This article presents a fascinating discussion with the Human Resources Director of X5, the largest retailer in Russia and employer of 90,000 people.  In the course of this interview, she discusses workforce management trends in Russia, the experience needed to succeed in human resources, and how the the human resources function has evolved.  Dr. Kozhevnikova also presents her view on repatriation.  This interview was conducted by Boyden Global Executive Search, and it is presented as a part of their continuing Leadership Series.  Please visit www.boyden.com.  (John Gude serves as a Managing Director of Boyden through their  Chicago office).

 

Boyden: What drew you to an HR career?

Kozhevnikova: To be honest, it was completely by chance. In 1992, around the time I finished my postgraduate study in economics at the Moscow State University, Coca-Cola had just started their business in Russia. They were looking to recruit smart people from diverse backgrounds who could help them grow the company. They had a vacancy in the training department and since I had experience teaching?at university, I was considered a good candidate for teaching “selling skills” at the Coca-Cola school. That’s how I started to develop an interest in HR.

Boyden: You’ve had important roles at other major global companies – what stands out to you as X5’s mission vis-à-vis workforce management?

Kozhevnikova: In any company that services customers, the main mission of HR is to make sure employees are treated properly. It operates as a perpetual cycle – if employees are treated well they transfer the same positive attitude to customers, who in turn feel happy and comfortable, and bring in more business through increased sales.

In our company, we interact with 3.5 million customers on an average every day and each transaction involves face-to-face contact. So we basically need to create

this magic cycle where our employees feel satisfied and in turn treat customers well. We then re-invest this money back to our employees and the business. This is the main mission of HR – to make sure that happy employees serve customers in a good way.

Boyden: Are there unique challenges or opportunities in HR at X5?

Kozhevnikova: The main challenge at X5 right now is that the company is moving from a functional model to a multi-format one. X5 operates in three formats or store sizes: hyper markets, super markets and discounters, and HR plays a key role in shifting and decentralizing responsibility, power and decision making down to each individual format.

First, we need to go through the entire organizational structure to make sure all new business processes work well. We then need to review the role of people at every level and clarify all budgetary issues. A proper remuneration policy also needs to be in place.

In addition, when people get new responsibilities and more power they also need to be trained simultaneously. Basically it is our responsibility to strategically and effectively communicate all these changes. Besides overseeing this structural overhaul, the issue of management changes is another significant responsibility for HR to lead.

Boyden: How has HR changed in the last decade?

Kozhevnikova: That would be the most important and interesting question for?me since I’ve been in HR for the last 20 years. Over the course of the last decade, in Russia and in the world as well, the most important deliverables businesses are seeking from HR include better leadership, increased productivity and improved operational excellence through key performance indicators (KPIs). And all of these areas will influence compensation and the assessment of employee performance.

In several HR positions I’ve held over the years, I was responsible for developing KPIs. I had to help business units identify what indicators should be calculated

and how they should be put together in one system to make sure they assessed all areas of performance – almost like a scorecard approach. Now, the increasing involvement of HR into organizational design, productivity and development

of KPIs means that we really need to understand business on a deeper level. This also converges into another significant trend we’re seeing now. Business leaders from operations, sales and manufacturing are now moving into HR.

Boyden: What key recruiting and workforce management trends are you seeing in Russia? And how do they differ from the rest of Europe, U.S. and fast growing developing markets?

Kozhevnikova: There are two big differences in recruiting and workforce management in Russia versus Europe or other countries. First, in the US and Europe you have a lot of cities where businesses are developing simultaneously. For instance, Atlanta is the headquarters for multinationals such as Coca-Cola and CNN, whereas Silicon Valley is concentrated

with a lot of technology companies and Houston supports the oil companies. Basically, in the US people can live in any part of the country and work at a relatively large company. The same trend is in play in India and China, which have several major megalopolises. In contrast, Russia is a more centralized country, where huge part of the business is located in Moscow, which results in intensive migration of the top level talent to Moscow. Unfortunately, our reality is that there are not a lot of companies with positions at the federal level in the Russian cities.

As a consequence, one of the limitations for business growth in the other regions, even big ones, is that other cities possess a relatively small pool of candidates with the required scale of general management competencies. Thus, it’s a real challenge to attract people from Moscow to the other regions due to high salary expectations and big differences in lifestyle. Moreover, Russians are also not very mobile, so you need to pay them more to move.

