Confidential

1. Confidential TOP SECRET

2. Welcome Danone Culture Research Centre, London • ANDiDAS.COM

3. Introduction – Analysis – Recommendations – Conclusion Economic Climate in Russia • Communism, Plan Economy -> Perestroika • Transition towards market economy (mixed economy) • Instable Economy in 1990s: • GNP reduction by 10% (1991) • $115 billion debt • High crime rates • Corruption • Support from the international Community • Admission to the World Bank and IMF in 1992 • Foreign direct investment will be delayed until stability and security are established

4. Introduction – Analysis – Recommendations – Conclusion Situation at Bolshevik • Despite uncertainty, Danone acquired of Russian Biscuit Manufacturer; Bolshevik, 1994 • 50% of all mergers fail, culture is often an issue • Danone has only consulting status, but soon takes over management control • Bolshevik has not been able to adapt to new market • No knowledge of free market concepts • Ineffective decision making • Poor discipline • Overstaffing • French expatriates have not been able to make positive changes, lack of cooperation from Bolshevik staff

5. Introduction – Analysis – Recommendations – Conclusion Objectives i • Give an understanding of Russian national & Bolshevik‘s organisational culture and traditional Russian leadership style. • Identify changes needed to make Bolshevik compatible with a market economy and the Danone Group and caveats • Outline the profile and leadership style most suitable to successfully implement these changes

6. Introduction – Analysis – Recommendations – Conclusion Objectives ii Outcome Performance enhancing Organisational Culture in the Russian Context Russian National Culture Bolshevik Organisational Culture New leader Objectives French/ Danone Culture source: authors‘ own estimate

7. Introduction– Analysis – Recommendations – Conclusion Hofstede‘s Cultural Dimensions • Power Distance • The extent to which society accepts the fact that power is distributed unequally (small/ large) • Individualism – Collectivism • The degree to which people live in a loosely knit social structure versus a tight social structure • Masculinity – Femininity • The extent to which the dominant values in society are masculine (materialistic) rather the feminine (caring, quality of life, people orientation) • Uncertainty Avoidance • The extent to which society feels threatened by uncertainty (weak/ strong)

8. Introduction– Analysis – Recommendations – Conclusion Cross Cultural Analysis Source: Hofstede, 1980 & 2001 and Bollinger, 1994

9. Introduction– Analysis – Recommendations – Conclusion Power Distance • High • Long history of monarchy • Elitist behaviour France Russia USA

10. Introduction– Analysis – Recommendations – Conclusion Individualism • Russia: Collectivistic Society • France: Individual Society

11. Introduction– Analysis – Recommendations – Conclusion Masculinity • Low • “Women know how to do everything, men do the rest” (Russian Proverb) • Materialism is not a top priority

12. Introduction– Analysis – Recommendations – Conclusion Uncertainty Avoidance • High • History of centralized power • Technocrats and bureaupathology • Blat (“Eastern European Guanxi”) • “Learned helplessness”

13. Introduction– Analysis – Recommendations – Conclusion Long Term Orientation • New dimension • Short term orientation • Living today, not caring about long term consequences

14. Introduction– Analysis – Recommendations – Conclusion Summary of Russian Culture • High power distance • Collectivistic • High Uncertainty avoidance • Femininity • Short term focus • Bear in mind when creating new strategy • French culture relatively similar, should facilitate the “danonizing” process • In the long run, cultures are expected to converge; globalisation

15. Introduction– Analysis – Recommendations – Conclusion Traditional Russian Leadership • Authoritarian & paternalistic • Reliance on belligerence and coercive power • Paradox of dependence on, but dislike for strong leaders (Kets de Vries, 2000) • Tightly hierarchical management structure, closely controlled flow of information • Similar to France • Micromanagement (Uncertainty Avoidance) • New breed of managers expected to emerge • Old managers less likely to adapt to change as well as younger managers

16. Introduction – Analysis – Recommendations – Conclusion Suggested Change • Danone will be able to take managerial control soon • Organisation & Cultural Change • Recommendations to make Bolshevik compatible with • A market economy • Danone‘s organisational culture

