business processes are what drive innovation in the final analysis. And innovative firms need to keep on innovating. When a product is rolled out, the firm already has to be thinking of how to improve it to guarantee continued customer satisfaction and stay ahead of the competition. This will not happen if the company does not run a corporate culture which directs all efforts toward continuous innovation.

More fundamentally than technology and R&D, innovation is about: efficiency, labor productivity, policy, organization, and other things. Innovation is a new way of doing something. It is about changes in thinking, about improved products, and more efficient processes. Innovation follows from the competitive race to offer better quality and make a profit, and therefore a great deal of the actual innovation is done by those implementing and using new technologies, products, and processes as part of their normal activities. The innovation itself is not necessarily a product or a whole new service; rather it is any useful adjustment or new idea that is incorporated in the production processes and service concept. We stress that we speak of a market driven creativity, for while creativity is a fundamental factor of innovation, it requires that there are market players (investors) that are eager to act on the creative ideas to attractively bring the product to the market so that customers are willing to pay for it more than it takes to produce it. An innovation is a creative idea that has been developed into a product and service and which is successfully implemented in a real business process. But while innovation starts with creative ideas it is not completed by them. The completion is a job for the whole corporate culture. All the factors of this innovative corporate culture add value by: constantly improved quality; creation of market demand; meeting the demand; individualization of the products and extension of the product range; increased productivity through reduction of costs; and improved production processes.

Thus I stress that an innovative economy is not only about inventing high-tech gadgets and machines, such as the mobile phone, Internet applications, nanotechnology, and so forth. It is highly useful and welcome government policy to invest in these fields to create awareness and set up beacons for the innovative economy and to give it a strong impetus. But most importantly, the government has to create the overall conditions for innovation in the country as a whole. This requires an open economy, freedom of choice, and liberty from a bureaucratic machine that would otherwise suffocate all efforts to modernize. A modern and innovative economy cannot be brought about solely by government fiat and the selection of priority sectors of the economy and heavy investment in research and development in the chosen fields. This is not to say that some palpable results could not be achieved this way, but the modernization efforts have to be aimed to cut deeper into the whole structure of economic culture of the state and the corporate cultures of firms. By the very definition we cannot know from where future innovations will come. We cannot plan the behavior of the customers. Only by guaranteeing maximum freedom in a market economy can we send the process in the right direction. For this we need concentrated efforts by the government and each firm to embrace the model of the innovative corporate culture, cultures that are permeated by the spirit to deliver superb customer service and solutions as part of a profitable business. Constant innovation follows from such a corporate culture. The corporate culture seizes every opportunity for innovation thanks to a low level of bureaucracy, lack of hierarchical constraints, and efficient communication, coupled with the priority of offering superior solutions for clients.

The Russian economic climate is still burdened by a suffocating bureaucracy and red tape which hinders private initiative and innovation. Russia has leaped forward in the last two decades and the Soviet economy has been replaced with a market economy. But Russia is still not a fully modern country, and I maintain that it cannot become so without liberating the people from the last remnants of the communist system, the yoke (no joke) of the Soviet bureaucracy. Not enough has been done to reform the administrative system inherited from the Soviet Union. All the old bad habits are taken for granted: for example, laws are still modeled on the manner in which the administrative-command economy was run. Many good initiatives still come hampered by the Soviet mold of thinking. No matter how nice a reform idea we hear of from the mouth of a president or a minister, by the time the apparatus gets its hands on it they bring out their Soviet rule-kit. It seems they cannot make a single law without a huge effort to conceive of dozens of completely insane and useless mandatory procedures. All because that is what they have been raised to believe in. Because of this situation, nobody ever asks the questions: Do we need this? Do the country and the people benefit from this or that law?

The Russian leadership has to make strong efforts to change the macro culture, and fast. But it is up to each business owner and all the business leaders to press on to change the way their companies are run, that is, change their respective corporate cultures. Here also the Soviet command-and-control administrative practices are evident. There is a strong hierarchy with stultifying effects on initiative and innovation, and which devastates customer service. In a bureaucratic hierarchical organization, like most Russian organizations are, executives do not lead but micromanage. The organization delegates up and not down as it should. Employees preoccupied with bureaucratic procedures and structures are more concerned with satisfying the needs of their immediate boss than the customer. It is a culture of blame and an atmosphere of distrust reigns. The managers ask ‘Who is guilty?’ but rarely ‘Who made this possible?’ Punishments are easily meted out but gratitude is hard to come by. Risk-taking and initiative – the cornerstones of innovation – are punishable. Communication culture is dismal and bureaucratic, and there is always a risk that the messenger will be killed to avoid facing the brutal facts of the business. Bad financial and management reporting systems feed the culture of blame and distrust – and no wonder, considering the dismal state of the reporting systems in a typical Russian firm.

