Tackling Russia’s talent problems can offer big rewards for business

Russia continues to be viewed as a growth hot spot for multinationals. But talent management remains a challenge for those operating there.

That was the key message from a CGMA panel discussion in Moscow, “Connecting Human Capital to the Growth Agenda”, which highlighted a dilemma found throughout the accounting profession. Russian finance professionals are entering the workforce with strong technical skills but lack other vital communication, leadership and management skills.

“We have got people who are exceptionally bright technically and can reach the sky, and we would like to grow them in the organisation to build high-profile leaders,” said Oleg Paroev, ACMA, CGMA, finance director of spirits maker Diageo in Russia. “But the thing that is lacking is leadership capability.”

The lack of management and leadership skills stems in part from Russia’s relatively short history as a free-market economy – a 21-year period that has not yet eliminated career short-sightedness born during communist rule, panellists said. Inadequate education in some institutions since the fall of the Soviet Union also plays a part.

Russian schools and universities are developing talent with strong technical skills, but “economic education” is not providing the necessary soft skills for leadership, said KPMG Russia finance director Eleonora Oleynikova. “I understand the problem for my team when I see the education of my 11-year-old son,” she said. “Unfortunately, in [some] Russian schools, they don’t pay attention to some of the special skills, the growing skills. It’s based on having very good marks for academic subjects.”

The solution lies in internal training and development, panellists said. Oleynikova said she has benefited from the use of mentors, such as CFOs, in developing her softer skill set.

Russian mentality

During the Soviet era, employees were less focused on career development because progression was not always available. Despite the end of communist rule in 1991 and the country’s status as an emerging market, most Russian workers have a lingering short-term mind-set.

Daniel Foggia, finance director of British American Tobacco in Russia, said that he has seen similar short-sighted attitudes in other emerging economies, such as Venezuela.

“In the meantime, we need to manage through the retention issues that this short-sighted thinking causes,” Foggia said. “People are looking at how they can get more money in another job tomorrow, rather than looking to progress to their next position [internally] over five to ten years.”

Another talent management concern affecting Russian businesses is a general perception that HR performance metrics are not of a high quality, panellists said.

Executives polled for a recent CGMA report, Talent Pipeline Draining Growth: Connecting Human Capital to the Growth Agenda, said they were aware of the importance of talent management, but lacked confidence in the measurement of their human capital performance, and few agreed on who has the mandate or responsibility to do so.

Only one-third of HR directors believe their company has a good understanding of the cost of human capital. In organisations that struggle to understand the full cost and value of human capital, 87% of chief executives believe measures of the cost of losing and replacing talent are too difficult to obtain. Just 12% of chief executives are confident about the quality of metrics they receive on human capital, and 38% of HR directors said their company struggles to get accurate data and metrics on human capital costs, productivity, value and ROI.

Panellists in Moscow indicated that they, too, grappled with talent management, and indicated that such data could be better managed and monitored.

On the economy

Russia is among the so-called BRIC nations, along with Brazil, India and China. The cluster of countries has been known for its rapid growth in recent years. But the economic expansion appears to be waning. Panellists expect economic volatility to continue in Russia and elsewhere in the world.

With this in mind, NRG Group has taken precautionary measures. Finance director Valery E, ACMA, CGMA, said the group has cut staff – albeit not to the same level as during the last financial crisis in 2008.

To insulate against the effects of a crisis, the panellists recommended businesses have a clear strategy, remain committed to operating in the region for the long term, and be prepared to deal with short-term surprises.

Despite the volatility, a majority of panellists remain optimistic about the future of business in Russia. So much so that Foggia said he wouldn’t want to do business anywhere else.

“The challenges are interesting, but the potential growth opportunities are huge,” he said.

Additional CGMA Magazine resources:

Moscow Panel Discussion: Connecting Human Capital to the Growth Agenda”: Top finance executives from leading Russian companies and multinationals discuss issues of talent management in the Russian market.

Poor Talent Management Hinders Companies’ Growth, Innovation”: Inadequate talent management is hindering the competitiveness and financial performance of businesses, a CGMA report suggests.

Emerging Market Multinationals Must Grow Leaders From Within”: Leadership teams at multinational companies based in rapid-growth markets need more international experience and a proper balance of global and local expertise, a new survey says.

Study Finds Early Warning Signs for a Looming Global Talent Imbalance”: Companies are overhauling their business strategies to adjust to the rise of emerging markets, new research shows. But demographic trends will add new challenges over the next five to ten years, specifically in talent management.