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Organizational Practices In Romania
1. Organizational Practices in Romania and US: Are We So Different?
Organizational Practices in Romania and US:
Are We So Different?
Matt Aiello
Awilda Borres
Madalina Bucor
December 7, 2008
Organization Management CR 505
DeSales University
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2. Organizational Practices in Romania and US: Are We So Different?
Introduction
In the fall of 2008, three MBA students from Romania and US convened a
roundtable on Romanian and Anglo-American management practices. Over the
course of several weeks, the roundtables covered four organizational themes:
Coordination, Courage, Collaboration, and Creating Change. This article is a
summary of their dialogue regarding organizational practices, based both on their
experience and empirical research.
Although all three came from different backgrounds, they shared a
common experience and expectation: all experienced economic shifts in their
countries and belief that the modern organization as it exists today, should
radically change. A brief background on participants of the roundtable:
Matt Aiello started and manages a small waste management company in
the US. Prior to starting his own company, he worked in multiple industries,
which provided him a broad view of different management styles and industries.
Awilda Borres is currently Director of Organizational Development with
Merck & Company, a global pharmaceutical firm, and has over 15 years of
experiencing in designing and leading large-scale change in large corporations.
Madalina Bucur is currently an assistant manager and regional selling
manager with Bucur Grup Automobile, a mid-sized automobile distributor and
service organization in Romania. Madalina is also a subject matter expert in
Informatics and Computer Science.
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3. Organizational Practices in Romania and US: Are We So Different?
Context
1. What changes have you seen in the way managers lead their organizations in
the last 10 years? How much does the general economic and social
environment (culture) influence organizations and management styles?
Awilda: I have worked in numerous countries but not extensively in Romania-so
so my statements are based mostly on my research and conversations with
colleagues in Romania and Eastern Europe: it is my opinion that national culture
has more influence on corporate culture than previously believed, even in 2008.
We also now have empirical findings supporting the impact of this factor1.
Romania was a socialist country and highly regimented, i.e., command and
control, as exhibited by its planned economy. It was not until the 'revolution' in
1989 that Romania abandoned the command economy model. It is almost 2009,
so practices such as competitive and open markets are still relatively new, at
least from my experience. Though much reform and progress has been made,
there are still fundamentals such as productivity which consumes management
time and effort. It seems time would be best spent on understanding how to shift
culture, though more difficult, the return on investment would benefit any firm.
Madalina: I would agree the change was not realized at once. It was only after
40 years of Communism, Romania joined the capitalist market economy. It has
1
Peretz, H. and Fried, Y., National Values and Performance Appraisal Practices, and Organizational
Performance: A Study Across 21 Countries, p.3. Our expectation is based on the model of culture fit, or MCF
(Aycan, 2005), which was proposed by Kanungo and his associates (Kanungo and Jaeger, 1990). The MCF
suggests that national culture affects employees are exposed to an HR activity that does not fit the national
culture they will tend to respond negatively (Aycan 2005).
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4. Organizational Practices in Romania and US: Are We So Different?
been a complex process, which needed time and a shift in the Romanian
people’s behavior. Understanding the backdrop in which Romanian companies
operate is critical for any manager:
The transition toward the market economy started in 1990 and during the
period 1990-1995, many small and middle size enterprises (SMEs) were created
due to the existence of unexploited market niches and the enterprising Romanian
spirit. A second phase of revitalization commenced after 2000, due in part to
Romania's entry to into the European Union and the investment of multinationals
in Romania.
During the Communist period, Romania experienced a highly centralized
system of management, which made initiative, critical thinking and innovation
dangerous. Nevertheless, these are the very qualities which are required in
management in a democratic market economy.
Matt: From a small business perspective, large corporations and franchises are
'taking out' small businesses in all industries in the US. Small business
managers in the last ten years have been fighting to survive more than ever--they
have to look for ways to innovate and cut cost. It is getting more and more
difficult for small businesses to compete across the board; large corporations
have the resources and capability of delivering cheaper products and services.