A consequence of all this is that corruption flourishes in the form of bribes and kickbacks, both in dealings with the authorities and between suppliers and customers. Often managers run their own private firms within the firm.

All this has to go. And the good news is it can be changed. Russian people are very flexible and enthusiastic workers when properly motivated. The problem with the dismal corporate cultures lies squarely with business owners and senior management, the executives who are supposed to be leaders but rarely fulfill this role. We see this because there are some truly outstanding corporate cultures in Russia, which you may experience as a customer. They exist while at the same time there are far too many examples to the contrary. The same Russian people work in the good and bad cultures! So what accounts for the difference? Management. In Russia you have the opportunity to see how true it is that the staff and customer service reflects the management practices of the firm like a mirror.

This book will tell how to make your image as a leader shine through the organization, how to create an outstanding corporate culture in Russia. This is done by creating a culture of engagement, customer focus, and innovation, employing the principles of employee engagement as explained here. The discussion involves ideas such as: leadership vs. management, empowerment, self-organization, the need to hire self-disciplined people, igniting the self-motivation inherent in self-disciplined people.

The corporate culture can be changed, and it is not even difficult. You might not want to go all the way with the principles I advocate. You may doubt that “it works in Russia.” I can assure you, it certainly does, just like anywhere. And as the general level regrettably is so dismal, it is easy to reap early gains already at the onset of the change program by making little adjustments. A change in the right direction is already a good start.

You can do it, for you have access to the most important element that goes into the recipe of employee engagement – inherently enthusiastic and flexible Russian people.

THE ENERGETIC, ENTHUSIASTIC AND FLEXIBLE RUSSIAN WORKER

Foreigners who wish to do business in Russia often find themselves in a position where they have to confront and overcome certain misconceptions – both about Russian employees, and about the country itself. In fact, in some cases, these misconceptions are not merely distortions, but can be described as the exact opposite of the truth. Let us take a look at Russian workers in particular: the myths that have formed around them, and the reality that becomes apparent to those who make the effort to uncover it.

It is common for Westerners who have not visited Russia to have a quite distorted view of the country. These distortions are often rooted in Cold War-era antagonism, but one should also admit that the Soviet planned economy did create some real problems in the form of bad practices. Fuel was thrown on the fire during the years of transition in the 1990s when virtual anarchy reigned in the country. To make matters worse, today the mainstream Western press, with its mendacious and distorted reporting from Russia, is doing its best to keep alive the negative myths of what Russia and Russians are like, while at the same time creating a couple of new ones.

However, foreigners that actually visit Russia, and especially those who work here, usually learn quickly to see through the myths and distortion. Experience on the ground does not harmonize with the received picture. Granted, there are those who remain unable to penetrate through the superficial manifestations of what appear to be insurmountable differences in culture and practice. Many agree with me in the judgment that there seem to be two categories of expat coming to work in Russia: those who love it and those who cannot cope with it. Time tends to distinguish the two: the latter people usually pack and leave within a year or two, while the addicts (like this author) stay on.

A person who forms his views based on the distorted coverage in the press would find it hard to believe that foreign businesses in Russia are actually thriving and that the expat executives are usually full of praise for the opportunities, while realistically admitting (but not exaggerating) the challenges of working in such an environment. Notably, most of them are full of praise for the Russian worker.

One of the received myths which I often hear (from people who have never worked in Russia in a management position) is that Russian workers are lazy. Nothing could be further from the truth. Russians are extremely hard-working and dedicated employees. Similarly, I have not found Russians to be particularly prone to be late for work or meetings, as some people claim. At the same time, they are always eager to improve themselves.

For those of us in business, Russia often feels like one big educational organization. People devote much time to education and training outside of work. Many do a second higher education degree, and some even a third. An example of this thirst for self-improvement is the teaching of English and other key foreign languages. While in the Soviet era, serious language learning was the province of a few, and the current school system is underfunded, young ambitious people learn English on their own, taking English courses on nights and weekends.

