[Deb Palmieri on Russia Table of Contents] The following article was published in the Russian Commerce News, May-June 1999. The Russian Commerce News is the official publication of The Russian-American Chamber of Commerce®. |
Following the August 17, 1998 crisis, most major American foreign direct investors made the decision to stay in Russia. But in order to survive, many had to take a variety of measures to remain competitive. They needed to re-engineer their corporate strategies in an economic, financial and political environment that had changed dramatically and presented new challenges. In this issue we talk about a few of these methods and approaches.
Result of Survey to Companies on Staffing and Salary Issues: Strategies Given Present Russian Realities
Dr. Deborah A. Palmieri
Our Board member American Express conducted a survey of foreign direct investors in Russia in late 1998. These included major companies in a variety of industries including consumer goods, pharmaceutical, computer, oil, heavy machinery, tobacco, major financial services firms and others. A total of 39 responses are analyzed below.
There were three main questions that were asked to respondents. The first was whether companies had reduced staff as a response to the August 17 crisis and aftermath. The second was whether they had enforced staff salary reductions. The third was whether they were paying salaries in dollars or rubles.
On the question of staff reductions, 25% did not reduce staff. But 31% reduced staff by 30% or more. Comments by companies included: "We use only temporary staff;" "15% of our reductions took place before December; and 15% after December;" "Recruitment is frozen; no reduction;" "We are going to dismiss unsatisfactory performers."
On the issue of salary reductions, 54% did not reduce salaries. 25% of the respondents reduced salaries by 15%-30% and only 5% planned to reduce salaries by more than 30%. Comments included: "Salaries above $1,200 will be reduced by 25%; salaries below $1,200 will be reduced by 20%." Some companies stated they were reducing salaries over time (October and then January).
On the issue of payment of salaries in rubles vs. dollars, 25% said they paid salaries in rubles; 31% in dollars and 7% reported other payment schemes. Comments included: "Pay in RUR against the rate 16.38. Very complicated system of Indexation;" "Pay in dollars, going to switch into RUR;" "Pay in dollars in special deposit scheme;" "Top managers in dollars, no bonuses; low level - RUR;" "Pay in dollars, no plans of switching to RUR;" "Planning to switch some employees to hourly rates;" "U.S. dollar base fixed, paid in RUR, will go to fixed RUR salary after passage of new income tax law or maybe sooner;" "Establishment of rouble-based salary as of March 1, 1999 at exchange rate of March 1, 1999; payment in roubles as of March 1, 1999; review quarterly against inflation, NOT against old U.S. $ salary base;" "To roubles February 1, 1999 at the rate of 22.6%."
These results suggest a mixed response by companies. Some companies took no or little actions. Other companies who were heavily impacted by the financial troubles of the country took measures to reduce costs and consolidate operations.
Data courtesy American Express. Data interpretation assistance from
Lyn Johnson.
Deborah Anne Palmieri
Russian Commerce News, May-June 1999
Copyright 2001 The Russian-American Chamber of Commerce®