Wednesday, July 26, 2017

Doing Business in Russia

Doing Business in Russia

 

Russian Culture

As most people are aware, the Russian Federation was communist nation for most of the twentieth century and is no longer referred to as the Soviet Union.

Russia is a country that places order above all other values and this accounts for its tendency to be ruled by strong-willed, authoritarian figures. Russians respect shrewd, strategic leaders who deal with problems quickly and decisively, regardless of how heavy handed the solution may seem. Russia is a very male-oriented society of stoic demeanor and tends to hold to philosophical attitudes that run darker and more introspective than are typical in Europe. It is a literate country with high reading rates and a populace both knowledgeable and proud of its writers. Though the demise of communism has seen a significant decline in arts funding, many Russians still hold poets, musicians, artists, and writers in high esteem.

 

There are strong undercurrents of racism throughout Russia and this tends to become more pronounced in the rural and western regions. Both homosexuals and Jews are openly denounced throughout much of the country. Like many of their urban counterparts in other nations, Russian city-dwellers are more cosmopolitan and tend to view those who live in rural areas as unsophisticated. It is important that outsiders realize that while Russian urbanites may look down upon their “country cousins” for their lack of worldliness, they often share similar cultural values.

Like most nationalities, Russians are proud of their county’s history and consider most other nations and their citizens inferior to an average Russian. Only Americans can count on at least some grudging respect as a legitimate challenger to Russian pride and achievement as a superpower.

 

As has long been the case, Russians tend to covet foreign products and the conspicuous display of high status brands like BMW cars or Chanel luggage is both common and expected. Likewise, they are deeply impressed with educational credentials from prestigious universities or business schools.

 

Unlike most western countries, smoking remains popular and while the government pursues a strategy to cut smoking rates, many Russians continue to light up in shops, restaurants, and bars. It is highly inadvisable for anyone – especially foreigners – to suggest they do otherwise.

 

Drinking can be considered something of a national pastime too, as Russia has some of the highest alcoholism rates in the world. It is a physical culture, with plenty of pecks on the cheek for women and bone-crushing handshakes and backslaps for men.

 

While the Russian Orthodox church and adherence to religion is widespread throughout Russia, there remains strong strains of belief in the paranormal, extra-terrestrials and the occult.

 

Business Hours, Communications, and Work Ethic

Most businesses operate between 8am and 5pm Monday through Friday, though shops also operate on Saturdays. Many businesses will close for lunch, sometimes for an hour or more, though banks typically close by 3pm. Late night shopping is very rare and limited to urban areas.

 

Russians are fond of business cards and welcome the opportunity to exchange them. It is considered a sign of high status to have many foreign contacts and working for foreign firms is generally considered more prestigious than working for domestic ones. Russians are very observant of official looking documents. Nothing gets and keeps a Russian’s attention more than official letterhead on good quality paper. This is an important fact to remember that can prove useful if you need to demonstrate your seriousness on business and legal matters.

 

Foreigners are encouraged to follow the Russian way of addressing fellow businessmen by their job title, followed by their last name. While it may seem odd to be addressed as “International Operations Manager Smith”, you should follow this protocol unless encouraged otherwise. Younger Russians may be less formal and are typically more inclined to use “Mr.” or “Mrs.” followed by a last name, but the wisest path is to wait until addressed and proceed in kind.

 

Though not as indifferent to their jobs as they were during the Soviet area, Russian workers still pay close attention to the clock and to most the prospect of working overtime is unthinkable. This is changing amongst younger workers, though slowly.

There is a tendency amongst Russians to leave problems unacknowledged, even when obvious. This could be a remnant of the Soviet era, when identifying trouble spots often resulted in the whistleblower finding their career aspirations cut short. The failure to remedy ineffective processes and offer solutions remains endemic amongst lower level Russian employees.

 

From a management perspective, it is important to address this by consistently welcoming both critical and supportive input and scrupulously maintaining that strategy. Do not, under any circumstance, reprimand employees in front of their coworkers. Like most people, Russians are not fond of humiliation and have long memories. In a larger social context, you should avoid discussing any period of Russian history or politics that could be perceived as contentious. As with anyone proud of their heritage, Russians do not appreciate foreigner’s opinions on domestic politics or national matters.

Despite their lack of enthusiasm for the workplace, Russians attack any clearly defined task with a doggedness that often surprises foreigners.

