Table Of Contents:
Section
I. Introduction
II. Managing a Russian Work Force – Russians and Corporate Governance in Western Organizations
A.
Caterpillar -
"Yellow Blood" in Russia
B. McDonald's - "People Promise" to Russia
C.
Arthur Andersen -
"Focusing Russians on a Capitalist View"
III. Managing a Russian Work Force – Line Labor
A. Russian Labor Skill Set
B. Benefits as a Motivating Factor
C. Training as a Motivating Factor
D. Work Environment as a Motivating Factor
E. Promotional Opportunities as a Motivating Factor
IV. Russian Entrepreneurship
V. Conclusions
VI. Notes & References
VII. Bibliography
MANAGING
THE RUSSIAN WORKFORCE
I. Introduction
With a population of almost 150 million, Western companies have long viewed Russia as a large and unsaturated consumer market. Following the Russian market expansion of the early 1990’s, many foreign multinationals entered Russia pursuing commercial interests. These companies carried out investment programs, acquiring or building production facilities in Russia with the intention of manufacturing products for domestic consumption throughout the Commonwealth of Independent States (CIS). Furthermore, Russia's abundant natural resources and highly skilled labor pool made in-country production even more attractive.
The corporate structure of foreign companies in the early- to mid-1990’s was indeed characterized by the integration of Russians and Westerners in the management ranks of the multinationals. However, the majority of middle-level and virtually all upper-level management positions were held by foreigners. The need for rapid, Western style growth guided by experienced capitalists was perceived to outweigh the incremental costs of compensating top executives serving duty overseas. From a world perspective, Russia’s economic future looked bright. On August 28, 1998 this all changed.
The sudden and unexpected ruble crash of late 1998 wreaked havoc on the Russian economy and precipitated a mass Russian organizational restructurings by multinationals. On average, multinational companies cut their Russian operations and management staff - relocating many expatriates outside of Russia. Still others, such as Unilever, made their main cuts by transferring expensive executives (whose cost typically runs to $500,000 a year) to new jobs with responsibility for the business of other countries.[1] Consequently, the door opened for Russians to fill vacancies in these multinational companies and those trained in Western-style management rose to occupy both middle-level and, to a certain degree, top-management positions in their respective organizations. Motorola’s paging joint venture, for example, now has one foreigner in place of three, but it has shed few Russian staff.[2]
The purpose of this paper is to compile in-country the testimonies of expatriates currently managing Russian or integrated workforces. Furthermore, this paper differentiates between the collection of middle-level and upper-level Russian executives, together termed as "corporate governance" for the purpose of this study, and the ranks of traditional production line labor. With respect to line labor, this paper highlights motivating factors, including benefits, training, and promotional opportunities which are employed by multinational companies to motivate their Russian subordinates. In all cases, this paper cites quotations and evidence collected from interviews of managers at multinational corporations such as Caterpillar (CAT), McDonald’s, Arthur Andersen, Monsanto, Nestle Foods, and Baker & McKenzie.
Furthermore, this paper addresses the spirit of entrepreneurship in Russia, a force that may potentially help to align the objectives of the Russian workforce with those of its foreign employers. Lastly, this paper also takes into account certain aspects of the Russian Labor Code, and how it pertains to motivating or de-motivating Russian employees.
II. Managing a Russian Work Force – Russians and Corporate Governance in Western Organizations
At the time of the
Soviet Union's collapse in 1991, a number of Western corporations had been
operating in Russia for many years.
Under Soviet law, Western investment had to be under a joint-venture
contract. However the Western-side of
the organizations were predominantly run by expatriates who performed foreign
service as part of their climb up the corporate ladder. Russians, on the other hand, were almost
never considered as viable candidates for these slots. On the whole, Western management considered
Russians ill-equipped to make strategic business decisions since they generally
lacked the necessary product development skills, forward capitalist thinking,
and the instinct for optimizing both quality and profit during manufacturing.[3]
Now, ten years after capitalism sprung from the ashes of the communist Soviet Union, the Russian government is taking large steps to stimulate growth and investment in-country. The abolishment of the joint venture paradigm, land reform, and tax incentives are considered great leaps of progress by most Western business leaders. However, many agree that for Russia to truly foster long-term prosperity, the country must now breed her own native business leaders – individuals with an understanding of competitive markets, profitability, and capitalist strategy. If this is accomplished, these native Russian leaders will alleviate the need for expatriates and provide Russia with long-term drivers of economic growth and a source of national pride.
