A dominant archetype of the HRM system in Russian industrial
companies in post-recession times
Igor Gurkov
Distinguished University Professor of Strategy and Organizations, National Research
University Higher School of Economics, Moscow, Russia
Alexander Settles
Professor, National Research University Higher School of Economics, Moscow, Russia
Address for correspondence:
Gurkov, I. Department of General and Strategic Management, National Research
University Higher School of Economics, Myasnitskaya 20, Moscow 101000, Russia
e-mail: [email protected]
1
A dominant archetype of the HRM system in Russian industrial
companies in post-recession times
Abstract Russian Human Resource Management practices remain durable even
with onslaught of economic change and exposure to global HRM practices and
international competition. Based on survey results of 201 CEOs of domestic
industrial companies located in central region of Russia we identify the resilient
archetype of Russian HRM system. Even in companies that have achieved high
levels of profitability or those that engage in innovative practice continue to
practice retrograde HRM techniques left over from an earlier era. We are able to
identify strategic misfits that are a direct result of the continuation of rigid HRM
system that prevent the development of an organizational climate to support
innovative or dynamic firms.
Keywords: HRM, Russia, upper echelon, survey, CEO
Introduction
In this paper, we provide a detailed account of the prevailing model of HRM in Russian
industrial companies. Previous research has indicated the relative limited role of HRM
officers of Russian firms in firm strategy development (CRANET, 2012). Thus, in this
study we concentrated our attention on CEOs as they provide the leadership and
expectations for the development of HRM systems. There exists extensive empirical
research focus on the perception of HR directors on the HRM systems while only a
limited number of studies that focus on the CEOs role in developing HRM practices.
CEOs attention to the HR function plays key role in the strategic direction of the firm
(Hambrick 1997, 2007) and the role the HR plays in the firm may be based on CEOs
perception of the HR function (Brandl and Pohler, 2010). This study expands both
theoretical framework applicable for predicting the patterns of HRM systems in postrecession times and tests the proposed framework using the data from the survey of
CEOs.
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This paper is organized as follows. In the first section, we present the prerecession findings on HRM system in Russian industries and shortly present the
development of the labor conditions during the recession of 2008-2009. The second
section contains the general research framework for investigation of HRM issues in
Russia in the post-recession settings, including the theoretical framework and
hypotheses development, the survey instrument, the rationale concerning the choice of
respondents and information about the sample. The third section presents the results that
enable us to draw the generalized picture of HRM systems patterns in Russian
industries. The next section deals with variations in HRM patterns and the recent
evolution of such patterns. The last section presents conclusions and suggestions for
further research.
Distinctive features of HRM in Russian companies system prior to the recession
and immediate reaction to the recession
The evolution of Russian management practices over the past decade was documented
in a series of studies. Among the most visible characteristics of national HRM system
may be listed:

the negligible share of officially guaranteed payment (i.e. industry-wide wage
rates or salaries based on the officially set minimum wage) in take-home pay
(Gurkov and Zelenova, 2009);

high rigidity of labor legislation regarding employment and redundancies (see
Kapelyushnikov et al. 2011) coupled with very high flexibility of working and
payment conditions (Gurkov and Zelenova 2011);
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
visible shortage of skills (Gimpelson et al 2010) and high demand for retraining
(Gurkov 1999, 2002a) coupled with inability of the majority of industrial
companies to allocate sufficient funds for personnel development;

high uniformity of HRM practices within industries regardless of different
strategic types of companies (Gurkov et al., 2007); and

