By Professor Ichak Kalderon Adizes

President, Adizes Institute and Former Dean,

Adizes Graduate School for the Study of Change and Leadership,

Santa Barbara, California

A presentation made at the

Ten-year celebration of the establishment of

Executive Development Programs at

The Academy of National Economy of

The Russian Federation

Moscow 21/1/ 2010

Honorable Dr. Mau, Deans, Faculty, Alumni, students, guests, dear friends.

I appreciate this invitation to make a presentation to you on such a festive occasion celebrating ten years since the establishment of the first executive program in Russia.

Congratulations on your leadership and on the excellent work Sergey Muyasedov and Ashor Sefarian are doing.

This presentation is not a product of some scientific research.  No questionnaires were given; no interviews were held. I did not run any statistical analyses or conduct any controlled double-blind tests to prove a point, to find      “ THE truth.”

This presentation is based on participative observations I have made while providing consulting services to some major Russian corporations, and also while lecturing to top executives in both Russia and CIS countries for the last ten years.

Furthermore, having lectured in more than fifty countries and consulted to more than half of them, it has enabled me to compare the management styles, systems, and culture that I have observed elsewhere to my Russian experience with the same.

Using some theoretical concepts from my theory of management, I derived some opinions about my observations that I present to you here and I dare to make some recommendations, which I sincerely hope you will find helpful or at least interesting. Furthermore, I hope that this presentation will intrigue and stimulate some debate, which is always helpful in generating new learning.

My presentation has three parts. First I will start with making observations what appear to be the problems with the Russian management practices. It is along list, which I hope you will not consider as criticism of Russia. Not at all.  As a matter of fact I see Russian executives more as victims than as villains

The second part presents what I think is Russia’s biggest asset that can give it enormous competitive advantage.

And at the end, in part three, what are my observations about management education and what needs to be done with it to overcome the above mentioned Russian management weaknesses and capitalize on their strengths.

Surrendering to authority

Let me start with an experience I have had several times, which I believe illustrates one of the problems all countries that were once part of the Soviet Union face as they attempt to develop managerial cadres and leaders.

I first had the experience in Kiev, Ukraina. I was lecturing to some 300 top executives of Ukraine. Among them were faculty members of a leading business school and their Dean.

I do not use PowerPoint software in my presentations        so that I can be free to follow the audience’s interests as I lecture. I use an overhead projector instead. This particular time, the projector was too high for me to easily position the transparency I was showing, and by mistake, I placed it sideways. This caused the audience to have to twist their heads to read it. It was not comfortable for them, to say the least.

Only towards the end of my presentation, when I happened to turn around to look at the projected transparency, I noticed that it was sideways.

Now my point: Not one, not the top businessmen in the audience, not the faculty, not even the Dean of the business school, interrupted my presentation to point out to me that my transparency was wrongly positioned.

I was truly surprised. If this had happened in Israel, the audience would have eagerly pointed out my failure to deliver a faultless presentation, and criticized me for days afterword and at length.

If it had happened in the United States, someone in the audience would promptly and politely have pointed out the problem to me.

But in Ukraine, there was total silence.   No one, not one person, said a word.

This intrigued me. So, sometime later, I was lecturing in Russia, and this time I had 800 participants in the audience, including top managers and faculty and Deans, ] and I decided to move the transparency sideways on purpose        to see what would happen. Again, silence. No one said a word.

My interpretation of this reaction, and granted it is a very limited sample, is that people In Russia, or what used to be the Soviet Union, seem to acquiesce to authority figures.  Authority cannot be criticized, certainly not in public.

I found supportive evidence to my interpretation in my consulting work.

I do not believe in classical consulting, where the consultant knows more than his clients do, and submits a report to them outlining what they should do.

I believe in providing tools to my clients so that they can correctly diagnose their own problems and solve them by themselves. Instead of giving them fish, I and my associates teach them how to fish.  Our work is more akin to psychotherapeutic organizational healing than to the traditional medical practice, which tries to heal by prescribing drugs.

Thus, in our work, we get up to 30 executives in a room, and teach the concepts they need to know to diagnose and solve their problems. Then we lead a discussion and monitor how they use the tools and implement successfully.