Currently, few Russians hold senior management positions in the Russian operations of multi-national firms. The question of why this is given that many multi-nationals have been operating in Russia for 10-20+ years has no clear answer. However, an examination of how these companies make organizational decisions helps us to understand where natives fit into the planning. For example, importing expatriates into Russia to manage the business clearly makes sense to many companies in the short-term. Ex-pats have the all-important company-specific experience, a worldwide contact network, and the implicit trust and autonomy to run the foreign operations from the senior executives at corporate headquarters.
However, some are beginning to realize that the cultural benefits of promoting Russians into senior management far outweigh the cultural transaction costs of having an integrated senior management team. Among these benefits is a higher degree of trust and respect from other nationals in the organization, an understanding of the people, customs, and country when managing relationships with suppliers, buyers, and partners, and a native's insight into the business and market climate that an expatriate may not have.
(Note that for the purpose of this section, we have included supporting evidence in a case study format, highlighting the executive management experiences of three prominent multinational players in Russia.)
A. Caterpillar - "Yellow Blood" in Russia
Caterpillar Inc. is the world's largest manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar first opened a representative office in Russia in 1973. Today they have 10 dealerships in the CIS territories, corporate headquarters in Moscow, and an assembly plant in Tosno, 40 km outside of St. Petersburg.
According to the General Director of Catepillar Russia, Mr. Jim Tevebaugh, one of Caterpillar’s three main goals in Russia is “...the development and training of our people. People make the difference and Caterpillar and our dealers will hire local people and make significant investments in their training and development.”[4]
Mr. Tevebaugh directs the entire corporate efforts in Russia-- making the most broad and encompassing strategic decisions. When asked when he or other senior managers might yield to native Russian leadership, Mr. Tevebaugh claims that currently Caterpillar has no plans for this type of organizational move. Currently, Russians are most frequently recognized by Caterpillar management for their excellent engineering and IT skills. He believes that 70 years of quota-driven communism has impaired older workers' abilities to manage both quality and profits. As a result, Caterpillar favors the hiring of younger Russians - usually just out of university- as they have a fresh, uninhibited perspectives on the business world. Still, Mr. Tevenbaugh made no reference to the possibility that a Russian would have any type of strategic say in Caterpillar’s continued expansion into the Russian markets over the foreseeable future.[5]
Despite this, Caterpillar has a general commitment to improving the understanding of marketing, finance, and Western-style accounting in its promising Russian associates.
The Caterpillar 3-month pan-European Global Management Program in Geneva can be likened to a mini-MBA. Approximately ten Russians have already participated in this program, which Mr. Tevenbaugh feels is the first step towards promoting a Russian to a senior management role.
At the Caterpillar Tosno Assemby Plant, Mr. Gilbert Holmes, General Director, has a slightly more liberal view on establishing Russians in senior management positions. In addition, Mr. Holmes has found that younger employees will develop Western-style management principles more readily than their older counterparts. Furthermore, in the more technical environment of the assembly plant, Russians have already been promoted to management positions in light of their ability to oversee a native labor force. Mr. Holmes pointed out that much of the line labor comes from the old heavy ship building industries of northern Russia. He concludes that it is sensible to hire experienced Russian managers skilled at motivating these workers through personal communication skills best exercised by native Russians. Mr. Holmes also mentioned that out of the six highest-level positions at the plant, two have already been assumed by native Russians. He was also quick to point out that three of those six positions (General Manager, the Financial Manager, and the Operations Manager) will remain occupied by Americans for the foreseeable future. To note, virtually all multi-national companies studied had expatriates in these three positions.[6]
Caterpillar has a conservative approach to integrating its Russian operations with native Russians. A main reason for this, outside cultural transaction cost theory is that Caterpillar consistently rewards longevity of service. Since the company did not have any Russians in its workforce until after the fall of the Soviet Union, there are more seasoned workers who are viewed by management as more deserving of these prestigious positions. However, the fact that the managers at the Tosno plant are hired to better deal with the culture and habits of specific types of workers (in this case former shipyard machinists), suggests that cultural transaction costs are seriously considered in organizational decisions. However, the question still remains: where are the perceived corporate limitations with respect to the cultural integration of the workforce? For Caterpillar of Russia, this limitation is clearly at the corporate level.[7]
B. McDonald's -
"People Promise" to Russia
In contrast to Caterpillar, McDonald's has been more aggressive about developing the native Russian staff. Sharon Ramalho, Director of Operations for McDonald's Russia, is one of only three Russia-dedicated expatriates in the management of the entire 58-restaurant operation (not including the founder of the original Russian venture, Mr. George Cohon, who now serves as the "Chairman of McDonald's Russia" as well as other high-level positions within McDonald's Corporation). Similar to Caterpillar, these three positions are Director of Finances, Director of Operations, and Director of Marketing. However, unlike Caterpillar, McDonald’s General Manager of Russia is a native who started as the manager of the original McDonald's at the Pushkin Square location back in 1988.