One of the options, for example, is to?find very junior-level people outside of Moscow and start training them from scratch. The downside of this, however,?is that it takes several years to prepare a decent level manager. While Russians are often relatively immobile between cities, people in Russia are highly mobile between companies. The result is we have a very, very tight supply of talent in Russia and the workforce almost always has the privilege of moving.

Boyden: With Russia’s retail market up nine percent and among the healthiest in Europe, how has the economic downturn in the rest of Europe affected Russia and the retail space?

Kozhevnikova: When we talk about factors affecting the retail industry in Russia, there are only two. Oil price is the most important factor – for the Russian economy overall and for retail and all other industries as well. If oil prices go up then the country’s budget is well balanced, salaries increase and with it spending power and sales. The boom that Russian retail witnessed from 2002 to 2008 was primarily due to very high oil prices. On the other hand, if oil prices go down due to the global economic downturn, it will certainly affect the Russian economy and retail space as well.

The second factor is the exchange rate?of the euro to the dollar and ruble. The food retail industry is heavily dependent?on imports. More than 50% of goods?are either imported or produced locally?in Russia but based on foreign, imported components. Take the case of beef, for example – Russia doesn’t produce beef?so a majority of processed meats like sausages, hamburgers, etc. are made from imported beef. So basically, if the euro becomes more expensive, in turn all food prices go up.

Boyden: What key management skills are in demand right now in Russian retail?

Kozhevnikova: There are two groups of skills in demand right now in Russian retail. The first is everything product-related: sourcing the product, which includes buying the product either internationally

or locally, and managing complex supply chain logistics. The supply chain system in Russia is the most important aspect to deal with because it’s a large country with difficult climate conditions.

The second group of skills is everything related to operational excellence – increasing productivity, reducing cost, optimizing business processes and introducing new technology. In particular, people who can manage large projects related to the implementation of new technology and business processes are very much in demand.

Boyden: What are the current challenges to management recruitment in Russia?

Kozhevnikova: There are a few challenges related to management recruitment in Russia, particularly for certain professions. Generally speaking, we don’t have specialists, so for certain jobs our management is imported from either Europe or America. For example, when looking at X5 and retail in general, most

top management in buying and operations are non-Russian. Retail has been rapidly developing in Russia only for the past 10 years. The first large retailer, Metro, started business in 2001. This means that the most experienced Russian person in retail would have 10 years of experience, which is sometimes not enough to make the right decisions.

Boyden: What is your view on repatriation and do you expect to see more Russians coming back?

Kozhevnikova: I really support repatriation and I have recruited former expatriates when I’ve had the opportunity. They’re Russian natives, so they understand the culture here. They also speak the language. At the same time, they have training in new fields and technologies from abroad

which locals don’t possess, so it all adds up to a huge advantage. I witnessed this trend while working at ROSATOM and Metro, where we’d recruit Russians who’d left the country for 15-20 years, only to return. A lot of them spent time either in the US, or in Europe and, in many cases, even held foreign passports. Many were in their 40s or 50s, having spent 20 years of their life in Russia and the other half abroad, so they really had an advantage of two diverse world views.

Boyden: What do you think are the greatest executive challenges that X5 faces as a company?

Kozhevnikova: As I mentioned, in terms of recruiting candidates, finding talent locally in the retail space is always a challenge. We have to bring in people from abroad, but that also leads to the language barrier. The people we bring from abroad often don’t speak Russian, which is a

big problem since emails, meetings and phone conversations are communicated in Russian. Thus, translators are required at every stage. But, in most cases, there’s no choice because we simply cannot find expertise locally.

Secondly, we find that local talent is quite short-term thinking in terms of career planning and compensation. People want results today and they are not willing to wait. Everything is looked at from a shorter time horizon versus international, longer- term standards. This then leads to the challenge of employee retention due to the fact that people are always on the move, either within the company itself or on to other companies. So not only is it hard to retain good talent but also very difficult to organize career and succession planning initiatives.

Another challenge we face is that sometimes due to the fact that a company is expanding very fast, often people get promoted too quickly and before they have enough experience to handle a senior-level position. But one has to take a chance on making these promotions because of the lack of options. The downside is these new managers are often not mature enough?to coach and manage their subordinates and build the right relationships with colleagues.

Boyden: You’ve moved from the professional services to energy to retail?in your career – is it fairly easy to move around from one industry to another in the HR function?

