The
key to success in this diverse region is considering each country in the light
of its own history and culture. Bo Jones reports
Russia
is in dire economic straits," according to the McKinsey Global Institute.
"Unlike the successfully reformed ex-communist economies – such as Hungary
and Poland, where economic performance fell during the early years of reform
but surged as it took hold – the former superpower has experienced only
decline." Indeed, focusing in on Poland, the Institute has a brighter
view, "Poland’s resurgence in the 1990s," they say, "has been a
well-kept secret. Unemployment has fallen to 10%, from 16% in 1993, and new
jobs have been created at a healthy rate of 1% a year since 1994."
That’s
why Western companies are being extremely cautious about where and in what they
invest in the region. Like any emerging economic region, there is a need for a
telecommunications infrastructure and information technology (IT) development,
and in the more advanced countries, specialists in these fields, such as
British Telecom, are moving in, particularly into the countries that are seen
to be more advanced both socially and economically. Likewise, the big
consulting firms such as PricewaterhouseCoopers are opening offices in most
major CEE locations. However, some are reportedly having a hard time getting
skilled and experienced people to relocate to these countries and finding
enough local talent to fuel their real business ambitions, and this limits
their growth and expansion.
Whether
or not reports of significant development for some nations and the slow demise
of others are entirely true, one thing is abundantly clear – not only is the
CEE region very different from its Western European neighbour, but each country
within the region has its own distinct political and social background and
economic climate. And that means that acquainting any organisation with the HR
issues in the entire CEE area is a seemingly impossible task. What firms
looking to expand into the region need to do, is carry out in-depth research of
each country individually.
Advises
Yolanta Strikitsa, head of HR consultancy at Morgan Chase’s Eastern European
practice, "Before you go, you need to look at the history of each nation.
The region is very different to Western Europe, even in terms of industry and
business development, not only socially and culturally." She goes on,
"Hungary, for example, was first to enter the developed world. Now, they
are already in the second stage of direct investment into the country, with
local companies merging with Western multinationals.
"Russia
too," Strikitsa explains, "is past the first stage and is facing
proper investment. Before," she recalls, "investors would go into the
market for a very short period of time. Today, there is more long-term
investment. HR’s role then is to find expatriates who are willing to stay at
least three to five years."
In
contrast, Yugoslavia and Serbia are today where Russia was back in the early
1990s, with very short-term investments only just being introduced. That means,
says Strikitsa, "that you see people coming in for perhaps three or four
months to do bits and pieces".
But
despite these very different stages of development that face multinational
organisations when they move into CEE, there is one underlying factor that
Strikitsa believes unites all these very diverse countries. She notes that
people in the region are all "well-educated. Yes they have their labour
issues and technological issues," she says, "but you just have to
find the right understanding and cultural key for people to get working."
Indeed,
her belief in the high skills levels of individuals in certain of the CEE
nations is firmly supported by some of the other players in this area. Looking
particularly at Hungary, PricewaterhouseCoopers in its Doing Business and
Investing in Hungary – 2000 report, says, "Hungary has a skilled and
well-educated workforce. Although," it admits, "certain skills, such
as knowledge of Western languages and of Western accounting and bookkeeping,
are still in short supply, this is changing as new graduates enter the market."
And
new graduates are not only signing up for economics and financial
qualifications. In Estonia, IT is the way to go. Encouraged, by the government,
which plans to open a university specialising in telecommunications and IT, the
people of Estonia are constantly being urged along the digital pathway.
In
1999, Hansapank, a regional bank, teamed up with IT services company MicroLink
to give away free computers to the first 2000 people to sign up for the
company’s Internet services. Through this sort of initiative, Estonia is
already the leader among the former Soviet States in Internet connectivity, as
well as mobile phone usage and on-line banking. Reports KPMG, "More than
half of the population has used a personal computer and one-third of residents
have logged on to the Net."
Indeed,
KPMG says, "Driving on Estonia’s highways, a first-time visitor may be
surprised to see blue-and-white signposts (distinguished by the familiar @
symbol) directing the traveller to the nearest spot to check e-mail."
Likewise,
it seems Romania too has a bright, digital-savvy population, with the Romanian
technology school regarded by KPMG as "one of the best in the world".
Indeed, the company says, "The Romanian labour force is often
over-qualified. It is a well-known fact that Romanian students finish their
studies by graduating from colleges in Western countries."
With
regard to labour rights, the West, it seems, has also played a significant role
in influencing employment legislation. "In order to ensure employees’
(including collaborators’) minimum labour rights, the Romanian government has
issued legislation covering domains such as working hours, minimum wages,
statutory holidays, paid vacations and paid maternity leave."
And
in Hungary too, modern Western principles have been adapted to the Hungarian
environment through the Labour Code of 1992. Explains Mark Humphreys, HR
specialist with an IT services provider operating in the region, "The
Labour Code regulates the basic elements of employer/employee relationships.
That means that under the Labour Code, workers’ councils are compulsory at all
locations with more than 50 employees." In addition, he adds, "The
Labour Code also allows unions access to places of work and gives them official
status as a negotiating partner with the employees."
It
seems that Morgan Chase’s Strikitsa was right on the mark when she says that
each nation within the CEE region must be considered in the light of its own
history and culture. There are certainly some similarities between countries at
a similar stage of economic development, with well-educated workforces and
modern labour laws. But for every similarity, there are also great differences
and a huge amount of diversity. Add that to an enormous amount of potential in
many countries and there will be some exciting and challenging times ahead for
firms expanding into this emerging market.
Who’s
going where?
It’s
the consultancies, telecommunications and IT companies that are venturing into
Central and Eastern Europe. The most popular countries for investment from these sectors are:
–
Hungary
–
Russia
–
Estonia
–
Romania
Further
information
Check
out the following Web sites for more info on expanding into the CEE:
–
PricewaterhouseCoopers: www.pwcglobal.com
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
–
McKinsey Global Institute: www.mckinsey.com
–
KPMG: www.kpmg.com