coexistence of Soviet heritage in job design and remuneration schemes in
“genuine”
Russian companies (see Gurkov et al., forthcoming) with the
replication of modern Western HRM techniques in Russian affiliates of foreign
multinationals (see Zavyalova et al. 2011).
In 2008 a survey of Russian HRM directors was included for the first time into
the CRANET framework for the comparative study of human resource practices that
allowed further international comparison. This survey uncovered the distinctive
characteristics of Russian HRM system such as low unionization and a low degree of
formalization of performance assessment. That study also confirmed the low relative
rank of the HRM function within Russian companies. The low status of HRM in
Russian firms was exhibited by the low level of participation by personnel directors in
executive boards, their low involvement in strategic issues, and minimal authority of
personnel departments on deciding or influencing remuneration levels and decisions
about lay-offs. HRM directors were often unable to provide even basic data on firms’
financial performance. HR department appears to merely fulfill an administrative
function in Russian firms and be incapable to provide strategic advice to the top
management (see Gurkov et al. 2012).
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The economic recession of 2008-2009 put additional challenges in Russian
HRM system. In many Russian industries, stagnation in output started as early as in
November-December 2007, and the financial crisis in August-September 2008 merely
accelerated the negative trends in firm performance. The fall in output between the
highest and the lowest points was in average for all industries as 23%. The minimum
fall in output was observed in oil extraction (1.2%), the maximal one – in machinebuilding (56.9%). However, Russian companies were able to adjust the labor and
employment conditions to the crisis quickly. Firms were able to cut real take home
salary by an average of 30 % and most enterprises were able to avoid politically
undesired large-scale lay-offs either by cutting the remuneration to the minimum wage
thus provoking voluntary redundancies or by offering employees to take “mutually
agreed voluntary leave without pay”. One indicator was that in 2009-2010 the total
number of those on “voluntary leave without pay” equaled the officially unemployed
two million persons or three percent of the total labor force. As a result, the fall in
output did not create a high level of unemployment (unemployment level by ILO
standards has not surpassed 9% in 2009). As the economic situation improved in 20102011, “voluntary leaves without pay” declined and remuneration levels partially
returned to pre-crisis times. Therefore, the experiences of the period between the end of
2008 and 2009, especially the proliferation of voluntary unpaid leaves, confirmed the
‘effectiveness’ of the established system of HRM for solving the current problems of
companies that have found themselves in the midst of a crisis. However, it was stressed:
It is this high effectiveness of adaptation at the micro-level that raises the question of
the socioeconomic costs of the recession in the context of Russia’s entire national
economy. The issue here is not so much the number of jobs lost as the quality of the
jobs that remain. The quality of the remaining jobs has declined as a result of even more
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flexible use of working hours and even more high-handed behavior by management on
matters of performance appraisal and wages” (Gurkov and Zelenova 2011, p. 77).
That prediction was taken into account in designing the research framework for
the present study aimed to depict the post-recession patterns of HRM systems.
Research framework
Theoretical framework for evaluation of HRM in turbulent times including normative
theory of organizational design and the basic hypotheses
The connection between the organization design and strategy has been examined in a
wide-ranging literature (Becker and Gerhart 1996; Delaney and Huselid 1996; Delery
and Doty 1996; Wright and Snell 1998; Martin-Alcazar et al. 2005; Chenevert and
Tremblay 2009). What we propose in this paper is a theoretical framework to study
HRM systems in extremely turbulent times of crisis and post-crisis recovery based on
normative theory of organizational design (see Burton and Obel 2004; Burton et al.
2006). Using the Miles and Snow’s typology of strategic orientation of the firm (e.g.
reactor, defender, analyzer, prospector) (Miles and Snow 1978) the normative theory of
organizational design prescribes particular kinds of organizational parameters for the
case of human resources such as the type of incentives, level of formalization of work
tasks, and type of organizational climate that better “fit” a specific strategic type. Our
major hypothesis was that during the times of rapid and often unpredictable changes in
macroeconomic and market conditions most Russian companies will exhibit the
strategic orientations of “defender” (when companies strive to maintain efficiency of
operations by creating “enclaves of stability” in narrow defined market domains) or
“reactor” (strategy where firms have lost their strategic orientation and simply wish to
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adapt themselves to the rapidly changing market conditions by inconsistent piecemeal
changes in any area of enterprise management).
Burton et al. (2011) predicts the following common characteristics of
“defenders” and “reactors”:

Extremely high centralization of resources.

High formalization of job content.

Incentives (either individual or group) based on behavior.

