Country Profile: Russia's dynamic market

Russia's economic performance has recently been dwarfed by that of 'Chindia', but the old Soviet behemoth is undergoing several quiet revolutions, including one in business education.

by World Business
Last Updated: 23 Jul 2013

MBAs first appeared in Russia during the period of perestroika in the late 1980s. It wasn't until 1999, however, that the country finally recognised the MBA as an official degree: 33 schools were awarded the coveted state licence and the industry has since mushroomed.

There are now 52 licensed schools and many more operating of their own, sometimes dubious, accord. Underpinning this business education boom is a growing economy in desperate need of talented managers.

Russian GDP grew some 48% between 1998 and 2005, and while the country's business schools churned out 7,000 graduates in 2005, analysts estimate that the country needs 30,000 new managers a year to stay on track and more like 50,000 to reach critical mass.

The truth is that many Russian business schools are still struggling to reach the standards of their European or US counterparts. Although most faculty will have spent some time abroad for a PhD or research purposes, most of the teaching is still in Russian, tainted with old Soviet political economy and of varying standards.

Elena Zoubkova, deputy rector of MIRBIS in Moscow, refers to the above as teething problems. Although national standards have helped regulate the MBA market, it has also burdened schools with requirements that can put them at a disadvantage internationally, such as the compulsory 1,100 contact hours over four semesters - the Association of MBAs (AMBA), which dispenses international accreditation, asks for only 400.

Many schools have teamed up with international partners to tap their expertise and several offer dual or joint degrees, including Sinerghia and Durham University, UK, or LINK and the Open University, Milton Keynes, UK.

Interestingly, flexible MBA formats have really taken off. The 'traditional' full-time formula is rare: only a couple of universities offer it, preferring instead the part-time version that allows participants to carry on working.

EMBAs, modular and distance learning MBAs are also gaining ground in a country that spans 11 different time zones. LINK, for instance, offers only distance learning MBAs (even though 90% of its students live within a few hours of Moscow).

Business education in distant provinces has been slow to develop, as the vast majority of schools are concentrated in Moscow and St Petersburg.

But most big cities will have a business school, particularly those that used to be Soviet centres of excellence with established universities, such as Omsk, Novosibirsk and Vladivostok. However, the facilities are often basic and the schools too isolated to offer good business links or attract top faculty.

Unsurprisingly, the only foreign students studying for MBAs in Russia are from ex-Soviet republics, save for a few token Chinese or adventurous expats. But Leonid Evenko, director of the Russian Association of Business Education (RABE), says that Russian business schools, in spite of their drawbacks, can offer useful insights into the reality of Russian business.

Russian companies and MNCs based in Russia now pay good money for local business graduates. Many, such as Gazprom and the Russian pension service, sponsor business schools and finance corporate MBAs. These programmes attract high-calibre students, often senior executives from those companies.

Peter Calladine, accreditation services manager at AMBA, says that European schools would do well to match the quality of these corporate courses. "Russia has a real need for trained and qualified graduates and you can feel that there is a very palpable energy," says Calladine. "The Russian MBA market is very dynamic and is making better progress than Germany, for instance." There are plans for a couple of new multi-million dollar establishments to bring together top students, faculty and business expertise in a bid to rival Western schools.

THE RUSSIAN LEADER

The vocabulary of the Soviet Union is constantly changing: words such as sovkhozy, gulag and refusenik regularly peppered Cold War conversations, while perestroika and glasnost were all the rage in the late 1980s. In the 1990s, as the USSR crumbled, state assets were sold off cheaply in return for political support and a new class appeared, known as oligarchs, as merely very rich businessmen became even richer. Although President Putin has pursued a policy against oligarchy, with the exception of a few such as Mikhail Khodorkovsky and Boris Berezovsky, most remain untouched so long as they do not dabble in politics.

At a lower level, this mix of business and politics can make life difficult for foreign investors - and business leaders still suffer from Russia's poor reputation abroad. "They're corrupt by association," says Stanislav Shekshnia, professor of entrepreneurship at INSEAD. "People assume that if you're Russian, you must be corrupt." Shekshnia's view is that Russian society looks up to what it regards as heroic, larger-than-life characters and attaches a disproportionate importance to them.

However, Eric Hansen, director of the US-Russia Center for Entrepreneurship (CFE), says that oligarchs have made little impact on the Russian business psyche. "They are worlds apart from the entrepreneurs we see," says Hansen, "just like Rockefeller would be from your average US entrepreneur."

The oligarchs' authoritative attributes are still characteristic of Russian leaders, but modern bosses are much better at working with others. "They're more flexible, they fit in more and know how to use their people's talent well," says Shekshnia.

In fact, one of the major problems for Russian leaders is the lack of mentors and is a reason why CFE was set up four years ago. "The US Russia Investment Fund, one of Russia's biggest investment funds, had been in Russia since the mid 1990s," explains Hansen. "It realised that Russian entrepreneurs were shrewd and had excellent technical skills, but that many of them lacked the business knowledge and skills to take their companies to a higher level."

Since its opening, CFE has helped several thousand entrepreneurs. To capitalise on the huge potential of the country, it is working with business schools on improving entrepreneurship teaching. It has developed a number of programmes to help professors build and improve their curriculum, and has organised for 11 Russian professors to attend teaching courses at Harvard.

Russian entrepreneurs are known for compensating for their business shortcomings with energy and perseverance. "Their enthusiasm really stands out," says Hansen. "Oligarchs accumulated their wealth at a time when everything was up for grabs. Most entrepreneurs we know have created a product, got the contacts and started from there."

These entrepreneurs represent Russia's new guard. Speaking at the 9th Annual Russian Economic Forum in April this year, Charles Ryan, CEO of Deutsche Bank Russia, said that small businesses had created thousands of jobs, many outside the traditional energy sector. Few have made it internationally yet, but the recent wave of listings on London's stock exchange - steel-maker Evraz, telecoms and consumer business group AFK Sistema, Rambler, the Russian answer to Google, and most recently, and controversially, oil giant Rosneft - suggests that many more will follow.

Ryan also pointed out that foreign direct investment reached nearly $20 billion in 2005 and shows no sign of abating.

SCHOOLS TO LOOK OUT FOR IN:

MOSCOW AND ST PETERSBURG

- Academy of National Economy, Moscow - this university provides an umbrella for 20 independent schools

- American Institute of Business and Economics (AIBEc), Moscow

- International Management Institute St Petersburg (IMISP)

- LINK, Moscow

- MIRBIS, Moscow

- Moscow State University Higher School of Business

- St Petersburg State University's School of Management (SOM)

- Sinerghia, Moscow

- State University of Management, Moscow

- Stockholm School of Economics Russia, St Petersburg

THE REGIONS

- Higher School of Economics, Ekaterinburg

- Kazan State Institute of Finance and Economics

- Nizhni Novgorod State University, Higher School of Economics

- Novosibirsk State Technical University

- Samara Institute of Business Administration Ural Siberian Institute of Business, Ekaterinburg and Perm

- Vladivostok State University of Economics and Services

Source: Begin Group.

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