According to Ms. Ramalho, Russia McDonald's promotion track is similar to that of its Western counterparts. A good employee who begins as line-staff worker has the opportunity to join the crew management team within several months. From that point, if an employee shows her mettle, she will move on to restaurant management. Any ascent beyond that will occur at a rate comparable to all other McDonald’s employees at that level, throughout the world. Promotion depends less on the understanding of Western business practices and more on understanding the criteria that McDonald's uses to define success on an international level. As a result, rigid guidelines for promotion have reduced the role that cultural transaction cost play in McDonald's organizational decisions.[8]
McDonald's vast experience in running effective overseas operations allows it the confidence and know-how to promote natives into senior positions without considering cultural transaction costs. Furthermore, the management hierarchy has no impediments to the advancement of workers from any culture. As a result, a type of "trickle-up" effect takes place -- workers can move quickly from line-staff all the way up to corporate management and without cultural barriers. In fact, Ms. Ramalho, a native Canadian, is a testament to McDonald's long-standing commitment to being agnostic towards culture. Given McDonald’s current success in Russia, it is easy to believe that cultural transaction costs are ignored for good reason – quality managers provide overwhelming value beyond any advantages/disadvantages culture might provide.
C. Arthur Andersen -
"Focusing Russians on a Capitalist View"
Mr. Robert Waters, Director of Human Resources in the Moscow offices of Arthur Andersen, provided the view from an intellectual capital services firm. Andersen (not to be confused with “Accenture,” formerly known as Andersen Consulting) has over 600 professionals providing audit, tax, legal, and financial services to clients in the CIS from offices in Moscow, St. Petersburg, and Novosibirsk.
According to
Mr. Waters, Andersen's number one Human Resources mission in Russia is the
recruiting and training of native Russians.
On average, Russians tend to be more loyal to the firm, less expensive
(no need for overseas pay), and willing to learn Western-style business
practices. Furthermore, as a
service-based firm, the cultural transaction costs that most effect profitability
are arguably those between the client and the professional team. Since Andersen works with a variety of
companies - both multinational and Russian - they clearly realize a need to
have a culturally diverse set of partners.[9]
In the manufacturing industries, Mr. Waters sees more of a need for expatriates. Expatriates are more adept in raising foreign funds for new ventures and often bring company-proprietary information and technologies to Russia for the purpose of teaching their native counterparts. However, in service related industries, the number of Russians in senior management positions (i.e. partners) should be proportional to the percentage of clients who have Western management vs. those who have Russian management. Naturally, Mr. Waters' observations fall right into the theory of cultural transaction costs: have Russian partners service the business of Russian-run clients and Western partners service that of Western-run clients.
III. Managing a Russian Work Force – Line Labor
Western manufacturing companies face many concerns when considering the prospect of establishing manufacturing operations in Russia. Questions regarding the stability of the economy, the valuation of the ruble, and the corruption in the government are key issues that cannot be ignored. However, another factor that deserves equal attention is the management of production labor – commonly referred to as “line” labor. Foreign multinationals are often concerned that their firms will not have access to a skilled labor pool capable of developing key capitalist philosophies (note, the mantra of the Soviet worker was touted to be ‘They pretend to pay us, so we pretend to work.’). While concerns involving the economy and corruption appear to be substantiated, any hesitations with respect to labor are not. In fact, after extensive discussions regarding the current Russian line labor market with companies who have successfully developed manufacturing operations in Russia, one can conclude that Russia’s labor market is ripe for Western companies' usage.
