CAN RUSSIANS DO BUSINESS ?

My review of ‘The New Russian Business Leaders’, (de Vries, Shekshnia, Korotov and Florent-Treacy, 2004), first appeared on www.dialogin.com.



In ‘Dead Souls’, Nikolai Vasilyevich Gogol writes that Russia is ‘mired in poverty and mess, unwelcoming with no arresting wonders of nature’ He goes on however to ask what is ‘this unfathomable, uncanny force that draws me to you ?’

Anyone who has ever lived or worked in Russia will know what he means – there is a remarkable fascination with all things Russian that grabs people who are exposed to its people and cultures and refuses to let them go. It is for these people above all that ‘The New Russian Business Leaders’ has been written. It is for Russophiles because it is about Russia first and about business and leadership second. The other potential readers will be MBA students of leadership and corporate cultural change, but I think that the majority of those picking it up will be the Russia enthusiasts particularly those of us who lose sleep over what is going happen to that country in the 21 century.

The book is not really for business people in the conventional sense, as it does not contain very many practical tips for doing deals in Russia – it is a very academic book and the reader would have to form their own conclusions about the practical application of the insights into the Russian model of capitalism. The book also assumes a knowledge of cross cultural theory that business people simply won’t have. You need to have read Hall, Hofstede, Lewis et al to get the most out of this book.

The book is extremely well researched and has three sections, the first reflects upon the Russian character with speculation as to what makes Russians so Russian and a look at the classic East/West interface that runs through so much of that society. The second section of the book – and in my view the best – profiles a number of Russian entrepreneurs from industries as diverse as hydrocarbons (Mikhail Khodorkovsky), sports clubs (Olga Sloutsker) and banking (Ruben Vardanian), and this does bring the book to life as the profiles are very real. The third section of the book pulls together the strands to make some conclusions and projects Russian corporate activities into the new century.

Entrepreneurs are generally exceptional people - in many ways a breed apart - and the Russian ones are no exception to this rule. There are however significant characteristics that separate Russian entrepreneurs from the rest of the herd. All entrepreneurs are opportunistic but many of the Russian ones (including some profiled in this book) have exploited a situation in a way that in the West would have them accused of conflict of interest at best or have them arrested at worst. The previous incarnation that many of these people or their families had under the USSR (membership of state property committees etc) allowed them at the time of the collapse to acquire vast businesses with relative ease often from under the noses of quiescent government officials . ‘Dead Souls’ was written in 1842 and shows us this is not a new idea in Russia. The near total lack of regulation in the Yeltsin years gave many of these entrepreneurs a great opportunity. As the book says, Mikhail Khodorkovsky of Yukos (now in jail for tax evasion), and seen as an entrepreneur ‘never had a great business idea along the lines of Amazon.com, Starbucks or Microsoft Windows’. The skills of many of the Russian business leaders have been ruthlessly exploiting an opportunity and tuning it around - as with Yukos - but I am not sure this is entrepreneurship.

The book shatters several myths about capitalism in Russia and Russian views of business. Money is not the be all and end all for most Russians – priorities are different and western companies often have problems hiring by basing remuneration on salary alone. Russians seek more than that and benefits such as health and pension care, fixed working hours and above all job security count for much more than just the roubles. The second issue is the extent to which Russia really is capitalist. The positive impact of red blooded capitalism on the lives of the vast majority of Russians is negligible. Salaries are still low, working conditions often bleak in the industrial sector and the civil society that western capitalism seems to have generated barely exists. Equally while there is some SME activity in Russia, the state machine does not encourage it and the collapse of the Soviet Union is too recent for any real risk taking spirit to have taken root. Of course it may never take root.

It is at this level that I do take some issue with the book - I find its tone too optimistic. The book admits that much work needs to be done to create a democratic state in Russia, emphasising the lack of a free press but tells us that ‘Many people have thrown away their old dependency-based behaviour patterns and taken responsibility for their lives and well being into their own hands…..” Some people have, but the vast majority have not. The safety net of the Soviet Union has gone but the second step of a private sector replacement has not emerged. Any foreigner visiting a residential block in Russia for the first time will be shocked at the decrepit state of the common areas – the flats inside may be refurbished and refurnished thanks to IKEA but the common areas are usually dark, dirty and unkempt. In some blocks all the flats are owner occupied but nobody takes responsibility for cleaning and painting the halls and stairs. At even this most basic level the dependency culture lives on. Capitalism will mean nothing to the vast majority of the population until the benefits trickle down to ordinary people. Russian business and political leaders need to grasp this fact.

As a study of Russian business leadership, the depth of research and cogency of argument in the book is well ahead of anything else seen to date and to that end it deserves to be highly regarded. It does what it says on the cover. To see the impact or otherwise of entrepreneurs in Russian society, a trip to the Russian regions and some Gogol are recommended.