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. Last Updated: 07/27/2016

Russia Leads In Imported Managers, Study Says

Expatriate executives whining that Russia is too large to negotiate and too slow out of the reform gate -- bite your tongues, rather than the hand that feeds you.


A study released by one of the world's leading executive search firms shows that foreigners account for a larger percentage of the managerial pool in Russia than in any other Central or East European market.


In Russia, 81 percent of top management positions surveyed are held by foreigners, compared with 73 percent in the Czech Republic, 67 percent in Romania, 63 percent in Hungary and 50 percent in Slovakia.


Part of this may be the result of statistics, reflecting the fact that expatriate-heavy foreign subsidiaries composed 85 percent of the Russian survey compared to only 65 percent in the total survey. State-owned firms are correspondingly underrepresented in the Russian survey.


But it may also have to do with Russia's size compared with its Central European neighbors and the difficulties of doing business here.


"I think the Western companies interested in coming into this country consider Russia as an even more adventurous market than in the other countries," said Axel Motlik, managing partner of Central and Eastern Europe for Korn/Ferry Carre/Orban International, the executive search agency. "They feel more comfortable leaving expats in Russia longer."


Motlik's firm released the survey in Russia on Wednesday in cooperation with the London Business School. The report sampled chief executive officers or deputies of 157 firms in Russia, the Czech Republic, Hungary, Poland, Romania and Slovakia.


Among other conclusions, the report found that Russia's dearth of home-grown managers has likely slowed eco The report admits that sampling does "understate state-owned and privatized firms, in favor of foreign subsidiaries and joint ventures -- with a potential bias toward the more progressive and better-performing firms."


Yet, it seems clear that expatriate managers are still playing a major role in Russia. In recent months, the demand for expatriate managers may even have grown, according to Jonathan Holmes, Korn/Ferry's Russia country manager.


"Certainly there has been quite a strong demand ... maybe more than it was eight or nine months ago, but I'm not sure that's a trend," he said. "In the consumer products sector, certainly the growth they've experienced has required them to bring in more expatriate management."


Korn/Ferry officials identified four stages of a market's executive development, beginning with relocating a high number of expat managers, then seeing many of these managers move between companies within the same market, followed by locals replacing most Westerners and finally taking over the market.


While Central and Eastern Europe as a whole is somewhere between stages two and three, Russia, according to Motlik, is somewhere around stage two -- maybe before it, maybe just past it. Part of that may have to do with boom-times in certain sectors that have upped the need for foreign expertise.


"In certain sectors, the [foreign] experience is often overrun by growth," said Holmes. "This market is growing so rapidly ... it may have reverted to step two simply to get the management needed to handle the growth."


Moreover, in a marked change from the past, Holmes said that many local expatriates looking to transfer to new jobs within Russia are commanding higher salaries and benefit packages than those brought in from the West.


Overall, the study found that the lack of managerial expertise in Europe's nascent markets has shot up salary packages for qualified local applicants, sparking bidding wars and doubling salaries in private firms between 1993 and 1995.


A typical salary and benefits package for a top expatriate executive now is valued at up to $250,000, the survey said.


Local managers ranked continued education and training as benefits almost on par with new cars and bonuses, it said.


Turnover is especially high in Russia -- 27 percent on average in the region as a whole in 1994 against 52 percent in Russia -- compared with less than 10 percent in the West. In turn, the battle to win and keep top managers is hurting economic reforms as new companies find it difficult to build a team of executives for handling long-range challenges.


"The best local managers tend to leave to start or join new companies," Motlik said.


Motlik also noted that of the types of businesses interviewed, foreign subsidiaries were considered to be the most effective, while state-owned and joint venture firms ranked at the bottom.


"In fact, joint ventures appear least predictable in judging their success," he said. "Multinationals might want to consider very carefully before entering into a joint venture."


Interestingly, managers in Russia spend more time abroad than those in any rival market -- 36 days a year, compared with 32 days for Slovak managers, 26 days for Romania and 27 days for the survey average.


About 50 percent of Russia's executives work 51 to 60 hours a week on average, while about 30 percent work 61 to 70 hours and 20 percent 41 to 50 hours.


Almost all of the survey's respondents said they reviewed salaries twice a year, something virtually unheard of in the West and likely tied to the markets' fluid nature. A housing allowance ranked among the most important benefits for both local and expat managers, followed by free or subsidized trips home and a car.