Strategies for Companies Doing Business in Russia

BRIC Country Series: RussiaBRIC Country Series: Russia

Strategies for Companies Doing Business in Russia

11© 2013 ITAP International, Inc. All Rights Reserved.

Table of ContentsTable of Contents

Management Strategies

Expats in Russia

Strategies for Engaging Clients

Special Offer


Management StrategiesManagement Strategies1. Currently, the most important business issues for

( ti d t ) i R imanagers (natives and expats) in Russia are: • Finding highly qualified staff that has good knowledge of

foreign languages and was educated in the West.• Obtaining financing.• Coping with corruption:

– ensuring that intellectual property is not stolen.g p p y– taking an appropriate level of risk. – taking onto account an unreliable legal system.– controlling your business despite the immense size of the g y p

country and the system.• Finding the right partners (trustworthy and professional).• Understanding and adapting to the Russian mentality (for


Understanding and adapting to the Russian mentality (for expats).

Management StrategiesManagement Strategies

2 Eff ti l d hi i R i i l d th f ll i2. Effective leadership in Russia includes the following behaviors: • Speak the Russian language, have respect for Russian p g g , p

history and culture. • Be strict (adopt an authoritarian management style) but

“generous,” do not show weakness. g ,• Bring valuable know-how from the West to Russia.• Work long business hours.


For Your InformationFor Your Information…

B i i t d t d d i th f ll i tiBusiness is not conducted during the following times and or occasions: • New Year's Day, Orthodox Christmas, “Old” New Year: 31 y, ,

Dec. - 10 Jan. • Defender of the Motherland Day - 23 February• Woman’s Day – 8 MarchWoman s Day 8 March• Labor Day – 1 May• Victory Day – 9 May

R i D 12 J• Russia Day – 12 June• Unity Day – 4 November


Motivating EmployeesMotivating Employees

R i l th h t d t t th i• Russians value the chance to demonstrate their talents.

• To build team spirit companies provide opportunitiesTo build team spirit, companies provide opportunities for employees to put on a talent show with cultural programs that include humor and music. Talent shows contribute to the group’s feeling of cohesioncontribute to the group’s feeling of cohesion.

• Recognition for individual performance is not particularly valued, because it can undermine group p y , g psolidarity.


Expats in RussiaExpats in Russia

1 Wh t th t i t t i f t1. What are the most important issues for expat managers in Russia to get right? • Speak the Russian language, understand the Russian mentality,

and show respect for Russian history and culture. • Build warm personal relationships with business partners.• Be aware of each region’s importance (parts of Russia besides

Moscow and St. Petersburg).• Understand the structure of the state machine; know the rules of

the game (re: bureaucracy, corruption).St l f i i l i ti i i l k t• Stay clear of criminal organizations or criminal market areas.

• Establish strong ties to influential persons in order to be protected from corporate raiders.



2 H t t i ll i d?2. How are expat managers typically perceived? • Russians tend to be very hospitable and communicative.

They very much respect expats and are likely to show new expats around town.

• At work, expats are perceived as knowledgeable and experienced newcomers bringing fresh ideas from the West. Some Russians, however, have worked with arrogant expats. Arrogant expat managers are not appreciated by Russian employees.

• As high earners (they are perceived to receive good compensation packages); sometimes this is viewed as unfair.



3 If t d ’t h k l d f d i t t i th3. If an expat doesn’t show knowledge of and interest in the Russian culture, mentality and traditions, he or she could be perceived by Russian nationals as arrogant and insensitive.

4 If t d ’t l k i d t t b4. If an expat doesn’t look serious, does not appear to be concentrating, or is not prepared at first meetings/encounters, he or she can be perceived by Russian nationals as unprofessionalunprofessional.

5. Smiling is generally reserved for something the Russians find amusing; it is not appropriate for everyday greetings of co-workers and other employees (Smiling is also reserved onlyworkers and other employees. (Smiling is also reserved only for greeting close friends.)