Why 30, or 20, or even 10 executives in the room? Why not coach the top executive and be done with it?

Because I have found that most problems cannot be solved by any individual, no matter how high-ranking he or she is in the hierarchy. Most problems are “in-between-people” problems. Thus, it takes a team to solve them––especially the strategic ones, which are the most important problems anyway.

When I consult to Russian companies, it always takes several sessions before the executives that were gathered to solve a problem will speak freely, not just to me, one on one, but to each other.

And if the top executive of the company attends the discussions that l lead, there is very limited or no discussion at all. No one openly disagrees with the authority figure.

The CEO of one of my clients told me that most Russian companies cannot even imagine, much less approve, the concept of having 30 executives discuss a problem openly. It is simply inconceivable to them.

Fear

It seems to me that the cause of this behavior is not just because the Soviet culture has an ingrained bias to surrender to authority. I believe there is also an unconscious, built-in fear that stems from the past. .

Historically, Russia has been ruled by a long string of dictators, some of them quite murderous. At no time in Russian past history was dissent nurtured and encouraged.

The result is that much of Russian managerial behavior is based on fear.

Here is an anecdote to illustrate the point.

In one Russian company, an American Organizational Development trainer was conducting a warm-up exercise, to encourage people, who had just met, to become comfortable with each other. He gave them this assignment:           “Tell the group something that no one knows about you.”

This was an innocent exercise. In another country, people would have told a story from their childhood, or talked about their hobbies, etc.

Here, there was total silence.  Frustrated, the facilitator asked one of the participants during the break why no one was participating. The answer he got was:

How do you intend to use the information you are going to get?”

Whoa! …… We are talking about the year 2010! Glasnost was introduced 20 years ago!  But, people still have fear, and this fear is not handled openly and consciously. I cannot discern any attempt to deal with this issue.

It seems to me, to the best of my limited knowledge that Russia is still in denial about the atrocities of the Stalinist era. I am not aware of a single historical museum that displays Stalin’s misdeeds. Not of one gulag camp that was kept untouched and maintained so that children could be brought in for educational programs to see and study what happened during that period, so that dictatorship is never allowed to develop again––or is at least discouraged.

It seems to me that there is denial, and with it, fear    that is not being addressed.

At one Russian company I know, the president punishes his executives with financial fines for any transgression––for example, for not returning his phone call within 15 minutes.  One of those executives told me, and I assume he was not exaggerating, that one month, he owed more in fines than he received as his monthly salary.

And what was the reaction?  Silence.  Neither he nor anyone else has challenged the practice.  Was it fear, fear of losing their jobs? Or fear of the unknown or an unconscious fear?

I know of no other country in the developed world where this practice would be tolerated.

Here is another observation:

Centralization

Russian companies are very centralized. Many reasons seem to contribute to this phenomena.  One appears to be the surrendering to authority. The other one is the fear we have talked about, so people do not take chances and rather let the top person in the organization make all decisions. Third factor could be the many years of central planning during the Soviet Union experience disempowered managers from making decisions.

The result of it all is that problems are sent upwards, with the expectation that some leader––the manager, the CEO, ––will solve it. Someone up there …People has no faith in themselves and do not believe that they themselves are needed to solve the problem.

Sense of impotence

Since no single individual can solve all the problem in the company, regardless of how high up they are in the hierarchy, many problems are left unresolved. They become chronic problems, which in turn creates a self-fulfilling prophecy:  Since not much gets solved, people become cynical and think that nothing will be solved anyway so why make an effort. But without making the effort guess what? They are right, because nothing will happen unless people get involved and committed to make it happen.

People feel impotent and act impotently.

Elitism

Some Russian top executives apparently like this “imperial culture,” where the “ one and only” has all authority and thus responsibility to deal with problems.

To allow open discussion makes it obvious that these executives are not capable of solving the problem by themselves. That is embarrassing, to say the least.

Russian executives are prisoners of the expectations to act as if they are capable of solving all problems. Thus they must manifest power to maintain that image.

In the modern medical profession, doctors tell you that you must listen to your body. People who live only in their heads get sick, or are sick, and do not take proper care of them.

