in a Post Socialist Society
Dr. Dorothy Marcic
Czech Management Center
University of Economics - Prague
Vol. 8 (5), 1995
Few will dispute that we are living in a new economic order, an order unlike anything the world has yet experienced. Change is no longer an option. Nowdays it is "change or die" for organizations. International trade is on the increase in most places in the world. In fact, one could hypothesize that it will be difficult to find companies which do NOT trade across borders within ten, or even perhaps five, years.
One area of the world going through almost cataclysmic change in recent years is the former soviet bloc. Although progress towards market reforms has been encouraged in varying degrees in different countries, yet all of them have experienced profound changes after the shackles of communism fell, leaving them to struggle, in some cases, for a firm grip on their very existence.
The governments can no longer promise full employment and a job for life, no matter what. Other things which were provided, and were considered "free," and which now must often be purchased, are health insurance, university and even high school tuitions, basic school textbooks, and so on. At the same time, though, salaries in many of these countries remain stable or are rising quite slowly, costs of everyday living is skyrocketing. As one economist said of Poland, "It has developing country wages and developed country prices." In short, the purchasing power has been severely diminished.
In the Czech Republic from the revolution in 1989 until 1993, costs of basic foodstuffs went up 134% (Czech Ministry, 1993), costs for public transportation have increased in some cases by more than 600%. Utilities cost more and landlords have been allowed to increase rents by 200%. Costs of opera and theater tickets has often quadrupled. In contrast, between 1989 and 1992 wages of blue and white collar workers have risen only about 45%, while total cost of living rose 88% (Garner, et al, 1994). Also, even though wages of entrepreneurs went up considerably between 1992 to 1993, purchasing power of that group (or real wages) grew only 3.5%, because of high increase in consumer prices (Quarterly Statistics, 1993). This means for the average Czech purchasing power has eroded, and for most, it eroded considerably.
Within this chaotic state, people are scrambling for more resources. Many call it a "Klondike fever," after the famous gold rush, or else say it is the same as a post-war economy.
As the Czech economy has developed and turned out to be one of the most stable in the former soviet bloc, there had been increased foreign investment, with more foreign companies setting up offices or joint ventures in the Czech Republic. During 1992 it was over $1 billion (Business Central Europe, 1994), while the total accumulated Foreign Direct Investment (FDI) is, to date, $2.09 billion (U.S. Embassy, 1994).
With this comes promises of salaries ten times the average for Czechs with minimal training in the basic business disciplines and a decent command of English. Which means, MBA students at the Czechoslovak Management Center, even before they had completely finished their degrees, were offered up to 50,000 Czech Crowns (about $1700 US ) per month (when the average salary was less than 5,000 per month). CMC also got many requests for graduates of its extended training programs. It follows, then, that MBA degrees and management training programs are popular in this country.
But what of the challenges of bringing the free market approach to a country whose popular sayings included,
- "We'll pretend to pay you if you pretend to work."
- "If you don't steal from your employer (the State), you are stealing from your family."
Or, as the "Seven Miracles of Socialism" indicate, the attitudes developed under the Old Regime were anything but user-friendly to a healthy market economy.
- Everyone has a job.
- Even though everyone has a job, nobody has to work.
- Even though nobody has to work, the plan is always fulfilled.
- Even though the plan is always fulfilled, there are always shortages.
- Even though there are always shortages, there is always plenty of everything.
- Even though there is always plenty of everything, everybody steals.
- Even though everybody steals, nothing is ever missing.
(Source: Unknown Bulgarian banker during the 1980s)
Further, this is a nation whose managers were chosen on the basis of party loyalty and whose training consisted of classes in Marxist economics and communist ideology.
A country where people were taught in schools, work and in society that there is one right way, one right answer, and if one is not sure what it is, better speak in an opaque fashion to be able to cover oneself later.
And a country where personal initiative was so discouraged and even punished under communism, that stories circulate about workmen who left cement bags out in the rain because no one told the workers to bring the bags in (Kohak, 1992).
A state whose Prime Minister has been quoted as saying, "We don't need any kind of help from Americans. We can do all of these things ourselves."
And a country whose heroes for decades (and even centuries, if one counts the period of domination by the Austrians) were what is today labeled dissidents, often whose best skill was exaggerating every weakness of the leaders and creating an atmosphere of distrust and suspicion (certainly the communists did a much better job of those two behaviors, though).
At the same time, this is a proud country, which achieved great levels of economic development from its inception as a state in 1918 to the domination by the Nazis in 1938. During the wars, it was the most prosperous and politicially stable Eastern European country (Hribal, 1991). At that time it was considered one of the leading industrial powers in the world, and its auto, the Skoda, was one of the best in Europe. Therefore, unlike some of the other soviet bloc countries, such as Romania or The Ukraine, it has a strong manufacturing and commerce tradition.