So small businesses must create a niche, or a specialty to grow if they are to
survive. I believe that the current economic situation and consumer culture in
America does impact small firms and how they are managed. The US consumer
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5. Organizational Practices in Romania and US: Are We So Different?
is turning from small business and to large conglomerates. Why? A better
product at a cheaper price. Also these large corporations have monstrous
advertising budgets at their disposal which influence or instructs consumers
where and how to find their services. But it would be unfair to lay all of this at the
feet of the American corporation or consumer—small business have made
mistakes by inefficient or poor management practices, which result in bad service
or poor products. We have entered a new age in America—before there was an
equal playing field in the US--now corporations are slowly taking over markets
traditionally served regionally or locally by small firms.
2. What are the key challenges facing management in your respective
organizations?
Matt: As you know I work in the waste management industry. Currently, there
are three large corporations that have close to 85 percent of the entire market
share in the waste industry. Due to size, they have been able to purchase most
of the smaller companies throughout the US. Though they can offer cheaper
services and better rates to commercial and residential customers, some smaller
companies have been able to compete (mostly in the states of New Jersey, New
York and Connecticut).
But since the economic crisis, the managing costs across the waste
management industry have increased and we have been forced into a price war
by larger competitors. So in my opinion, the key challenges for small business
managers in industries like mine and other managers in small organizations:
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6. Organizational Practices in Romania and US: Are We So Different?
1) how to manage more efficiently, cut costs, and
2) how to differentiate our services in a unique manner so that customers
remain loyal and paying customers during an economic downturn.
Madalina: First, the Romanian market is often characterized as an quot;unstable
and an atypicalquot; market, which means in most cases one cannot really predict
what is going to happen, or to make plans based on the market. Yet there are
success stories, such as Carrefour and Renault. Both firms (retail and auto
manufacturer) primarily entered the market based on market studies--a huge risk.
Yet now Carrefour Orhidea, located in Bucharest, is the second largest revenue
stream for the entire company. Likewise, it was Renault's intent to produce only
the Logan model in Romania, but now Renault operates a techno centre with
multiple products lines in Bucharest.
2) The second challenge is the rapid change of economic legislation,
which makes it difficult to develop and implement financial and strategic planning.
3) The third challenge is the educational system which does not stimulate
creativity or correlate theory with practice. As a result the majority of university
graduates are not well prepared for the challenges in the real market or
workplace.
The facts mentioned above affect all the companies--in fact, the small and
medium size firms (as the one I work for) are mostly affected by the lack of well
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7. Organizational Practices in Romania and US: Are We So Different?
trained employees and specialists. But this does not only affect employees, let
me share some facts about 'the typical Romanian manager':
In the 1990s, college graduates were reticent to work for an international
company, preferring to work for a state company. Although 26% of Romanian
managers have some form of formal education, they were not actually prepared
to think and act commercially. In the last years there have been made major
investments which have resulted in the growth of corporations and transfer of
managerial know-how.
Based on a survey2 realized of 850 companies in 21 counties (judete), this
is a portrait of the typical Romanian manager: adult male (75.5%), highly
educated (48% technical, and 26% economical high education), and diligent
(more than 50% work at least a 60 hours week). Though most managers were
trained in Western countries or are expatriates, they rarely set strategies or
establish objectives in their organizations--they adhere and follow policies,
strategies set from headquarters, typically a multinational. In contrast, the typical
company in Romania has one or more business partners, many with family
members involved in the business and ¾ of all managers are married.
4) Finally, the last challenge is connected to the last challenge regarding size of
companies-- access to loans for investments and funds for innovation is difficult,
given that more than 60% of a small and medium size firm turnover is due to the
amount of taxes paid to the Romanian State. As a footnote, this week (first week
2
O.Nicolescu,A.I.Maniu,C.Nicolescu,F.Anghel: White Chart of Romanian SMSs in 2007, Olimp, Bucharest,
2007
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8. Organizational Practices in Romania and US: Are We So Different?
of Dec 2008) the Romanian government passed a plan to stimulate investment
on behalf of companies. In 2009, taxes will be reduced and funds must be
reinvested into innovation practices and plans. At the same time, national banks
increased interest rates to 23-25%, making it difficult for businesses to secure
loans.
Coordination
3. How does management communicate to their employees? To each other?
What tools are available to employees?
Matt: From a small business perspective, this is straight-forward due to the
smaller staffs in these organizations—simple and direct. Even if the staff is
larger, it is nowhere near the size of a corporation such as Merck with over
40,000 employees! However that is not to say management in small
organizations do not have their challenges, for example, there may be more
politics among employees. There is a higher likelihood of developing personal
relationships which is positive but also potentially a risk because they may know
more about each other than about the performance of the small firm or the
industry.