In a similar way, I suggest that one of the problems of Russian management is that the head does not listen to the body. Executives do not listen to the workers?  The head is detached from the body. The workers, or subordinates, are sub-ordinary––not even ordinary. Why listen to them

Language

The Russian language does not have good translation to some managerial concepts. That hampers communication.

For example, the Russian language does not have an accurate translation for the word “management.”  The word usually used is “upravljanje” which literally means to give a direction.  “Management is more than just giving direction. You need to also perform “rukovodjenje” in order to implement decisions. Nor is there a Russian word for the English word “effectiveness”; it is translated as “resultativno,” which means “results-oriented,” but      this is not a good translation either, because not all results will make an organization effective. Effectiveness means to produce the DESIRED results.

Ironically, the Russian word meaning “effective,” “efektivno,” is used to mean “efficiency,” which I find confusing, since there is no direct translation for “efficiency.”       Or an accurate translation for “accountability.”  All these words are necessary for communicating and instilling efficiency.

Lack of (A)

And I find that Russian systems are not efficient. Russian behavior, even on the street, is not (A)-oriented. I am referring to (A), meaning the (A)dministrative role, from my (PAEI) code, which I hope you are all familiar with.

Look how Russians drive. Look how they stand in line: Most people simply ignore the line and try to push their way to the front. Compare this to the way English people behave: They create a line and peacefully stand in line and wait their turn. If someone tries to break into the line, they politely tell him off and send him to the back of the line.

When English people drive, they keep to their lane. Naturally.  Not so with Russian driving.

In Russia, there is bureaucracy, but not because of too much (A). On the contrary, it is from the lack of (A).  The Russian bureaucracy stems from corruption and from lack of organization. From lack of (A). It does not surprise me that Peter the Great had to import Germans to bring some order to the country.

The Communist regime had to impose (A) by force, because (A) was not culturally indigenous to Russia. And because (A) was imposed for the purpose of control rather than efficiency,  Russians became even more hostile to the (A) role.

But inefficient systems still need to perform. How? What helps them perform is corruption, which is one of the biggest challenges facing Russia.

Corruption, greed

Several factors put together have made corruption a major problem that is crippling the Russian economy and at the same time enabling it to perform nevertheless.

Here are my insights as to what causes, after analyzing  collateral damage and benefits,  this dysfunctional behavior.

On the one hand, the bureaucracy is not efficient. We already talked about it. This creates a demand for the services of people who know how to circumvent the bureaucracy, like  issue permits. ––  i.e., expedite  the process;  People who can use their authority to issue or not issue permits for instance.

For this demand, the supply  is provided by  people with entrepreneurial spirit  that expresses itself through illegal means. These are people who, driven by greed, dare to provide those needed services illegally for a fee.

Now, let us address the question of greed.

For more than 70 years, Communism suppressed materialism. Now that the genie is out of the bottle,        people are chasing money, money, money with a vengeance. Compulsively, people are trying to accumulate wealth, and if they cannot do it legally, corruption is the answer.

Another cause of corruption is a weakness in the Russian system of values created during the Soviet Union times.

Communism rejected personal ownership.       Everything of value was state-owned. As a result, people have gotten used to feeling that nothing belongs to them;        that nothing is theirs to protect. Thus, undermining government processes by corrupt practices is not condemned.  People may object to it publicly, but in private they tolerate it.

And corruption oddly enough makes the system work.  With the lack of order and systematization , without the expediting service  the wheels of government will be even less functional and will even more undermine the performance of government.

The System discourages entrepreneurship

Why is what we are discussing here important?        Why focus on it?      Because  Russia needs to depart from relying solely on raw materials, such as gas and oil, for its economic well being. If it wants to transform itself into a developed, sophisticated country with high-tech solutions, it needs entrepreneurs. Entrepreneurial leaders have no fear. They innovate. They take chances. They address problems themselves rather than expect  others to solve the problems for them.  They get rewarded for taking chances, but by legal means, not by circumventing the system .

But in an environment based on fear, on a hierarchy that cannot be challenged,  where decision-making is centralized, where bureaucracy  is prevalent and corruption the mode Vivendi, there is not much room for entrepreneurship, for innovation, for daring to be different legally.