My experience has been as teacher and consultant at the Czechoslovak Management Center, which offers an MBA as well as numerous executive training programs. During my time of over two years here, many American and other Western faculty members and management trainers have worked with Czech and Slovaks. While most of the foreigners have done at least an adequate job, still there was a significant minority with little or no cultural sensitivity, extreme ethnocentrism, and lack of understanding how cultural variants, structure of government, and its policies are closely linked to economic development. What results, then, is an arrogant assertion of the American system as not only the best, but certainly, one which can and should be adopted as a whole for the Czech Republic.
When one considers the descriptors of the Czech system listed above with these characteristics of some of the Western faculty, it can be realized that many potential conflicts exist. However, even without ethnocentric Westerners, there would still be problems teaching management in this country.
Work ethic and punitive environment. The decay of the work ethic under communism has resulted in a workforce used to tardiness, long coffee breaks, and leaving early on Fridays for the cottage. In addition, because of the "full employment"policy, there were often twice as many people needed. Therefore workers time was filled with busy-work and a lack of demanding job tasks. Further, because punitive measures are often used in schools and families for rule infractions, people are familiar with punishments for behavior control.
Two two factors above (lessened work ethic and punishments), work together to create a large portion of managers who subscribe to the Theory X framework that workers are lazy and must be threatened and finally punished in order to get anything done. So we get many students, such as one MBAer, who commented,
"You can't motivate Czech people to work after forty years of communism killed the work ethic here." Thus, despite the evidences of such companies as McDonald's who have trained a Czech workforce and motivated them with a creative incentive system, there are still the cynics who believe punishment is the only way. However, there is an increasing number of managers who do not accept this, those who believe one can design a system with interesting jobs and a motivating reward system which will produce a productive workforce.
Managers. Under the old regime, managers were not required to have any particular skills as managers, per se, but rather to be "good communists" (translation: loyal). Very few of them were the "true believers," as many people joined the party merely as a tool for career advancement or to lessen social problems for family members.
Management was not seen as a profession, but rather just a higher level of technical job where people were then responsible for other's work. It was seen as an additional burden, and was not seen as "real work" (Cakrt, 1993).
Managers were sent to management training, but it had more to do with becoming a better communist than a better manager. One of our MBA students said that previously management was done by "improvisation."
The result is that in many, many companies, universities, and governmental offices, there are countless incompetent bureaucrats. Thankfully, not many of them seem to come to management training programs, either through self-selection or realization at higher levels of the potential wastefulness of money spent for them. Though we tend to see the brighter, hard-working and competent ones in our classes, we know the others exist because we have heard too many stories from scores of people.
Having so many rigid bureaucrats makes our jobs as teachers more difficult, because it makes change in the organization less likely and increases the frustration of those we are trying to teach, those who want positive changes.
We are seeing, though, that this phenomenon diminshes almost to nothing when a company becomes privatized, after which useless jobs are eliminated and workers tend to have a better sense of their purpose for the company. Employees in State companies complain about the meaninglessness of the tasks they must do. We don't hear many such complaints from workers in private firms.
Another issue related here is one of "leadership" as a concept. We find in our classes some students resistant to the very idea of leaders having power and leaders being able to shape an organization's culture and strategy.
This is too much like Communism," some say disparagingly. "Under the old regime we used to go to training schools and we learned all about how our 'leaders' would help us to see the truth, the correct vision. We can't hear it now. You must wait for the next generation of managers to bring these concepts."
Related to this uneasiness with "leadership" is the management style not uncommon here which was described as the "get a rock" management approach (Frink, 1994). It goes like this. The manager tells the employee to "get a rock," but does not say how big, what shape, whether smooth or rough, and so on. At the deadline, a perfect specimen is accepted and anything less is criticized. As my colleague said, he is told to prepare a report, but given no guidelines. Since rough drafts are not accepted [this is a form of authoritianism (Mestenhauser, 1994)], one must turn in a polished product. Only at this point is there any information given on what were the requirements of the report.
In some consulting and management training I do, we find some Czech managers confused by project planning, perhaps because it involves procedures, planning and giving of direction, none of which were common previously.
Much of this relates to the cognitive map many Czechs have. It tends to be more linear than Americans are used to. Examples are seen in filing systems, which generally catalog items by date. Therefore, to look up a letter of two years ago, knowing the person or subject is not helpful. You must know the date the letter was sent or received. Similarly, the concept of time is linear. I do time management programs and it is not uncommon for participants to say,
"I am busy every minute of the day. There is nothing I can do to add more tasks." In such people, the idea of "managing" time, changing priorities, delagating, and so on are hard to grasp.