Small organizations often do not have large intranets and extranets at
their fingertips, so communication about the business and industry can be limited
compared to how large corporations communicate daily instantly globally to their
employees.
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9. Organizational Practices in Romania and US: Are We So Different?
Madalina: If we view Romania using Hofstede’s cultural dimensions, one could
say that the culture in Romanian organizations have a low uncertainty avoidance
ranking, which means a ready acceptance of change and greater tolerance for
risk-taking. The research indicates a short-term orientation, and a higher power
distance, which can indicate the absence of a balance of power within society.
This means, individualism is more prevalent than collectivism, which is helpful to
understand how managers and employees approach their work in this culture.
From my experience I would agree with the research. For example, generally
Romanian firms have a greater number of hierarchical levels than their
international counterparts. As mentioned in a previous roundtable, autocratic
management style and culture is typical, and participative management is seldom
to be seen or actualized.
Managers as well as the employees prefer face-to-face communication. E-
mails, memos and briefings or the company intranet are less used. Both
managers and employees are less formal about delegation and conducting
meetings. In the multinational companies it is different: processes are more
formalized and communication is done by electronic means.
Important to note is that communication at the same level is slight or
minimum, dependent if information is required to fulfill her/his own tasks.
Everybody is focused on accomplishing their objectives and tasks, and less
interested in how decisions, outputs affects a peer's tasks or the company’s
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10. Organizational Practices in Romania and US: Are We So Different?
performance. Hofstede's framework seems to validate the individualistic
tendency of employees: it can be both positive and a negative in multinational
companies, I think.
Courage
4. Is speaking up or risk-taking acceptable or common? Is it rewarded?
Madalina: Managers do not usually involve the employees in the strategic and
tactical planning of processes of the company. Although there is a big gap
between them, speaking up is acceptable as long as debate on the topic is
encouraged. Romanian firms are only now placing importance on strategic
planning, as stated earlier. On a day-to-day basis, employees take risks, but in
most cases they are not aware of their consequences later in the process or to
company performance. If the result is satisfactory, then it is considered as part of
successfully completing one's job, and possibly a bonus or salary increase is
given.
5. What kind of influence (power) does middle management have?
Matt: Given our assumption: a small business is a company with less than 100
employees, I need to state that middle management is not needed in this size
organization. However, it is my experience that entrepreneurial individuals are
attracted to small organizations because they may have more' power', authority,
or direct reports (as opposed to a corporation).
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11. Organizational Practices in Romania and US: Are We So Different?
Madalina: Middle management influence in initiating and influencing strategic
decisions is quite low-- it is more about informing top management about what
how goals are met/not met. (There are qualitative studies to substantiate this).
Middle management exert their influence on lower levels with the objective of
coordinating and controlling objectives and outputs.
6. What kind of influence do more “senior” employees have? Women?
Matt: In this arena, I think small companies definitely have the edge and
competitive with larger corporations for the following reasons:
1) Senior employees at small businesses are usually employed longer than they
are at large companies, sometimes until they retire. The corporate world is
more fast-paced, and driven by results. I believe small businesses care more
about employees, and less quick to lay-off talented employees.
2) Employees in small companies is a huge capital cost, so management does
not want to lose talented performers as it more expensive in the long-run.
This is why I believe there are more women in senior management and as
owners of small to mid-sized companies in the US. Regardless of your
gender, if you are talented and a proven performer, the playing field is equal
—which is different in large organizations in the US.
Madalina: Now that is a definitely a surprise! I would have expected more
progress in the US. In Romania, more and more women are in leadership
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12. Organizational Practices in Romania and US: Are We So Different?
positions, and recently there has been the recognition of the top 300
businesswomen in the country. Nevertheless men are predominant in leadership
positions. A survey done in Romania3 shows that the main criteria for promotion
are: results (79.50%), potential (16.15%), age and experience only 4.35%. The
criteria used for determining salary level does not take into account the person’s
gender. Education, the person’s position and the results are of primary
importance. Senior people in a company usually receive a bonus, but that does
not mean they possess greater power or influence than junior managers.