 

The most crucial element of doing business in Russia is building long term relationships. Any effort to complete a major business transaction will require many meetings, plenty of idle chit chat and several opportunities to imbibe to excess.

Since contractual law remains somewhat “open to interpretation”, the best insurance against problems is an excellent relationship with your Russian business partners. This cannot be overstated. overall, Russians view foreigners with suspicion or as gullible fools who are neither as smart nor as determined as they are.

 

For this reason, it is imperative when doing business in Russia to forge a strong, local, and trusted relationship and the more that can be established, the better. Your local representatives will assist in developing contacts and steering your concerns through government and legal issues, so it is vital they have extensive references and where possible, be subject to a background check.

 

Where possible, always seek out interpreters with specific industry experience and seek the same when finding legal counsel. Under no circumstances should you sign anything at any point without having it thoroughly examined by your Russian lawyer. While most legally binding documents are supplied in both party’s native language, the implications of the nuances and small print can only be grasped by an experienced Russian lawyer. Once again, be sure you can trust both your lawyer and your interpreter.

Contract law and its obligations remain an ongoing project in Russia and while things are improving, many Russian businessmen see contracts as loose agreements rather than formally binding obligations. Your interpreter and legal representative are key to maintaining vigilance in ensuring contracts and their obligations are understood by both parties.

 

Gender Issues:

As stated previously, Russia is a male dominated society and the diminished role of women in society at large and in business is often difficult for westerners to accept. While in the communist era women were extolled as equals to their male counterparts, often it was their role as mothers that was the root of that appreciation. Though their status is improving somewhat, women in management positions at Russian firms are rare and most are employed by foreign companies. To a large extent, women in business are hired based on their looks and typically relegated to secretarial or customer relations tasks.

While the treatment of women may be unpalatable to westerners, lecturing your Russian counterpart on “women’s rights” is extremely unwise. Instead, you should accept that women are considered trophies towards whom men are expected to show good manners, polite behavior and “old school” etiquette. Never, ever swear in front of a woman, or you’ll risk being labelled a “hooligan”.

 

If you are a female executive, you should expect some degree of flirtatious behavior, though just how much may depend on the age of your Russian counterparts. If you find overtures becoming too explicit, you should firmly make it clear they are unwelcome and then tactfully move on to other matters.

 

Laws, Meetings, and Negotiation

Under no circumstances should you involve yourself in any industry with a hint of vice. Cigarettes, alcohol and “street level” businesses often have close associations with organized crime. No matter how convenient it may seem to cut corners ethically, it is strongly advised to avoid this. “Bending the rules” to accomplish your objectives will be seen by your associates and employees as license to continue doing so and engaging in “grey area” business practices can have lasting implications. Though the straight and narrow can be exhausting and seemingly fruitless, do not waver in this respect.

As noted previously, Russians are not especially time-conscious and are reluctant to schedule meetings of any importance on Mondays. Anticipate meetings beginning late and running much longer than scheduled. Also, be prepared to have unexpected participants attend the or to have last minute cancellations. Though it is never useful to lose your temper, you can and should express your dissatisfaction when seeking a rescheduling for a cancellation.

 

When meetings do begin, often after several late arrivals, they will drag on. Stamina and persistence are required. Be well prepared by keeping a clear agenda and, until specific details are required, it is advisable to keep to a broad, well informed plan. Tell your interpreter they must divulge every single word of what is said, regardless of how inconsequential they may regard it.

Russians will know if you have done your homework, so be prepared. If you do not want to embarrass yourself, it is imperative to have a thoroughly researched business plan in the context of the Russian market or industry.

If you must ask questions about a proposal during a presentation, wait until the person has finished speaking before doing so. Do not interrupt. If you disagree with positions taken during the meeting, it is best to leave some “wiggle room” for the person you are questioning. Causing anyone to become embarrassed by your line of questioning is to be avoided.  Wherever something is unclear, it is often worthwhile to follow up afterwards through correspondence.

 

It is extremely likely that at least one person will smoke during the meeting – and often heavily. The only known remedy for this is if a remark that she is allergic to smoke. Any other request to not smoke will be considered insensitive at best and both ignorant and offensive at worst.

Meetings end when your hosts decide they end. Your best guide to a meeting’s success will be the amount of hand shaking and back slapping that occurs afterwards. Of course, the more, the better.

 

Doing the Deal

In any interaction in Russia, always maintain eye contact with whomever you are speaking with. Failing to do so will cause suspicion amongst Russians and should provoke the same reaction in you.

