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Attract, retain and find employees and partners in Russia

by: Pia Kähärä, Associate partner of Hofstede Insights

Why should I read this document?

It is not easy to find employees and partners when going to a foreign country or working in a foreign environment by rules that you are not familiar with. As a relatively young market economy, Russia, with its diverse cities and regions, is not one of the easiest markets to operate in. Read the most important things in partner and employee work in Russia to avoid costly mistakes. The document gives pointers about finding a partner and searching for employees, their motivators, and cooperation building. The author has done versatile export business with Russia for more than 20 years and also lived and run a business in Moscow.

Important!

5 most important things to know about doing business in Russia (if you only read one thing this is what you should read).
 
1. Russia is a young market economy of people with various backgrounds and experience: don’t be over-trusting and check the facts when possible.
2. In a collectivistic country, relationships are major assets to everybody. Recommendations from your partners open doors.
3. Russia is also a high power distance country which means that companies in general are hierarchical and decisions are made on a high level.
4. It is important to understand that Russians expect certain status and decision-making abilities from you as their partner or their boss, too.
5. As a boss, be ready for unexpected situations and changes in the environment. Creativity, quick thinking, ability to make decisions and constant checking on your team’s performance helps you to manage your team and business successfully.
 
One of the pieces of information that came out of the interviews with SMEs is the difficulty that SMEs have to find employees and partners that are reliable when going to a foreign country.
 
The goal of this document is to give them pointers on what they will encounter when hiring and managing people from Russia, a culture different than their own.  
 
Russia, with about 140 mill. inhabitants, is the largest country in the world (17,075,200 square kilometres /6,592,800 sq mi).  It is at the same time very centralized in politics and business life. It is important to understand that about 80% of its monetary funds flow through its capital Moscow, which is also the most hectic place where the headquarters of most companies are located. St. Petersburg, Russia’s window to Europe, is the second biggest and an important city in the country where a lot of importing companies are situated.  Also, it is worth mentioning that Russia belongs to the Eurasian Economic Union with custom-fee access to its neighbouring countries: Belarus, Kazakhstan, Kyrgyzstan, Armenia. EAEU is a single market of over 180 mill. consumers.

 

Finding, attracting and retaining partners

Technically, finding partners in Russia is about the same thing as anywhere but with some market specifics. If you have contacts in the country, use them, as Russia is a collectivistic country where doors open the quickest through introductions and recommendations within different networks.
 
Do your homework first.
 
Before proceeding to the partner search stage, I strongly recommend doing a market analysis first. Companies often want to skip this stage to save time and money and eventually end up doing business with the wrong partners and on the wrong competitive strategy (not positioning your offering right, for example) or not finding partners at all because they have not been able to offer the market the right thing. You will surely save time and money by working with professional  ‘go to market’ service providers (specialized consultants, chambers of commerce, local embassy of your country) in market analysis and partner search.
 
After the market analysis stage you are more prepared to set proper search criteria and ideal partner profiles for partner candidates. In addition to business-sector-specific requirements, you may wish for experience in working with European business partners, which ensures that the partner handles complex logistical systems and import procedures or Russia (customs) well and also understands what European partners usually require from their business partners. In a collectivistic country it is also important that the partner has good relationship network (business, administration etc.)
 
Russia is a vast country and you should know where to go. Most head to Moscow or St. Petersburg in the beginning and expand later to other regions. Actually, Russia is very Moscow centric in business life: headquarters of most companies are situated in Moscow. Many importing companies are also situated in St. Petersburg. There are also good distributor/dealer companies in the regional big cities, but many of them do not do customs operations, but prefer buying from importers. 
 
As a newcomer without contacts, you can search for partners from open sources, demo-versions of marketing studies by business sectors (keyword search), specific trade fairs and trade fair catalogues, checking your known European companies’/competitors’ site about their partners in Russia, or doing searches of their product name in Russian search engines and checking out business sector associations and publications etc. A good source is also Russian imports customs statistics (TNVED) which gives you names of importers and import statistics of your product group. If you decide to do the job without professional help, you need a Russian speaker for this, as most company sites in Russia are only in Russian. However, a local consultant’s analysis on the partner candidates can be more than valuable.
 