Organizational climate that is characterized by a variable level of tensions but by
a high resistance to change (“group climate” or “climate of internal processes”).
An additional hypothesis related to HRM management in uncertain times is that despite
the strong objective necessity to enhance quickly the firm’s base of competences the
majority of firms will decrease the amount of internal uncertainty by avoiding
recruiting employees with unusual work experience and dissimilar job preferences.
The choice of respondents
As the previous research of Russian firms (Gurkov et. al 2012) found that there existed
only limited organizational power for Russian personnel directors, we decided to use as
informants on HRM systems top executives, especially CEOs. These respondents
played a central role during the Great Recession and the period of fragile recovery as
they made the final decisions on all strategic personnel issues and shape the HRM
system in their companies. In doing so we continued the tradition of using Russian
CEOs as informants on HRM issues (see Gurkov 1999; Gurkov 2002a; Gurkov, 2002b;
Gurkov and Zelenova, 2009). In addition, we decided to narrow our focus to industrial
companies. Industry was historical the leading sector of the Russian economy and had
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set the model of human resource management in all other sectors (Gurkov et al.,
forthcoming). Although employment in the industrial sector has drastically decreased in
1990-2000s, industrial sectors including extraction and processing industries;
electricity, gas and water; construction still employ in Russia around 20.7 million
persons or almost 30% of the total employment by the 2010s. The working conditions
of industrial jobs in Russia still influence HRM patterns in most other sectors or, at
least, serve as reference points for differentiation.
Constructs and measures
Within the proposed framework, we selected the constructs that may better reflect the
theoretically prescribed characteristics of companies of different strategic types. Type of
remuneration system was assessed by evaluating the proportion between fixed and
variable parts in home-take pay of three categories of employees – managers, nonmanagerial white collar workers (also known in Russia as “specialists”), and shop-floor
workers. The variation in remuneration instruments was assessed by the frequency of
use of various monetary incentives and benefits and applicability of non-monetary
benefits to various categories of employees. The formalization of job content was
assessed by the availability of written job description for various employee categories
and by strictness of supervision to ensure compliance with job descriptions and
performance standards. The latter instrument was proposed in Barton et al. (2006).
CEOs were also asked to indicate which type of organizational climate (the
development climate, rational goal climate, group climate, or the internal processes
climate) is currently observed in their companies and which type of climate is the
desired one. Here we used the instrument proposed in Burton and Obel (2004). The
level of centralization of resources was assessed by the degree of discretion of middle
8
managers in forming and using budgets of their departments. Finally, CEOs were asked
to assess the expected shortage of particular types of employees and difficulties in
filling the particular types of position. This was a variation of the instrument used in
Gimpelson et al. (2010).
There are exogenous and endogenous factors that may shape or affect patterns of
HRM systems. Thus we collected information at the firm level that included industry
information, absolute size of a company (measured by the number of employees),
relative size of a company (measured by the volume of annual sales by relation to the
average company in the industry), and the CEOs’ participation in firm’s ownership
structure. We put special emphasis on perceived innovativeness (number of types of
innovations that are mastered regularly) and assessment of the current company
performance as the both measures play an important role in assessing the strategic type
of the company.
Data
The survey was conducted in the second half of 2011 and the sample consisted of 201
CEOs of companies from Central Russia involved in various production activities.
National champions, companies that qualify for state aid and subsidiaries of foreign
companies were excluded from the sample.
The sample screen was designed to select firms that operate in the Russian
market without reliance of state aid or under the control and influence of non-Russian
owners as other studies in Russian HRM stress visible differences between “indigenous
Russian companies” and foreign MNCs (see Zavyalova et al. 2011). The number of
employees of the surveyed companies ranged from 150 to 16,100 employees with a
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median size of 500 employees. We could consider our sample, albeit not large, as
representative to the “indigenous” Russian industrial companies.
We also should remind to the reader that we observed industrial companies
during the period of fragile recovery. In our survey almost 63% of our respondents
acknowledged they their industry has experienced a serious recession at the end of 2008
and first half of 2009. Again, in the second half of 2011 CEOs demonstrated very
limited optimism about the current state of their markets.
A generalized view of HRM system of Russian industrial companies
Our research findings are organized beginning with HRM features that are common to
the majority of firms followed by those characteristics with greater variation.
Centralization of resources
A common feature of most Russian HRM systems is extremely high centralization of
resources. Merely eight percent of the surveyed CEOs indicated that middle managers
such as plant superintendents, department chiefs, and others manage separate budgets,
while 92% of CEOs admit that decisions about all significant expenses are made at the
top. This high level of concentration of control reduces dramatically the likelihood of
innovation in process or product by middle managers or shop-floor employees. As all
innovations in employment or work design are centrally controlled, this deadens the
level of initiative of middle managers.
Formalization of job content
10
The second universal feature of Russian HRM system is high formalization of job
content (see Table 1 and Table 2). More than 80% of the surveyed CEOs indicated that
written job descriptions are available to all employees, including top managers. In
addition, such job descriptions are controlled tightly or very tightly.
----------------------------
Put Table 1 here
--------------------------
------------------------
Put Table 2 here
--------------------------
So far, we observed organizational characteristics that correspond well to the
theoretically prescribed characteristics of “defenders” or “reactors” – high centralization
of resources and high formalization of jobs.
Demand for the workforce
The experienced recession has not solved the problem of shortage of skills. In our
survey, 24.2 of the surveyed CEOs indicated that their firm has a lot of vacancies that
are filled slowly. This is roughly the same figure (27.2% of companies with significant
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shortage of employees) that was observed in “fat times” of 2005 (see Gimpelson 2010,
p. 315).
It is important to clarify which areas need immediate strengthening. Russian
industrial CEOs see the urgent need to strengthen by qualified employees the three key
functional areas -- production (operations), marketing and sales, and technical support
(see Table 3). It worth to note the complete disregard by CEOs of all “techno-structure”
(in H. Mintzberg’s terms) positions – business planning, finance and accounting and
