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Regular version of the site

Unsupportive Environment

What hinders innovations in Russian business

© ISTOCK

Only a few Russian companies regularly introduce innovation in products and services. The reason why many others fail to do so may have something to do with how they treat their employees’ innovative ideas, according to HSE sociologists.

Some Ideas Never Come to Fruition

Studies show that only 15% to 25% of Russian companies can boast consistent innovation in their products or services, although there is no lack of innovative ideas.

A survey of more than 600 specialists and mid- and low-level managers  of nine foreign-owned and eight Russian-owned companies in Moscow, Nizhny Novgorod and Rostov-on-Don found that more than one-third of their employees had come up with at least one original innovative idea in the previous year.

The most prolific idea-generators include senior managers (51%), employees with more than one academic degree (63%) and those with high self-assessment of their professional competencies (59%).

There is no difference between foreign- and domestically-owned companies in the proportion of creative employees, approximately 35% in both cases.

It appears that problems with innovation arise at the stage of implementation.

Employees of domestically-owned enterprises tend to be less motivated to bring their ideas to life, causing their employers to lose the innovation race.

Status Matters

Despite similar levels of creativity, employees in Russian and foreign-owned companies have different perceptions of who is in a position to come up with innovations.

A common assumption in Russian companies is that supervisors rather than line employees should initiate innovation; in contrast, most people in foreign-owned companies believe that anyone can propose new ideas.

The belief that it is a supervisor's job to drive progress was shared by 33% of employees in Russian companies and by only 19% of their peers in mostly foreign-owned companies.

Where does this difference in attitudes stem from? Read on.

Realistic or Illusory Chances of Ideas Coming to Life?

In fact, the share of employees who attempt to bring forward innovative ideas is approximately the same in domestically-owned (78%) and foreign-owned (80%) companies.

The former, however, have a much smaller chance of seeing their proposals implemented.

Of all successful innovators, 59% in domestic companies and 69% in foreign-owned companies saw their ideas implemented in their own job functions, 48% versus 68% reported upgrades in their unit's operation based on their proposals, and in 28% versus 39% cases, innovative solutions were implemented in products or services.

But the most striking (2.6-times) difference was observed in the use of innovative ideas in employee training and retraining, reported by 21% of innovators of Russian companies and 54% of their peers in foreign-owned firms.

These findings confirm the hypothesis that in Russia, 'individual innovative behaviour of employees is more effective in companies with predominantly foreign capital'.

Tangible Rewards Not Guaranteed

The researchers further explored why highly qualified and creative employees of domestically-owned companies might be less motivated to innovate than their peers in foreign-owned firms.

It turns out that the latter are more supportive of intrapreneurship, which ultimately leads to a more efficient use of the company's internal resources and has a positive impact on the bottom line.

Consequently, Russia-based companies with foreign owners tend to reward their employees for initiating innovation by bonuses and raises as well as career advancement opportunities and empowerment.

This is not the case in domestically-owned companies where rewards for innovators are scarce: just 9% of the surveyed innovators were rewarded financially (compared to 19% in foreign-owned firms) and just 5% were promoted (compared to 11% in foreign-owned firms).

Russian employers are more likely to use non-monetary incentives – according to some respondents, they 'feel more appreciated' at work – but verbal praise does not necessarily translate into salary raises and career advancement.

'Just being thanked' for their ideas was reported by 45% innovators in Russian-owned companies compared to 29% of their peers in firms with foreign owners.

More than 20% of the authors of innovative ideas have received formal certificates of recognition and appreciation from the management in both types of companies.

However, raises, bonuses and promotions are universally considered to be a better and more transparent encouragement. According to the study authors, the availability of direct and tangible incentives sends a clear signal that the company is interested in what employees have to offer.

Democracy More Effective

A democratic management style where employees are consulted and involved in decision-making is more supportive of innovation.

The reverse is also true: an autocratic management style, which is practiced by many domestically-owned companies, where the boss makes all the decisions without consulting subordinates tends to discourage employee innovation.

When asked about their reasons for 'keeping quiet', 66% of respondents from domestically-owned firms who reported never sharing new ideas said that it was not well-accepted in their workplace: 'the boss will do his own thing anyway', 'no one asks me', 'this is not encouraged in our company' – were common responses.

The proportion of such responses is significantly lower at 51% in foreign-owned firms, where employees are more likely to mention personal barriers to innovation, such as 'not being sufficiently qualified' or 'having difficulty convincing others' (49% of respondents versus 34% in Russian firms).

And finally, there is a major contrast between foreign-owned and Russian-owned companies in how specific and practical employee ideas are: in the former, these are usually new solutions to concrete problems, while in the latter, new proposals are often more abstract and sometimes have the sole purpose of pleasing the boss.

Encourage Innovators

The study authors argue that Russian companies can benefit from encouraging and supporting employee innovation, in particular through financial incentives, career advancement opportunities and involvement in decision-making.
IQ

 

Study authors:

Еvgenia Balabanova, Professor, HSE Faculty of Social Sciences
Azer Efendiev, Professor, HSE Faculty of Social Sciences
Anna Gogoleva, Associate Professor, Professor, HSE Faculty of Social Sciences
Pavel Sorokin, Associate Professor, HSE Institute of Education

Ekaterina Shokhina, edited by Olga Sobolevskaya

Author: Olga Sobolevskaya, January 16