Robustness and flexibility of human resource management practices. The results of a repeated survey of Russian subsidiaries of multinational corporations
| DOI | https://doi.org/10.1108/ER-07-2016-0138 |
| Date | 07 August 2017 |
| Published date | 07 August 2017 |
| Pages | 594-625 |
| Author | Igor Gurkov,Evgeny Morgunov,Zokirzhon Saidov |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
Robustness and flexibility
of human resource
management practices
The results of a repeated survey of Russian
subsidiaries of multinational corporations
Igor Gurkov
National Research University Higher School of Economics, Moscow, Russia
Evgeny Morgunov
Department of Applied Psychology,
The Moscow School of Social and Economic Sciences, Moscow, Russia and
National Research University Higher School of Economics, Moscow, Russia, and
Zokirzhon Saidov
Department of General and Strategic Management,
National Research University Higher School of Economics, Moscow, Russia
Abstract
Purpose –The purpose of this paper is to retrace the sources of robustness of the operations of Russian
manufacturing subsidiaries of western multinational corporation (MNC) during the downturn, from the point
of view of applied human resource management (HRM) practices.
Design/methodology/approach –A repeated survey of heads of Russian manufacturing plants of western
MNCs was implemented. The same respondents aswered the similar questions in 2014 and in 2016.
Findings –The current evolution of HRM arrangements in the Russian manufacturing subsidiaries of MNCs
can be explained by an attempt for ambidexterity. On the one hand, managers of the Russian manufacturing
subsidiaries of MNCs attempt to prevent employee alienation. Thus, they retain permanent contracts and
preserve guarantees of home-take pay. On the other hand, there is the elimination of several social benefits.
In the author’s opinion, the cost-minimization approach has been used excessively. The authors speculate
that the system of social benefits will need to be adjusted again to transform the system from one that is
“crisis-proof”to one that is “stagnation adapted.”
Originality/value –The findings provide a basis for a broader discussion on mutation of HRM systems in
manufacturing subsidiaries of MNCs facing deteriorating market conditions.
Keywords Russia, Multinational corporations, Human resource management, Surveys,
Manufacturing subsidiaries
Paper type Research paper
Introduction
Despite the current political tensions between Russia and the west and the retaliatory
exchange of economic sanctions, subsidiaries of foreign multinational corporations (MNCs)
continue to occupy a very important place in the Russian economy. This is especially so in
the manufacture of consumer goods, such as foodstuffs and food packaging, personal and
home care products, construction materials, home appliances, consumer electronics, and car
assembly. By some estimates, in 2012, Russian subsidiaries of foreign MNCs accounted for
Employee Relations
Vol. 39 No. 5, 2017
pp. 594-625
© Emerald PublishingLimited
0142-5455
DOI 10.1108/ER-07-2016-0138
Received 14 July 2016
Revised 15 February 2017
Accepted 7 April 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0142-5455.htm
Conflict of interest: no conflict of interest exists for this paper.
This work was supported by the research grant of the Faculty of Business and Management of the
National Research University Higher School of Economics in Moscow.
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more than USD100 billion in output, or 30 percent of Russia’s total manufacturing
production of consumer goods that year (Gurkov, 2014, p. 223).
In 2014-2016 however, Russian subsidiaries of foreign MNCs met extremely unfavorable
market conditions. In December2014, the value of the ruble plunged.This devaluation created
a radically different business landscape for most Russiansubsidiaries of western MNCs;over
the period 2015 -2016, Russia’s domestic market saw a decrease in demand for many types of
goods and services that were produced in Russia and that aimed at the middle class.
This rapid decline was most spectacular in several local markets that were dominated by
foreign companies. For example, in 2015, new car sales in Russia decreased by 40 percent
(and, in 2016, by a further 12 percent). In fact, the number of new cars sold in Russia, in 2016,
was approximately 50 percent of the 2012 sales level. Also, in 2015, juice sales decreased by
30 percent, and construction material sales decreased by 15-30 percent, depending on the
product category. From March/April 2014 to March/April 2016, the volume of overall retail
trade decreased by 14.2 percent.
In addition to market erosion, the twofold devaluation of the local currency, at the end of
2014, caused large negative-foreign-exchange (FX) effects[1], including the following:
•a reduction in invested capital (on consolidated balance sheets);
•brand impairment (because the forecasts of future sales also deteriorated for
particular brands that were expressed in a foreign currency); and
•the impairment of other tangible and intangible assets.
Despite the very unfavorable market conditions however, no massive exit occurred (plant
closings, divestments, liquidations) of Russian manufacturing assets by western MNCs.
In contrast, during 2015-2016, most western MNCs completed the large industrial projects
that had already been planned and were in various stages of development (construction of
new plants, installation of new production facilities in existing plants), maintained the
robustness of their manufacturing operations despite the suboptimal capacity utilization of
many of these plants, and remained attractive employers for existing and newly installed
production facilities (see Gurkov and Saidov, 2017).
