Management practices in Russian manufacturing subsidiaries of foreign multinational corporations: challenging some beliefs about contemporary Russian industrial management

Abstract

This article reports the results of observations of management practices in 20 Russian manufacturing subsidiaries of Western multinational corporations (MNCs). I argue that to counterbalance the higher country-specific risks associated with investing in Russia, MNCs impose on their Russian subsidiaries high demands for superior performance in terms of both technical and economic efficiency. My observations confirm that in most cases such demands are successfully met by the implementation of highly effective practices. Thus I challenge several beliefs about industrial management in Russia, including the myths that Russian firms are hostile towards knowledge sharing and are wary of talent.

Acknowledgements

This article is an output of a research project implemented as part of the Basic Research Programme at the National Research University – Higher School of Economics (HSE). The author appreciates the valuable assistance of his research associates (Professor Vladimir Kossov, Professor Evgeny Morgunov and Dr Zakir Saidov) with interviews and data processing and thanks the managers of the companies surveyed who spent their time and efforts on interviews and other activities related to the study.

Notes

^1. Alternative statistical estimates put the share of imports in Russian consumer markets at 8–9 percentage points higher due to smuggling and grey (i.e. unauthorised) imports but also indicate a gradual decrease in the share of imports in 1999–2011 (Centre of Development 2012, p. 8).

^2. Knauf CIS does not reveal the exact figures of their production volumes in Russia but we can assure readers that such volumes exceed USD1 billion.

^3. For example, tobacco products are smuggled from Belarus where taxes and levies are lower; cars are shipped from the USA for the same reasons.

^4. A three-course, hot meal in the middle of the working shift is a norm for Russian employees, especially for workers and foremen. So the suggestion of C.N. Parkinson that ‘the canteen reveals more than the office… Just as we judge a hotel by the state of the cruet, so we judge a large institution by the appearance of the canteen’ (Parkinson 1958, p. 84) is still valid in Russia.

^5. I have visited dozens of Russian factories yearly since the 1990s, Professor Morgunov has worked on workplace ergonomics since the 1980s and Professor Kossov has gained vast industry experience since the late 1960s. In addition, all of us had opportunities to visit the production facilities of leading multinational corporations in Western Europe in the 1990s.

^6. As ‘outsiders’, we paid for our meal; for employees the lunch was either free or heavily subsidised.

^7. At Solvay's subsidiary we decided to go out the back door of the office. We entered a brightly lit and clean corridor, opened a door, and saw a continuation of the same corridor but on the territory of the Russian company – slimy walls, dented floors, dim bulbs etc. We do not want to scare readers by describing the environment of the production site of another Russian subsidiary we visited, which is located in the still intact shop of a textile factory that went bankrupt 20 years ago.

^8. Frankly speaking, this was not the most clean and efficient factory we visited.

^9. In the Soviet Union there existed a carefully developed hierarchy of state orders for exceptional ‘labour achievements’ (three types of medals, six types of orders and the highest award – the title of ‘Hero of Socialist Labour’, with extremely generous benefits for holders). State orders were presented to employees of all ranks, with special attention to ensuring a considerable share of workers in the orders lists. After more than 20 years of neglecting to award these state orders, in 2013 the title of ‘Hero of Labour’ was restored as the ‘second highest title in the Russian Federation’. Among the first five persons to be awarded the order there are three workers.

^10. An expatriate manager in the Russian regional headquarters of a major American corporation delightedly told us in an interview that ‘you simply cannot imagine what Russian plant engineers may make from cheap Chinese machinery and equipment!’ Unfortunately, neither the name of the company nor the names of those modest heroes can be revealed.

^11. Husted and Michailova did not escape the temptation to apply a very interesting model for diagnosing hostility to knowledge sharing (Husted and Michailova 2002) in a series of interviews in six Russian industrial firms (Michailova and Husted 2003). We do not attempt to question the sincerity of respondents or the accuracy of interview recordings, but the whole study was designed as a model-proving, not a reality-revealing exercise. As a result, vague answers were received to vague questions; more importantly, the whole topic of knowledge transfer was totally separated from everyday activities of the firm. Nevertheless, both articles have the highest citation rate among all writings by S. Michailova and K. Husted (131 and 102 citations respectively in SCOPUS, 26 September 2013).

^12. An old Russian proverb says ‘In Russia everything is a secret; nothing is a mystery’.

^13. The first notion of ‘adolescent behaviour’ of Russian industrial companies was put forward in (Gurkov 2009a, 2009b).