especially, human resource management. This means that during times of crisis and
post-crisis recovery the existing techno-structure of Russian industrial companies is
considered by CEOs as incapable to offer especially valuable solutions to enhance
radically company’s competitiveness.
----------------------------
Put Table 3 here
--------------------------
If the overall shortage of workforce has not changed much between 2005 and
2011, the selection criteria for the workforce have seriously changed. This became
visible as we compared the perceived difficulty of selecting employees for particular
positions in 2005 and 2011 (see Table 4).
----------------------------
Put Table 4 here
--------------------------
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The recession made easier the shortage of professionals and workers, but
imposed new, much higher standards for selection of managers. It became visible as we
assessed the expressed needs for particular types of employees (see Table 5).
----------------------------
Put Table 5 here
--------------------------
As it was expected, Russian industrial companies have no place for old men, for
strangers (employees exposed to direct or indirect foreign working experience), and, for
young ambitious graduates in economics, management and business administration who
pretend to occupy staff functions. Thus we confirmed our secondary hypothesis about
the reluctance of Russian CEOs to increase internal uncertainty by offering jobs to
unusual types of persons. We should add to the picture of the very low level of
companies’ expenses for personnel training and development. Around 14% of the
surveyed CEOs reported no expenses at all on personnel development in their
companies in 2009-2010, a further 63% assessed the total expenses on personnel
development (including the use of external services providers, purchase of the necessary
literature and teaching materials, tutoring and mentoring, on-the-job training etc.) as
less than one percent of the total sales. So, Russian industrial firms want their
employees to come to the firm with the necessary skills and competences to do their
job. Fortunately (for both employees and employers), Russian industrial companies are
not affected by discrimination practices that became visible in service sectors race
(nationality) is not taken into account as a selection criteria. Gender issues are important
13
for clerical positions (for example, job advertising usually require females as bookkeepers and accountants), but do not affect managerial positions.
In general, CEOs desire that they staff their companies by employees at the
heights of their physical and mental abilities who will have no trouble in adaptation and
will not introduce unfamiliar working habits and standards. The clearly articulated
avoidance of employees with exposure of foreign experience either acquired in Russian
subsidiaries of MNCs or by working abroad indicates that CEOs have a strong bias
against employees who may question their power and expertise.
Organizational climates – expected and desired
The important measure of HRM system is assessment by CEOs of the current
and desired type of organizational climate. On these questions we received the most
interesting results (see Table 6).
----------------------------
Put Table 6 here
--------------------------
First, the observed organizational climates of the majority of companies are the
climates theoretically prescribed for “reactors” or “defenders”. Around 18% of CEOs
observe in that their companies group climate, prescribed for “reactors” where the
company is like an extended family; atmosphere is friendly, top managers are
considered as parental figures. Further 48% observe the “climate of internal processes”
prescribed “defenders” when the firm is a set of well-built and effective procedures,
processes and structures; leaders are good coordinators. Regarding the desired climate,
14
the situation is similar as 12% of CEOs wish to see a group climate and 49% a climate
of internal processes. The majority of CEOs who observes either group climate or
climate of internal processes are satisfied with the atmosphere in their companies and
wish to keep the climate unchanged.
The most interesting, however, are desires of those CEOs who observe in their
company “climate of rational goals” (an organization is oriented towards properly
measured financial results; high demands are imposed on employees, and internal
competition is encouraged) or a “developmental climate” (the firm is a dynamic and
creative place to work; leaders are considers as innovators with a bit of adventurism and
individual initiative, constant readiness to change and to surpass competitors are
encouraged). Almost half of CEOs who observed a developmental climate and a third
of CEOs who observe a climate of rational goals wish to move their company towards a
climate of internal processes which fits better a strategic orientation of “defenders.”
So far, we have found evidence supporting our initial hypotheses that the
overwhelming majority of industrial Russian companies assemble HRM systems for the
better fit with “defender” and “reactor” strategic postures. However, the picture of
remuneration system in the surveyed companies turned out to be less uniform.
Remuneration systems
Remuneration systems were assessed by the estimation of the overall flexibility
of the current payment conditions, reasons for offering variable parts of home-take pay,
the structure of additional benefits offered to employees and the methods of nonfinancial recognition used (see Table 7-Table 10).
----------------------------
15
Put Table 7 here
--------------------------
CEOs present a very interesting picture of the division between fixed and
variable parts in home-take pay. Although the mean and median do not differ for
various employment categories as around 30% is the average share of the variable part
in home-take pay, the mode seems to be a more informative parameter. The modal share
of the variable pay is 50% for managers, 30% of non-managerial white collar
employees and 20% for shop-floor workers. The trend is obvious as an employee moves
up through the hierarchy the higher the share of his/her total pay consists of variable
pay.
This contradicts our initial hypothesis of shaping the remuneration system
accordingly to “behavior-based” measures. This became even more obvious as we
assessed the prevalence of particular reasons for administering awards and bonuses (see
Table 8).
----------------------------
Put Table 8 here
--------------------------
Result-based measures, including measures based on company’s performance
are prevalent forms of additional remuneration of employees in Russian industrial
companies. At the same time, the system of social benefits offered to employees
somehow counterbalance the measures based on company’s performance (see Table 9).
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----------------------------
Put Table 9 here
--------------------------
The majority of social benefits are offered to a limited fraction of employees,
mostly to managers or senior employees from other categories of workforce
(“specialists” and experienced skilled workers). This weakens the role of result-based
monetary bonus system.
We should also remember that besides monetary benefits Russian industrial
enterprises inherited from the Soviet time a developed system of measures of nonfinancial recognition (see Table 10). Such measures are given at the discretion of top
management and enforce the individualistic and merit-based character of remuneration
system.
----------------------------
Put Table 10 here
--------------------------
Prevailing model of HRM system in Russian industrial companies – preliminary
results
Based on the previous and the present studies, we may depict the following dominant
features of the typical Russian HRM system:

