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West is Best?

Gergely Stewart What are the key differentials when it comes to defining the divergent ways of local and international firms? As with any definition, there is no single neat and universal answer.Through working in the Russian real estate recruitment market over the years, Cobalt has heard first hand of the experiences of employees and managers on both sides of the divide and the following general trends, both in perception and reality, are evident.

Firstly, Western firms are often perceived to have more rational, long-term business strategies, allowing for lengthier and more stable career development for employees. Changes occur to business plans only after lengthy consideration and the involvement of various levels of management. Employees will be aware of the long-term goal and will be given a structured approach with shorter term incentives to get them there, and change is slow and considered.

On the Russian side interviewing candidates, we hear regularly of short term mind-sets leading to a reactionary, or “opportunistic” rather than a strategic approach. Reflected itself in the decision-making process, employees speak of decisions being taken based on arbitrary factors, i.e. whether the plan appears reasonable to the senior executive, and are often taken right there on the spot. We hear of talk of a sense of not knowing what tomorrow will bring as the direction of the company can be at the whim of a single individual.

This also creates risk for an employee; what they thought they came to do last week might be completely different the one after. This is partly the reason we see much more movement in candidate CVs than in Western Europe for example; as many of are forced upon employees them by the rapid changes they experience with their companies.

Higher salaries commanded within Russian developers
Paradoxically, when things are less predictable, this can make work more stimulating on a daily basis. As a result of this added risk, however, candidates used to working for foreign companies do sometimes say that they would only be ready to work for a Russian business for a salary 30-50% higher. This is not necessarily unrealistic either, as Russian developers tend towards paying higher salaries than their international counterparts.

Secondly, and one of the key reasons behind the different approaches to strategizing, there are evident differences in management styles. In short, this boils down primarily to the idea that whilst some Russian companies can be very autocratic, underlying their faster but less predictable approach to decision making, Western companies are perceived to be more cautious and steady but meaning potentially less dynamic, slower in making decisions and more process driven.

Trust versus competence?
On the Russian side, especially within single shareholder businesses, this centralised way of working can lead to an “us and them” approach between employees and owners, leading to a lack of trust. One individual we know has said that the entire team she worked in was required to take lie-detector tests on a yearly basis. Relatives of an owner are often brought into the business, reflecting this more personalised management style based on trust and loyalty. Indeed, employees tend be careful when speaking their mind when discussing plans with shareholders, knowing that their personal loyalty can be as important to their career prospects as their professional performance.

Reflecting also the management culture, short term strategies and indeed whole teams might change with the replacement of a business unit leader. There are a couple of examples of teams on the developer side who have changed employers and yet barely changed their own internal make-up for over eight years, following their CEO from one firm to another. Of course there are always exceptions to the rule, the merry-go-round of the retail brokerage teams betweenJLL, Cushman and Colliers being an obvious example of this in 2012.

In our experience, the differentials in what top managers earn within Russian business when compared with junior employees tends to be far greater than in their international competitors. Senior executives can typically earn more for working for a local company. Indeed, some Western firms take advantage of their more prestigious standing and pay less knowing full well that quality candidates will work for reasons other than the level of their monthly salary. Many of our contacts at Russian firms explain that although they have received promises of bonuses since the crisis, these have rarely materialised into reality. Western firms are perceived to be more reliable in the sense of keeping to promises when it comes to bonuses.

Candidates also express a belief in clearer career development structures at Western firms. The process of promotion is given clear definition in terms of years needed to be served and targets achieved to move from one role to another. On the Russian side, whilst externally there may be an official organisational structure to them, progress between positions can be dependent more on the loyalty and trust discussed above than on years worked for at the firm. This also however offers great opportunities to top performers. For those that work in meritocratic Russian businesses, the young can potentially advance far faster than in international businesses.

On the Western front, whilst management may be less personalised, some employees say that they see the sacrifice of effectiveness in the name of political correctness and in wanting to make everything “fair”. Top performers can lose out as their career development might be limited by age and experience, even if they are bringing more to the company than those senior to them. In local companies, we do see professionals in roles they would unlikely be able to secure in a London or New York. In this sense, Russian firms might be considered to be more “accessible” in terms of career advancement than Western firms. We know of a Fund manager in charge of a sizeable amount of equity who is barely past their mid-thirties.

A further attraction for working for a Russian firm is the decision making process Russian business are typically ready to make big decisions faster. Many an international investor has come into the market making loud noises about how much they are going to invest and how strong the commitment is to the Russian market. However, when it has come to committing the equity, a six month long due diligence stage may be of no point at all if a Russian investor is ready to make a quick decision and grab the investment from under the international investor’s noses., Working for a Russian firm can also mean that employees get greater access to projects and enjoy a steeper and faster learning curve.

The route to international experience
One of the key factors that candidates have given us as to why they want to work for international firms is the chance to practice their foreign language skills and the chance perhaps to relocate abroad to an international office at some point in the future.

However, specifically within the commercial real estate sector, the chances to move internationally with a Western firm are limited. Firstly, there are not so many current, and fewer still new, Western investors on the market. Even those that are present tend to want to hire locally; their French or German CEO will have the opportunity perhaps to run another division abroad, but that opportunity will rarely be afforded to their Russian deputy. In fact, we advise candidates that if their aim is to work abroad eventually, they are now better off joining Russian investors looking to diversify internationally.

Finally, some consider that working for a Western firm is more prestigious in its very nature than working for a Russian business. This is a very interesting point, and links back to a much deeper cultural relationship between Russian and the West. From my own personal experience growing up between post-Soviet Budapest and London, there was a deep admiration and even awe of products coming East. Whilst the shine has faded somewhat as Eastern Europe has integrated further into the Western capitalist world, there is no doubt that this mind-set is still quite prevalent, leading to a respective backlash from politicians amongst others in defending local cultures and ways of doing things. The fact remains however that for many Russians, to say you work for an international firm alongside people from all over the world is a sign of prestige and success in itself.

Every career opportunity is unique
However, on a day to day, individual basis, when making a decision about what type of employer to work for, the key is acceptance of the reality of working there. Does the benefit of a higher salary and larger and faster moving project outweigh the fact that your job might change without notice? Do you have a good relationship with the owner and what is the track record of that company in promoting its staff? Will the Western firm expect you to put in four years as an Analyst reporting to a Senior Analyst and will the Russian firm give you the chance to work directly with the Investment Director? Each and every role and company does need to be judged on its own merits, and West is most certainly not always Best.

In the long run, though, if Russia keeps on its path of globalisation, as evidenced in its recent accession to the WTO, Russian firms will in theory start resembling their international competitors more. That might lead to more Russian business operating successfully on a global scale. But even within this lies a small sadness, that is the homogenising effects of globalisation. Maybe Russian businesses will come to resemble their Western competitors more and more, and Russia will start to produce more world class firms. But at the end of the day, is the Starbucks coffee better than a glass of Kvass? Maybe it has more universal appeal and is globally more successful, but the Kvass is Russian, and somehow we don’t want to lose that completely.

Written by Gergely Stewart, Regional Director of Cobalt Recruitment – CEE, Russia & CIS
Article first appeared in CRE Magazine, April 2013.

This entry was posted on Friday, April 26th 2013 and is filed under Property & Real Estate. You can subscribe to our RSS 2.0 news feed here.