Collaboration
Are teams common in organizations? (quality circles, cross-functional or self-
7.
directed teams)
Madalina: In the last few years Romanian companies have become more
and more aware that in order to solve some problems or to innovate it is
necessary to create teams. Inside of a company, industry, company size, it is
possible to find quality circles, cross-functional or self-directed teams. Although
Romania is seen as more as an individualistic than collective society, the
employees, especially new hires, have adapted rapidly to newer forms of
organizations and practices.
We are seeing more cross-functional teams comprised of different
departments to solve a common problem. In my company, teams have been
3
D.Popescu, I. Verboncu, I.Chivu: THE EUROPEAN DIMENSION of the HUMAN RESOURCES MANAGEMENT -
A NEW PERSPECTIVE FOR ROMANIA, ASE, Bucharest
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13. Organizational Practices in Romania and US: Are We So Different?
established to launch new products and to achieve corporate-wide investment
objectives.
Matt: I believe there are fewer teams in small business because teams require
so much time and resources. Management is always concerned that all
employees and processes operate effectively, but management has to be
efficient as well. Also, it is a risk to create teams just for the sake of creating
teams—it can backfire in small organizations as teams may focus more on how
they are working together than on the work itself.
Creating Change
8. There is internal and external pressure to change corporations and reinvent
management (see Hamel). Do you think this is possible in your company?
9. How quickly does change tend to happen in your industry? Is change
introduced and managed top-down (defined by the industry or upper
management) or bottom-up (employees)?
Matt: As a whole, I believe there are always external pressures to reinvent
management. In order to succeed in the waste management industry in the US,
first one must reinvent business operations---every cost you can cut has to be
cut--this includes equipment, advertising cost billing, and yes, employees as
well.
As a manager and entrepreneur, I need to think innovatively about how to
operate efficiently as well as new sources of profits. Operationally, I think about
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14. Organizational Practices in Romania and US: Are We So Different?
e-bills for billing and advertising online to customers. As an innovator, I think
about how to eliminate the manual labor involved in waste management such as
residential incinerators or automated waste collection. These innovations would
change the whole landscape of the waste management industry yet impacts how
I think about my business today.
Madalina: As we discussed in an earlier session, employee attachment to a
'corporation' is low, and mainly dependent on how much his/her own interests are
satisfied. In this there is a strong similarity with the individualistic culture in the
US. However, the use of external compensation as motivator and reward for
performance differs from US reward systems in that position and years of service
(seniority) is a consideration (though not the only factor).
Regarding change and innovation, in 2007 a study conducted by the
National Council of Small and Medium Sized Private Enterprises in Romania
(CNIPMMR) revealed that innovative efforts within SMEs were especially
focused on new products (34.87%), new technologies (26.99%), new managerial
and marketing approaches (15.92%), renewing the informational system
(13.77%) and human resources training (13.46%). According to this chart, (see
Table 1) you see there are companies with no innovative approaches at all in
2007 (21.18%) !
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15. Organizational Practices in Romania and US: Are We So Different?
Table 1
Innovative efforts within SMSs in 2007
34.87%
40% 26.99%
21.18%
15.92% 13.77% 13.46%
20%
0%
new products new no innovation new new human
technologies activities managerial informational resources
and marketing system training
approaches
I do need to state that the study did cite over 25% of management respondents
intention to overhaul or restructure their management structures and systems—
indicating the growing need to innovate management practices. The
respondents included management from small to large corporations in Romania.
Matt: These roundtables have been interesting in how more alike we are than
not—in my industry change also happens from the top-down. It is unavoidable in
a small organization. In fact, building a positive company culture and sustaining
a healthy, growing small firm depends on your ability to manage change
effectively. As a small business owner, you owe it to yourself and to your
employees to be the best change leader one can be, and understanding key
industry drivers is the first step.
Awilda: Typically western corporations still adopt a classical change approach
to deal with change. By a classical change methodology, I mean:
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16. Organizational Practices in Romania and US: Are We So Different?
1) top-down, defined and led by current management
2) project or process management approach, such as Sigma, and
3) focus on restructuring. It is the same in the US as in Romania: years of
institutional, bureaucratic thinking is difficult to change in a few months—thus
managers spend years reorganizing and redesigning processes.4 The paradox
underlines the issues with the pharmaceutical industry and corporate
management today: C level executives consider human capital as the
competitive differentiator, especially in the research and development of new
drugs and vaccines. Yet we have just started experimenting with bottom-up
change: engaging employees to shape strategy and as leaders of change.