Also, the contacting phase of a partner search is quite specific and time consuming. Usually Russian companies do not publish contact names on their sites, so you must find and reach them by contacting the company by phone. For certain types of companies, to be taken seriously and to go through ‘gate keepers’, you should write ‘official letters’ (i.e. preferably with a round seal of your company) and make numerous calls afterwards to be able to speak to the right person (usually it takes a few rounds at least to reach the right person). As Russia is a very hierarchical country (high power distance), you must target the high level in the company as decisions are made on a higher level than in many Western European countries.

Who should I trust? What to take into account regarding the partners?
 
In Russia, a reasonably collectivistic culture, people usually trust only the people they know quite well. Contrary to Scandinavian countries, for example, there is no general trust towards strangers. In Russia, you must prove that you can be trusted.  In collectivistic countries you find partners and operate the best through connections and their recommendations. When working in Russia, you should remember to apply this rule both ways, don’t be overly trusting either.
 
At first stage, there are other possibilities to check the trustworthiness of your potential partners:  
 
Check their juridical information first from the official site of the Russian Tax Office: www.nalog.ru. There is a place to check your counterpart. You can see if the company really exists and if it pays its taxes.
 
However, for deeper background checking of your potential partners, I again advise you to turn to professionals who provide these services. Often this work is done by unofficial channels, as in Russia most companies do not openly share things like their financial information including annual turnover, or sometimes even their employee headcount. More detailed financial information can later be shared between partners.
 
Some general things to look for in partner trustworthiness in Russia: time on the market (history: in Russia, 20 years is long), check the internet about their reputation, employee headcount, employee feedback (there are some blacklist sites of employers), amount of distributors and dealers when applicable, existence of foreign management or investors (can sometimes be considered safer partners), range of products/services, imports experience, and warehouses. Also, when visiting a potential partner, your general feeling about the management and employees is important. It is also beneficial to ask for recommendations about the partner from their existing business partners, for example, your fellow country companies, if possible. Take into account that it is a big plus, if there are staff in the company that you can communicate with in a  common language. If you have Russian-speaking employees, it solves the language problem.
 
In Russia, generally agreements are valued when they are written, signed and stamped officially. Spoken agreements can sometimes be considered as no agreements at all, so they are not binding and change. Russians are quite pragmatic, too. For example, distribution agreement conditions and required sales quantities tend to be renegotiated when situations change.   
 
A common mistake is to be overly trusting of your new partner. Advance payment or partial advance payment minimises risks in the beginning and is commonly practiced in Russia.

Finding, attracting and retaining employees

Russia is quite a flexible job market for companies. You see different forms of work: short term, long term, part-time contracts, even the illegal worker market flourishes. Workers unions do not regulate the job market or have power in practice. There are a lot of different kinds of job seekers with different levels of understanding of worker rights: low-pay workers are not too educated in how to protect their rights, but some educated employees know all the legal details and can be very demanding of their employers.
 
Just as in the case of partner search, companies prefer to search for employees via their contact network: personal contacts, business sector associations etc. If you have relations in Russia, use them.
 
If you don’t have a wide contact network in Russia, you can use recruitment companies or individual recruitment agents or browse different open recruitment sites. However, it can be hard to evaluate how professional the recruitment services are, and the open recruitment sites information is sometimes outdated.
 
There are also some sites/portals which gather information from different recruitment sites, for example: https://rabota.yandex.ru. Job publishing in printed media is not widely used anymore. LinkedIn usage has been officially blocked in Russia since the end of 2016.
 
Salary and motivation
 
Salary levels differ significantly between the regions of Russia. In Moscow the salaries are the highest (as are all other expenses), in St. Petersburg the second highest and then come the regional cities. Salary payment for office duties is usually done once a month, for workers 1-2 times a month.
 
In Russia, employees are used to different motivational forms: one month extra salary, sport club membership, free tea, coffee and biscuits for the office etc.  
 
