Transition Culture in East European Business

From: University of Michigan | By: Michael D. Kennedy
EDITOR'S INTRODUCTION |Michael D. KennedyFor those who seek to build democracy in Eastern Europe, the dynamic process of change from a socialist past to a capitalist future poses specific challenges in business. Michael D. Kennedy (right) — vice provost for international affairs, director of the International Institute, and associate professor of sociology at the University of Michigan — looks at how East European business leaders and Western advisors evaluate expertise differently. In particular, Kennedy considers questions such as: how might East Europeans use their local identity to their advantage while at the same time erasing their connection to a socialist past?

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For many a Western advisor landing in Eastern Europe in the mid-1990s to advise those who would build markets and capitalist firms, the "old socialist manager" was clearly a thing of the past. For many East Europeans, this new advisor represented hope and a chance for their country to become "normal" and their firm to gain the competitive edge. Indeed, the whole concept of "transition" with its two mantras — from plan to market and from dictatorship to democracy — depended on the stability of these oppositions and the teleology built into them.

Business leaders often develop practices that fuse important elements of the socialist past and of the capitalist West in the making of post-communist capitalist firms. But whose culture needs to be superceded is not always so obvious. In what follows, I draw upon a larger study of the cultural formations of post-communism to suggest some of the ways in which Western experts and East European business leaders have not only worked together, but also against each other, to define their firm's future within the business culture of transition.

Contextual expertise within transition culture

The business practice of transition culture engages contextual expertise in several different ways. It can appear as a benign form of local knowledge that must simply be assimilated to the global culture of transition. Global advocates of transition culture can view this local knowledge as a useful additive, assimilated in order for business techniques to become effective. For instance, when I asked one Western expatriate manager how he could be a marketing expert in a culture he doesn't know, he responded as a scientist might. First, the Westerner provides the conceptual guides and the indigenous fill in the details. Next, the marketing expert tests those formulations through research, and alters pre-conceived notions if necessary. He recalled that pizza delivery didn't seem to work as a concept. People didn't want it; at least they apparently preferred to go to the delivery stands and eat their pizza there. This was partly because they didn't want to stay in their flat, he said, but also because they didn't believe that delivery would really be free, and that it would really arrive hot. As a consequence of this learning, his company initiated a major advertising campaign to convince people that space age technology keeps pizza hot. They also were explicit that delivery was free. With the proper concepts and research, he said, you can see that the indigenous market in any particular post-communist society is "pretty much the same as the rest."

Contextual expertise functions as a useful additive not only in the promotion of products, but also in the promotion of new ideas in firm practices. It's not only getting the ideas right, but making sure that claims about East Europeans can be backed up by an East European. For example, one American emphasized that it was really important to have an indigenous partner for each American advisor.

That's indispensable if you want to be effective...because then when you go in and say you make a recommendation, you say the East Europeans are like this. Or like this. And then the local fellow can back you up, because they're East European.

Contextual knowledge is thus tied to Western experience not only because it can provide information, but also because it helps expertise become more persuasive when the indigenous can be used to convince their fellow nationals of transition culture's insight. Transition culture therefore becomes more powerful to the extent it can be translated into the variety of local contexts. With this deployment, local culture is an additive to making globalized business expertise powerful. Local culture is not always so benign, however.

The label of socialism

Socialist culture is generalized across space in the structure of transition culture, but in the application of transition culture, it is grounded in locales. It becomes a label with which an individual, or set of practices, can be consigned to the past to be superseded.

Representatives of a global transition culture cannot, by definition, be assigned to this past. By contrast, locals must struggle to demonstrate that they are not a part of it. And given that this contextual expertise is one of their greatest assets in the practice of transition culture, they must figure out a way to elevate the value of their local identity while at the same time expunging the socialist past that might contaminate them in transition culture.

Americans have ready scripts with which they can identify the representative of socialist culture, the type of actor or behavior that does not belong to transition culture. One American was quite specific about what most needed change in local practice, and thus a clear sign of the past infecting the future.