As this economy continues to develop, I think we will see a new "ruling class," at least in business. It will be those managers able to change from linear thinking to one which classifies, analyzes and synthesizes.
Unanimity of thought. Under the communist regime, only a narrow deviance from strict norms was allowed for the common person. This applied to behavior and to thoughts, as well, to the extent they could be determined or detected by the authorities. Evidence exists, however, that these strict behavior requirements existed during the Hapsburg Empire, from 1620 to 1918 (Hasek, 1973).
Therefore, this culture has centuries of punishments for "wrong thinking." It would be surprising, then, to find creativity at its peak, or inventive solutions to be commonplace. When faced with a difficult problem, one solution may be presented. If this is not acceptable, often the shoulders shrug up, as do the eyebrows, with an "I don't know" response. A common response to problems in a case study is, "There were no other choices. The manager had to behave that way."
Another common behavior in classes is for the manager to give a long, complicated and convoluted answer that, in the end, doesn't say much. Czechs say this was a skill developed under the old regime to avoid taking a stand and to be able later to claim the true meaning as almost anything.
Included in this unanimity of thought was the search for the one "right way," to one correct answer. Evidence of this characteristic are questions in class, such as,
- "But which is the correct solution to the case?"
- "Which of these six leadership theories is the best?"
Hofstede (1984) calls this uncertainty avoidance, the quality in a culture where ambiguities are not accepted and society develops structures to create the illusion of clarity and agreement on all issues.
However, we have noticed in our management training programs that in the past two years, there seem to be fewer managers who speak in "regimese," and more who can answer a question efficiently. And compared to faculty in our faculty development programs, the up-and-coming managers (those chosen by companies for fast-track training), have more concise analytical thinking skills. Evidently the market is rewarding this type of managerial thinking.
Initiative. Related to the concept of unanimity of thought, initiative refers to the levels of personal creativity, the ability to see things in a new way, to have ideas and take responsibility for putting them into action. It is a proactive rather than reactive mode.
We see the strongest example of this in our MBA classes, where the Westerners tend to dominate class discussions and group projects, for they seem to be more comfortable with exploring various options in problem-solving. Naturally, part of the dominance is explained by the tendency for Americans to be more extraverted and gregarious than Europeans, particularly East and Central Europeans. Often in group projects, the presentations are quite boring and without any fresh ideas.
And yet this behavior is easy to understand, for their are many stories of people being severely punished with loss of jobs or prison because they were too successful, they stuck out from the group (Kohak, 1992). One high-ranking Czech said, "This is a negative part of the culture that when someone does looks better than everyone else, that person has to be brought down."
The positive side of this quality is when Czechs have intense loyalty for members of their group, whether family, friends or respected co-workers. In such cases, it is remarkable, from an American perspective, how far the Czechs will go to help one another, at least for members of their own group.
Increase in initiative can be seen over time in groups rewarded for creative ideas. The Young Manager's Program at CMC and the MBA program have shown how students, when put in an environment which expects inititiave and new ideas, will develop these skills quickly. Or at least exhibit the skills which may have been there before but were not shown as evidently. Even the local MBA students after some months with Western students, will hold their own and in some cases dominate the Westerners in discussions.
Technical Assistance. Right after the fall of communism, Czechoslovakia became over-run with Westerners trying to help. Unfortunately, too many of them were also trying to turn a quick buck, consultants charging exhorbitant fees with clients afterwards unable to determine what positive difference the "advice" had made. It is therefore unerstandable there would be some backlash, some resentment towards the foreign experts. Often we here Czechs say they are tired of being treated like "monkeys in the trees" by Westerners.
However, when it becomes a prejudice directed at all Western assistance, it creates problems in management training programs when some participants (thankfully only the rare attendee) will sit most of the day, with arms folded on the chest, a pouty face, and will finally declare, "What can you, an American, tell me about my problems here in the Czech Republic?"
Ethics. This is a rarely discussed topic in this part of the world, and when it does come up, people will openly admit their willingness to be unethical, if it could bring profits. "Everyone does it," they say. In fact, some MBA students were caught cheating, and during a later class discussion they were asked how such behavior would help them be better prepared as future managers, as when one cheats you don't really learn. The response was, "Yes, it will help us, because all managers cheat and here we can learn how to cheat better!"
Many managers in our training programs say it is necessary to cheat now to help the Czech Republic catch up economically with other countries. In five years, they say, then it will be time to be honest. Not all share this view, though. A few of them say that if one cheats now, that behavior won't just stop after five years, it will continue, that one must be honest now as well as later. One of our Czech colleagues told the MBA students it is a matter of whether they want to be like everyone else or whether they want to be a force for positive change, to be an example.
