Vol. XIII No.10
October 2008



Developing Romania’s Workforce...
Romania is in the midst of sweeping changes and economic transitions. The hustle and bustle in the major cities, youth dressed in the latest trends, and English language advertisements all demonstrate a vibrant global economy. Since the fall of Communism almost two decades ago, a number of Eastern European countries have made the transition from centrally planned to emerging market economies. A Fortune Magazine survey shows that 67% of U.S. executives now consider Eastern Europe to be a new major market.

Investment in Romania has had reverberating effects on the public, private, and governmental sectors. The Ernst & Young 2005 Attractiveness survey noted that Europe as a continent attracted 3,066 instances of foreign direct investment. Romania, Bulgaria, and Turkey accounted for 85% of regional foreign direct investment between 2001-2005, resulting in over 19,000 jobs in South East Europe—equaling the number of projects in Germany and Poland” (Catsiapis and Kouris, 2007). Business leaders surveyed ranked South East Europe as more competitive in cost (40% of those polled), and more labor effective (31%) than the rest of Europe. Of those countries tallied, Romania is “in line with first wave accession countries,” and was voted regional leader and most attractive by international decision makers. Romania’s most promising qualities have been its high productivity levels (27%) and its leader status in foreign direct investment within the manufacturing, logistics, and call-center sectors, resulting in the production of over 42,000 jobs (Catsiapis and Kouris, 2007). Romania’s appeal is not solely economic, offering a rich culture filled with social dynamics, historical heritage, warm hospitality, and scenic diversity.

Despite these accomplishments, remnants of Romania’s difficult past have not completely disappeared. Challenges include a lack of management education, training and organizational knowledge, as well as a difficulty in cultivating an efficient and productive workforce. The following article acknowledges Romania’s difficult past and suggests management strategies needed for a successful future. Companies expecting successful outcomes in Eastern Europe—specifically in Romania—should be aware of the cultural and economic challenges of this young and dynamic market and be prepared to modify the organizational culture, invest in human resource development, and revise the traditional hierarchical management models.

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Culture and Management
The emergence of capitalism within post-Communist cultures created genuine excitement and hope during times of change, but the economic and political failure that followed during the transition quickly deflated hope and amplified despair (Sapsford and Abbott, 2006,50-71). As a result, former Communist countries have a legacy to overcome. Elements of mistrust and obligation are deeply embedded in post-Communist culture, leaving lasting effects that are still evident today. Generational differences and a lack of an operational framework create challenges when working within Romania’s market. In spite of the cultural baggage of Communism, there are innovative business strategies that offer hope for a fresh new start.

Although there is no magic solution or precise blueprint for companies to follow, there are lessons learned, creating ‘best practices’ that acknowledge the Romanian context. Multinational companies working in Romania can overcome challenges by revising traditional hierarchical management models, investing in human resource development and adapting the organizational culture to the unique characteristics and environment in Romania.

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The Tradition and Structure of Management
Much of Eastern Europe remains in the throws of transition and Romania is no exception—trained to act collectively and take orders, employees as well as managers often find if difficult to take initiative. Successful market integration hinges largely on Romania’s ability to cultivate and expand its growing economic sector, and develop management skills. Fear of “the boss”, blame and punishment, and the tendency to hide mistakes are still common issues in today’s workforce.

The workforce is divided into three hierarchical groups: the young, the middle, and older generation. Most of the quality workers come from the middle—fighters, survivors, “children of transition”—experiencing both Communist and post-Communist Romania, and currently working abroad. Romania’s younger generation makes corporate development and proficiency difficult with its high turnover rates (three month average) and lack of commitment. Conversely, the older generation is fully committed, yet slow to accept change producing other difficulties by valuing stability over reform. The biggest challenge for human resource managers is combining the generations in a mutually beneficial and productive way.

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Human Resource Development
Companies cannot compete without powerful individuals or a mature workforce. The most crucial factor in human resource development has proven to be the ability to establish trust. Companies currently working in Romania have realized the importance of inducing trust by keeping promises, providing open channels of communication, and maintaining regular involvement. Offsite activities such as team building retreats and “Company Days” create valuable opportunities for employees to get to know each other. Citibank Romania has a “Club-Citi” that organizes activities such as soccer teams or picnic days, creating the opportunity for employee involvement. “Managers that remain involved and have a positive attitude have had the best results.” (Citigroup, HR)

In a culture that longs for praise and individual attention, on-the-spot rewards and personal recognition have shown to be most successful in motivating and encouraging staff. Benefits packages have also shown to be effective motivational tools, while offers of higher education opportunities—such as MBAs or professional training—are the greatest incentive. Shareholders must look beyond short-term profit as sustainable; efficiency depends on the development of their workforce. Once workers are nurtured in a culturally relative corporate strategy, organizational loyalty will naturally develop, ultimately leading to long-term profit and stability.