Furthermore, during the Communist era in the Soviet Union, it was dangerous to be entrepreneurial. Entrepreneurship was not just discouraged; it was punished. It was tantamount to speculation, and speculators were punished. An entrepreneur had to operate furtively, like the mafia. Those memories are still vivid in the Russian subconsciousness., I believe.

Income Disparity

When the system opened up in 1991, and market forces were introduced, entrepreneurship was needed. But who was available? Who was capable of responding to the new environment? Most probably, it was those who were ethnically predisposed to entrepreneurship, or else those who already had experience performing it  illegally.

This small group of people  exploited the new conditions to the fullest, creating a major disparity in income in the country.  Suddenly, on one hand there is a small, extremely wealthy group of people and on the other hand,  rank and file people  scared of losing their income and being unable to feed their families.

It is ironic that it is happening in a country that was espousing socio economic equality   not too long time ago.

So far we focused on what is wrong.  Now what is right.

Quality of Russian executives

Individually, Russians are highly educated, very creative and competent. Take a Russian out of Russia and he will build an empire. For example, who founded Google?

My experience with Russian executives is that they are excellent  at analyzing and making correct judgments. I would not be afraid to put a Russian executive up against any executive anywhere in the world. The Russian executive would compare quite favorably, for sure, if not excel and perform even better.

In the United States, I work with American companies that happen to have Russian executives. They shine with their intelligence and competence. And look at what happened to the Israeli economy since  the 1990s, with the influx of Russian immigrants. The country is flourishing with innovation, frequently generated by Russians.

So why  we do not see the same innovative forces and entrepreneurship in Russia?

What is happening here?

What land is the most fertile? The first inclination is to say dark  earth.  It is not so. Do you realize that it is the dessert.  How come?

Here is a joke that I hope will explain this surprising fact.

A guy had problems with his brain and went to buy a new brain. He asked the store manager to show him some brains he had in inventory.

“ This  brain is of a doctor in Physics. 100 000 Euros. “

“ This other brain is of a Nobel prize winner in medicine. 500 000 Euros. “

“ And THIS  brain, Michaels brain, is  one million Euros.”

The buyer was surprised. :” Why would a Nobel prize winner be half a million Euros and Michaels brain, an unknown person be double that?”

” His brain is totally new. Never used” was the answer

The desert is fertile because it has never been used but it has all the ingredients to be very fertile.

If you go to a dessert it looks totally desolate. Nothing  grows there. Right? Miles and miles of just sand . But than you come across an oasis and it is unbelievably fertile. Right? Flowers,  fruit trees . More than any dark earth soil can produce. What is going on here?

The desert is fertile because it is not being used. All the ingredients for making the desert blossom are there. Never used. The land was never arable. All it needs to be heaven on earth is  WATER.

The desert reminds  me of Russian executives. Fantastic people . Fantastic talent. Fantastic emotional intelligence. Competence.  What is missing for them to bloom, to excel,  to be the best in the world is hope, openness, supportive – no fear environment.  Like the desert needs water to be heaven on earth.

One of my  and of my certified associates’ major challenges in helping Russian companies is to instill hope in the company––hope that, yes!––change can and will happen. To decentralize the company  and empower the managers to decide, to lead. To build teamwork. To remove fear. To build reward structures that encourage entrepreneurship.

And let me tell you  my experience. It does not take much . it does not take long. Just open the door. Just show that you are willing to listen and be surprised what talent you will find in your organization.

The biggest asset Russia has is not its oil nor its gas. It is its people. Committed, Hard working . Still believing in a better future in spite of being for generations wronged and abused. Russian executives  are survivors who work and deliver no matter what barriers are put in front of them. I would put Russian executives  among the best I have encountered in my professional experience.   As individuals.        What holds them back to perform is the organizational culture. The history. The remnants of a system that tied them up in ropes and chains.  Shut their mouth, not letting them speak.

Russian companies will not realize their potential until their executives learn  to trust,  to hope,  to believe, and to try.

Management education: Learning the wrong models of management

Now the third part of my presentation.

