Strategies for Companies Doing Business in Russia

BRIC Country Series: Russia
Strategies for Companies Doing
Business in Russia

1
© 2013 ITAP International, Inc. All Rights Reserved.

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Table of Contents
Management Strategies
Expats in Russia
Strategies for Engaging
Clients
Special Offer

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1. Currently, the most important business issues for
managers ( ti
(natives and expats) i R
d
t ) in Russia are:
i
•
•
•

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

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

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2. Effective l d hi i R
2 Eff ti leadership in Russia includes the following
i i l d th f ll i
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.

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For Your Information
Information…
Business i not conducted d i th f ll i ti
B i
is t
d t d 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
Woman’s Day – 8 March
Labor Day – 1 May
Victory Day – 9 May
Russia D – 12 J
R
i Day
June
Unity Day – 4 November

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Motivating Employees
• R
Russians value th chance t d
i
l the h
to demonstrate their
t t th i
talents.
• To build team spirit, companies provide opportunities
spirit
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 cohesion
cohesion.
• Recognition for individual performance is not
p
particularly valued, because it can undermine group
y
,
g p
solidarity.

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Expats in Russia
1. Wh t
1 What are the most important issues for expat
th
ti
t ti
f
t
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).
Stay l
St clear of criminal organizations or criminal market areas.
f i i l
i ti
i i l
k t
Establish strong ties to influential persons in order to be protected
from corporate raiders.

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Expats in Russia
2. How are expat managers t i ll perceived?
2 H
t
typically
i d?
•

•

•

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.

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Expats in Russia
3.
3

If an expat doesn’t show knowledge of and interest in the
td
’t h
k
l d
f di t
t i th
Russian culture, mentality and traditions, he or she could be
perceived by Russian nationals as arrogant and insensitive.
4.
4 If an expat doesn’t look serious, d
td
’t l k
i
does not appear t be
t
to b
concentrating, or is not prepared at first meetings/encounters,
he or she can be perceived by Russian nationals as
unprofessional.
unprofessional
5. Smiling is generally reserved for something the Russians find
amusing; it is not appropriate for everyday greetings of coworkers and other employees. (Smiling is also reserved only
employees
for greeting close friends.)

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Expats in Russia
6.
6 If an expat d
t doesn’t wear something expensive or something that
’t
thi
i
thi th t
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 perceived
school),
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 Russian
appointments
nationals as difficult to do business with / as not dynamic / as
disinterested.
8.
8 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

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

making jokes about the government
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).

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Client and Business Strategies
How can vendors b effective at b ildi rapport with
H
d
be ff ti
t building
t ith
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
Don'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-toface to
face communications and the telecommunications system is
unreliable.
Be patient and understand that negotiations with Russian
partners is a long process that will take time.

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What h ld
Wh t should vendors d when visiting a prospect or a
d
do h
i iti
t
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 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.

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What h ld
Wh t should vendors avoid doing?
d
id d i ?
•
•
•
•
•
•
•
•
•

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
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
relationship.
Do not apply success formulas of the home markets to Russia without any
adaptation.
Do not expect quick wins.

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The 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 advice
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.
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.

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What is
Wh t i considered a conflict and h
id d
fli t d how are conflicts
fli t
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 end
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.
war
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.

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The
Th most effective things one can do to maintain a
t ff ti thi
d t
i t i
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 expensive
wine,
cognac,
chocolate, or some region-specific presents). The higher the
manager/partner is in the hierarchy of the company, the more
expensive the p
p
present should be.
Invite the boss to a restaurant, concert or some other client
event on a regular basis.

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Hofstede Scores for Russia
•
•

•
•

•

Individualism: 39
(Group Orientation)
Power Distance: 93
(Hierarchical
Orientation)
Certainty: 95 (Need for
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
Russia.
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).

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Cultural Disharmony Undermines
y
Workplace Creativity

“Managing cultural friction not only
Managing
creates a more harmonious workplace,
says professor Roy Y.J. Chua, but
Y J Chua
ensures that you reap the creative
benefits of multiculturalism at its
best.”
SOURCE: Blanding, Michael, W ki K
SOURCE Bl di
Mi h l Working Knowledge, H
l d
Harvard B i
d Business S h l 09 D 2013 R
School,
Dec
Research & Id
h Ideas

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Special Offer – ITAP’s GTPQ
1.
1 If you already suspect that there is a cultural misalignment
l d
t th t th
i
lt l i li
t
among and between team members…
2. If you want to examine the gaps in the work-related values
within your t
ithi
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
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
time.

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Measuring Cultural Disharmony
ITAP measures human process
interactions on teams which
include:
• Executive overviews
• Both quantitative answers
and qualitative insights
• Automated diagnosis
• Customized with questions
that address your team
goals…

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Avoid Ambient Cultural
Disharmony…
PROMOTION: Buy 1, get 1 FREE (GTPQ team
analysis)
Buy 1 iteration of ITAP’s Global Team Process
Questionnaire (GTPQ )
Questionnaire™ (GTPQ*) at $1000 and receive 1 iteration
free and 1 hour of virtual debrief with each iteration. Email
me (cbing@itapintl.com) and enter PROMOTION CODE
R14GTPQ i the subject line.
in th
bj t li
*GTPQ (Premium version) retails for $1,000/team plus debrief or delivery of interventions for the
team @ $350/hour

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Questions? Please email or call me…
Catherine Mercer Bing
CEO, ITAP International, Inc.
cbing@itapintl.com
ITAP International, Inc.
353 Nassau Street, 1st Floor
Princeton, NJ 08540 USA
(W) 1 215 860 5640
1.215.860.5640
http://www.itapintl.com

Remember! Put your
PROMOTION CODE: R14GTPQ
in the subject line of your
email.

…thank you…
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Strategies for Companies Doing Business in Russia

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