TIP: To avoid bigger operational and personnel risks at the first stage, smaller companies in particular use service companies who offer turn-key company establishment services providing you with local office premises, hiring personnel and outsourcing them to you, organizing bookkeeping, etc.

Some points to consider:
 
Quite many Russian employers do not employ people over 40 years of age, so this is a good possibility for European companies to find an experienced and dedicated work force.
 
Again, when hiring, don’t be overly trusting. There can be misleading or false information in the CVs of some candidates. Mostly people lie about their diplomas, either they do not have them or they are “bought”. They can be checked from the awarding university, for example. Of course, people can also exaggerate their work experience, previous salary, language and computer skills or add to their list of former employers companies they have not worked for, write false reference letters, etc. So, when interviewing, check the above things.
 
In Russia, there is a special system of having an official personal workbook/booklet ‘trudovaya knizhka’. Companies keep them for their employees, mark the work in the book and when people leave a company, they take it with them. So, it keeps record of all the official work history of the person. However, many people had to work illegally in the 90s, for example, for companies that did not pay their taxes. In these cases there are naturally gaps in the workbook.   

What type of manager do you have to be with Russian employees?
 
Russia is one of the most hierarchical countries in Europe. The employees expect clear instructions, a lot of guidance and control, at least in the beginning. Micromanagement is often not seen as a minus, but even as a sign of caring. In most Russian companies, there is a clear management hierarchy and the management is expected to make all decisions. Employees are often not encouraged to express their opinions or challenge their boss. This is often a stumbling point for European managers from more egalitarian countries who often want to consult their subordinates and delegate rather than give clear orders.
 
The manager can give very direct feedback to subordinates if he/she is not happy with the performance. Russians usually consider a good boss like a good father who is kind and fair, but tells you what is expected from you and punishes when needed.
 
Dos and don’ts  
 
Do not give young employees too much responsibility and freedom without testing their abilities and willingness to take it first, or without giving them clear instructions on what to do.
 
Create personal trust first. Russia is a collectivistic culture in which personal relationships are more important that relationships to companies. Russian employees work for you personally as their manager and if they respect you, they usually work hard.

Be fair and decisive. As a boss you are expected to make (quick) decisions and bear the responsibility.
 
Know what happens around you, go out from your cubicle and talk to people a lot, ask questions, help people, monitor things that happen in the market (changes in laws and requirements for companies).  

Give clear and detailed instructions for the tasks with a clear timeline as well.

Take into account the team-spirit building for the employees and work team, it is very important in collectivistic cultures. If you come from a less hierarchical culture, you must encourage your Russian employees to come and talk to you openly and tell you if something is wrong.
 
Be quick, as situations sometimes change quickly in Russia. Be pragmatic, creative and open-minded, as in Russia official laws and rules often differ from practice.
 
Personal involvement is the key to success. Do not leave your employees alone. Communicate a lot. Organize nice events for your employees outside work, for example, to create a good feeling and trust. Meet with business partners as often as possible, too.

Short case study

A Finnish client of my consulting company who had worked with a local Russian importer/distributor company for more than 10 years was not happy with the partner’s performance and asked me to help to find a new partner on the side. I organized several meetings with possible partner candidates. It was obvious that the partners had different experience and motivations which you can only see in a face-to-face meeting.
 
We met with the second biggest player in Russia, with subsidiaries in about 70 cities in Russia. This partner candidate seemed flexible enough for a smaller manufacturer and its people nice, although not English speaking. Already in the first meeting we preliminarily agreed to start cooperation, but warned that we are not going to offer them exclusive rights as we have the other partner, too.

A few weeks after the meeting, prior to signing any contract, this company took part in a big tender of our biggest end-customer with our products and won it. The other partner had also taken part.

This deal was crucial for the Finnish company, so the management decided to sign the distributorship agreement, even though the first feeling of this kind of operation by the new partner was not very good. However, the new partner explained that this deal was crucial to offer a good start for the cooperation and they had worked with the end-customer already for a long time, and it was easy to understand that in Russia many common business rules do not apply. After this unconventional beginning of the cooperation the companies have built a very good, trusting relationship for years, and the business is developing well.