They haven't learned yet to think about making a profit. I mean when we were there, we were developing a system to chart costs for them and it was the first time they were really thinking about "are we pricing our products high enough to cover our costs?" It was the first time they really looked and said "oh, we lost $12 million this year." That's a big deal, you know, especially when your sales are not that much. And a lot of things they do they don't do the standard sort of cost analysis that we do here in the US. "Should we undertake this project? Should we do this?" They just, I don't know, they kind of do it out of their gut.....

The relationship between socialist culture and East European cultures is not, however, obvious to Americans. For instance, some Americans presumed that the qualities associated with socialist culture may be more enduring qualities of being Hungarian, Polish, Romanian and so on. One American, after praising the strengths of his East European colleagues, lamented that they

would approach a situation saying, "This is a problem." You know, that would be the first thing that they would say. And initially it was frustrating for us because we are both a little bit more optimistic about things. And we'd say, "No, this is an opportunity... If you're going to speak to people at the parent company, you have to be a little more positive and not say it is a problem, because that will put people on the defensive immediately."
Another American sympathized with this East European disposition, but definitely saw it as a problem for business. She said, "It's easy to feel the way they do, to feel frustrated, to be downhearted, not to want to kind of problem-solve and move forward. I've been in that attitude myself.... And I think it looks really unprofessional." She later ascribed this particular disposition to that nation's culture, itself produced by "being under someone else's rule for as long as they have, they have a very defeated attitude." East Europeans are quick to recognize this American cultural criticism. For instance, one East European recalled the American impression of her countrymen:
When I asked them what they think about East Europeans, one of the things they mentioned was that they are not really ready for changes and to change things. What's really interesting is that everybody's complaining, and some people do try and change things, but a lot of people do not... (984).
One could interpret this cultural critique of socialist and perhaps national cultures as simply an American or Western presumption and condescension. But this critique is also embedded in East European accounts of culture in transition. Some East Europeans are very powerful critics of the socialist disposition and, in many ways, are better situated to recognize how it works. One East European manager specifically charged the East European partner of his multinational firm with trying to limit the joint venture's success. He thought the motivation for this interference came from fear. He believed that the joint venture's success might reflect badly on the accomplishments of the indigenous firm: "it proves that is possible to do something in that company." The most compelling example comes from another Westernized East European manager who reflected on the executive he replaced. The old boss had a completely different management style from Western management, and that style simply had to be transcended.
I mean, my first board meeting I come in and — we go through agenda items, I run the board meeting and, well, he's there. And there is a, uh — what was it? The decree or the resolution of the board that needs to be signed. So I look at the resolution. Everybody signed it already. And the resolution says, "As of such and such date, the price for such and such an item in such and such store should go from this to that." And I said, "Why are we signing? Why is it so important that the board needs to sign this? I know nothing about this item, I know nothing about this store. It should be, I don't know, Sales Manager, or Marketing Director deciding and — signing off, and that's it..." So what it meant was that all decisions, even the smallest ones, were taken by a team. So if something went wrong, nobody was accountable... So, no accountability. No risk-taking. And that ran through the entire organization... So, that was definitely something entirely inconsistent with the way the parent company would like to see the company run. Or any Western company, yeah. The fact that he [sigh] didn't really, had never been exposed to Western concepts regarding business management didn't help either. Because, you know, the parent company guys were talking a different language.

This recollection indicates powerfully how transition culture depends, in practice as well as in structure, upon a holistic imagery of socialist culture as a culture to be transcended, and against which an alternative must be imagined.

It is difficult, however, to fix the relationship between this socialist culture and East European cultures. Westerners are more likely to extend the drawbacks of socialist culture to a wider range of practices associated with being East European. The Westerner is also more likely to presume the East European to be a representative of socialist culture until that East European can demonstrate that they belong to transition culture. One of the most successful strategies for an East European to realize this ambition is to speak English, work as many hours as their Western counterparts, and to acquire those specific skills associated with the future to which transition is supposed to lead.