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Human resource management in Russia: an American’s dilemma Jack Daly arrived in Novgorod, in north-west Russia, in spring 2003. He worked for Starline Inc., a major US food manufacturer, and had been posted to head up its wholly owned Russian subsidiary. Starline Russia was a medium-sized manufacturing plant with 280 employees. It had been set up in 1994 and had a functional organization with the top tier staffed by American expatriates, and with locally recruited middle management. The Americans were typically on short-term postings: two to four years for the president (Daly) and six to twelve months for three vice-presidents, of production, marketing and sales. All had international experience, but none had worked in Russia or Eastern Europe before. Before moving to Novgorod they received short cultural briefings and a three week crash course in Russian. The Russian managers were mainly in their late twenties, well-educated but with little management experience and no experience beyond the region. The blue-collar employees came from various backgrounds but most had experienced serious financial difficulties before joining Starline. A third had been unemployed; the rest had been employed but had received no wages for months on end. Their average wage at Starline was around US$200 a month, about 30% more than the average wage then in Russia. The new company had quickly run into problems of pilfering, theft and production stoppages. By late 1999, when Daly’s predecessor Tom Stark had arrived, theft was a major problem, with about 30% 0f production workers thought to be involved. Although absenteeism was rare, lateness and unscheduled breaks were common. Productivity was a long way below that of other Starline factories in the Asia and the West. There were also problems with the Russian managers, who showed little initiative, ignored instructions, and failed to address problems down the line. Tom Stark had initially responded in two ways. He had introduced tighter control systems, including security checks and bag searches carried out by the local managers. And he had created an informal reward system based on those traditionally used in Russian firms, and those used by Starline in some developing countries. Each month the best performing manager and supervisor were awarded special badges, received thank-you letters from Stark, and had their photographs mounted on the wall. The initiatives had little effect, however, and in 2002 Stark had hired a senior Russian manager to oversee the Russian management team. Nikolai Rubkoff was in his mid-fifties and had previously been managing director of a large tractor plant, and he brought in a completely new management style. He believed that little could be achieved unless people feared punishment, he shouted and abused the Russian managers, and he intimidated the production workers. To combat theft he simply selected a group of workers and demanded that they prove their innocence. When they could not (how could they?) he fired them. That, he told Stark, would teach them a lesson. By the time Daly arrived, theft was down significantly, discipline had improved, and productivity, though still low, had also improved. The managers were still not showing initiative, but deadlines were met and problems sorted out quickly. Rubkoff’s methods were not applauded by everyone, however. On consulting his American colleagues, Daly found one arguing that Rubkoff had turned the company round and clearly knew how to manage in a Russian context, and another arguing that his methods were a disgrace and should not be tolerated. The third was torn between the two views. Jack Daly’s performance would be measured in terms of how Starline Russia performed over the next two to three years. His gut reaction was that Rubkoff’s methods were immoral – but they were producing results.

Required:

1. What ethical issues are involved in the above case? Elaborate!

2. Which of the three evaluations finally forwarded to Daly about Ruckboff way of dealing with issues are justifiable? Elaborate!