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it might be beneficial to start by sharing those stereotypes because they are often true although exaggerated or simply outdated.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
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 For example, Russia gets demerits because it repealed of many of the glasnost-era freedoms but China’s repression is overlooked.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 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.
- 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