Managing Human Resources in Central and Eastern Europe

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Managing Human Resources in Central and Eastern
Europe

David Chelly Msc. Business and Management in
Europe09/17/2004
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Aims of the seminar

• This seminar is designed to acquaint students
  with Human Resources Management practices and
  strategies in Central and Eastern Europe.
• This course may be useful to them in their
  careers, as Central and Eastern European
  countries offer excellent job opportunities for
  students in management
• The topics range from the political and cultural
  values to the employee, with a special focus on
  how to manage people in foreign multinationals.
• Students are introduced to specialized research
  sources. The documents of the seminar are fully
  available at the web address http//www.centreurop
  e.org

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Your instructor

• David CHELLY
• Ph.D in Management Sciences, post-graduate
  diploma in Finance, degrees in Money and Banking,
  Law, Accounting and Sociology.
• Head of a consultancy firm and a website
  (http//www.centreurope.org) specialized in
  business with Central Eastern Europe
• Professor of management in various business and
  engineering schools

contacts_at_centreurope.org
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The seminars outline

• Part I. The Central and Eastern European cultural
  and political environment
• Part II. Managing Human Resources in Central and
  Eastern Europe

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Methodology

• REQUIRED WORK AND FORM OF ASSESSMENT
• Students will have to write a 3-page document on
  how to do business in Russia (or any other CIS or
  Balkan country). All the documents used (or their
  reference) will be presented in the appendix.
• The documents of this course will be fully
  available through the internet, in English and in
  French, at the web address http//www.centreurope.
  org

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I. The Central and Eastern European
socio-economic environment
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A rich and ancient history

• It is not because we (French people) dont know
  Central and Eastern Europe history that these
  countries do not have any history.
• Almost all CEE countries have played a major role
  in Europe in their history
• But they have early fallen under the domination
  of different empires, which have shaped their
  future

Cyrille and Méthode, inventors of the Cyrillic
alphabet
Charles the IVth (1346-1378), King of Rome and
Empereur of the Holy German Empire
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The empires and their influences

• Long dominated by the Habsburg Empire, the
  history of Central Europe has been marked by
  education, art and modernism.
• While in 1789 in France only a third of the
  citizens were able to speak and read French (the
  rest spoke local dialects), education in German
  had been compulsory for a century in the whole
  Kingdom
• Eastern European countries used to live under the
  Ottoman and the Russian Empires rule, which
  prevented their economic development.

Vlad Tepes (1428-1476), a Romanian figure of the
struggle against the Ottoman Empire.
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The communist heritage

• Central and Eastern European countries have lived
  forty (seventy) years of communism, which still
  influence local behaviors and habits.

The communist heritage Corrupted civil servants,
unreliable businessmen, opportunist politicians
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An inefficient legal framework

• In Central and Eastern Europe, the legal
  frameworks are very similar to those of Western
  Europe.
• But in practice, the legal environment is a
  jungle. Laws are
• Incomplete (lack of case law, decrees)
• Volatile and contradictory
• Not enough enforced

On the main square of Sofia, one can buy the most
recent and expensive software CDs for a few
dollars.
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Exercise Central and Eastern European countries
on the map
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Central and Eastern Europe map
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Exercise sub-groups in Central and Eastern
Europe

• You are a consultant with the French Center for
  External Trade (CFCE). Your task is to promote
  business relationships with Central and Eastern
  European countries.
• Up to now, the CFCE had grouped the countries of
  this region in a category called  Pays de
  lEst  ( Eastern countries ).
• Until 1991, the region used to comprise eight
  countries Albania, Yugoslavia, Bulgaria,
  Romania, Hungary, Czechoslovakia, Poland, and
  USSR. But now they count up to more than twenty.
• Your mission is to split them in different
  subgroups, that should be geographically close
  and economically homogeneous. Explain your
  decisions.
• The countries are Albania Armenia Azerbaijan
  Byelorussia Bosnia-Herzegovina Bulgaria Croatia
  Estonia Georgia Hungary Latvia Lithuania
  Macedonia Moldova Poland Czech Republic Romania
  Russia Serbia-Montenegro Slovakia Slovenia Ukraine

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II. Managing Human Resources
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Why do foreign investors invest in Central and
Eastern Europe ?

• Foreign direct investments in all sectors and
  from all countries are welcomed and little
  restricted.
• Central and Eastern European countries benefits
  from a cheap and qualified workforce and an
  advantage of territorial location
• Investment incentives are offered for
  Manufacturing investors.
• But the main reason for FDI is good access to
  domestic and foreign markets

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Where and how to invest ?

• A few countries attract the majority of FDI
• In Eastern Europe, some large companies are
  scheduled for privatisation, but the best deals
  have long been done
• Joint ventures and licensing also offer limited
  opportunities
• The most profitable way of investment is the
  Greenfield investment
• Good personal relationships are crucial to
  succeed in Central and Eastern Europe

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Restructuring and current situation of financial
and production systems

• Privatisations of banks and companies are well
  advanced
• But the industrial restructuring is still
  unsufficient
• Competitiveness is high in foreign-owned
  companies
• Central and Eastern European economies shift
  towards less industry and agriculture and more
  services

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A qualified workforce

• The workforce is
• Qualified, especially in technical fields
• relatively cheap, especially in Eastern Europe
• respectful for hierarchy and rules and able to
  stand hard working conditions
• So how can we explain such low salaries?

In spite of a high qualification in technical
fields such as computer science, Bulgarias wages
are about 10 times less than in Western Europe
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A low labor productivity

• commitment (especially towards foreign
  investors), sense of initiative, mutual trust
  between workers, customer satisfaction, ability
  to communicate and ethics at work are low
•  pretend to pay us and we will pretend to work 
•  the one who does not steal, steals his family 
  (Czech proverbs)
• People behave in a more productive way in Eastern
  Europe

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How to recruit/sack people?

• Young graduates are targeted by companies
• Outsourcing recruitment is not as common as in
  Western Europe
• Assessment centers, psychological tests and even
  cvs are not as widespread as in western Europe
• Sacking employees is easy, as labour laws and
  trade unions have little influence But it is
  risky especially for seniors.

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How to motivate? How much to pay?

• Money is generally the best incentive to motivate
  people
• Young graduate receive higher salaries than their
  older colleagues with a long experience
• Bonuses are not much widespread nor much
  effective
• Cellular phones, company car and other
  non-monetary allowances have more impact than
  salary increases
• Honors and titles are appreciated

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What is the importance of training?

• Central and Eastern European human resources are
  eager to learn
• Training is not perceived by employers as a
  strategic investment, especially for  soft 
  skills
• Money spent on vocational training is very low

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HRM strategies

• Two HRM strategies coexist in Central and Eastern
  Europe
• A culture-free model based on the global best
  practices
• Corporate cultures must be stronger than national
  cultures.
• A cross-cultural management model based on
  contingent strategies
• Different environments, cultures and attitudes
  towards work lead to different practices
  corporate communication, pay systems, HRM
• The new trend in IHRM Think global, act local

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More information
D. Chelly F. Lafargue, Guide culturel et
d_at_ffaires pour lEurope de lEst, LHarmattan,
2003
www.centreurope.org East-west business portal