International companies in Central Europe are beginning to realise they don't need to look further than their doorstep when recruiting quality managers.

International companies in the CEE are finding their leaders closer to home.

Since the fall of the Soviet Union, international companies have been sending their business and managers to Central Eastern Europe to benefit from the region's low manufacturing and labour costs. Now, these companies are beginning to recognise the potential of their regional workforces, and letting locals take the lead.

"The road is being taken over by local managers," said Peter Szabo, country manager for Hungary at SpenglerFox Executive Search and HR Consultancy. 

Until recently, international companies employed western expatriates almost exclusively in medium and top level positions in the region, Szabo said. "The change is that the region has developed a good professional group of people who were sent off to gain western experience," Szabo said. "They're coming back now."

Brain power soars

Moreover, companies are starting to take advantage of the incredible intellectual value that Central Eastern Europeans hold, he said. Though countries like Poland are recognised for the market value of their large population, The Czech Republic, Slovakia, Hungary, Poland and Slovenia hold huge potential because of their cultures' emphasis of high education.

"The companies coming here are now using brain power rather than cheap labour. The flexibility, the good ideas, and being able to transfer ideas backwards to Western Europe are useful," Szabo said.
 
Why is the shift of management from western expats to locals within international companies a recent trend?  For a long time, "Western ethics of business were missing in these areas," said Czech Rostya Gordon-Smith, managing partner of the consulting company People Impact. "The infrastructure and the law and legislation weren't in place."

After the dissolution of the Soviet Union until the mid to late nineties, Central Eastern European countries faced fissure problems, Gordon-Smith said. "At the beginning there were certain hiring ethics involving sexual and age discrimination. You had a population over forty who had been raised in a communist country that had no language skills or training applicable to today's market. They were discriminated against and unemployable," she said, referencing specifically to the Czech Republic.

To some extent, international companies were able to tap the younger population, who had applicable training, but not experience. "Some companies underestimate the Czech people by sending second class managers to this country, who are too close to retirement or too young, without any kind of immersion training. Sometimes these managers didn't stay long enough. In countries like this you need to stay more than three years to establish everything," Gordon-Smith said.

Do western business models work?

But as the markets in these countries grow more closely toward western models, she said, there has been an increase in both demand and qualified people to take over management positions. Expatriates who have returned to their home countries from positions abroad are highly desirable for their versatile skills and local knowledge.
 
However, she said, people no longer have to gain experience out of the region to qualify for higher positions. "People have a lot of opportunities here. They've started building houses and having steady incomes and are establishing themselves, instead of travelling abroad. There's a constant headhunting for qualified people. Those who are qualified, speak several languages, and who comport themselves professionally are sought after and don't need to go abroad unless they want to," Gordon-Smith said.

The maturation of Central Eastern European markets toward western models does not mean that Central Eastern Europeans have the same management values and practices as the West, warns Blake Wittman, country manager Czech Republic & Slovakia at SpenglerFox.

"There's a higher emphasis on work ethics in Western Europe," Wittman said. "How to lead a workforce, and not just to manage it," he said. In part this comes from a historical emphasis on technical degrees rather than business degrees. Though the people of this region are as highly, if not more highly educated than those in Western Europe, they are not traditionally as adept at sales and management, he said.

"Nowadays most people have experienced a western style of management and they've had enough exposure to it. Then they add their local idiosyncrasies to the way they manage."

These "idiosyncrasies" range from institutional divergences to life outlooks, Wittman said.

"Absenteeism and sickness is still a major issue in these countries," he said, "whereby once you go into a doctor about an illness they usually assign you one week leave to stay home. It's a bit of a dilemma when people aren't really sick because people must stay home and legally companies can't ask you to come in."

Culturally, Wittman said, it is a general problem for Central Eastern Europeans to sell themselves. "It's simply not in their nature. It's very easy to get enthralled with the expats who are fluid and can sell themselves easily to you. It could be that a Czech person would be much better in a position, but it's hard to recognise that because the expat is better at marketing themselves and the Czech is more reserved and humble," he said. This can make hiring locals much more difficult than hiring an expatriate because HR professionals must work harder to determine if a local is qualified for the job, he said.

'Work to live' not 'live to work'

This is related to the fact that "unlike the United States and much of Western Europe, Central Eastern Europeans don't live to work." Wittman said. "They work to live." This attitude profoundly affects work ethics and isn't always compatible with western business ambitions.
 
"People should not go to these countries without some kind of basic cross cultural management," said Gordon-Smith. "The differences should really be observed and investors should be warned. Even if we use the same language it could mean different things," she added.

 For example, Gordon-Smith said, when the employees of a company in the Czech Republic refused keep the later hours of the western company policy, the manager asked her to step in and speak to them.

"He told me to tell them how it is in the world, and how they need to be more flexible. If I stand in front of Czech people and tell them to be more flexible they'll laugh me out of the room," she said. "They're the most flexible people in the world! Every other country has marched through ours, we've been occupied, and we've survived. We're the most flexible people under the sun, I said to him. But to you, flexible means ‘do as I say!'"

Gordon-Smith said that companies often find themselves in these situations. "When you're investing in a business in this region, numbers might add up," she said. "But don't forget that the main capitalisation comes from the human element. If you don't fit that in your math, you better redo it."

As investments, development, and international managers continue to move farther east, Wittman said, it is important to keep in mind that non-western societies can adapt to, but never fully adopt, western models of business.

"Central Europe will never become western Europe. It will come more into line with some of the best practices in Western Europe, but it even as productivity goes up, it will remain Central Europe, where there are different practices and value systems and that has to be respected," he said.
 
     
July 2006

Victoria E Fine is a freelance writer based in Paris.

Subject: Recruiting staff in Central Europe, HR management in Central Europe