Hanken & SSE Blog
The value of great leadership for your business in Russia 

For many Western and especially Nordic companies, Russia is and will remain an important market. Many companies have invested in sizable business units that operate in the somewhat turbulent and volatile Russian business environment. Most are in the country for the long haul with the goal to establish and develop lasting and successful business operations there.

 

Business success can be divided into three key elements:

 

  • Customers as ultimately, they are the ones who pay and help generate revenues
  • Employees whose level of commitment, engagement, motivation, professionalism and interplay makes the magic work
  • Results/profits as happy customers and engaged employees alone do not guarantee the financial logic of the business

 

Employees are somewhat neglected in Russia – for historical reasons the local business culture has not considered human capital to be an important asset. This is changing with Russia experiencing an acute shortage of talents – a combination of demographic decline, deteriorating quality of tertiary education, outbound migration of highly qualified individuals and a high local demand for talents result in huge challenges that can be experienced on the Russian labor market.

 

In this situation one can imagine that for the management of Russian units the shortage of talents and the ways to offset its impact (i.e. employer’s branding, talent development, leadership development, corporate culture etc.) would be high on the strategic agenda. Surprisingly, often this is not the case.

 

Hanken & SSE Survey results

In March 2018, Hanken & SSE surveyed about 20 representatives of foreign company units in Russia (MD's and HR's) on leader competences and characteristics. The survey revealed that roughly 60% of the managing directors and 30% of the HR's do not consider that the shortage of talents in Russia and its consequences is a phenomenon well understood and addressed by their management. When asked to assess certain key competences and characteristics of their leaders, the same respondents also gave somewhat low evaluations of their management teams as shown in the image. With 1 being poor and 7 being excellent, even if we take 5 to be the reasonable benchmark, the figures are fairly low.

 

An interesting question that emerges is that if quite many managers do not understand the challenge a talent deficit poses,  and their overall competence level (in the eyes of their own managing directors and HR's) is quite low, then how are we going to win the war of talents and build thriving leadership teams that attract, develop and promote talents to drive the business?

 

Before addressing this question, I wish to bring up that the meaning of the famous phrase “Culture eats strategy for breakfast” by Peter Drucker seems to have gone passed quite a few leaders. The main thinking and focus is on goals and KPI's and little or no focus is placed on the so called soft topics such as leadership, motivation and engagement.

 

In the Russian units, this line of thinking is further reinforced by two facts. Firstly, since the Russian economy started stagnating many local units got instructed by their HQ's to do what they could to make the figures with no increase to their budget. Secondly, the Russian specifics are often difficult to understand for the HQ's: the shortage of talents, the dynamic impatience of Russian talents, the relatively bigger (compared to Scandinavia) importance of compensation as a motivational factor and so on. It is not that they don’t care, it is that the distance, both physical and psychological, does play a significant role.

 

This keeps the local units hammered between the expectations of HQ's and the realities of the Russian business landscape. As our survey would imply, some 30-40 % do understand the strategic importance of the issue and invest efforts in improving their leadership skills, working on the creation of high-performing teams and development of a truly motivating corporate culture based on values. The majority seems to focus solely on the business goals to keep the costs down and meet the objectives of the HQ. But this is a sustainable strategy only in the short-term. 

 

The same thing goes for the business goals and corporate culture. Leaders with strategic foresight create an atmosphere that attracts talented employees, motivates and develops them with a true team spirit and a desire to be better, excel together and reach for more. A large part deals with the genuine desire of leaders to leave a legacy of a sustainable culture that performs, not just overheating teams of performers with little to share but their own ambition and reached KPIs. This is where the true importance of leadership and corporate culture manifests itself in the long-term success of our business operations in Russia.

 

Find out more and join the Lead Russia 2018 program where we address the central challenges for your company and its leaders in the Russian market. 

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04 April 2018

Picture of Peter Zashev
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