A Western company in the financial sector which had been operating in the Russian market for more than 10 years decided, when its contract with its managing director, an RF citizen, expired, to offer this position to a resident of its own country, giving him the authority to form a new team. After the arrival of the new leader, three Russian top managers were replaced by ex-pats. However, problems began to arise, clients were lost, and in six months it was down more than 15 places in the consolidated ratings for company assets.
It was decided to turn to a Russian employment agency for help. After an all-round analysis of the existing situation, the following conclusions were drawn.
1. The ex-pats had not been able to fit into the team and develop good relations with the local staff.
2. The previous team had gone out onto the market. Furthermore, the dismissed staff and those being dismissed had accepted offers, even on worse salary and benefit terms, from the former managers in order to continue working in a familiar team.
3. Clients had left along with the staff, which soon affected the economic results.
On the recommendation of the agency, and with its help, the company introduced Russian personnel who had proved themselves in the market sector in question into the top management positions. Some former staff from before the change also returned to the company. At the present time, there is a clear positive trend in the company’s business.
Many people make this sort of mistake. As soon as a foreign company has its Russian business up and running, it brings ex-pats into the top management for “greater transparency”. However, the ex-pats need several months to adapt to Russian conditions. During this time, clients leave along with the old team, which is rapidly enticed away by competitors.
A team should be changed gradually, and a trusted member of staff who has a good understanding of Russian realities and the specifics of the local corporate culture must be appointed to help the ex-pat. No more than two new managers a year should be introduced into top management. If this rule is not followed, the organisation risks dropping out of the market for a long time.
A major international corporation decided to open a branch of its company in the financial sector in the RF. A CEO, financial director and business development director were soon found. But a problem arose with specialists in risks, operational activities and other staff. Either they were all already employed, or they demanded salaries which were clearly far too high.
The Russian employment agency to which the Western company applied conducted a market analysis of the specialists in question, including their possible motivation for moving to a startup and their expectations of financial reward. A solution was proposed: to invite top managers from among those successfully working in this segment to join the departments where they were needed for consultation projects for a one-year term, and during that year, to select specialists with lower salary expectations, train them and bring them up to speed. The Western company agreed to the proposed solution. The employment agency selected the consultants and the prospective specialists, who a year later, after training, successfully took over the management of all the required fields of activity.
Inviting “guest stars” to startups at an early stage is fully justified. In the final analysis, the company saves a considerable amount of money while gaining access to the best market practitioners at the given time, without the risk of competitors buying up the top managers available in the market.
During a period of general sales recession, an international pharmaceutical company decided to combine its branch in the RF with the countries in the CIS, and brought in a manager who had previously headed the business in Eastern Europe as CEO, with the mission of optimising costs and reducing staff. However, the reduction in costs did not lead to improved financial results. On the contrary, the situation became worse.
When this situation was investigated, it became clear that the reduction in staff was conducted at the expense of specialists in sales and business development. The remaining staff had their workload increased by a factor of three to five. In parallel with the reduction in sales staff, the staff of financial experts was increased. Their task was to calculate the efficiency of the reforms taking place. This provoked a reaction in the form of loss of remaining sales staff followed by loss of clients, and a drop in sales. The company management was advised to change its policy by bringing in new directors of personnel and marketing. The company accepted the employment agency’s recommendations. The first thing the director of personnel selected by the agency did was to bring in a programme to raise the loyalty of staff, consisting of giving bonuses based on results of work, rises based on length of service, holding corporate events and so on. The loss of personnel stopped. The new director of marketing selected by the agency increased the marketing budget for the section dealing with client marketing, which enabled the remaining clients to be retained and led to the return of those who had previously left. At the present time, the company’s profits in the CIS countries have fully recovered, and are increasing.
Incorrect decisions about staff or an incorrect interpretation of such decisions can set back the financial results of a Western company in the Russian market by several years. Managers of personnel and marketing departments correctly selected with the help of an employment agency will ensure that business develops normally in Russia, and will prevent a fall in sales.
To increase business turnover, a meeting of shareholders in the Russian subsidiary of a Western company decided to invite a team of top managers from a Russian company in a similar line of business. The team was given carte-blanche to manage the company’s Russian business for a year, and the necessary finance was provided. In that year, the Russian team of top managers not only failed to achieve an increase in turnover, but also failed to submit an intelligible development strategy.
The company applied to an employment agency, and the following came to light. The Russian team of top managers had divided up the salary fund so that their own salaries and bonuses were markedly higher than the market rate. Consequently, the proposed level of salary for the specialists the company needed was below the market rate. Sufficiently qualified staff were not being recruited, which led to the general failure of the team.
The agency recommended dismissing this team and appointing as CEO someone well known to the shareholders, a person in whom they had complete trust. This was done. The manager appointed by the shareholders, an ex-pat, selected a new team with the aid of the employment agency. As a result, the Russian subsidiary became transparent for the Western shareholders, and the situation was fully under control. The measures taken quickly led to a growth in turnover and an expansion of the client base.
Buying up in the market a well-coordinated team of top managers with their own internal understandings and work philosophy involves certain risks for Western companies operating in the Russian market. Such teams should never under any circumstances be given carte-blanche to manage the business, certainly not for a long period. This leads to them overestimating their own worth, and incites the Russian managers to take inappropriate decisions about their own salaries and bonuses. The best option for Western companies in the Russian market is to have one or two people close to the shareholders present in the management, not necessarily at the very top. These people will be able to monitor the situation from inside, and the Russian enterprise will always be sufficiently transparent for the Western shareholders.