17. Introduction – Analysis – Recommendations – Conclusion Operations & Culture i 1.) Current management does not seem suitable (Shimanov) 2.) Integrate French expatriates 3.) “Theft upward reporting and fact-fudging were common at all levels...“ (Case, p. 4) Immediate counter measures needed

18. Introduction – Analysis – Recommendations – Conclusion Operations & Culture ii 4.) Continued employment of middle management should be reviewed on a case to case basis 5.) Otherwise employ new younger mangers (ideally with western work experience), • Require lower pay • Allows to compensate inexperience with in-house training 6.) “Paying a monetary bonus only benefits a firm one time in increased motivation” (Fey et al, 1999, p.51)

19. Introduction – Analysis – Recommendations – Conclusion Operations & Culture iii 7.) Offer evening classes to the entire workforce to teach the working of a market economy 8.) Introduce group work 9.) Make layoffs as painless as possible • Outsource 10.) Communication of Organisation Strategy and Rationale • Internal compass

20. Introduction – Analysis – Recommendations – Conclusion Operations & Culture iv • Long term considerations: • Employee empowerment (negative decision lists) • Flatter hierarchy • Lateral communication • Computer technology • Western accounting standards • Benchmarking

21. Introduction – Analysis – Recommendations – Conclusion New Director Leadership style • Leadership Models • Model Methodology Leadership styles effective in Russia: Source: Fey et al, 2001

22. Introduction – Analysis – Recommendations – Conclusion Authoritarian vs. Authoritative Russians must learn to distinguish between: • Authoritarian (Status Quo) • Autocratic, dictatorial, despotic, tyrannical, oppressive, illiberal • Not compatible with Danone Core Values • Authoritative (Target) • Dependable, trustworthy, authentic, strict • Facilitate empowerment, involve workforce by providing meaning, encourage people to “own”, foster openness & teamwork, exercise discipline and control by providing clear boundaries, give support, create a sense of security. • Compatible with Danone Core Values Source: Oxford Dictionary Thesaurus & Kets de Vries, 2000

23. Introduction – Analysis – Recommendations – Conclusion Leadership Strategy • Transactional Leadership • Transformational Leadership Source: authors‘ own estimate

24. Introduction – Analysis – Recommendations – Conclusion Leader Profile • “We don‘t understand what‘s going on at the Bolshevik. Maybe it‘s because of the interpreters but we don‘t understand what the people over there mean when they talk” (Danone Management) • New Director Profile • Transformational leader • Bicultural & Bilingual manager („Expatriate -Inpatriate“) • Working experience in France (or Western organisation) and Russia • Authoritative • Flexible • Build trust • Communicate

25. Introduction – Analysis – Recommendations – Conclusion Overcoming Resistance to Change • Implement changes slowly, small steps or incremental, in accordance with workforce • Clear communication and trust building (Education) • Use local employees as “agents of change”

26. Introduction – Analysis – Recommendations – Conclusion Disclaimer • Only secondary research possible • “All models are wrong, but some are useful” • Culture is not an exact science, it is not possible to extract the national/organisational component only • Culture is constantly changing, every individual is different • Leadership must be flexible • Recommendations are suggestions/ guidelines, not definitive • Other models are not mutually exclusive

27. Introduction – Analysis – Recommendations – Conclusion Conclusion • A simple replication of Western management systems is not the answer • Attempts must take Russian culture/values into account • Slow, systematic implementation of all changes in accordance with the workforce • Communication, trust, training, group work • Change to Authoritative leadership • Leadership must change with changes in culture

28. References & Further Reading • Fey, C. F., Nordahl, C., & Zätterström, H. 1999. "Organizational Culture in Russia: The Secret to Success". Business Horizons. vol. November-December. p. 47 - 55. • Fey, C. F., Adaeva, M., & Vitkovskaia, A. 2001. "Developing a model of leadership styles: What works best in Russia?". International Business Review. vol. 10. p. 615 - 643. • Kets de Vries, M. F. R. 2000. "A Journey in the "Wild East": Leadership Style and Organizational Practices in Russia". Organizational Dynamics. vol. 28. no. 4. p. 67 - 81. • Camiah, N. & Hollinshead, G. 2003. "Assessing the potential for effective cross cultural working between "new" Russian managers and western expatriates". Journal of World Business. vol. 38. p.245 - 261.

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