The attitude of Russians towards learning, and their positive interest in foreign cultures and languages, is markedly noticeable in how Russians grab every chance to speak English with foreigners. This happens in meetings with clients, in social gatherings, and in other settings. Nowhere, however, is it more marked than when getting served in cafes and restaurants. Immediately when the Russian waiter identifies you as a foreigner, he starts to address you in English, no matter how poorly he speaks it, or how well the foreigner speaks Russian. Admittedly, I personally find it annoying that they address me in English even when I talk to them in Russian. I am even frequently in situations where we go through an exchange of several rounds of statements where I persistently speak Russian and the waiter replies to me in English. At some point I ask if the Russian waiter does not speak Russian. I wish the managements would address this problem. From where I come, it is considered impolite and bad customer service not to respect the way a foreigner addresses you in your local language. But annoyed as I am, and persistent in not giving up, I understand that the Russian person does not mean to be impolite or rude; on the contrary for her or him it is a sign of respect towards the guest to address you in your own language (some seem to think that English is the native language of all foreigners) and also, which is my point here, the person wants to use the opportunity to practice his language skills. This also shows how Russian people are in general very eager to learn and liaise with foreign cultures.

Another myth states that Russians have a very low tolerance for change (Tiri, Mirja: Differences in Corporate Culture are reflected in Human Resources Management in Russia (Finnish) in Henkilöstöhallinnon käsikirja 2012, Finnish-Russian Chamber of Commerce). This is a hilarious statement considering that the social, political and economic system and practices – and even the cultural and gastronomical practices (half of the types of food Russians have in their fridges today were unknown to the population only 20 years ago) – have undergone radical changes two or three times in the last 20 years. The truth is that Russians are by nature very flexible, and form the ideal material for management to create a culture of engagement. As a worker, a Russian is like clay from which good management can form the very best product. The problem is simply that too few have tried to do so.

We now consider a myth that appears to have considerably more staying power, given its long cultural pedigree and support from high intellectual authorities, and from Russians themselves. This is the myth of Russian collectivism. Russian philosophers and political thinkers have seen this trait as ingrained in the Russian people; it is a belief that unites thinkers of seemingly opposite tendencies, such as Orthodox Christians and Communists. It is also believed by many ordinary Russians. However, it is founded on a false and tendentious historical analysis.

The origins of Russian collectivism are supposedly anchored in prehistoric times (Chapman, Steven R.: “Collectivism in the Russian World View and Its Implications for Christian Ministry” in East West Church and Ministry Report, Vol. 6, No. 4, Fall 1998). This is already a problem, as it assumes that Russia’s prehistory was different from that of other European people– including the other Slavic peoples (who, being supposedly more individualistic, apparently lack this “prehistory” despite their common origins with the Russians), and other peoples living in a harsh natural environment, such as the Scandinavians. In the quoted source we read that “People trying to maintain their existence in a rather harsh environment needed to band together in order to survive.” Therefore, we are told, they developed the zadruga – a clan or extended family commune – supposedly unique as a basis for Slavic tribal society. Further there was the mir, an agricultural village commune. The sobornost, the strong sense of community central to the Russian Orthodox Church, is quoted as yet another of the sources of the presumed collectivist traditions. The source I quoted forgot to mention the other side of the coin: serfdom, the system of unfree peasants being held under feudal dependency, which system was abolished only in 1861. This respite from an enforced “collectivism from above” turned out to be relatively brief, as Russian people were put under a different form of serfdom again after Lenin’s Communist revolution of 1917. This time, they became serfs of the state.

Having no direct experience of pre-revolutionary Russia, I cannot accurately describe life in a mir. It makes sense to believe that it had strong elements of social cooperation, as well as the practices and customs of the Orthodox Church. That, however, is not collectivism, at least not in the meaning it is assigned in the myth of “Russian collectivism.” Themir was in fact a system of free and independent people negotiating on common issues in the interest of each person, from which the collective interest followed. But the serfs, and later the Soviet citizens, lived in a forced collective. It was not a voluntary collective of free individuals. When it comes to examples of “idyllic” communal life, I hope nobody mentions the kolkhoz (collective farm) and kommunalka (the communal apartment where many families were forced to live together, sharing the kitchen, bathroom, and corridors, while the entire family lived in one of the adjoining rooms). Probably no institutions have contributed more to the Russian aversion to collectivism than these two.

The whole communist state represented a most unnatural way of living together in a system that was totally different from what it was called. It was, in effect, a system of institutionalized cognitive dissonance. In fact the Soviet system destroyed any form of true collectivism or collective initiative. All normal social interactions based on social traditions from the past were destroyed or degraded. Any form of voluntary, spontaneous collective action – whether it involved reading poetry, worshiping God, or playing jazz music – ran the risk of bringing down the state’s wrath. Religion, for centuries the basis for most people’s customs and habits, withered under a sustained assault that lasted decades. Even Soviet wedding ceremonies, which replaced religious symbolism with images of Lenin and the hammer and sickle, proclaimed the supremacy of state power in all aspects of life. Under such circumstances, people learned that they could only count on their own cunning and on small networks of trusted people to try to survive the best they could in that system of faux collectivism.

