Ichak Adizes to RBC: “CEOs Need Big Ears and a Small Mouth”

Management guru and founder of the Adizes Institute, Ichak Adizes, gave the Russian publication RBC an interview, which is printed below. In the interview, he discusses two fatal problems of Russian companies and explained why businesses in Russia are built as clumsily as state management is.

Ichak Adizes to RBC-1

“When free thinking managers appear in the company, they are immediately squeezed out of there.”

– Your visits to Russia have become quite frequent recently – you help the management of Sberbank and “Sibur” restructure work and change the mentality of their managers. In your opinion, what problem is characteristic of Russian business?

– The biggest trouble I see in Russian companies is autocracy, which is rooted in the history of the country. Both in the epoch of tsars and during Soviet times, people were estranged from the businesses they were employed by; they were not the owners. They did not understand what their interest from the exhausting labour was. This mentality is persistent even nowadays. On the one hand, everyone wants democratization, on the other hand, when open, free thinking managers appear in the company, they are immediately squeezed out.”

It is a trap, since even if a leader does not intend to be autocratic; people want to see him as utterly authoritative. Otherwise, he simply will not be respected. This situation cannot change from the top – it has to change from the level of ordinary employees who are also used to directive management. This is what we are trying to do in Russia. We want to help companies restructure their work.

– And is this the reason why management in our companies avoids new managerial practices so much?

– Yes, this is the exact reason. Managers of Russian companies gladly discuss new practices: Agile, gamification, working without an office. But, how can you let people go from the office if you want to control even the way they smile? All new managerial methods require employee involvement, their engagement in business, and this is impossible while keeping hyper-control. Russians have excellent brains; they are able to excel in studies. However, they allow themselves to sink in bureaucracy and suspicions. It hurts to see this!

– What issues did you help your Russian clients solve?

– I cannot speak about the details – it is a professional secret. But, I can name another major problem in most Russian companies that I dealt with. It is a communist system of centralized planning, which outlived its age. At first, you come up with what to do, and then the whole company works at implementing the idea. And, motivation of the employees is the same as in that old Soviet time anecdote, in which the president of Czechoslovakia, making a speech in front of the crowd of demonstrators, says, “Why do not you want to build communism? During communism, everyone will eat strawberries with cream!” A voice from the crowd, “Because we don’t like strawberries with cream.” The president replies, “That is all right, during communism they will make you like it!”

There are good production managers in Russian companies, but marketing is extremely weak, especially the part that deals with studying the market. It is the biggest and the hardest change that is needed in Russian companies. Their entire structure and priority system need to be rebuilt for this.

– If this is Soviet heritage, then the situation is probably the same not only in Russia, but also in all the former Soviet republics.

– No, it is not. The situation differs much in former republics. The planned economy was forced by Moscow, and its rudiments are most vivid there. The further away from the capitol you get, the less the companies are prone to central planning. Even within Russia, corporate mentality differs a lot from that in Moscow. For instance, already in St. Petersburg, entrepreneurs are not so obsessed with planning. Not to mention such cities as Kazan, Irkutsk, Novosibirsk, where companies have more freedom from centralist thinking. Speaking about former republics, the earlier they abandoned the former center, the better. For instance, Baltic companies are almost European.

“In order to change the economy, one needs to hold the reins of power firmly.”

– According to the conception presented in your books, all companies go through the same life cycle: foundation, growing up, maturity, getting old and death. If Russia is viewed as one big corporation, which stage is it on?

– Russia is at a special point, which is called “a Founder’s Trap”. Russia is very well developed, but not in a harmonious way. The entire country looks like one huge plant – the government is obsessed with the idea that if a mathematical model of how everything must be is built, and all relations of people and organizations are to be written in it, then an effective economy will be successfully built. But, everything turns out unnaturally, not in the way people themselves want it to be.

Moscow is a symbol of this dysfunctional approach!

People are given accommodation in multi-story houses and “Earthscrapers”, which are a good idea economically, but the concept that looked pretty on paper does not work in life. These houses are uncomfortable. Russians are a victim of the system – like a child who wants to play and wants to live, but is dressed in a suit and a tight tie.

