Studies Eastern European Markets
Eastern European Markets
Kari Liuhto
EX-SOVIET ENTERPRISES AND THEIR MANAGERS FACING THE CHALLENGE OF THE 21ST CENTURY

Lappeenranta University of Technology. Studies in Industrial Engineering and Management. 2001 N:o 12

    Some essential conclusions

    In Soviet economy, the number of enterprises was considerably lower and their size considerably larger than in a market economy. The centrally planned economy preferred a small number of large enterprises, as planning the activities and controlling a large number of small enterprises would have been a complicated task.

    Another main reason besides control was the economies of scale thinking, which stresses the role of large production units in increasing efficiency. The transformation has changed the overemphasised economies of scale thinking into economies of dynamism philosophy.

    Prior to the mid-1980s, neither Soviet citizens nor foreigners had a right to establish an enterprise. Due to the state monopoly over enterprise activities and the practically non-existent possibility of bankruptcies, organisational degeneration occured. The transformation ended the degeneration and fuelled an enterprise boom. This has led to the expansion of enterprise population.

    Classical Soviet firms were dependent actors inside the centrally planned enterprise web. As all the Soviet firms were responsible for a very specified function in the giant Soviet production machine, Soviet firms were chained to that particular production function. The transformation has destroyed the Soviet enterprise web, and thus, liberated post-Soviet firms. They are now capable of operating freely within the legislative frame.

    Althoug it is too early to predict the outcome of the business cultural revolution, experiences from 10 years of transition indicate that the features of local cultures and international business are increasing. Correspondingly, the characteristics of the old style Soviet management and the shadow sides of transition period are slowly dispearing. However, it remains to be seen how long the transition period will last and what its effect on business ethics is in the long run.

    The directors of Soviet enterprises were generally older than their collegues in a market economy. One reason behind this managerial maturity was the small number of enterprises i.e. the number of managerial posts available was lower than in the west. Another reason for the older management generation was the fact that political maturity (nomenklatura) was often a prerequisite for career advancement. Since the collapse of the political Soviet economy, professional education is playing an increasingly important role in managerial appointments.

    As the USSR adored industrial growth, it is only logical that the majority of Soviet managers had an engineering background. In a transitional economy, a sales background is becoming more frequent.

    Centrally planned system did not encourage innovation and individual activity, and thus, the classical Soviet manager can be characterised as a passive and rigid person, who would stick to plans. Post-Soviet managers are already more active and flexible, Besides, they solve existing problems, not only follow existing guidelines. Therefore, post-Soviet managers can be described as order-givers rather than order-takers.

    The classical Soviet manager was a party man, who wanted use his/her priviledged position to increase his own welfare. The Soviet director benefited from the status quo, and hence, (s)he was extremely risk-aversive. After the collapse of the socialist system, risk-aversion has appeared and post-Soviet managers can be called as true entrepreneurial businessmen.

    The Soviet director put his/her energy into solving operational difficulties involved in meeting the production plan. Therefore, it is appropriate to describe the classical Soviet manager as operation-focused, plan and production-oriented. The post-Soviet manager is more strategy, market and consumer-oriented.

    To conclude, it is important to notice that many successful Soviet managers have become successful post-Soviet managers. This indicates that the majority of the Soviet directors were not truly committed to the Soviet ideology. Besides, the Soviet managers success, even after the disintegration of the USSR, shows that they have managed to use Soviet-era friendship network in building up their post-Soviet career.


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