And the history of forging the Communist Russia and keeping it together is certainly not any testimony to Russian collectivism. Soviet Communism was established through a long and bloody civil war, followed by years of repression, first under Lenin and then under Stalin. There was too much individualism that needed to be extinguished in order to create the impression of collectivism. One might also cite the experience of Russian emigrants to foreign countries, who certainly do not seem to suffer from any deficit of individualism in their new environments.

So whatever prerevolutionary traditions existed, Russians of today are – for good or bad – distinctly individualistic in nature. Therefore, I adhere to an opinion which appears paradoxical at first sight: that Russians need a democratic form of government (which has been progressing rapidly since 1991) and corporate cultures based on engagement and self-organization. The paradox here is that it is, contrary to the received prejudice, precisely the hierarchical and bureaucratic organization that does not work. Russians are by nature too inquisitive and curious to know the big picture to which their tasks relate – too creative, if you will – so that when this is denied, as happens in the typical badly managed organizations of today, people will not be properly motivated to do their best. They will not be fully on board with tasks in which they don’t feel a personal stake. But that is really nothing new; it is in accordance with the global theory of engagement. Indeed, the mir was not a hierarchical bureaucracy; on the contrary, it was a form of self- organization. And so were the cooperatives called artels, which the peasants formed when they began to move to cities.

Hierarchical bureaucracies don’t work anywhere in the world, and Russia is no exception. We who live here have ample opportunity to verify this with our own eyes on a daily basis. In my personal experience, and from my understanding of history, Russians cannot fundamentally be coerced into any kind of desired behavior. Rather, they have to be convinced of your point, won over by participative argumentation. In terms of corporate culture, this means that they have to be engaged and won over to work for the good of the organization by the principles of employee engagement.

The difficulty here lies in the fact that so many people are immersed in the bad practices of the past. Therefore when you tell your leading committee that you want to introduce employee engagement, you will meet a lot of resistance. But you will have to convince them, and if you cannot do so, you should let the unconvinced ones go.

EMPLOYMENT ENGAGEMENT IN RUSSIA OFFERS HUGE OPPORTUNITIES

Due to the transition from the Soviet planned economy, today’s Russia is full of paradoxes. Here you can find the most stellar examples of how things should be done properly, while at the same time encountering examples warning how not to do them. One finds this in many spheres of life, and organizational culture is no exception. Russia is full of enthusiastic, conscientious and creative people that make for excellent workers in any organization. And we who live and work in Russia see how well-managed companies have succeeded in capturing this energy in surpassing organizations. But at the same time one still finds here organizations that serve as antitheses of a modern culture of engagement. These old-school organizations are still guided by the bureaucratic and militaristic management principles of the command-and-control economy. I will here outline some of the characteristics of such organizations which demonstrate all the worst parts of the Soviet administrative culture without embracing any of the best parts of modern Russia.

When I compare the well-managed organizations of the new Russia with the old-school depressing Soviet organizations, I cannot help but think that the organization really is a mirror of the management. Out of Russian people you can create the best organizations in the world – as I am fortunate to know from my own experience – but also some of the worst imaginable. The yawning difference in quality between the worst and the best can be attributed to one thing: leadership.

In Russia organizational behavior is still largely informed by the administrative command system of the Soviet Union. Soviet management styles, together with outdated rules and regulations, obstruct efforts to modernize business processes. If Russia wants to create innovative companies that can compete on the global scene, then its companies must start by renewing their organizational cultures, let go of the old models of bureaucracy and hierarchy, and focus on creating a culture of engagement.

Typically a Russian firm is organized in old-fashioned inflexible hierarchies where bureaucratic structures create barriers to empowerment, improved customer service, and innovation. The problem with bureaucracy is twofold in Russia. From one side it is present in the form of the bureaucratic system of public administration, but from the other side it is present in the form of the bureaucratic model of social interactions between people, which weighs heavily on all social and business practices. This bureaucratic model has permeated the corporate cultures in Russian firms, making them top-heavy in administration and unfit to operate in a modern competitive economy where a company has to continuously focus on customer satisfaction, find new innovative solutions and adapt to change. The bureaucratic model prevents companies from recognizing that any business should be organized around a sole overarching cause, that of dedicating all its efforts to profitably serve customer needs.

