Russian business faces challenges that many of its leaders are ill-equipped to meet. The outside world is evolving rapidly; in unpredictable and often frightening ways. Yet discussions in Russia about the types of leadership required continue to focus inwardly on personality types, rather than what organisations must become. And to paraphrase Jack Welch: 'if the rate of change on the outside isn't matched by the rate of change on the inside, the end is near'.
My previous post compared business approaches in Johannesburg and Moscow. South African business approaches challenges by increasing the number of possible alternative solutions in play at any one time. It accepts partial failure as inevitable; discounting it as a learning cost. Better answers arise from the clash of multiple perspectives in this Darwinian process of ‘increased variation and evidence-based selection’.
Russian decision-making largely remains a linear process (visualised in the picture above from a recent Business Insider article). Decisions taken at the top - by those often furthest from the action - are passed down and compliance is expected from those on the front line. Decisions, even poor ones, are rarely challenged and initiative is still punished. This is a ‘creationist' mindset: the world is willed into action by a higher being and divergence from commands are punished as heresy.
The modern Russian culture of decision-making emerges from the soil of the Soviet Union's 'managed economy’. Technocrats would agree ideal outcomes, measure current baselines, and design steps to close the gap between today’s reality and tomorrow's ideal. While this highly-structured produced some success (e.g. victory in the space race) it ultimately failed to prevent the Soviet economy from spluttering, laying down and rolling over. But has Russian business learned the key lesson of this failure yet?
In the immediate aftermath of the Soviet collapse Russian business sought 'silver bullets' - simple solutions to complex problems - from western 'gurus' (so called as so few can spell ‘charlatan'). Yet the wrong insights were presented and drawn and even at a recent leadership conference in Moscow the debate continues as to ‘ideal leadership styles’ - is the ideal leader a mentor, servant or (whisper it) benevolent dictator? This navel-gazing misses the main point about effective leadership - it isn’t about style, but substance: it requires recognising and responding to the true nature of the challenges faced.
All decisions have a situational context. These are located in one of the three systems prevalent in nature:
'Complex' is the natural, dynamic state of things in nature (which we are part, like it or not). 'Chaos' is what nature often unleashes on us in natural disasters. While 'ordered systems' are humans attempts to guard against the threat of chaos and uncertainty of complexity. However, taken too far, the quest for order turns our organisations into rigid bureaucracies. This makes them inflexible and unable to adapt when external change accelerates, such as in the aftermath of Lehman Brothers collapse or sharp falls in oil prices.
Recognising the true nature of the challenges faced and learning the required decision-making response is critical in Russia today. Many challenges remain 'ordered' ones - requiring improvements to make processes or products better, quicker or cheaper - but existential challenges - the ones keeping leaders awake at night - are increasingly complex. This means old-style command and control leadership - even tempered with a dose of mentoring style - are simply insufficient to deliver success in today’s harsh market.
Complex challenges demand leaders become more than just captains of their ship: plotting a course in advance for the crew to follow, who - despite storms and demons - will reach the safety of the intended harbour. The tool box leaders today need to effectively navigate complexity is the subject of the next blog in this short series.
Ideas here inspired by 'A Leaders Framework for Decisions-Making' by Boone & Snowden
When attacked Russians hunker down to out-wait their opponent: Muscovites abandoned their city to Napoleon, letting his army dissipate in it; and the Soviet Union drew red lines around its main cities, as their defenders bloodily drained Hitler's army through attrition. The magnitude of these victories testifies to the potency of Russian resilience under attack.
Spending time in another BRICS country recently I was had discussions about two transformational events in South African history: the Afrikaners 'Great Trek', as whole towns upped and resettled thousands of miles away to avoid British rule; and the post-apartheid 'Great Transformation', as the country avoided a descent into a widely-expected civil war .
The reason these historical narratives are important is that they define how leaders make decisions in times of pressure in Russia and South Africa today. Faced by it's current opponents the Russian cultural reaction is to tighten belts for the long-run. While in modern South Africa the 'Great trek' provides a common reference for how far one might need to go for a solution, while the post-apartheid transition (though not yet finished) steels South African determination to defy expectations.
The different culture of decision-making reveals themselves at a practical level:
In Johannesburg - we're invited by a room full of senior decision-makers to discuss why our highly innovative approach may help meet their challenges. As risk is tolerated failure is understood in the 'great trek' towards trying ten things to discover the one that may change the entire game for them. Collectively they look for compelling reasons to conclude 'there is enough evidence to try your approach'.
In Moscow - we're challenged by gate-keepers to prove upfront that our offering is superior. Should we manage this we're ambushed by other gate-keepers on the long road to the budget holder. Failure is not an option, no risks can be taken. Case studies are demanded (even though the discussion is about innovation, which by definition has not been tried before in their market) and collectively the organisation is looking for any reason to opt out.
Decision-making is defined by cultural-historical narratives. Russia defensive stance when under threat - a failure avoidance position - is historically robust (Napoleon and Hitler were both sent packing). But the cost to Russia is huge. In this crisis state-owned enterprises will draw from the reserve fund to survive and multi-nationals will live off the fat they have accumulated. But for many Russian business owners these are not options. So cutting and running - exacerbating a brain drain that undermines Russia's long-term capabilities - is the chosen path.
This is a slow death for Russian business! But is there an alternative?
Political leaders call for economic diversification as a response - 10 or even 40 years too late - for one must diversify from a position of strength, when the resources required are in abundance. Furthermore, such calls come without instructions on how to make it happen. Witness the throwing of (now) scarcely available capital at the potential white elephant that is Skolkovo, which confused cause (an innovative business climate) and effect (a Russian Silicon Valley).
Russia doesn't have its own 'Voortrekkers' who made the 'Great Trek' 175 years ago, so must seek to evolve in line with its own cultural narrative. If Russia is to become a modern, innovative economy - one better able 'to suffer the slings and arrows of outrageous fortune' - it must exploit every opportunity that presents itself. Some of these will not work, while some will catapult the entire economy forward. The next blog in this short series will introduce pragmatic steps organisations can take to recognise the difference and help usher in a Russian spring for business.
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