Decision-making on every important issue of enterprise development is
concentrated at the very top of management hierarchy, with very limited
17
discretion of middle managers on budgets of their departments and remuneration
of subordinates.

A low level of unionization and minimal state guaranties of payment enable
companies to alter both payment levels and work regimes in very broad limits.

While the job content is highly formalized and the current control of behavior
and performance of employees is tight, personnel evaluation is done in a great
extent in informal way thus increasing the power of top managers over
employees.

Russian industrial CEOs wish to see their companies as smoothly run
“machines” assembled from sets of well-built and effective procedures,
processes and structures. At the same time, functional departments of Russian
industrial companies (so-called “techno-structure”) are mostly seen as
“auxiliary” units. Moreover, aspiring to achieve smoothness and efficiency of
operations, Russian CEOs avoid as much as possible recruiting persons with
unusual skills and experience, especially employees who are exposed directly or
indirectly to Western management techniques and practices such as former
employees of foreign subsidiaries of MNCs, and young graduates of business
schools.
Such a grim picture should be complemented by a very complicated remuneration
system that, first, should ensure the connection of individual additional monetary
rewards that occupy between a third and a half of the total home-take pay to company
performance, second, should enable top managers to divide employees into separate
groups with contradicting interests and, third, should facilitate to assure loyalty of key
18
employees by offering to them individualized monetary rewards, unique social benefits
and various measures of moral recognition.
Variances in HRM systems in Russian industrial companies
The picture presented above is uniform regarding the level of formalization of
job content, the powerlessness of middle managers and avoiding to recruit “suspicious
subjects.” At the same time, we found visible variances in

the organizational climates Russian CEOs observe and wish to establish in their
companies;

peculiarities of remuneration system based on the share of a variable part in
home-take pay; and