When business negotiations begin, you will almost certainly be asked to present your side first. Russians are much better tacticians than they present themselves to be and it is useful to appreciate that chess is to Russia what baseball is to America.

, there are three broad strands to Russian negotiations.

 

The “you cheat” approach will argue that your firm or a similar one lied and cheated in previous dealings. Keep calm and without making things personal, offer an alternative version with Russians responsible for the deception and failings. Do not make the mistake of laying blame at a personal level. Keep your tone civil and maintain your composure.

The “crazy time waster” ploy can be separated into separate strategies. In the “time waster”, months of negotiations will be met with the opposing negotiator claiming they lack the responsibility to decide. In the “crazy” tactic, the proposal offered is so incredibly outrageous and one-sided that no reasonable person would agree. Both strategies are intended to test the limits of your enthusiasm and determine the point at which your urgency exceeds your judgement. The best method of dealing with ridiculous demands is to respond with your own and then negotiate downwards. The time waster is a standard stalling tactic which is best confronted with patience, though this can often become the final straw which legitimates breaking off negotiations.

 

Finally, the “corporate caring” strategy will see appeals made on behalf of the “poor workers” who might stand to lose their jobs unless a deal is made. The most reasonable response to this is a reminder that what is good for a profitable company tends to be good for its workers too.

When negotiations are resolved, the fine print of the deal should be exhaustively poured over by your counsel. As has been mentioned previously – do not sign a single document you are not confident about.

Because the legal system in Russia continues to wrestle with international agreements over issues like copyright, it is often a sound strategy for joint ventures to use a neutral third country (such as Denmark, Sweden, or Norway) to arbitrate disputes.

 

Socializing and Entertainment

If invited to someone’s house, you must go. To do otherwise would be considered deeply insulting. You should arrive with a small gift of wine, or perhaps flowers. Do not enter a home with your shoes on, nor walk around someone’s house in your socks. You host will likely have a pair of slippers to offer you when you arrive. When meeting other guests, always stand to greet them. Never refuse a second helping of food when it is offered, as it always is. Never point or gesture with a utensil.

 

Russians enjoy drinking and are amongst the heaviest drinkers in the world. Alcoholism is a national problem. If you spend any length of time in Russia, there’s a good chance you may find yourself in a restaurant full of boisterous, loud, and very drunk people. You may even see a fight break out, or patrons stumbling over one another. Though this is unsettling for westerners, you should not, under any circumstances, involve yourself or create a scene. If you are being disturbed, finish your meal quickly and leave. Of course, if the revelers are your business cohorts celebrating after a particularly successful meeting, your options are more limited.

Non-drinkers are viewed with suspicion and if you hope to avoid partaking in the revelry after a day of meetings, your best bet may be feigning a “medical condition” (you might want to produce a pill bottle for full effect) that prevents you from participating. As with women’s roles in Russia, you should never comment on drunkenness in Russian society. Though you may be tempted to berate someone for being intoxicated, the outcome could be a violent and prolonged beating. Even though public drunkenness carries less stigma amongst Russians than it does Europeans or North Americans, do not believe that you won’t be held to higher standards.

 

Russians are very fond of small gifts, which are understood to be part of both personal and business relationships. Small, well considered gifts with a corporate logo are much appreciated and will allow your recipient to demonstrate their foreign connections. Good quality, refillable cigarette lighters with an embossed or screen-printed logo will make an excellent impression.

 

Many foreigners find routine requests like ordering tickets or attempting to alter travel plans to be extremely complicated and time consuming in Russia due to hearing “Net” (No) in response to almost every request. Be advised that this is something of a national habit, meaning you must be persistent and resolute. Don’t take no (“Net”) for an answer. A strong, persistent, and conscientious approach in dealing with Russians is the only path to success – don’t forget it.

 

The last few years have seen Russia promoted as a member of the rapidly developing BRIC (Brazil, Russia, India, and China) countries and hence, worthy of greater global investment. But just as globalization has opened new markets and opportunities, it has opened challenges to considerations on how business “works” on both social and cultural levels. Russia has long maintained a fickle infatuation with the west and though it admires and covets much of the material gains in Europe and North America, the liberal social policies attached to them are at odds with the deeply conservative nature of the country.

Doing business in Russia means coming to grips with its social and cultural values. Strong leadership, a consistent and intelligent strategy and a deep understanding of Russian history and her people are the minimum requirements of success.