(Please note, this section includes supporting evidence under primary thematic headings, drawing upon the experiences of multinational players where relevant.)
A. Russian Labor Skill Set
Multinationals who have successfully entered Russia are quick to characterize their employees as hardworking, skilled, and reliable. Caterpillar’s Tosno plant of 500 employees consists of one-third high-school graduates, one-third trade school graduates, and one-third college graduates.[10] The education level of the work force at Caterpillar’s St. Petersburg plant is a microcosm of the larger Russian population, which boasts an impressive 98.5% literacy rate.[11] In fact, the technical capabilities of the Russian workforce is often considered to exceed that of the workforce in the U.S.
Not only is the Russian line labor skilled, but also it's collective work ethic compares favorably to that of any Western country. For example, Sharon Ramalho of McDonald’s Russia, an experienced McDonald's manager in many Western countries, went so far as to say that “the McDonald’s staff is better in Russia than in the West”[12] In addition to the excellence of Russian line labor (i.e. skills, work ethic, reliability), the productivity of the Russian work force is further enhanced by the currently high motivation Russians feel when working for a Western company. When McDonald’s announced plans to open its first restaurant in Moscow a little over ten years ago, it received 27,000 applications for the 600 positions. Even today, McDonald’s still receives ten applications for each job opening.[13]
B. Benefits as a Motivating
Factor
Russians choose to take advantage of the opportunity to work for a Western multinational for four main reasons: compensation and benefits, training, quality of the work environment and opportunities for promotion.
The consistent provision of quality benefits is a major attraction of Russians to Western companies. Not only do multinationals offer good paying jobs, they also actually pay consistently and on-time. While this may sound absurd to most of the Western world, in fact, prior to the entrance of foreign multinationals, many Russians had to contend with the failure of management to make payroll. However, since better employment opportunities (where payment would be received for services performed) did not exist, Russian workers did not have the luxury to quit under these. Even now, when Russian companies make their payroll there is no guarantee that their employees will receive all of the salary that is rightfully due to them. Russian companies are notorious for understating employee wages on their books in order to avoid paying taxes. The result is a “culture of distrust” that has existed between the commercial players and the Russian government; corporations claim that the government expects annual increases in tax payments regardless of changes in the profits or investments of companies simply because otherwise the government will suspect the company is finding new ways to hide money. As a result, corporations often pay part of their employee’s salary “under the table.” While this portion is commonly denominated in dollars, the “recorded” portion of an employee’s salary is paid in rubles.[14] Western companies provide Russian line laborers with an attractive alternative that promises consistent paychecks fully denominated in dollars as well as top quality benefits packages.
C. Training as a Motivating Factor
In addition to providing superior compensation and benefit packages, foreign multinationals can gain an advantage over their Russian counterparts by providing training for their employees. Employee training is an activity that is relatively scarce in Russian companies, due to the fact that training expenses (among others) are not deductible for tax purposes in Russia-- a result from the aforementioned distrust of companies by the government. Scott Antel, tax and legal partner with Arthur Andersen in St. Petersburg commented, “training of staff is virtually not tax deductible due to corruption.”[15] Art George, a partner with Baker and McKenzie in Chicago who has worked extensively in Russia, states that the provision of training can be a source of competitive advantage for companies competing for high quality Russian labor. “Russian employees are largely motivated by short-term, immediate benefits and are likely to walk across the street for more money. Companies offering training would be appealing to Russians, however.”[16] McDonald’s Russia provides on-going training that is no different than that which is provided in the U.S. or Europe.[17] This may help to account for the high demand for McDonald’s Russia jobs.