the use of particular measures of material remuneration and non-financial
recognition.
In this respect, we attempted to understand how such variations are related to two
parameters the relative profitability and the innovativeness of companies. The choice of
these two parameters followed a quite simple logic. As the business conditions improve,
the greater share of industrial companies will exhibits higher profitability and
innovativeness. Thus, by evaluating how HRM systems are organized now in small
fractions of profitable and/or innovative companies, we may predict the possible afterstagnation evolution of HRM systems in Russia.
For our analysis, we measured perceived profitability as relation between the
assessment by CEOs of costs and prices of their companies versus direct competitors.
Innovativeness was measured by the number of areas production, marketing, finance,
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internal organization of the firm that experienced significant changes in 2009-2010. In
our sample there were 30% of companies with abnormal low profitability, 57% of
standard profitability and 13% of companies with abnormally high profitability. Again,
there were 37% of companies with extremely low innovativeness, 36% of low
innovativeness, and 27% of companies demonstrated high innovativeness. It should be
noted that in current conditions of Russian industries the level of innovativeness and
profitability are completely independent parameters (corr. 0.074; sign. 0.305).
The results of our analysis were discouraging in terms of the implementation of
HRM systems design to support firm level strategy. First, innovative companies do not
differ from their less innovative colleagues in assessing the need of personnel of
specific experience and skills. In a comparison of the variation of level of profitability,
only very profitable companies differ significantly (sign. 0.060) from their less
profitable colleagues in terms of a higher desire to recruit persons with foreign working
experience.
Profitable and innovative Russian companies also do not differ from other
companies by the share of a variable part in home-take pay. The variance in types of
monetary benefits was also very limited – only most innovative companies use more
often quarterly/annual bonuses based on department’s performance (sign. 0.016).
Regarding social benefits, both very profitable and innovative companies use additional
medical insurance for a wider circle of employees (sign. 0.030 for profitability and
0.080 for innovativeness). In the Russian context, additional medical insurance has real
significance to employees. State medical care remains substandard and additional
medical insurance enables insured persons to visit better clinics or to be placed in better
hospitals.
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In a examination of the correlation between variables concerning the measures
of non-financial recognition, profitable companies use more often verbal recognition to
employees either in private conversation (sign. 0.066) or at the presence of the top
management (sign. 0.037). Innovative companies put greater emphasis on “written
recognition in an official letter” (sign. 0.008). It terms of “moral” persuasion and
recognition both innovative and profitable firms do attempt to create a non-financial
connection between their employees and the firm, though limited in scope. Most
importantly CEOs of innovative companies do not differ from their colleagues at noninnovative companies in their preferences in the desired organizational climate as the
absolute majority (55%) of CEOs of innovative companies desire a “climate of internal
processes” in their companies.
So, we may see that profitable and innovative enterprises differ from other
companies only in a few minor aspects of HRM system – the both types of companies
are more willing to spend the time of the top management on moral recognition of
employees and also inclined to spend a fraction on their profit on health care of their
employees. However, even profitable or innovative companies do not see the reason to
change the essence of HRM system as they just wish to add more “lubrication” into
smoothly-run mechanisms of managing their companies as production units. This means
that the period of economic recovery in the post 2009 period will not adjust seriously
the prevailing features of “defender-oriented” HRM patterns. Results from our surveys
in 2011 indicated that firms are unaffected by market conditions on how they design
and implement their HRM systems. The expectation is that even in the post recessionary
period there will be limited evolution in HR practices and the dominate features of
Russian HRM archetype will remain in force.
21
Evolution of HRM systems in Russian industrial enterprises
The conclusions in the previous paragraph do not mean that HRM systems in Russian
industrial enterprises are absolutely stable. We found significant shares of companies
engaging in implementing innovations in their HRM systems (see Table 11).
----------------------------
Put Table 11 here
--------------------------
The intensity of innovations in HRM system is in part related to the higher
articulated shortage of young line managers and older specialists with unique
experience. However, such shortages are in turn, specified by higher innovative
activities of companies in product and technological innovations (see Table 12).
----------------------------
Put Table 12 here
--------------------------
Regarding the impact of innovations in HRM practices, we discovered that just the
beginning of considerations about the changes in HRM system signifies real
implementation of some changes. Companies that “consider”, “implement pilot
projects” or “implement regularly” the changes in performance assessment and
remuneration schemes, do not differ from themselves significantly, but they do differ
significantly (sign. 0.100 and less) from companies that do not consider changes as:
22

they have higher level of expenses on training and personnel development;

they use more often “written recognition in a decree”;