“Skolkovo” is a good example of how dysfunctional it is on the level of state initiatives: it is impossible to create a “Silicon valley” in the place where it has not started to emerge yet! Although, if it were Putin and not Medvedev who stood for Skolkovo, the project progress would certainly be better.

Ichak Adizes to RBC-2

– And what do you think of Vladimir Putin as a manager? What are the strengths and weaknesses of his managerial style?

– He is impressive; he holds power skillfully and uses it with talent. But, it is not like Putin is an open book: he has succeeded greatly in hiding what is on his mind. Therefore, I would keep silent here and not draw any conclusions.

– What can Russian government do in order to extricate the Russian economy from crisis?

– I would suggest creating a Ministry of De-Bureaucratization; moreover, its head must be the Prime Minister at the same time. If you want to use human capital and innovations created in Russia, and not let it all flow abroad, first and foremost, you need to put an end to bureaucracy. There are areas, in which Russia could make a breakthrough in just a few years. For instance, hi-tech: you have the best programmers and mathematicians in the world; you could become the leading digital power in the world. But, your bureaucrats do not let anything develop, and as a result, foreign companies make profit out of innovations created in Russia. It is for fighting the officials that the Ministry of De-Bureaucratization is needed.

– Do you have a candidate for the post of the Head of this Ministry?

– I would like to see German Gref at this post. He is a person who would succeed in changing the whole Russian government. He is fearless in fighting hardships. Look at Sberbank where he introduces advanced solutions, inviting people from Silicon Valley and making his own managers study project management at Stanford. I dedicated one of my books to him as one of the most creative managers in Russia (the book “Insights on Management. Volume II” was published in Russia in 2016 by the editorial house “Mann. Ivanov. Ferber.” – RBC).

– Is it possible to have economic reforms in the country without political ones?

– Of course, you must democratize the political sphere. But, it needs to be done in the right order. Do not start with politics. It is a mistake made by Gorbachev: first, glasnost, then perestroika. Starting with political reforms, he lost his power in the country quickly and, as a result, was not able to carry out economic transformations. In order to change the economy, one needs to hold the reins of power firmly.

Let it be a single-party system and stable elite. But, at the same time, carry out decentralization of economic management, change business environment, loosen control over companies. Let the real middle class and plenty of rich people emerge who will leave their capitals in Russia. And only then, as a result of this all, initiate political reforms. Thus, I would support Putin, for now, in restraining political powers that are trying to compete with him.

– In other words, you are for the Chinese way of reforms.

– I am. With the course of time, China will certainly become more democratic than it is now. There are more billionaires in the People’s Republic of China than in America, and they are gradually changing the system from the inside.

“At some point people will just not be able to tolerate corruption.”

– If the Russian government blocks reforms in favor of stability, is there a chance that the situation in our country will develop according to the Ukrainian scenario?

– You have touched a very interesting issue. I am sure that three years ago Putin began demonizing Ukraine exactly because he was afraid of “the export of revolution”. However, restraining Maidan and non-disclosure of problems using propaganda is not salvation; it is a way to upheavals. The main trouble is corruption. It cannot continue anymore in Russia, this will lead to an explosion. At some point, people will just not be able to tolerate it.

And, an external war can become that impulse that will trigger overall destruction: now Syria can play the same part as Afghanistan once did.

– But corruption is a product of the political system, is it not?

– Do you think that corruption is a problem of the countries without democracy? It exists everywhere I worked; well, except for Switzerland, perhaps. Trust me, there is enough corruption and parochialism in the USA. Of course, this all is not as open as it is in Russia. The Ukraine is even more open about it that Russia. It’s on its way to democratization, and corruption is much more open and shameless than in Russia.

The desire to let your people get to the “sinecure” is a normal human trait. If the situation in the country is unstable, whom will I employ? Somebody I can trust – my son, my brother, my nephew, my friend. Why is this phenomenon not as widespread in the USA as it is in the developing countries? Because, there is professional management with a strictly defined system of rewards and fines, and any owner understands that a manager hired under certain conditions will work more efficiently than a relative will. It is useless to fight parochialism only with prohibitions – instead of this, specialists that can be trusted more than relatives need to be raised up, and legislative regulation for their work needs to be created. Sooner or later, owners and government officials will start choosing professionalism over personal loyalty.

