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What Drives Innovation in Russian Companies

As part of the Management session of the XX April International Conference, Carl F. Fey from Aalto University School of Business, Finland, presented his paper on Facilitating Innovation in Companies in Russia: The Role of Organizational Culture. In his talk, Professor Fey spoke about the results of three studies he has been conducting with his team. All three studies focused on technological innovation and the practices that can be implemented to make people act more innovatively.

Organisational Culture Is Key

The first study that involved a meta analysis of all quantitative literature exploring the relationship between managerial practices and innovation. Organizational culture emerged to be the most important element for facilitating innovation probably because it underlies everything that happens in a company and ultimately makes all the different management practices work.

Organisational culture is the set of values and resulting practices concerning relationships among people and the world around them which are shared by people in the organisation and differentiates that organisation from others.  It is particularly important for large companies where a CEO and top managers cannot meet with every employee on a regular basis. Having a common understanding of organisational culture is performance enhancing because it means that everyone shares the same understanding of a company’s culture helps them determine what they need to spend their limited time on.

 Knowledge management, while undoubtedly vital to the development of innovation, was found to be the second most important factor, followed by strategy, external linkages and network to knowledge, HRM, systems&structure, leadership, and resource allocation. The study also looked at the components of each factor, analyzing their relative importance.

Russian Specifics

In the second study phase, researchers looked at Russian companies to determine how different cultural dimensions influence innovations.  Researchers conducted in-depth interviews with CEOs or top managers of twenty industrial firms based either in Moscow or Saint Petersburg. The interview questions focused on drivers of innovation in the firms.

The research showed that in companies surveyed the following practices are considered the most beneficial in terms of fostering innovation:

Develop organisational culture which encourages innovation

This can, for instance, be done by telling people that not trying new things is bad, but that trying and failing quickly is OK

Create a culture not to punish honest mistakes

This is especially important for Russia because there is a long history of punishing people for mistakes. So it is essential to get people to believe that they would not be punished for honest mistakes. One company went as far as send people who have made a mistake home for a day will full pay and ask them to think why the mistake occurred. This is done for development rather than punishment. What happens is that sometimes people are just too tired or distracted and a day off is an excellent opportunity for reflection, as well as a possibility for some rest.

Facilitate empowerment in culturally specific ways

If you delegate a lot in Russia and empower employees, people tend to think that the manager is lazy or incompetent and start wondering why he/she is not making the decisions. So, it is important to take this into account when building empowerment strategies.

As one manager noted, ‘our organizational culture stresses empowerment but we will never be like Finland. We are in Russia which is a hierarchical culture. For us it works better to move partially towards empowerment and be sure that once a week we have an hour meeting where everyone can freely give honest feedback and ideas to all regardless of their level’

Decrease bureaucracy

Many Russian companies tend to be rather bureaucratic and have a lot of internal rules and regulations. Enabling people to quickly act on their idea greatly boosts the innovative potential of a company.

Train and develop employees to be more innovative

As one of the respondents mentioned, ‘we have been running training programs to develop our employees to be more innovative’

Create a flatter organization and ways to provide feedback

Companies need to build a culture where employees should provide feedback to management on how things can be done differently and better facilitate innovation. In one of the companies the CEO meets with every new employee after they have worked 3 months to ask for feedback. In another company every employee as part of the hiring process spends half a day walking around a company and then commenting on what could be changed or done better.

Still, with Russia predominantly having a hierarchical culture, the key is for the managers to ask for a lot of input from their subordinates but to make all the key decisions themselves.

Provide employees time to be innovative

One of the firms lets all its employees have 20% of their time to work on innovative projects. ‘Some projects don’t work out and would not be what we would choose. However this practice has created tons of value for our firm,’ the top manager commented. In another company people even go to a different place to do something innovative.

If compared to other countries, the success strategies might be similar or the same. However, the degree of relative importance would differ.  For example, training appears to have a bigger influence in Russia than elsewhere. The same applies to getting rid of bureaucracy and building a culture of not punishing people for mistakes, which are both more pronounced in Russia than in other countries. It can be concluded that national culture affects the way people work most effectively.

What Dimensions of Organisational Culture Best Facilitate Innovation

Professor Fey’s current project which is still work in progress is a quantitative study into what types of organizational culture facilitate innovation in Russia. First, 100 managers from different firms in Russia were asked to list the five words that best describe their firm’s organizational culture. The words were then grouped together and used to develop a questionnaire. Two respondents from each of 200 national and international firms participating in the survey were asked to complete this questionnaire during interviews.

The research suggests that the key dimensions of organizational culture in Russia are:

  • customer orientation,
  • change (how adaptable, risk-taking and flexible a company is),
  • involvement (including teamwork),
  • speed,
  • mission,
  • being flat (with little bureaucracy),
  • society orientation,
  • feedback (including clear performance evaluation standards).

All these factors can be mapped against 2 key dimensions of competing values framework – External / Internal influence and Change / Stability. With both dimensions it is crucial to maintain a healthy balance between the two ends of the spectrum. This mapping tool can be used to make profiles of different companies and compare and contrast them. It can also be employed to identify what aspects of organizational culture companies are already good at and what they need to focus on.

The results of the research so far indicate that for Russian innovative companies the three most significant elements of the organizational culture are involvement, speed and change.

The last element does not mean that a company is in the process of constant change. Rather, it implies being ready to change and adapt should the circumstances require it. This is especially important in Russia because of the dynamic external environment companies operate in.

Five other factors - customer orientation, mission, societal orientation, flat, feedback – were also listed as important but less so than the first three. What was surprising is that customer orientation did not score higher in his study. This is probably due to the fact that customer does not necessarily know what can be innovative and companies need to look beyond customers to find a truly innovative idea.

Professor Fey concluded his talk by saying that future studies could look at lagged objective measures of performance and subcultures, the moderating role that unit leaders play, and the differences between different regions of Russia.