To explain how to do business in a specific culture without using stereotyping is almost impossible but it might be beneficial to start by sharing those stereotypes because they are often true although exaggerated or simply outdated.
I found the following video created by ”2sharp creative brand agency“ for Russian lighting company Tochka Opory very useful, especially for new expatriates coming to Russia for business. It is funny and provocative enough to ignite some interesting debates about various communication styles across cultures.
To put in perspective this video, I have highlighted some very good points written by Konstantinos Tsanis in his excellent article: Do’s and Dont’s when doing business in Russia combined with useful tips from Interdean’s Moving to Russia Guide and some other facts from the book: The Emerging Market in Russia - For Dummies
The pros of doing business in Russia
Even 20 years after the fall of the Soviet system, some amazing opportunities are ahead for Russia:
- Educated population: The Russian education system is excellent. Almost 43 percent of Russian adults are college graduates, and almost 90 percent of high school students graduate. Russia has one of the world’s highest literacy rates, so most of the people can function in a modern economy. The country has people who can do whatever work needs to be done.
- Rich natural resources: One of the world’s leading producers of oil and gas, Russia produces iron ore, bauxite, and gold, too. Russia has rich agricultural soil and is a net exporter of grain and timber. Russia can sustain its own people, and it can provide food and materials to other nations. The growth in India and China creates demand for Russia’s resources.
- Strong financial system: After the 1998 default, the Russian economy was completely restructured. Russians concentrated on making their own system strong in the absence of outside investors, and with banks taking a hard-line on risk, Russia made it through the 2008 global financial crisis with no problems.
Risks of doing business in Russia
Some Russians complain that international investors focus too much on Russia’s risks while ignoring similar risks in other markets. For example, Russia gets demerits because it repealed of many of the glasnost-era freedoms but China’s repression is overlooked. The Russian resentment is probably valid, but even so, Russia has plenty of risk:
- An aging population and brain drain: The average age of the population in Russia is 38.5 years, and the birthrate is below the replacement rate. This situation raises the question of whether Russia will have enough workers to support its retirees and enough workers and consumers to support a more diversified economic base.On top of the declining birthrate, Russian scientists and engineers have a long history of leaving for greener pastures in other countries. However, as Russia’s economy becomes more stable, the people will feel more confident about the future, which in turn will boost the birthrate (the government already pays a bonus to women who have a second child) and lower migration.
- Corruption and crime: Like many formerly Communist countries, Russia has a long-standing culture of corruption because that’s how people got things done. That corruption scares off foreign investors. The government has been addressing the issue, and if investors notice a real change, Russia will become a more attractive place to do business.
- Reliance on one key industry: The Russian economy is based on oil and gas. That’s good because global demand for carbon-based fuel is huge and growing. However, by being so narrowly focused, the Russian economy is directly exposed to price fluctuations. Also, the planet’s oil and gas will be used up someday. The lack of diversity in Russia’s economy creates a big challenge over the long-term.
On the plus side, Russia has the potential to have a more diverse economy. It has a range of natural resources and geography, and its people are talented. Diversification should happen.
The Russian Soul
That is something that you feel immediately when you arrive in Russia, even in Moscow : Russians are not Westerners . The term Russian soul has been used in literature to describe Russian spirituality. The Russian soul can be described as a cultural tendency of Russians to describe life and events from a religious and philosophically symbolic perspective. Whether this is true or not can be challenged by the fact that younger Russians are strongly influenced by globalization and economic development opportunities. Nevertheless Russians are really proud and appreciate the arts and rich history of Russia. Russians are almost always very educated, whilst in most Western countries only 50-60% of people receive University Education. Russians always have an opinion about politics and current affairs. So it’s good for you to understand that education is a value, rather a necessity.
Russians do not tend to make a distinction between hard logic and emotion, which governs the Western culture. They value intuition rather than rationality. They will make business with you because they like you, not because of economical or technical arguments based on rational analysis.
The Oligarchs, the billionaires who, through the use of legal and illegal methods concentrated large fortunes during the transition from Communism to Capitalism, have given a false impression about doing Business in Russia: Some of them have the largest business and personal divorces in the world. Other have used prostitution rings to make their business, while others have been accused for killing, stealing and anything else illegal. These figures however are hated within Russia. The fact that the money was stolen, result on them not being idolized, as it happens with many Western businessman. So, during a business relationship, this topic could be an ice maker (rather than an ice breaker).
Attitudes and Values when doing business in Russia
Emphasis in moral laws
Importance of spiritual principles
The joy of working
Tendency for teamwork, which has its fundamentals on a history of collectivism
Making of long horizon plans with sweeping actions
Sobornost – underline the need for cooperation between people at the expense of individualism It is clear that collectivism’s religious roots derive from the sobornost of the Russian Orthodox Church.
The importance of informal relations
As mentioned above, Russians will make business with you because they like you. This means that, even though a business meeting will always start in formal ways, a business will develop only through the creation of informal bonds. In other words, even though in the beginning of a relationship they might appear ‘cold’ and reserved, they are much happier in an environment where they can also express their feelings and emotions. That’s why meetings might last longer than expected; Its much more important to complete the business through a good hand shaking rather stick to timetables.
Other things to consider when doing business in Russia
- Russians do not value nyeculturny (without culture) behavior. So, don’t swear, don’t forget to leave your coat in the cloakroom, don’t stand with your hands in the pockets, and do not shout in public.
- Do not start with a joke. Instead, keep your presentation serious, include facts and technical details. You can inject emotion in your discussion slowly. In my personal experience humor is rarely translated and what makes some people laugh in one culture may offend people from different countries.
- Even though it’s not of primary importance, your blat (personal network) matters as well. So use it and refer to it accordingly.
- Meetings can be interrupted and remain formal. Moreover, egalitarianism is crucial here: Nobody is better than anybody else.
- Constant communication through visits and phone calls are crucial. Moreover, when a business has been set up, monitoring the performance is critical.
- Re-negotiations are always present, so even though you will have a contract, expect the unexpected.
- Bring gifts with you: Russian people value gifts. Good gift ideas are brand-name products of high quality. With home visits try flowers, alcohol and branded food products. Avoid cheap products, they can have a negative impact in your relationship
- Business cards: It’s common to exchange business cards; one side should be written in Russian and the other in English.
What Is The Most Important Fact Your Learned That You Wish You Knew Before Moving To Russia ?