they use more often “presentment of employees to honorary titles”; and

they use more often all forms of material benefits -- personal additions to the
salary based on personal results (achievement of targets); irregular bonuses for
extraordinary achievements; quarterly/annual bonuses based on individual
performance; personal additions to the salary based on personal merit
(competences, loyalty, length of service); quarterly/annual bonuses based on
performance of a department; quarterly/annual bonuses based on company
performance.
Thus, the majority of Russian industrial companies as the business conditions are
improving are keen to expand the repertoire of remuneration measures. At the same
time, the key element of remuneration system – the proportion of a variable part of
home-take pay -- is exactly the same in all the selected groups of companies (in average
32-37% for managers; 31-33% for “specialists” and 32-34% for workers).
Discussion
Our study indicates that the traditional form of administration and control dominates the
HRM practices of Russian firms as this survey of CEOs demonstrates. Russian firms are
not constrained by traditions of worker involvement, labor representation, or employee
rights and the institutions support the dominate position of the employer in the
relationship.
Within the institutional environment the dominate HRM model thrives without
limited regard to strategic demands of the firm or changes in the market place or society
23
in general. There exists widely recognized problem relating to the supply and quality of
new employees due to the changes in the demographic conditions in Russia as the very
small generation of the people born in 1990-1999 enters the job market from 2008 to
2018. Firms have not adjusted the HRM practices to account for these changes in the
supply of workers (as they still avoid to recruit younger employees). Simultaneously,
the ability of firms to recruit necessary personnel within the given system of preferences
and constraints in employee selection is decreasing. As we have seen, the shortage of
qualified managers became acute. This research indicates that the majority of CEOs
understand that practices need to react to market and demographic forces but such
reactions are mostly superficial and do not affect the essence of HRM system – arbitrary
evaluation practices, complete lack of power of middle managers in remuneration of
their subordinates, limited proportion of a variable part in home-take pay.
Another dominate feature of Russian HRM has been the stability of practices. A
longitudinal analysis of Russian HRM practices (Gurkov at al. forthcoming) indicates
that many current practices (especially the forms of “moral recognition”) stretch back
into the Soviet period. The durability of these conditions regarding CEOs practices
concerning HRM practices is not new as demonstrated by the conclusion drawn by
Gurkov (2002) in a study after the 1998 crisis.
Innovations in HRM as our survey of CEOs are subordinated to other types of
innovations – product and technological innovations. Such innovations are implemented
regularly only in a minority of firms (see Gurkov, 2011). These firms may have also had
either analyzer or prospector strategies prior to the period of crisis and continued or are
now reviving these practices as stability returns to the Russian market. However, such
“would be” analyzers or prospectors miss the key ingredient of their strategic type – the
24
desire of CEOs to maintain the corresponding organizational climates (developmental
climate or “climate of rational goals”). This means that innovations, including gradual
innovations in HRM systems will create “strategic misfits” (unbalanced situation
between structure, strategy, HRM systems and organizational climate). Serious mental
shifts in “upper echelons” are needed to give innovative firms rid from the formalized
and centralize nature of the Russian HRM archetype.
Conclusions
The economic recession of 2008-2009 put most of Russian industrial enterprises into
defensive or even reactive positions. Companies strove to defend their market niches
and to re-establish stability. The design of HRM system has been subordinated to that
task. Thus, the observed high centralization of resources and high formalization of job
content, and an emphasis on climate of internal processes are quite logical. These
patterns shape HRM system for the best fit with the theoretically prescribed
organizational design of a “defender” based on the Miles-Snow typology of strategic
types. The position of a defender, especially a low-cost defender also explains the
reluctance of Russian CEOs to increase labor force diversity through the avoidance of
younger and older employees and especially of employees with greater exposure to both
direct and indirect foreign working experience and to spend funds on training and
development.
However, the observed features of remuneration systems contradict the patterns
theoretically prescribed for “defenders” such as group measures oriented towards
motivation of behavior (opposed to result-based motivation). Russian industrial
companies widely use highly individualized systems of results-based motivation,
25
carefully selecting employees of extraordinary performance and offering for such
persons a broad range of measures of both material and moral recognition.
These patterns (especially the individualized remuneration system) coupled with
earlier observed characteristics of Russian HRM systems (Gurkov et al. 2012) as low
level of legally guaranteed pay, low unionization rates, extremely poor unemployment
protection and low level of formal procedures in performance appraisal form all
together a consistent system of “Theory X” industrial relations system similar to the US
system in 1930s which were the recovery years after the Great Depression of 19291933. More importantly, companies that demonstrate higher profitability and
innovativeness still do not differ in their HRM arrangements except for a few minor
details. We have demonstrated that the “explosive” changes in the dominant HRM
archetypes are related with regular implementation of both product and process