Closing Comments
Madalina: If Romanian companies want to be more competitive, there must be
more focus on innovation. In his book “The Future of Management” Gary Hamel
asserts that if a company wants to cope with globalization and accelerate
change, the company must become a quot;serial innovatorquot;, and the only innovation
that offers a durable competitive advantage, is management innovation. To
achieve this goal a company has to commit itself to a bold goal, to deconstruct
the management orthodoxies, to embrace new principles and learn from positive
deviants within their organizations.
4
Van Frausum, Y.G., Gehmann, Ul, and Gross, J. quot;Market Economy and Economic Reform in Romania:
Macroeconomic and Microeconomic Perspectivesquot;, Europe/Asia, Studies, Vol.46, No.5, 1994, 735-736.
16
17. Organizational Practices in Romania and US: Are We So Different?
As I pointed out in earlier roundtables, Romanian management are not
captive to hierarchical management orthodoxies--this does not mean that these
principles are unknown but most Romanian managers lead instinctually. This
may actually prove to be an advantage to new principles and practices.
In my opinion, unlike the American management, the Romanians should
see management innovation in the opposite way—that is to formalize the existing
practices while not adopting large corporate cumbersome practices—always look
for positive deviation from today's practices. This is the real opportunity for
Romanian companies in today's global competitive marketplace.
Matt: Given today's competitive pressure, customer demands, regulatory
requirements, supply upsets, and technology breakthroughs --change is no
longer the exception—it is now 'The Rule.' Unfortunately, in the US, 80% of
change initiatives fail to meet expectations5, regardless of the transformation: IT
innovation, re-engineering, lean manufacturing, merger, or acquisition. So the
reality for small or large organizations is that the global landscape and playing
field has changed forever. From what I see in the US, there are few senior
business leaders and executives able to absorb this fact--which means there will
only be a few who will make it in the new economy—statistically this means 20%
or less will survive in the long-run.
5
Smith, M. E., quot;Success rates for different types of organizational changequot;, Performance Improvement, 41
(1), 2, 2002. Initiative Failure Rates: Culture Change (81%), Business Expansion (80%), Software (74%), Re-
engineering (70%), M&A (67%), TQM-Driven Change (63%), Restructuring (54%).
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18. Organizational Practices in Romania and US: Are We So Different?
Awilda: Matt's statement reminds of a Romanian saying: 'Brains take a long
time to thaw out after a hard winter'--management are still thawing to the
possibilities of new ways of managing.6 Companies are seeking ways to adapt to
disruptive technologies and economies. It is a fact that large companies are still
instrumental in introducing new practices, technology, ideas, especially in
emerging markets--however Madalina is on point to caution that managers
should not adopt processes without critically assessing their value. The same
institutions driving changes are feeling tremors in their own executive suites.
It is not only Hamel who questions if managers today can envision and be
the architects of tomorrow. Personally we can no longer afford be spectators on
the sidelines, criticizing management—we need to get on the field and shape
game plans and even the game itself.
Appendix
Strategic Planning Activities and SMEs
Of the 54.84% of small and medium enterprises (SMEs) which develop
annual strategic plans, 13.58% are involved in strategic planning activities, and
34.10% are not preoccupied with any planning activity at all. In order to
understand the degree to which management is involved in strategic planning,
7
one must also take into consideration the firm's experience on the market (and
in most cases this means management also).
6
Dalton, K., Kennedy, L. quot;Management culture in Romania: Patterns of change and resistance,quot; Journal of
East European Management Studies, 2007.
7
O.Nicolescu,A.I.Maniu,C.Nicolescu,F.Anghel: White Chart of Romanian SMSs in 2007, Olimp, Bucharest,
2007
18
19. Organizational Practices in Romania and US: Are We So Different?
Table 2
% Involved in SME Length of Time
Under 5 5-10 years 10-15 above 15
Strategic
years years years
Planning
Involved in annual 56.07% 54.36% 52.56% 57.43%
strategic planning
process
Involved in 3-5 13.18% 11.50% 15.06% 16.83%
year strategic plan
No involvement in 33.59% 34.96% 34.11% 34.00%
strategic planning
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