6 If t d ’t thi i thi th t6. If an expat doesn’t wear something expensive or something that demonstrates success (such as an expensive watch) or does not let others know of significant achievements (such as a degree from a prestigious school) he or she can be perceiveddegree from a prestigious school), he or she can be perceived by Russian nationals as not successful, or not a decision maker.

7. If an expat doesn’t show short-term flexibility regarding meetings or appointments he or she can be perceived by Russianor appointments, he or she can be perceived by Russian nationals as difficult to do business with / as not dynamic / as disinterested.

8 If an expat is not friendly and does not show a certain personal8. If an expat is not friendly and does not show a certain personal interest in his/her colleagues, he or she can be perceived by Russian nationals as untrustworthy and as a difficult business partner


partner.


9 S ti d b h i i t f9. Some actions and behaviors are appropriate for Russian nationals, yet should not be adopted by expats who are not completely fluent in Russian p p ypractices and culture. Here are a few examples:– Criticizing the government in public and the media:

• making jokes about the governmentmaking jokes about the government,• criticizing Russian administration or infrastructure• talking about the Stalinist era • critically discussing Russia’s role in wars

– Being involved in any corruption or bribery even if your business demands it (there are always ways to avoid corruption).


Client and Business StrategiesClient and Business Strategies

H d b ff ti t b ildi t ithHow can vendors be effective at building rapport with potential clients in Russia?

• Identify and select the right partner. y g p• Assure your Russian partners that you are present in other

locations beside Moscow or St. Petersburg. • Don't assume that business practices in the home country can beDon t assume that business practices in the home country can be

automatically transferred and used in Russia. • Recognize that trying to do business in Russia over the telephone

is generally ineffective for two reasons: Russians prefer face-to-is generally ineffective for two reasons: Russians prefer face toface communications and the telecommunications system is unreliable.

• Be patient and understand that negotiations with Russian


Be patient and understand that negotiations with Russian partners is a long process that will take time.


Wh t h ld d d h i iti tWhat should vendors do when visiting a prospect or a client?

• Shake hands with male Russians; greet female Russians without shaking hands.

• Engage in small talk during meetings and invite a potential client to a restaurant, concert or other event in the evening.

• Use counterparts’ first name and second name (for example Igor Vladimirovich or Alena Nikolajevna) or Mr. Ivanov, Mrs. Ivanova. The Anglo-American naming conventions are seldom used in Russia or are used just between colleagues who have worked together for a longused just between colleagues who have worked together for a long time and know each other very well.

• Have a proper business card in Russian and English to share with one’s Russian counterparts. Follow up calls and meetings help develop


mutual trust and good interpersonal relations.


Wh t h ld d id d i ?What should vendors avoid doing? • Do not start a meeting going right into a discussion of business. Engage in

some small talk.• Do not expect to get a contract signed in a short period of time• Do not expect to get a contract signed in a short period of time.• Do not bring a bottle of vodka as a gift. Do not say that all you know about

Russia is that it is always freezing cold and that there are bears on the streets.• Do not be insolent / arrogant; do not consider yourself to be superior to the

Russians. • Do not reject an invitation to dinner or lunch. • Vendors should not overpromise.• Focus on both technical details and on developing a personal relationship• Focus on both technical details and on developing a personal relationship. • Do not apply success formulas of the home markets to Russia without any

adaptation.• Do not expect quick wins.



The most important things to keep in mind whenThe most important things to keep in mind when negotiating with prospects or clients from Russia…

• Find an international agency with experience in the Russian market for domestic and cross border tax and legal advicedomestic and cross border tax and legal advice.

• Find an experienced local partner to tap the Russian market.• Keep in mind that the level of corruption is high in Russia; be careful

when choosing partners and clients.when choosing partners and clients. • Russians see business negotiations as win-lose. They are not likely to

strive for win-win scenarios. They view compromise as a sign of weakness and will continue to negotiate even after concessions are offered. They take their time and sometimes use stalling tactics to wear down their potential business partners.



Wh t i id d fli t d h fli tWhat is considered a conflict and how are conflicts handled?