The aim of the paper is to retrace the sources of robustness of western manufacturing
subsidiaries’operations, during Russia’s economic downturn, from the point of view of
applied humanresource management (HRM) practices.First, we present the existing evidence
on the differencesbetween HRM systemsin “genuine”Russian companiesand those that were
foreign-owned prior to the current downturn. Second, we compare the HRM practices that
were applied in the2014-2016 period in a significant numberof manufacturing subsidiaries of
foreign MNCs. Third, we discuss the rationale for the inertia and the change in particular
HRM practices in the manufacturing subsidiaries of foreign MNCs in Russia.
We should also stress the exploratory nature of our study. Although there are academic
studies on downsizing in foreign subsidiaries of MNCs, based on case studies and surveys
(see Andrews, 2001; Kawai, 2015), only a few studies are devoted to HR challenges and
solutions in subsidiaries of MNCs during times of economic crisis (see, Balázs and Veress,
2009; Fodor et al., 2011; Poór et al., 2014, 2015; Lazarova et al., 2017). Such studies are based
on the experiences of developed countries or new members of the European Union
(especially Hungary), where subsidiaries of foreign MNCs dominate the manufacturing
sector and largely operate HR systems that differ from that of the host country in both
content and context.
HRM in the Russian context: “Genuine”companies vs subsidiaries of MNCs
Russia’s transition to a market economy revolutionized the HRM practices within industrial
enterprises that had existed in the Soviet era. These practices have been carefully studied in
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Robustness
and flexibility
of HRM
practices
both Russian and international research publications. Shulzhenko (2012) summarizes more
than 60 Russian books and articles on the subject, thereby presenting a good overview of
the Russian-language research on this topic. With respect to English-language
(international) publications, we should distinguish among three groups of studies: first,
those within the tradition of industrial sociology, which are based on intensive qualitative
studies (e.g. Clarke, 1995, 1996, 1999, 2007, 2014; Rautio and Kosonen, 2006); second, those
focusing on labor-market issues, using macroeconomic data and medium-size surveys
(e.g. Gimpelson et al., 2010a, b; Kapelyushnikov et al., 2011, 2012; Gimpelson and
Kapeliushnikov, 2015a); and third, management studies that combine such issues as
company strategy, organizational learning, leadership and HRM, and are based on surveys
of corporate executives (e.g. Gurkov, 1999, 2002a, b, 2013; Gurkov and Maital, 2001;
Gurkov and Zelenova, 2009; Gurkov and Settles, 2013). Moreover, in 2008, the first Russian
survey of HRM officers was implemented, using the Cranfield Network on International
Human Resource Management (CRANET) methodology of international comparative
analysis of HR practices (Gurkov and Zelenova, 2011; Gurkov et al., 2012). This survey
allowed for some comparison of the Russian HRM system with international HRM systems.
Of note are three works that have received relatively little attention but which contain
very deep insights into the “emerging dominant Russian HRM approach.”First,
Andreeva et al. (2014) presents, through the synthesis of the relevant literature, a list of
peculiarities of key HRM practices, including staffing, training and development,
compensation and benefits, assessment, and development of organizational culture
(Andreeva et al., 2014, p. 969). Second, a large chapter in a book by Gurkov et al. (2014) uses
four interconnected metrics to assess the retrospective development of HRM in Russia, from
the late ninteenth century to the present. They are the level and change in working
conditions and monetary rewards, social benefits, and moral incentives; the balance between
tools for positive and negative motivation in the workplace; the adoption of innovations by
employees at all levels of the enterprise, ranging from shop-floor workers and farm laborers
to top executives; and the dynamics of labor productivity in part, derived from the other
three variables. It was found that, in the late ninteenth century, Russia was positioned on
those four metrics somewhere between the conditions that existed in the Austrian Empire
and those of Brazil; and in the 2010s, Russia still remains behind the less-developed parts of
the former Austrian Empire, such as Slovakia and Croatia, but well ahead of developing
countries, such as Brazil (Gurkov et al., 2014, pp. 364, 383), which exhibits relatively poor
working conditions and low reward levels; a low level of adoption of innovations by
employees, which shows an unbalanced situation between the use of positive and negative
tools for motivation in the workplace; and very low increases in productivity.
Gurkov and Zelenova (2011) made a third interesting observation, using CRANET data.
In this case, they found striking similarities between many aspects of the HRM systems in
Russia and those in Tunisia, such as the level of involvement of HR in strategic issues; the
influence of line managers in the remuneration and promotion of subordinates; the level of
formalization of performance assessment for various categories of employees; and the
possibilities for collective bargaining. Like in Tunisia (see Yahiaoui, 2015), there are visible
attempts of “hybridization”(striking a balance between adoption and adaptation of HRM
practices) in Russian subsidiaries of MNCs, but such hybridization goes not through
adoption and adaptation of elements of the “emerging dominant Russian HRM approach”
but though amalgamation of some western practices and some Soviet-time practices
(see Gurkov and Kossov, 2014).
Combining the findings of both Russian-language and English-language studies on
HRM in Russia, we present the following picture on the institutional framework, the
peculiarities of the labor market, and the organizational settings for HRM practices in this
country (see Table I).
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