Corruption emerges in every place where there are changes; it is like a wall in which holes appear after each new earthquake. So what, do we abandon changes entirely? No, just constantly, 24 hours a day, renew legislation, we must fix these holes. I think this function could also be taken on by the Ministry of De-Bureaucratization.

– Speaking about the USA, do you think that Trump will manage to deal with the country’s economic problems?

– Too many people voted for Trump hoping that he would solve social and economic problems. But, my professional experience tells me that he will not succeed in anything. A democratic society cannot be managed as a company. The owner of a business has the right to say, I created the company, I can employ people, fire them, and when I get bored, I will just close it. However, the USA is not the property of the president, and he does not have the right to do whatever he wants. He can only incorporate into the party that represents the interests of a huge group of people and try to make it work for the common good. America is on its way to disintegration, a breakdown into many groups, each of which has its own interests, and it cannot be put together with orders – only with therapy. It is the same way with the family, to which you cannot order: Now, live together and love each other again!

“Times of autocracy are over.”

– You often say that all companies perish at the end of their life cycle. But, for instance, there are banks that have successfully existed for more than 100-200 years already. Can companies achieve immortality and if so, what is needed for that?

– They can, and not only companies, but entire countries. I would put it this way: the guarantee of immortality is to change, without disintegrating into parts at the same time. You need to be modern.

– What do the words “a modern manager” mean to you? What characteristics must he have?

– Until quite recently, company management worked the same way as it did hundreds of years ago, when the owner of a farm or a factory told workers where to go and what to do. Figuratively speaking, managers had a big mouth and small ears; they acted according to the principle: I am the boss – you are the fool, you do what I tell you. Nowadays, when we live in the information society, it does not work anymore: a leader cannot manage the company hierarchy of 40 floors, without getting down from the very top of his authority pyramid.

Information is spread everywhere and good ideas and solutions quite often come from below.

Now both CEOs and managers need big ears and a small mouth: they must be able to get information from the organization itself, to monitor what is going on in the team. Times of autocracy are over; managers must become humbler, more open and respectful to the opinion of their team members. It must be just like in the human body, where there is a brain, but at the same time, each of the trillion cells “think” as well, and the brain takes into consideration signals coming from them.

– And how do new technologies and generation trends affect management?

– Here are two examples. Nowadays, business does not need offices, first of all, due to the development of IT. Retailers get bankrupt in the USA; malls, outlets and food shops are empty: people order products online. The next in line are restaurants and other kinds of business. This means that managers must learn to manage employees distantly.

Another trend is that today people work not because they will die from hunger without a job. It is impossible to motivate the Millennials with money; therefore, a directive approach does not work anymore. One must be able to inspire them with a mission, a goal, in which they would believe. And this means that the transition to participative management [the approach, in which employees get part of the profit and participate in management] is needed.

Five tips to managers from Dr. Adizes

  1. No manager can be perfect. All that a manager can do is select a team that would compensate for his flaws.
  2. Every human is born with a certain type of personality. If you a bureaucrat according to your character, you cannot become an entrepreneur. But if you learn to be flexible and to hear others, you will be able to be useful for the company. We cannot change ourselves, but can become more harmonious.
  3. Nowadays, a manager must be an informal leader – not to press employees in order to make them follow his instructions, but to inspire the team with the idea, to cause respect with his competence.
  4. The fact that there are so many women managers in modern companies is not the result of emancipation. It is a request from the employees themselves: they want to be managed with the heart not with the callous mind. Any manager must learn to do it.
  5. Success is the result of dividing external integration by internal disintegration. The first parameter is the energy spent by the company on finding out existing opportunities. The second one is the level of mistrust and disrespect within the company. The higher the first parameter is and the lower the second one is, the better the result is.

Source: Ichak Adizes, “The Ideal Executive: Why You Cannot Be One And What to Do About It”. “Alpine Publisher”; Moscow; 2014.

*First published in Russian at the following Web address on May 2, 2017: http://www.rbc.ru/interview/own_business/02/05/2017/58ff24709a79475c3d17eccf