In such a setting the organization delegates up and not down as it should, and as a consequence the executives don’t lead; rather, they micromanage. In a typical Russian organization, employees are not empowered, but assigned highly specialized functions and given narrowly defined jobs. The communication culture is secretive and inefficient. There reigns an atmosphere of distrust and a culture of blame. Most people are preoccupied with internal politics and protecting their own turf. Bad reporting systems make things worse. Officially the culture is risk averse and avoids uncertainty at any cost. Risk-taking and innovating thinking is punished. This while individual managers take their own private illicit risks collecting and giving bribes and kickbacks, and sometimes run their own enterprises using the assets of the firm.

I have collected in table 1 a list of observations which, according to my experience, characterizes a Russian organization from the old command-economy school.

TABLE 1: Hang-Over Factors from Soviet Management Style

1. Organizations are extremely hierarchical, but executives don’t respect organizational subordination – CEO views the organization on the principle “Me and my thousand helpers”
2. Executives do not lead but micromanage
3. The organization delegates up and not down as it should
4. Employees are not empowered but assigned highly specialized functions (narrowly defined jobs).
5. There is an atmosphere of distrust. Preoccupation with internal politics. Protection of turf instead of teamwork.
6. Customer focus is lost. Organization worried more about reactions of management than customer satisfaction.
7. Organizations preoccupied with bureaucratic procedures and structures
8. A culture of blame. The managers ask “Who is guilty?” but rarely “Who made this possible?”
9. Risk-taking is punished, “initiative is punishable”
10. Communication culture is dismal and bureaucratic, “killing the messenger”
11. Bad reporting systems feed culture of blame and distrust – and reason to distrust!
12. Corruption flourishes (bribes, kickbacks). Often managers run their own firms within firms.
13. The principles of trust, respect and fairness are not widely honored – punishments are easily meted out but gratitude is hard to come by

These are only some of the problems that the Russian corporate culture is riddled with. Therefore it is a formidable challenge to any business leader in Russia to cure the corporate culture of the old ills and put in place a winning, modern corporate culture. But this challenge also represents an opportunity, for systematic investment of time and resources in building the desired corporate culture usually yields extraordinary results in the form of return on investment considering the dire state of contemporary management, but also the huge capacity of the employees and the flexible environment of today’s Russia.

The influx of international corporations into Russia after the fall of the Soviet Union has had an enormously positive effect on developing the local corporate cultures. Many of the foreign firms have served as formidable standards of best practices, which little by little trickle down to the country at large. One of the pioneers in this respect was McDonalds which, to my mind, has done more than any university to teach good management practices to Russians, both those who have worked and learned at the firm and customers who have the opportunity to see how a well-managed firm is run.

Judging from my experience of 20 years in management and HR in Russia, Russians prefer to work in a foreign-owned company, precisely for all those reasons that I list in this book as drivers of engagement and corporate culture. I have in mind here most educated young Russians, the kind of people that form the material for a culture of engagement.

Of course, I need to qualify this statement, by pointing out that there are horrible examples of corporate cultures in foreign-owned firms as well. And we should also keep in mind that we can naturally not suppose that all “foreign-owned companies” form a homogenous group so as to juxtapose those with Russians. I therefore stress that I make here a generalization between what I see as typical traits in multinational corporations stemming from the West and the general level of Russian owned corporations.

I also need to make another qualification concerning individual managers or executives. There are good and awful individuals among them all, but generally in well-run Western owned companies, the relative harm done by one awful individual is mitigated by the very corporate culture.

HOW RUSSIA ENGAGED ME

When I first came to Russia, I felt as if I had walked right into an underground-style black and white movie. I was in the movie but did not belong to it. Everything seemed so different from what I was used to. The movie was populated by a strange cast of personalities that surprised me at every corner. Watching TV confirmed that the country was to a large degree ruled by the same personalities. That was in 1991, and I think it took at least a couple of years before I more or less shook off this feeling of witnessing a strange way of life. I realized that I had adapted when after a couple of years the babushkas would stop me on the street and ask for directions or advice.