How does management education in Russia address the problems I have presented so far? How is management education capitalizing on this incredible natural asset called the Russian people?

How  are the above-mentioned problems––an authoritarian style of management, the fear of authority, centralization of decision-making, personal greed, corruption––treated?

Is Russian management education addressing the real problems of Russian management practices?  Are we developing entrepreneurship or training more       establishment leaders , fodder food for the Russian  hierarchies?

It seems to me that Russian managerial education is relying and copying more than necessary the American management practice and theory.

Why is that?

Well, America has had success economically, and is considered,  so far,  the leader of the free world. One of the reasons for the  economic success is attributed to American managerial practices. So the world looks up to American management education.

But  the cultures are totally different. American management practice and thus its leadership education is based on the American culture of individualism. It encourages rather than discourages entrepreneurship.

American culture is one of fair play;  it rewards success, talent, and performance; there is  lack of fear from government and illegal behavior is punished . Furthermore, American educational system  nourishes learning more than knowledge. It is an open society. It encourages and protects free and fair competition.  That is by and large not the case in Russia. True, American  managerial training encourages elitism  too. In their case it is  because of the predominant culture of individualism and worshiping to achievement. But   I would suggest to you that this practice of elitism in American management is harmful––even to America. So why copy it? It is undemocratic, and it is difficult to maintain democracy on the macro level while tolerating, or even encouraging, a dictatorship, or at best benevolent dictatorship, on the micro level.

American managerial education is attractive to Russia  because it supports the elitism of management, it provides for a hierarchy , it builds up the role of the CEO  or top management , and it  disregards the role of workers in the process of management.  The  American management educational programs, although attractive, may  I suggest to you, are   dysfunctional to Russian managerial needs. They are  dysfunctional  because they reinforce exactly that which needs changing.

Russia needs to learn to have less fear  of authority,         and more individual integrity. Russian management desperately needs training for openness, to learn teamwork, to increase organizational flexibility, and decrease political intervention.

Stop teaching American-style management.  Study and experience humility;   teamwork;  integrity;  justice.       Freedom.

And do note that  America is changing. American managers are learning from the Japanese. If there is something good to learn, they are not afraid to learn it. Participative management––breaking down hierarchy with open systems––has become the newest fad in America.

So, why copy in Russia what is becoming outdated even in America?

I recognize the fact that  it would be difficult to introduce participative management now in Russia, where hierarchy is so dominant, and the lower you are in the hierarchy, the fewer rights you have.  But what needs to be taught is what needs to be changed and not necessarily what the market wants to buy.  That is what is the role of  non commercial education all about. Is it not?

Business schools in Russia  teach subjects such as strategic planning,  finance,  and marketing––  all-important subjects, but that is not where the biggest need is.  What they really need to teach is ethics.   Yes, ethics. Not just social responsibility, but ethics:  Why corruption is wrong;      what to do about it;  how to fight it.

They need to teach participative management, how to make decisions as a team, how to collaborate, how to respect differences of opinion, how to delegate and run a decentralized organization. How to get the workers involved , How to fight corruption. How to have less fear and dare more…

Once that happens,  President Medvedev, to whom this Academy reports directly, will have what he wants:  a country with entrepreneurial leadership, that can practice innovation        and flexibility. Then, this country will not have to rely only on selling commodities such as oil and gas.  It will finally start selling solutions to the world.

Along with openness, willingness to participate, and honesty; along with being critical and working with integrity, Russian management schools should be teaching its students to love people more and things less.

During the Communist period, materialism was pushed to the back of the line of priorities, in favor of pride and sacrifice for the motherland,  as well as valuing motherhood,      brotherhood, equality,  and idealism. In both education and media, those were the top priorities.

With the transformation to a market economy,  the priorities turned upside down. Materialism suddenly became the top priority––  with a vengeance. Money became the new God.

It is OK to love money, but do not make it your God. Some of the values that socialism promoted are definitely worth preserving. Do not throw out the baby with the bath water.

Russia has to adapt  American management education to  its own particular needs,  and design a management development program that specifically addresses Russian problems.

There is still time.  And the sooner, the better.

I wish you all well and I thank you for allowing me to speak.

Dr I. K. Adizes