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Organizational Culture and Context
Organizational culture is the foundation upon which a business strategy is built. A powerful means to gain competitive advantage and sector leadership is aligning organizational culture with corporate strategy. Theories developed in the United States should not be generalized in the European context due to the significant differences surrounding human resources (Hofstede, 1980). Countries like the U.S. or U.K. tend to have higher levels of individualism, masculinity, and power distance; indicating a looser tie to society, and an emphasis on self with an understanding that the distribution of power is not equal. The cultural framework of European countries identify higher levels of uncertainty avoidance, power distance, and individualism; representing the culture’s level of tolerance for uncertainty and its search for truth. Romania’s cultural framework also includes high levels of uncertainty avoidance, power distance, and individualism; confirming Romania’s core issues with the distribution of power, its search for truth and the need to survive. Unlike other collective cultures, Romania scores low in ‘long-term orientation’, indicating its perspective on the ability to overcome obstacles in time.

Multinationals have often attempted workforce development reforms as a way to reshape the corporate culture of a country. Yet, this ‘one size fits all’ approach is not applicable to the Romanian context and has often failed. Rather than copying the Anglo-model of management, companies like Leadership Development Solutions have developed their own authentic model from within, synthesizing it from other cultural models and customizing it to fit the local context and restrictions of Eastern Europe.

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The workforce development models that have proven most successful have been those based on the understanding that an organization’s corporate culture stems from the way management and staff communicates with one another. An employee’s participation in these conversations influences the way one views their work experience; which in turn determines how they go about their daily work. All it takes is one misunderstanding at work to completely ruin a person’s mood and willingness to work. By creating a common method of communicating problems and opinions, companies can influence the way people view their work—thus impacting their actions. Shifting into this new method of communication fundamentally alters the nature of the organization—reducing problems such as gossip, and encouraging open communication and productivity—resulting in an environment that enables growth.

Although Romania may differ from its fellow European Union members, the workforce development issues it faces are not special or unique to the challenges all companies face with organizational change. If a blue print were to be replicated, the model used by Landmark Education Business Development (LEBD) consultants in the case of BHP New Zealand Steel, would serve as a powerful example. When Broken Hill Proprietary (BHP) obtained ownership of New Zealand Steel in 1996, it was plagued with industrial relations problems and frequent union-management conflicts. BHP laid out a new initiative to increase steel production and cut costs. However, even though their new strategy reduced costs, it did not resolve the prior tensions, pessimism, and conflict that saturated the workforce. As the General Manager of Human Resources pointed out, “We were expecting the impossible from the employees. Headcount was going down, change was everywhere, and the business was built on shaky technical assumptions. Yet, we needed people to become proactive, positive, energetic, and dramatically change their relationships with each other” (Logan, 1998, 4-5).

Landmark Education Business Development (LEBD) consultants were brought on to formulate a strategic direction for the company and address the organizational challenges. LEBD held seminars with the entire BHP workforce, teaching effective communication methods, and developing a common language and to use when addressing personal and organizational issues. From participation in LEBD training programs and initiatives, employees realized that the root of their issues came from interpretations based on the companies past, not the direction of its future growth, illustrating a common business problem new organizations face when blamed for the incompetence’s of the past (Logan, 1998, 9). When these interactions are multiplied by the number of employees in a company, it becomes evident that thousands of people are investing enormous amounts of time and energy relating to one another negatively. Such attitudes-pervasive in corporate environments—lead to disputes, complaints, strikes, and an often dissatisfied work force (Logan, 1998, 9).

This type of intervention could serve as an example for replication in Eastern Europe and Romania, if the models are adaptable to the context of each culture. The organizational training programs and interventions on interpretations and interactions produced impressive and measurable results. According to BHP personnel, safety performance improved by 50%, key benchmark costs were reduced from 15% to 20%, return on capital increased by 50% and raw steel produced per employee rose by 20% (Logan, 1998, 25).

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Final Thoughts
Companies investing in Romania must address the challenges of the past in order to access possibilities for the future. Organizations need a model that will create a strategic direction for the company on a local level, and build an entirely new work culture supported by stakeholders and constituents. Such strategies will create a promising future for the organization tailored to the unique needs of a post-Communist culture—focusing on performance, agility, and an ability to maintain a competitive advantage. Profit and efficiency lie in the hands of the workforce. Resolving organizational issues through training and interventions creates organizational loyalty, which results in additional profit. Companies that understand the benefit of revising traditional hierarchical management models, investing in human resource development and modifying the organizational culture, create their own opportunities to tap into a new and dynamic market. Only then, can companies fully address the limitations of the cultural past, establish trust and enroll their workforce in the possibilities that await them in the future.

This article was contributed by Ms. Oana Amaria, a Masters Graduate of Public Service at DePaul University Chicago, with a specialization in International Development.

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Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2008 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

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