I am not saying that I condemned what I saw, although a lot of it I did. Mostly, I was just fascinated by it, as if I were watching one of the quirky, absurdist movies of my compatriot Aki Kaurismäki. And my perception was blurred by a whirlwind of often contradictory impressions as I was trying to make out what kind of country this was and what kind of people these Russians were. For a start, coming from Finland I was imbued with the stereotypes nourished by Western propaganda. I was convinced that Russia was a country of military discipline where people marched to the tune of the police. So you can imagine my surprise when I became aware of the total lack of order and respect for rules. My first independent insight to the Russian soul really was the realization that Russians were incredibly individualistic and freedom-loving. And I liked that. I do, however, admit that it was an excess of this individualistic behavior that put the country through a lot of trouble in the years of anarchy in the 1990s. But some of the prejudice or stories I heard proved true. I could even experience in person one of the jokes about Soviet society. Mind you, this was in 1991, during the worst consumer crisis caused by Gorbachev’s perestroika policies. The joke was about the shortages that plagued the Soviet planned economy. In this story a group of Western tourists visited Moscow and a tour guide took them around to the shopping venues. At the first store all what the tourists saw were empty shelves, and one asked the guide “What kind of shop is this?” The guide answered that it was a grocery store. In the next store the same empty shelves; and the guide said it was an electronics shop. And so on from one store to another, until they finally came to a store which did not have any empty shelves, because it didn’t have any shelves at all, only blank walls. The tourist asks, “Then what kind of shop is this?” “Oh, this is a furniture store which specialized in shelves.”

What I experienced in the Moscow stores was too much in accordance with this anecdote for comfort. There was practically nothing to buy and people would walk around with empty “just-in-case” bags (as they called them), ready to stuff them with anything that might suddenly come on sale. I, too, would have to stand in lines for one or another commodity, and when last in line, I was frequently approached by passersby who would inquire what could be bought at the front of the line.

Odd exceptions to the endless shortages were the fancy flowers with cellophane wrappings you could find at every metro station. I later learned that the availability of the flowers was due to the fact that this trade had been already liberalized, while almost all other forms of economic activity were still regulated by Gorbachev.

One of my weirdest experiences was when I ventured to dine at one of the few restaurants in town, one at the Moscow Hotel by the Manezh Square. When I approached the entrance I was stopped by a stern-looking guard who barked out in a commanding voice: “What do you want!” I was taken aback by this reproach and, disconcerted, retreated a bit and timidly confessed that I was contemplating eating in the restaurant. After a few inquiries I managed to convince the porter that I was a presumptive customer. He then unceremoniously commanded me to wait at the door and disappeared behind it. After a while he returned with somebody that looked like the maître d’hôtel. This person was much more customer-oriented, and told me he had learned about my desire to eat. But he let me know that the restaurant was quite full now and it would be hard to arrange a seating. He then asked me to wait while he ran up the stairs to the big dining hall. After a few minutes he reappeared. He continued negotiating the terms of this complex business deal with me and ran up the stairs again. After a round of three or four runs up and down to the dining hall, we inked the deal. The maître d’hôtel had found a seat for me, and it would be an all-inclusive night considering the money I had paid upfront to him at the entrance. I was finally let into the vestibule and then I solemnly walked up the stairs to the grand dining hall. I must say that I really regret that the building was later torn down (and replaced with one which merely replicates the façade), for the dining hall was really impressive: a bit worn out but with an unmistakable aura of pompous Soviet architecture in one of its better incarnations. For some reason, though, I was not much surprised to find the dining hall almost empty.

Then came the menu. Naively, I began actually to study it – although one of the jokes should have warned me against that, too. I was inquiring what this or that item would look like, how it was cooked, and other innocent questions. But the reply was invariably that the item was not available. I finally understood that I had to turn the question around and ask what was available: stolichnaya salad, cold cut fish platter, “biffsteaks” (as it was called in the Soviet Union), and Chicken Kiev, washed down with vodka, Soviet champagne and Pepsi (the kind where the sticker logo was always plastered in any conceivable position on the bottle). But the meal was enjoyable.

Next time when I ventured back to this restaurant, I had learned from my experience. When asked by the grim-faced guard what I wanted, I cut him short and parried him: “What kind of place is this?” The guard was surprised by such an unprecedented question and did not seem to understand it at all. I repeated it three times until he finally replied that it was a restaurant. Now imagine my satisfaction when I could throw in his face the retort: “If this is a restaurant, then what would you imagine I was coming for?” And I was now also prepared when I entered a bank where the guard, this time with a Kalashnikov assault rifle in hands, greeted me with the same obtrusive question.

Restaurants were always an experience at that time and I treasure many a fond memory of them. Like the one which published its prices in rubles but insisted that foreigners had to pay the same amount in US dollars. Once I saw a decent-looking young couple, aged around 25 or so, on a date washing down their meal with warm vodka, which they drank from water-glasses filled, and refilled, up to the brim. And in one I was offered a shot of German Kiwi liquor with my starter soup. This was when all the foreign influences suddenly invaded Russia and people had not yet figured out the intricate details of Western habits.