D. Work Environment as a Motivating Factor
Another appealing characteristic of Western companies is the positive work environment. The quality of life at multinational plants is better than domestic plants and often times better than that in the homes of the Russian workers. Western facilities are often clean, heated, offer medical attention, and provide healthy meals. Upon seeing the quality of life afforded to Caterpillar’s employees, one St. Petersburg official remarked, “[Caterpillar] is more socialistic than we ever thought to be. You actually care about your people.”[18] In addition to the benefits mentioned previously, two of the top three motivators to work cited by McDonald’s are the fun atmosphere and the team-oriented culture. McDonald’s employees enjoy regular, company-wide events such as picnics and nights out at discoteks. Further, workers value the manner in which their managers treat them. Face-to-face meetings with senior management instill a sense of community and importance in each worker.[19]
E. Promotional Opportunities as a Motivating Factor
Finally, opportunities for promotion not only constitute incentives to Russians in general, but also offer opportunities unavailable anywhere in the current economy. McDonald’s communicates to its employees the hierarchical nature of its organization, as well as its expectancy for advancement. Most importantly, employees are promised equal opportunity for upward mobility. Titles such as “employee-of-the-month” and “grill person-of-the-month” are awarded to encourage performance deserving of promotion.[20] At Caterpillar, the college graduates working on the line are prospects for line-management positions.[21]
The factors outlined above make opportunities at Western companies such as Caterpillar and McDonald’s very appealing to Russians, resulting in comparatively low attrition rates. Caterpillar did not lose a single employee at its Tosno plant in the St. Petersburg oblast last year.[22] McDonald’s Russia experiences only 50% turnover in its crew as opposed to McDonald’s U.S., which has a turnover rate of close to 100%. Moreover, most of those that do leave McDonald’s Russia do so to return to school; only 20% leave in favor of a position at another company.[23] Russians are not only cognizant of how limited such opportunities are, but they are also very receptive to the reward-based compensation structure of Western companies. In fact, Russians have proven themselves receptive to accepting Western cultural requirements on top of performance standards. At McDonald’s, Russian customers notice that all of the employees are smiling. “We even have little contests for the best smile”, said Sharon Ramalho.[24] The better their quality and the harder they work, the greater their prospects are for improving their position in the company and in their lives. This begs the question of why such enterprising, hard-working employees don’t aspire to eventually leave multinationals for entrepreneurial opportunities?
IV. Russian Entrepreneurship
In the past, Russians have proven their ability to take advantage of entrepreneurial opportunities. In 1990, Mikhail Gorbachev allowed Russian citizens to profit from what was referred to as ‘kooperativy,’ or cooperative initiatives. At the time, many citizens profited greatly from the ability to open kiosks on the streets of Moscow to sell previously scarce goods. However, increased rent, taxes, and tax complexities have made it more difficult for small businesses to flourish. This is not the only burden entrepreneurs assume in Russia, as most entrepreneurs must contend with the mafia and bureaucratic corruption. As one unidentified businessman stated, “Most businesses have to pay the mafia. Otherwise, they will burn down your business or even kill you. There is no way around it. You either pay or you are out of business.” While 5% of profits is the typical amount extorted, “if a business is very profitable, they will try to squeeze as much as possible from you.” Some consider the mafia’s affect minor from a financial perspective when compared to the increasing demands for bribes by bureaucrats.[25]
The state of entrepreneurship for Russian citizens results in a significantly positive side effect for multinational businesses considering operations in Russia. First, with the current market depressing the prospects for would-be successful entrepreneurs, a more reward-driven, creative base of labor exists in multinational companies offering real monetary rewards not available in the entrepreneurial private sector. This dimension allows those multinational companies to capitalize on a favorable labor pool from a cost and skill-level standpoint.
For example, in Moscow last year, Intel Corp, the world’s leading manufacturer of microprocessors, announced its intention to open its own offshore programming center in Nizhnii Novgorod. The company decided to convert the local programmers it had been hiring on a contract basis over the past seven years into full-fledged Intel staff. The center will add to the nation’s software outsourcing boom, which constituted a total of $70 million in offshore programming services last year, according to a report by Brunswick Warburg brokerage.[26] Russia’s IT sector is rife with entrepreneurs capitalizing on their world-class mathematics and programming skills. The skills they have, and their knowledge of natural sciences, have found a use in modern capitalist Russia. The laws of physics and mathematics are the same whether you use them to write computer software or, to put it more crudely, build a nuclear bomb.[27] Most of the older programmers in Intel’s Nizhnii Novgorod lab are former defense workers, but others are recent college graduates and still others are students. “We didn’t ask them where they worked,” stated Intel Corp Executive Director Craig Barrett, “We are more interested in the work they can do today.”[28] In many instances, Russian entrepreneurs prefer exercising personal initiative within the bounds of a larger corporation, as this arrangement allows them to tap commercial resources and avoid the pitfalls posed to small businesses by the modern Russian market.