• Conflict might arise for example if one part wants to cheat another or there is a battle for superiority or a larger piece of the business (profits).

• Conflicts are normally resolved nonverbally, such as in the course of playing a game. However, serious conflict often brings business partnerships to an endpartnerships to an end.

• Formal apologies are not common; sometimes, speaking openly about the problem and offering options for possible solutions helps to resolve the conflict and avoids a “war” or battle between the parties.the conflict and avoids a war or battle between the parties.

• In some cases it is advisable to find a legal partner and fight for rights. At other times, especially when trust is lost, it is better to end the business partnership.



Th t ff ti thi d t i t iThe most effective things one can do to maintain a relationship (for the purpose of getting follow-on business) are: )

• Call or visit on a regular basis. • Send New Year’s greeting cards (and possibly a gift like a good

choice of wine whiskey or cognac high quality and expensivechoice of wine, whiskey or cognac, high quality and expensive chocolate, or some region-specific presents). The higher the manager/partner is in the hierarchy of the company, the more expensive the present should be.p p

• Invite the boss to a restaurant, concert or some other client event on a regular basis.


Hofstede Scores for RussiaHofstede Scores for Russia

• Individualism: 39 (Group Orientation)

• Power Distance: 93 (Hierarchical(Hierarchical Orientation)

• Certainty: 95 (Need for Certainty)Certainty)

• Achievement: 36 (Quality of Life Orientation)

• Time Orientation: 81 (Long-Term Orientation)

The graph above provides a snapshot of the culturally based values in Russia The graph shows that Russians


The graph above provides a snapshot of the culturally based values in Russia. The graph shows that Russians are group and long-term oriented, respect power differences, and have a strong Need for Certainty. They tend to work to live rather than live to work (Quality of Life Orientation).

Cultural Disharmony Undermines yWorkplace Creativity

“Managing cultural friction not onlyManaging cultural friction not only creates a more harmonious workplace,

says professor Roy Y J Chua butsays professor Roy Y.J. Chua, but ensures that you reap the creative benefits of multiculturalism at itsbenefits of multiculturalism at its

best.”SOURCE Bl di Mi h l W ki K l d H d B i S h l 09 D 2013 R h & Id


SOURCE: Blanding, Michael, Working Knowledge, Harvard Business School, 09 Dec 2013 Research & Ideas

Special Offer ITAP’s GTPQSpecial Offer – ITAP’s GTPQ

1 If l d t th t th i lt l i li t1. If you already suspect that there is a cultural misalignment among and between team members…

2. If you want to examine the gaps in the work-related values ithi twithin your team..

3. To bridge gaps to motivate employees, work more effectively with colleagues, and engage clients more successfully…

4. If it would help focus the team by comparing your team’s culture with the culture of the 5 best teams in ITAP’s database…

ITAP’s Global Team Process Questionnaire™ (GTPQ)…ITAP s Global Team Process Questionnaire™ (GTPQ) identifies cultural misalignment as well as other areas that

need work so you can focus on improving team performance. The GTPQ allows you to measure change/improvement over


The GTPQ allows you to measure change/improvement over time.

Measuring Cultural DisharmonyMeasuring Cultural Disharmony

ITAP measures human processITAP measures human process interactions on teams which include:• Executive overviews• Both quantitative answersBoth quantitative answers

and qualitative insights• Automated diagnosisAutomated diagnosis• Customized with questions

that address your team


that address your team goals…

Avoid Ambient CulturalAvoid Ambient Cultural Disharmony…

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Questions? Please email or call me…

Catherine�Mercer�Bing

Questions?��Please�email�or�call�me…

CEO,��ITAP�International,�[email protected]

ITAP�International,�Inc.353�Nassau�Street,�1st FloorPrinceton,�NJ�08540�USA(W) 1 215 860 5640(W)�1.215.860.5640http://www.itapintl.com

…thank�you…Remember! Put your PROMOTION CODE: R14GTPQ

in the subject line of your


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Strategies for Companies Doing Business in Russia

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