Security, or the appearance of security, controls and restrictions, was very much the obsession of Russian organizations of that time. It still is. Whenever you wanted to enter an office or administrative building or a special territory, you needed the “Propusk,” an entrance pass. Usually anybody could obtain such a permit with a little pleading, but it was an unpleasant bureaucratic hassle wrangling with people at the “bureau propuskov,” who did all they could to uphold their sense of pride based on controlling who gets in or not. My most memorable experience with the propusk was when I wanted to visit the Easter church service. On television they told that the main Easter mass was being held at Yelokhovsky Cathedral and that President Yeltsin was going to attend it. I thought it would be interesting to experience the golden feeling of an Orthodox mass, with its striking colors, the scent of the burning candles, and the intriguing chants and music. And I would also have a chance to see the president there. So at night I headed for the church. I checked the location in a tour guide and took the metro to the nearest station. When I surfaced from under ground, I saw the church in the distance and headed towards it. Then I saw a police cordon. The road to the church was blocked. I walked up to the police line and asked an officer what this was for and how I could access the church. The policeman informed me that he could only let through invitees with a valid propusk. I was disappointed; coming from Finland I had not expected that one would need permission to enter a church. I turned back towards the metro, but after taking just a few steps back the guard called me. He asked where I was from and I told him I was from Finland. To my surprise he said: “From Finland, then you can pass.”

Now I felt good to be from Finland, and joyfully headed further towards the church. I saw that approaching the church most people turned right but a few followed a smaller path to the left. I decided to choose the left path. Around the corner there was a small queue. I advanced a little in the queue and noticed that people were showing some identification cards. It was again the propusk, I realized. Having nothing on paper, I decided to use the same pass I was given by the police, that is, the recognition “I am from Finland.” The line was small and soon only 5 people were in front of me, but then I noticed that at the entrance, flanked by younger security personnel, stood the Russian Minister of the Interior, Mr. Barannikov. Now I got worried about the validity of my oral propusk and the fact that I had got so far with it. Frankly, I felt a creeping feeling of danger. I was in the former Soviet Union, the country that had been named the “evil empire” by the president of the United States, and portrayed in the West as an inhuman KGB-run machine. And in front of me, the head of it all, a minister of the interior, who had all the appearance of a person that could inspire fear in a Finn like me standing without a valid entrance pass at the VIP entrance to a church. By then it was too late to panic and I had learned in life to stay cool. So I did not panic. But I was thinking how to get myself out of the situation. I couldn’t just turn around, that would arouse suspicion. What would they think about me? Maybe they would assume I was not there in good faith (sic!). How had I avoided the earlier checkpoints? In any case I decided not to lie; I had to stick to the truth. Soon there were only two persons in front of me. A lady put a hand in her purse and, as if it were the most normal thing in the world, flashed her propusk and identification. One more person showing his credentials and then it was my turn. I sensed the examining gaze of the Interior Minister penetrating me. The end was near. “Maybe they would just deport me,” I consoled myself. Now the young security guard dressed in a neat civil suit looked at me, in a surprisingly friendly manner. He asked for my documents. I showed my passport. “Propusk,” he said, using the magic word. “I don’t have one,” I admitted, looking him firmly in the eyes. “On whose invitation do you come, the embassy’s?” he asked. The Finnish embassy sounded like a good choice, but I decided it was better to stick to the truth. “The officials of the Russian Orthodox church?” he suggested. “No, not them,” I replied, with some hesitation. He gave me two more choices which I turned down, and then he finally said: “Then who invited you for, for you must have an invitation?” I suddenly realized that I had one: This was a church, a Christian church, a branch of the religion in which I had been baptized. I knew I had found my invitation, my pass to entrance. I replied “God invited me.” He looked up at me. I was surprised because he was not surprised. In Finland even the religious would have thought I were nuts; on the other hand, I knew I was right. If there are churches and there are religions, then it is the God of the religion that invites you to the church. This much was clear to me. I saw the security officer going through his mental records, and then he delivered his verdict: “Visitors with those invitations are supposed to use the main gate around the corner.”

I was relieved, thanked him and threw a glance at the Interior Minister, turned around and went towards the main gate. At the main gate, I was again asked for my entrance pass. But I felt secure now: I just said that I had been sent from the other gate. And I was let in. This process of entering the house of God in the center of Moscow in 1992 was so telling an adventure. All of post-Soviet Russia and the role of a foreigner in it were concentrated in these moments: the restrictions, the fear, the gap between cultures, the suspiciousness, the humility and humanity, the truth, and the value of truth.

