Can we educate Russians in HRM? The issue of HRM transfer Markku Sippola Strategic Business and HRM in Russia (Together with lecture course Economic development of border regions)

Esityksen nimi / Tekijä 2 Nordic countries & Russia: Whats common, whats different? Soviet legacies: -de facto workers control -engaging workers with the Soviet system as collectives and with the enterprise as individuals (Ashwin 1996) -authoritarian paternalist style (Clarke 2004) Scandinavian heritage: -industrial democracy in the 1970s -norm of social responsibility (the Nordic experience) -de facto workers control over labour process ?

Esityksen nimi / Tekijä 3 Structure of the presentation 1.The concept of model transfer 2.The limits of model transfer 3.How to educate HRM? 4.Traits of Scandinavian corporate culture in Russian subsidiaries 5.Conclusions

Why model transfer – and why in the context of human resource management (HRM)? Many Nordic firms in Russia, e.g. more than 600 firms, in which 50,000 employees Market-seeking foreign investment model requires a positive image, including social responsibility towards employees Russian management culture can gain from foreign investors, not only in the form of spill-overs in technology but also in HRM -> some practices can be regarded as global, e.g. Japanese lean production and quality management methods -> HRM is an area through which we can trace more general currents of the society – is Russia becoming post-modern in the way western societies are doing? Esityksen nimi / Tekijä 4

The concept of model transfer

The concept and scope of model transfer Anne-Wil Harzing: One of the central questions in the literature on MNCs is the extent to which their subsidiaries act and behave as local firms (local isomorphism) versus the extent to which their practices resemble those of the parent company or some other global standard (internal consistency) a relatively modest model transfer from the West to the East of Europe as regards to employee relations –studies on the model transfer from German enterprises to Central and East European (CEE) subsidiaries support this observation (Dörrenbächer, 2001; Bluhm, 2001; Fichter, 2003) –Norwegian enterprises have not transferred their home-country model of employee relations to Polish subsidiaries (Kvinge and Ulrichsen, 2008) Esityksen nimi / Tekijä 6

HRM transfer (Smale & Suutari 2007) Transfer of HRM knowledge (HRM policies and practices) is common in different kinds of organisations -> one of the most commonly cited areas is that of compensation Esityksen nimi / Tekijä 7 We are adjusting personnel policy, rewarding and so on to parent company principles. However, it is important to note that: - The ethnocentric and culturally dominant approach inherent in transferring cultural knowledge from the West into CEE countries has been much criticized and deemed inappropriate, particularly in view of the recent progress that as been made together with the valuable knowledge and expertise that already exists in the region (Lang & Steger 2002; Jankowicz 2001 cited in Smale & Suutari 2007).

The limits of model transfer

Conti (2006): …even if the governance system of the enterprise is in principle not democratic - whatever the social context - internal relations are strongly influenced by the kind of social relations that take place in the surrounding social environment. If people live in a free and democratic environment, they are imbued with a culture that makes them hardly accept autocratic styles of management. In different contexts, where people have been brought up in a paternalistic social environment, they may be disoriented by too much autonomy Esityksen nimi / Tekijä 9

Esityksen nimi / Tekijä 10 (Russian) employee (Russian) locality (Scandinavian) firm Empirically evidenced: -> expects to carry western practices (including rapid firing/hiring [Stal]; right to manage / supervise [Stal] etc.) (Russian) labour market: -> Flexible in its characteristic, post-Soviet way (Kapelyushnikov et al. 2011) -> expects social responsibility-> expects stability of work contract, (e.g. Melin (2008) Firms take their socialdecent conditions of labour, voice responsibility in Russia, Tieto&trendit 2/2008; (as it was in the SU, as it is in Scandin.) Sippola (2011) Traits of Scandinavian..

My evidence: -> it pays off to pay attention to social relations on the shop floor and in the locality. Nordic companies seek to achieve this goal by using two distinctive strategies: (1) resorting to a more Soviet-style (and also Nordic-type) personnel management with social awards, outdoor events and collective bargaining; or (2) transferring Anglo-Saxon human resource management practices, such as performance-related pay, suggestion schemes and employee consultation, to the Russian subsidiary. -> Both strategies have their pros and cons, although the latter one is more detached from the social reality based on local social relations Esityksen nimi / Tekijä 11

A false idea of the functioning of the Russian labour market? The problem of the Scandinavian firms labour policy in the post-Soviet context lies in the twisted (not natural) flexibility of the Russian labour market -> in times of crises, firms accommodate themselves to new conditions by means of contracting working hours and cutting wages rather than dismissing workers (Kapelyushnikov 2009) -> does not correspond to either numerical or functional flexibility However, the workers and the society are expecting other labour management model than the uncomplicated adaptation of the western right to manage / hire and fire ideas; Rather, the typical Scandinavian / Soviet pattern would be preferred Esityksen nimi / Tekijä 12

Nordic companies as foreign agents Nordic companies have a chance to act as foreign agents in a positive sense: companies-foreign-agents Esityksen nimi / Tekijä 13

How to educate HRM?

A hard task… Perceived feelings of superiority (because of the great history and the size of the country) sometimes make Russians to argue vaguely that this will not work in Russia (Camiah & Hollinshead 2003) Strong group affiliation and suspicion towards outsiders -> not-invented-here syndrome (Michailova & Husted 2003) A Russian mindset to be overcome (Smale & Suutari 2007): Esityksen nimi / Tekijä 15 The general doctrine is that Russia is very developed country, actually the most developed in the world and thus no external help or knowledge is required. They have it all here. It is a sort of self-sufficiency, and they really believe in that. It is really difficult to make the point that the transfer of this knowledge is really beneficial to them.