Furthermore, as Mr. Gil Holmes, the General Director of Caterpillar’s St. Petersburg facility stated, “Russians understand that we, like most other multi-nationals, will not participate in corrupt business practices, so much so that we have incurred costs significantly greater than the bribes suggested to remove the problem at hand. Russians know we will not participate in any payoffs of any kind. As far as the mafia is concerned, because there is no one owner of our facility, we are not in any danger. One man who owns a business can be tortured to sign over his business, but the mafia knows that there is nobody within our organization who would have that ability.”[29] Working in a multinational corporation within Russia allows enterprising Russians to capitalize on the rewards of their hard work without the risks of corruption. By effectively avoiding corruption, many multinationals are in a prime position to leverage the vast resources available in Russia such as this copious source of skilled labor.
Former President Boris Yeltsin was quoted as saying that, “Small business constitutes one pillar of economic development, of the population’s well-being, as well as social and political stability, and I would say in many ways of the country’s moral standing.” This sentiment reflects the government’s acknowledgment that empowering its workforce to capitalize on entrepreneurship is necessary. However, as long as significant measures are not taken to curb corruption, the powerful Russian workforce will be available for multinationals to leverage for production advantages over strictly Western-based competition. While this bodes well on a small scale for potential multinational entrants into Russia, the hindrance of entrepreneurship in Russia has significant effects on a stagnating economy. As the renowned economist Joseph Schumpeter wrote, “it is the entrepreneur’s profit which is the primary source of industrial fortunes, the history of every one of which consists of, or leads back to, successful acts of innovation. And as the rise and decay of industrial fortunes is the essential fact about the social structure of capitalist society…this process of innovation in industry by the agency of entrepreneurs supplies the key to all the phenomena of capital and credit.”[30] At some point, Russia must empower entrepreneurs to be the catalyst of economic prosperity, but currently this requires the control of bureaucracy and corruption, which are not small tasks.
V. The Russian Labor Code
But what of the rare situation of a Russian worker not performing to requirements? Employee-employer relations in Russia are still governed by the 1992 Labor Code, which gives employees a very high degree of job security and makes firing a worker extremely difficult. Russian courts are traditionally employee-oriented and will likely rule against the employer. Transgressions that would typically mandate termination are difficult to prove and often do not merit immediate firings. Some companies have attempted to write additional clauses into contracts outlining more explicit grounds for termination, but these contract are typically not enforceable.
Ultimately, the only way to effectively terminate an employee is to document the employee’s performance and provide at least two written warnings, a process that usually takes a full year to complete. Often times, to avoid officially being fired (a black mark on the employee's record that would significantly impact future employment opportunities), an employee will agree to ‘mutual consent’ of terminated employment. In such an instance, companies are required to pay two months of severance. By extending these terms, however, companies can provide incentives for employees to agree to termination.[31] While few situations arise in which terminations are necessary, concluding such issues can be a time-consuming, arduous process. However, one should note that this process is not necessarily easier in Western countries and may in fact be more frequent since developed countries’ workers are not as compelled to retain their jobs.
As demonstrated in the preceding sections, the concerns of Western companies regarding the Russian workforce rarely center on difficulties with the Russian labor code. Russian employees are hard working, skilled, motivated and entrepreneurial. Workforce retention has in fact proven to be far more of a boon than a curse.
VI. Conclusions
After a careful analysis of the Russian labor market, we feel that the advancement of Russians into senior level management positions is a tenable long-term strategy for multinational companies in Russia. As evidenced through case examples, the Russian workforce is highly skilled, ambitious and responsive to Western forms of motivation. Russian executives have proven adept at assimilating Western-style business practices and often can provide country-specific insights that may elude foreigners.