I had first come to Russia with the view of establishing my own consultancy here, but I soon noticed that in the prevailing business climate I would not be able to consult anybody, even myself. Thus I decided that I had to take up employment and learn the Russian laws and business practices before I would venture to consult other people. I landed a job in a joint venture firm between an American and Finnish corporation and the Russian Ministry of Railways. The Ministry of Railways was a huge structure which in Soviet times had employed 3 million people (so I was told), and although the JV I worked for had only a staff of 150, it was permeated by the culture and practices of the massive Soviet ministry. (Only when I later joined a big American corporation did I experience something similar, but with a softer touch on the surface.) I was the CFO and also in charge of legal matters, and the only expat on ground until later, when I was able to hire some assistants from Finland. The business culture was a huge shock for me, with its culture of fear and the bureaucratic practices that penetrated all aspects of the work. I was going to say that the organizational structure was hierarchical but that would not be true at all, although one might first perceive it as such. In fact the organization was as flat as could be: there was the CEO and his thousand helpers (in this case more correctly, his 150 helpers). The CEO was micromanaging every aspect of the work and did not respect the principles of subordination at any level, personally assigning tasks, demanding reports, and giving detailed instructions to all of the 150 staff members. I was one of 5 or so vice- presidents who belonged to the executive committee (sort of). The meetings of the executive committee were designed as sessions where the CEO either gave his weekly monologue, vaguely connected with business matters and full of crude street philosophy, or as public verbal executions of one of the vice-presidents or any other person in the organization who happened to have fallen victim to his caprice of that day. There was an elaborate system of punishments based on the fact that more than 60% of the salary was designed as a so-called “currency premium” which could be withheld at will. Thus any kind of omission or perceived omission could lead to the punishment of being deprived of more than half of one’s monthly salary. I remember that once in a while the CEO organized a razzia at the front door at 9.00 AM to monitor if people showed up at work in time. Those who were late even by one minute would lose all or half of the currency premium.

It is no exaggeration to say that this was a culture of fear and blame. But I have to admit that there was also another side to the story. I partially adapted to this culture myself in the sense that I took over some of the behavioral patterns of the CEO; I thought they were needed in the business culture of Russia in those years, and to some degree still are today. A dose of that style was appropriate; I just wish our CEO had struck a better balance in that. He did a great job with the JV and took it to great heights. He was surely running one of the best firms in Russia in the early 1990s. He was also a wonderful person in his private life, a good entertainer, with sharp philosophical insights, hardworking, creative and successful. One of the monologues I enjoyed in particular was when he had invited the two young tax inspectors who were in the process of auditing for “a chat” to his office. As the CFO, I had been invited in order for me to learn how correctly to treat the tax inspection. At that time tax laws and practices were a total mess and the taxpayer was left to the arbitrary mercy of the inspector. For tax audits young incompetent tax inspectors showed up with the sole purpose of finding, or inventing, fault so as to fine the company millions. Our guy would not put up with this. So I witnessed a theatrical monologue featuring the teachings of Nietzsche, the Bible, Russian writers, the virtues of hard work, and how SFAT was the most honest firm in Russia – “so keep your silly fingers off our firm!” It worked. We never had any problem with this tax inspection.

As we will see in this book, a lot of problems remain in terms of organizational culture, but in the last 20 years a lot has changed. There is color in the movie. Moscow can now offer culinary sensations from all over the world with a great variety of restaurants for all tastes. There is a real consumer market and a lot of firms that really want to serve their customers. In this environment I have myself been able to create a corporate culture in Awara, the firm I co-own and work in, based on the best principles presented in this book. We run a self-organization populated by self-disciplined and self-motivated people. We are truly a non-hierarchical low-bureaucracy organization based on the principles of managing by projects, where virtual teams have replaced hierarchy and matrix. We have thus in Russia been able to create the organization of the future in Russia, while it still remains a rarity in the West. Personally I have adapted my working style and life style to the possibilities offered by this organization. I don’t have a cabinet in the office. I don’t even have a dedicated seat. I just sit at any of the desks that happen to be free when I visit the office. Really, visit is the right word, because I come to the office only for meetings, for external and internal scheduled meetings. Apart from that, I work at home or in cafés and restaurants. As a managing partner for a consulting firm, I have to read and write a lot – like I am doing writing this book. And how could I possibly do that if I had to sit in the office in order to manage people in the traditional way. I can also take my work with me to a foreign country, to spend, for example, the harsh winter months in sunny Brazil, when I am working for the firm in Russia.