innovations, and also requires profound changes in the mind-sets of “upper echelons”.
However, the changes in mind-sets are feasible as the new ways of thinking and
behavior are properly rewarded. Under present conditions of Russian industries, there is
minimal coincidence between higher
innovativeness and abnormally higher
profitability. Unless such connection will be re-established (perhaps, in the next stages
of the current business cycle), we cannot expect serious adjustment of the described
dominant archetype of HRM system in Russian industries.
Acknowledgements
This study was carried out within “The National Research University Higher School of
Economics’ Academic Fund Program in 2012-2013, research grant No. 11-01-0022” and with
support from the research grant of the Faculty of Management of the National Research
University Higher School of Economics.
26
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28
Table 1. Presence of job descriptions
Variant of answer
Percent
of
CEOs
No job descriptions
1
For some positions
4
For all shop-floor employees
5
For shop-floor employees and middle managers
9
For all employees, including top managers
81
29
Table 2. Control of job descriptions
Variant of answer
Percent
of
CEOs
Loose
16
Tight
58
Very tight
26
30
Table 3. Indication of functions that need immediate strengthening
Area
Percent of CEOs
Production
73
Sales and marketing
48
Technological department
44
Design of new products
19
Planning
8
Finance and accounting
8
Supply
7
HRM
6
31
Table 4. Comparison of perceived difficulty of selection of various skill groups in
2005 and 2011
Managers
Professionals
Workers
(“specialists”)
2005
2011
2005
2011
2005
2011
No difficulties
57.1
16.0
4.2
14.4
1.5
21.2
Some difficulties
33.5
56.5
57.6
58.7
41.4
48.5
Extreme difficulties
9.3
27.5
38.0
26.9
56.9
30.3
Note: data for 2005 was recalculated from (Gimpelson et al 2010, p. 319). For workers
we took Gimpelson et al. 2011 data for “skilled workers.”
32
Table 5. Reported shortage of particular categories of employees (percent of
CEOs)
Employee category
No need
Some need
Acute shortage
Workers of unique professions
24
50
26
Specialists of unique professions
31
46
23
Young workers
39
40
21
Young line managers (foremen, 38
43
19
35
9
36
10
19
7
19
6
2
5
shop managers)
Young specialists of functional 56
departments (finance, marketing,
supply, personnel etc.)
Older employees with unique 54
experience
Employees with experience in 74
Russian subsidiaries of MNCs
Employees with oversea working 74
experience
Other categories
93
Table 6. Current and desired organizational climates
Current climate
Desired climate
Percent of
33
Group
Internal
Rational
processes
goals
Developmental companies
with
the
current
climates
Group
58
18
12
12
18
Internal processes
3
67
17
12
48
Rational goals
0
34
51
15
22
Developmental
8
44
0
48
12
49
22
17
of 13
Percent
companies
with
desired climate
Note: data in italic presents the distribution of answers about the current and desired
climates, data in bold presents the shares of CEOs who which to maintain the current
organizational climates, data in plain text presents percentages of CEOs who wish to
move from the indicated current climate towards the indicated desired climate.
34
Table 7. The share of the variable part in home-take pay (percent)
Measures
Employment category
Managers
Non-managerial
Shop-floor
“white collars”
workers
Mean
36
32
33
Median
30
30
30
Mode
50
30
20
of 17
17
15
Percentage
respondents
with
mode value
35
Table 8. The shares of the firms that regularly use various measures of material
remuneration (percent)
Measure
Regularly
Occasion
Not used
ally
Measures of bonuses based on individual results
Personal additions to the salary based on personal 36
41
33
31
55
14
individual 37
25
38
Personal additions to the salary based on personal 28
39
results (achievement of targets)
Irregular bonuses for extraordinary achievements
Quarterly/annual
bonuses
based
on
performance
Merit pay
33
merit (competences, loyalty, length of service)
Bonus based on performance of a department
Quarterly/annual bonuses based on performance of a 37
27
36
23
27
10
88
department
Bonuses based on company performance and profit sharing
Quarterly/annual
bonuses
based
on
company 50
performance
Stock options
2
36
Table 9. Use of social benefits (percent of companies)
Type of benefit
Not used
Some
Selected
All
full-
employees
categories
time
of
employees
employees
Additional sickness allowance
21
22
16
41
Additional medical insurance
48
12
11
26
Holiday premium
48
12
12
25
training 44
31
17
8
Housing allowance
56
28
10
7
Credits to employees
56
32
8
4
Compensation
of
(learning) expenses
37
Table 10. The use of measures of moral recognition (percentage of companies)
Measure
Frequency
Not used
Occasionally
Regularly
10
40
50
39
52
47
42
14
39
47
Recognition before colleagues (the board of 24
31
44
37
37
Verbal recognition in private conversation
Verbal recognition in presence of his/her 8
colleagues
Verbal recognition in presence of top 10
management
Written recognition in a decree
the best employees, radio announcements,
Intranet announcements etc.)
Invitation of employees to events where the 25
firms receive awards, prizes etc.
Dignity “The best in the firm” etc.
39
25
35
Industry honorary titles
33
33
34
Presentment to state orders
52
29
19
Table 11. Innovations in HRM systems (percentage of companies)
Type of innovation
Degree of actions
Not
Under
Realized as Realized
considered
consideration
pilot
regularly
projects
38
New
sources
of
personnel 33
26
22
19
New methods of performance 22
25
27
25
23
38
20
recruitment
assessment
New remuneration schemes
19
39
Table 12. Correlation of innovations in HRM practices in other innovations
Type of innovation
Type of innovations
New
New
New
New
products
marketing
technologies
methods of
channels
quality
control
New
sources
of
personnel 0.323**
0.240**
0.103
0.229**
0.154*
0.266**
0.339**
0.083
0.413**
0.345**
recruitment
New methods of performance 0.275**
assessment
New remuneration schemes
0.284**
Note: * - significance at 0.05 level (2-tailed), ** - significance at 0.01 level (2-tailed)
40