Line laborers also tend to be very responsive to training, work environment improvements, and promotional opportunities. In addition, the uses of symbolism, such as workroom attire or personal distinction (i.e. badges of merit), serve to instill a sense of corporate culture as well as to inculcate the worker into their environment.
Age of prospective workers was a theme addressed by virtually all parties interviewed. Our discussions led to the conclusion that, apart from candidates for highly specialized positions, the majority of candidates considered by multinationals fall within the sub-35 year old age bracket, possessing of secondary education. Household surveys conducted by the Russian Center for Public Opinion Research (VCIOM) provide some evidence to support this supposition.[32] During the early years of the transition, these surveys were one of very few sources of information on such labor market aspects as demography of those working for the private sector. According to VCIOM data, as of 1995, the private sector tended to employ:
§ 1.2 times more men than women
§ 1.1-1.2 times more youth under 24 years
§ 1.2 times more college graduates, and
§ 1.9 times more skilled workers than other sectors.
Such data suggests that foreign multinationals find employees that fall within this age parameter to be more able to adopt Western-style business practices and personal responsibility for executive decisions.
The Russian entrepreneurial spirit, seemingly at odds with the concept of Communism, is a very real factor that adds to the compatibility of the Russian workforce with Western-style business processes. The spirit of entrepreneurship underlies the personal motivation, ingenuity and resourcefulness multinationals seek in employees worldwide.
Finally, the
Russian Labor Code appears to be more bark than bite. Although cumbersome, the Code does outline processes that, if
followed, permit foreign companies to terminate ineffective employees. The Code posed very little concern to the
parties whom we interviewed in-country, all of which highlighted their high
retention rates of qualified Russian employees, rather than the difficulty of
restructuring.
Exhibit
1.
Table demonstrating productivity by sector relative to the United States. Software sector entrepreneurship leading productivity.
Notes
& References
MANAGEMENT INTERVIEWS
Caterpillar - Corporate
J.
L. (Jim) Tevebaugh
General
Director, CIS Operations
Caterpillar
S.A.R.L.
Moscow
103006, Russia
2/4
Krasnoproletarskaya st., Bldg. 13
(7-095)
755-6807
Tevebaugh_James_L@cat.com
John
F. Calder
Director,
CIS Business Operations
Caterpillar
S.A.R.L.
Moscow
103006, Russia
2/4
Krasnoproletarskaya st., Bldg. 13
(7-095)
785-4996
Calder_John_F@cat.com
Alexander
Chichankine
GAS
CHP/Large
Projects
Development & Application Support Supervisor
Power
Systems - CIS
Caterpillar
S.A.R.L.
Moscow
103006, Russia
2/4
Krasnoproletarskaya st., Bldg. 13
(7-095)
755-6811
chichakine_alexander@cat.com
Caterpillar - Tosno
Manufacturing Plant, St. Petersburg
Gilbert
R. Holmes
General
Director
Caterpillar
Tosno LLC
187000
Leningradskaya obl.
Tosno,
Moskovskoye shosse 1/1
+7-812-118-4200
Holmes_Gilbert_R@cat.com
McDonald's
Sharon
Ramalho
Director
of Operations
McDonald's
Russia
B.
Nikolopeskovsky per., 15
Stroenie
2
121002
Moscow, Russia
(7-095)
755-6692
sramalho@mcdonalds.ru
Arthur Andersen
Robert
Waters
Director
of Human Resources
Arthur
Andersen International, B.V.
Kosmodamianskaya
nab., 52/2
113054,
Moscow, Russia
7
095 755 9700
rob.waters@ru.arthurandersen.com
Other Contacts that
contributed to this paper
Nestle
Food LLC
Jennifer
Galenkamp
Head
of External Corporate Affairs
Valovaya
Str. 1
113054
Moscow, Russia
(7-095)
725-7000
jennifer.galenkamp@nestle.ru
Evind
Djupedal
General
Director
O.A.O.
GPK "Efremovsky"
Cargill
Russia, Inc.
Molodjozhnaya
str. Efremov-7
301860,
Tula Region, Russia
(7-095)
244-3622
Eivind_Djupedal@cargill.com
Gennady
Eryomin
General
Director
Monsanto
ZAO
26
Prospect Mira, Bldg. 5
Moscow,
Russia 129090
7
(095) 933 5920
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