Fey & Shekshnia (2010): Russia has a tradition of strong, larger-than-life mavericks such as Peter the Great, Josef Stalin, and World War II hero general Georgy Zhukov. The new wave of Russian capitalism confirms this tradition: regardless of a successful Russian entrepreneurs competencies and management style, he or she invariably has enormous power within the organization. Followers look to the leader as a superior being who has unique rights and, by definition, deserves compliance. Russians have a need for powerful charismatic leaders and tend to create them often irrespective of the leaders intentions Esityksen nimi / Tekijä 16

…but the role of a foreign manager seems to be different (Fey & Shekshnia 2010): Russians expectations of foreigners in leadership positions, however, are more complex. The formal title of CEO does not guarantee its holder the same level of compliance from Russian subordinates when a Russian does not hold that position. Respect and conformity will come only if the foreign leader demonstrates superior competence and delivers tangible results. […] Russian employees expect from him or her specific actions that address their problems and improve their working lives and the performance of their company. To some degree foreign executives must live up to a higher ideal than Russian managers since in Russia the general belief is that foreigners are more progressive and can do more for their staff than Russian bosses Esityksen nimi / Tekijä 17

Given such a point of departure… -> a foreign manager can have influence! Esityksen nimi / Tekijä 18

An institutional bricolage? I: Do you see any Nordicness in this company organization? R: Being a Danish company? Yeah, I think I do. I: Whats that about? R: I think its about corporate culture. Denmark being in general, again, in my personal opinion, very kind of people-oriented and socially responsible kind of country. I: Exactly, thats the Soviet values. R: Soviet values. And thats why I think, Danish culture very well goes in line with Soviet culture [laughs]. Because, we often call it Scandinavian socialism, because its about being socially responsible, its about being stable, its about taking care of employees. And its about being, I dont know, pretty straightforward. I think Nordic culture, compared to, I dont know, eastern culture for example, its very straightforward. What I personally like about Danish people is that very often you know where you are with the person. If there are some problems, then you will hear about it. If something is good, then you will also hear. And it goes very well with, again, Russian culture, I think. Because Russians are also pretty open. Maybe pretty tough sometimes but in general pretty open about problems and issues and everything. So, thats why I think Danish or Nordic culture goes very well in line with Russian culture Esityksen nimi / Tekijä 19

Traits of Scandinavian corporate culture in Russian subsidiaries

Scandinavian corporate culture: How it differs from the other ones? In comparison with American corporate culture, Scandinavian culture is more oriented to people -> at the core of the American CC are such features as individualism, pragmatism and performance -> in the Scandinavian CC, on the contrary, core features are the value of personality and taking care of personnel Esityksen nimi / Tekijä 21

Esityksen nimi / Tekijä 22 When employees, who have got acquainted with Russian pyramid-like authoritarian management, enter into our company, [our management culture] appears a surprise to them, - says Sergey Chernishev, General Director to Russian subdivision of Ruukki, a European supplier of solutions to construction and mechanical engineering. – But in due course they get accustomed to a more democratic manner of communication with the management, the possibilities to take the initiative and to come out with decisions of ones own.

What features does the concept of Scandinavian corporate culture consist of? Involvement of employees in discussion and decision-making upon issues that concern with their work (through trade unions or other channels) Information and consultation (through trade union or other channel) Job autonomy, possibility to utilise ones skills and abilities at work Work safety and good working conditions Decent and regularly paid wages Mutual trust and openness Quality of work Commitment to fulfilling ones jobs, integrity Work-family balance -> this exhibits a model, which might become a comparative advantage for Scandinavian companies! Esityksen nimi / Tekijä 23

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In what manner Scandinavian CC spreads in the companies? -Expatriates -Training abroad for Russian personnel -Selection of personnel -Matrix management -Forms of control -Organisation of work, e.g. pay systems Esityksen nimi / Tekijä 26

Conclusions

Coming back to my original idea that Nordic companies serve as foreign agents… My current research asserts that for foreign managements, it pays off to pay attention to social relations on shop-floor and in the locality They do so by using two distinctive strategies: 1.by resorting to a more Soviet-style (and also Nordic-type) personnel management with social awards, outdoor events and collective bargaining; 2.by transferring Anglo-Saxon human resource management practices, such as performance-related pay, suggestion schemes and employee consultation, to the Russian subsidiary Esityksen nimi / Tekijä 28

…foreign agents: Both strategies have their pros and cons, although the latter one is more detached from the social reality based on local social relations The post-Soviet patron-type management style – which is still admired by among the older workers – strengthens the significance of local embeddedness Besides the fact that the labour market is tightening in Russia, there is almost a 'Scandinavian' tendency towards demands among ordinary workers for decent salaries, sufficient leisure time and employee involvement schemes –On one hand, there is a trend to establish 'Soviet' style non-material awards for retaining the employees –On the other hand, some Nordic companies have introduced real measures of employee participation and job autonomy the management at a researched factory is pondering whether, and which way, to involve trade unions in participation processes Esityksen nimi / Tekijä 29

In the long run, a more holistic labour management strategy - that takes the employees' needs better into account – will be needed to gain a better position - and reputation - in the Russian market. (Sippola 2012) Esityksen nimi / Tekijä 30

Спасибо за внимание!