Dissident employees. For decades the dissidents represented the moral courage of the country. They stood up to the powerful regime, often with severe punishments for themselves and their families. They were forbidden to write or speak publicly or work in their own professions (many examples of top scientists washing windows for a living) , or even lost jobs, and sometimes put into prison. Children of dissidents, also, could not go to the university. Some people may have been willing to sacrifice themselves, but not the future of their children. And they were a united group, prepared to take charge after the revolution. It is not surprising that one of the most eloquent and courageous of the dissidents, Vaclav Havel, was elected president and continues to be the moral conscience of the country.
On the other hand, most people saw the dissidents as trouble-makers, believing, "If they didn't cause such problems with the authorities, we would all be able to develop this country more."
However, imagine being a manager in an organization with several people who are habitual dissidents, whose most familiar skill was being angry at anyone in power. Though the regime is gone, they still use familiar behaviors of undermining authority, clandestinely speak of the injustices they see, expecting others to observe strict lines of loyalty concerning office gossip. In other words, don't give any important information (certainly not what anyone else said) to those in authority. If such behavior is carried to excess, is creates an atmosphere of suspicion
Certainly, some of the dissidents were real heroes, stood up to a corrupt leadership, and finally helped with the downfall of the old regime. Some of these dissidents took Havel as a model and when the communists left, they changed their behavior to that of rebuilding the country. Many others, unfortunately, still continue to be best at creating subversion.
Economy. We must be careful not to paint to grey a picture, for the situation in the Czech Republic is quite hopeful. Of the 23 former Soviet countries in Eastern and Central Europe, The Czech Republic has proven to be the most stable and economically sound, when measuring gross domestic product increase, inflation, real effective exchange rates and hard-currency account balances (Roth, 1994 and CEER, 1994).
As the economy grows and shows signs of continued health, more and more managers will be encouraged to study more effective management techniques. One reason for the relatively rapid transition to a market economy may be historical. Betweent 1918 (the beginning of Czechoslovakia) until the Nazis invaded in 1938, Czechoslovakia was one of the world's nine most developed countries (Pribova, 1993).
The Czech Republic, too, has a long and distinguished history of intellectualism, and, as described by Hrabal (1990), it is
And it is, perhaps, one of the few places on the earth where philosophy books are hawked by street vendors (and people buy them). Therefore any learning will no doubt occur more quickly here than many other places.
Human resource management. One can look at the situation here where there have been virtually no human resource management programs as either one of great difficulty or one of great opportunity to bring positive change. Because there are have been no such programs, it makes it so much easier to create a more modern system. There are no performance review programs to dismantle and restructure, no policy manuals to revise. All of this means much opportunity for new MBA's and graduates of management training programs.
Ethics. The "father" of Czechoslovakia, Thomas Masaryk, is a highly respected figure, who based his politics on morality (Tismaneanu, 1992). Among other things, he is known for his motto, "Truth will prevail." Many people compare his moral courage with that of the current president, Vaclav Havel, who has updated Masaryk's ideas for the modern age with "Truth and love will prevail over lies and hatred." (Hribal, 1991). Every week Havel is on national radio imploring the people to "live in truth," as he has modeled his life (Havel, 1987), to drop the cynicism and hopelessness of the past. He is the moral conscience of the country and a force for goodness quite unique compared to almost any other country in the world.
World integration. This is a country where nearly everyone seems to be learning English. A comparison of the situation from two years ago is significant. Plus the level of involvement of other countries in the Czech Republic continues to increase, with informal reports of increases in immigration. Foreign investment is up to over $2 billion (Price Waterhouse, 1994).
Entrepreneurial spirit. It is remarkable that in a country where private business was all but forbidden, that within the space of about three years, there are now one million registered entreprenuers. Many of these are not only active in their business, but involved in a entrepreneurial networks, such as Klub Ensus,which has 350 participants.
Perhaps this is party due to a remarkable change in attitudes. At the beginning of the transition, in 1990, 70% of Czechs scored as pessimists, while by 1992 that had changed enough that the majority were now optimists (Pribova, 1993).
The Czech Republic has had a bright future at other times in history, notably in 1918, when the country began, and in 1945, at the end of the war. History did not allow its climb to continue during those eras. However, the country has once again bounced back and gives every indication of regaining some of its world stature.
It is our hope that technical assistance from various nations and in different disciplines will help this process move forward even more smoothly. This paper has been an attempt to honestly look at some of the challenges and opportunities faced when bringing technical assistance to organizations and managers.
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