Russia is poised for an economic renaissance that will reshape its role in global commerce. This report explores how this will come about through the growing capabilities and influence of Russia’s executive population.

Our understanding of Russia is too often flawed by the corporate scandals and failures of the past, reinforced by a Russian tendency to churn over negative experiences. Strident media headlines have obscured the reality of a country that has changed enormously over the last few years.

What brought this about?

At the turn of the millennium, Russia changed from being an insulated energy provider to a more open business society seeking closer integration with the global business community. The dissolution of the Soviet Union, privatisation, dogged multinational expansion and opportunities for Siberian business with China alerted the executive population to a shift in trading relationships. A multi-polar world was emerging that resonated withRussia’s European and Asian roots. A more positive mindset began to take hold among Russia’s executives.

While the younger, aspiring generation embraced social media, global integration was strengthened by the digital economy. Previously isolated groups of managers, government officials and state employees found themselves in a new bloodstream – regional connections and personal relationships began to flourish as new trading organisations, multinational subsidiaries, government authorities, international business schools, collaborative partnerships, HR experts and entrepreneurs linked together in a new commercial environment, as shown in Exhibit 1.

Russians are becoming much more positive in their thinking and international perceptions are changing.

Exploding the Myths

Myth one: Soviet dependence on hydro-carbons started to dissolve with the breakup of the Union. Russian executives are shaping careers in other industries, partly driven by an increasing share of services to GDP relative to agricultural output and low-end industry. This is spreading economic wealth across a broader range of industries, rebalancing the economy.

Along with this, Russia’s new relationship infrastructure is providing the momentum to open the country up to trade and change the structure of the economy. We see this happening already, with Russia being one of the top 10 recipients of foreign direct investment, buoyed by growing transparency and political stability.

Myth two: Russia’s institutional infrastructure, slow to develop and lagging behind commercial progress, is not a significant limiting factor. While some industries benefit from state protection, in other sectors international companies thrive through expansion or collaborative partnerships that enable them to reach a burgeoning consumer market and secure high returns on investment. The most effective way of handling Russia’s developing institutional infrastructure is to adopt the right mindset and align expectations and corporate behaviour to the vagaries of the market. Planning for change and acting intuitively are key elements in the Russian mindset.

Myth three: Fruitful ventures in Russia are very much the norm, despite media reports showcasing difficult experiences for multinationals. A lot of companies have been enormously successful in Russia. Turning opportunity into tangible returns depends on having the right Russian leaders and investing time and energy in relationships across the whole relationship infrastructure.

Myth four: Russia’s higher education system is seen as outdated. However, the strength of the Soviet education system provided a very strong foundation for today’s business leaders to evolve their capabilities in finance, marketing, sales, HR and other areas of corporate expertise.

The increasing participation of international business schools offers exposure to global best practice, as well as valuable introductions to regional and international executives. Corporation participation in business schools is growing in line with a more coherent HR strategy in Russian and international businesses.

Myth five: The assumption of outdated HR practices misses the point that HR is changing rapidly from a technical function to a source of strategic expertise for corporate growth. Three main changes are evident: (i) the extent to which HR drives internal communications and therefore the implementation of corporate ambitions; (ii) the development and use of key performance indicators for the HR function; and (iii) a new perspective on people not as human resources, but as “co-creators”.

Myth six: Assessing and hiring executives in and for Russia is challenging. There are a number of complexities based on unique combinations of skills, experience and economic heritage. Best practice in assessment involves both quantitative and qualitative elements. Three challenges emphasised by our participants are: (i) the concentration of talent in Moscow; (ii) few career paths with critical mass that provide an element of predictability in hiring; and (iii) limited major capital investment projects over the last 20 years, requiring supplemented expatriates, adding another layer of complexity in assessment and hiring.

Myth seven: For expatriates, Russia can be highly rewarding, offering good return on investment for individuals as well as companies. Successful expats are able to read the market and adapt their behaviour to certain expectations in professional relationships. Western expatriates need to exercise their intuition, overcome a tendency to be overly logical and believe in the impossible.

Myth eight: Russia’s development of an innovation economy is buoyant, but obscured by a lack of fanfare in Russia, unlike in China and India. Skolkovo is a very good example, housing more than 500 start-ups in a range of sectors and generating new conceptual thinking in innovation, resulting in products based on affordability and practicality. Russia’s renaissance will benefit from three areas of innovation: blended innovation, iterative development and innovative leadership.

To conclude, it is our assertion that Russia’s executives will lead the country’s economic renaissance. We see a growing body of managers and business leaders with a strong belief in their ability to bring about change; opportunity is being turned into tangible results through the evolving relationship infrastructure; and Russia’s rich history is a deep source of answers and solutions to commercial challenges in the future.

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About Boyden Global Executive Search

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