Kozhevnikova: Basically it is easy, as long as a person is flexible and willing to accept the changes that come with every new industry. It’s not a workable approach if you come with a rigid set of principles and you just replicate them in every company. For example, if I tried to implement all

the principles I learned at Metro, which is in the retail space, over to ROSATOM in the energy sector, it would fail. You also really need to inform yourself about the industry as best you can – read literature, talk to people, be a part of the professional community, attend conferences etc. Personally, I really try to observe what’s going on within the industry and the outside world as well.

Boyden: Your educational background has had a strong focus on economics–in what ways has this specific concentration added value to your HR roles?

Kozhevnikova: Economics is the key to my understanding of HR. As HR has

evolved, it’s now all about calculating productivity, optimizing organizational structures, undergoing effective benchmarking and statistical analyses, and implementing compensation and benefits, budgets and cost control. Basically, everything I do is related to economic figures and some mathematical analyses.?I believe that every top HR professional must either have a concentration in economics or at least a business education.

Boyden: What has been your biggest career challenge?

Kozhevnikova: I spent almost 15 years working at western companies, and?then I moved to a Russian, state owned company. So my biggest challenge was to successfully implement all the international best practice approaches of HR I had learned over the years in the state-owned Russian company. I faced significant organizational resistance and it took me quite a long time and a lot of effort to succeed.

Boyden: If you could highlight one significant career achievement, what would it be and why?

Kozhevnikova: My biggest achievement was the successful turnaround of the HR function at ROSATOM, one of the world’s largest nuclear energy companies. We had to manage over 280,000 people and more than 200 subsidiary companies. When I joined the company, all the HR staff was very old fashioned and composed mostly of administrative clerks. In the two years that I led the company’s HR department, we changed 90% of the management, including most of the HR directors.

We introduced a new, systemic employeeselection procedure, including a thorough assessment and professional qualification checks, to make sure new recruits fit?the job requirement. We also introduced professional development sessions for HR personnel and we developed an internal school for our HR employees

to teach them new approaches to build effective compensation and performance management systems.

The company was geographically spread?all over Russia and many of its operations were placed in secret locations, far away from the city. In this case, it was not possible for us to employ an external workforce. The only option was to recruit local talent with high potential but no professional background and train them from scratch. We had to educate all these people in new HR methods and technology. Due to the HR overhaul, the on-boarding and training changes were completed more quickly and effectively.

What companies need to realize is that the agent of change needs to come from within the organization itself. Even if they belong to an HR or finance function, as many usually do, it’s important to have the ability to view the business as a whole.

Boyden: What key metrics do you incorporate for employee evaluation and performance?

Kozhevnikova: I believe that key performance indicators should be a combination of quantitative and qualitative metrics. If you evaluate performance only based on quantitative KPIs like company growth or sales, it constitutes a limited approach. For example, an employee may perform very well on project outcomes but may have poor teamwork skills or

behavioral issues. That’s why I think that 40-50 percent of employee evaluation metrics should be qualitative as well. Factors such as how a person well works on a team, how many people he/she successfully develops as successors, etc. are important assessment factors as well. Basically I believe in a balance between the two.

Boyden: What is a “day in the life” like for you at X5?

Kozhevnikova: Typically, my day usually starts at 8:30 a.m. and lasts about 12 hours, but often not all of it is in the office. My work is all about communication, so?I’d say that 80 percent of the time I’m interacting with people. Normally, I have?at least one candidate interview every day because I personally manage projects for the board level or level below. I deal with headhunters and interview candidates and my role also involves a lot of face-to-face communication with colleagues in different departments.

Every day I have at least one or two meetings, including formal ones as well?as informal five to 10 minute chats with coworkers to see what’s going on in their department. I also make a point to go to the purchasing department and speak to buyers for updates on what new products are moving onto the shelf. Then, I’d say that at least two to three hours per day?are spent interacting with my team, either individually or in group meetings. While there are 700 people in the HR department, I directly deal with 20-30 people on a daily basis. That said, the entire department needs to hear from me on a regular basis, and not just by email. I like to engage in regular face-to-face communication.

Boyden: What would be your one piece of career advice to individuals striving to move up in senior management?

Kozhevnikova: In moving toward a specific functional expertise, it’s very important?to understand the significance of other parallel business roles. For example, if

you want to be in HR then it makes sense to work in operations or sales for some time too. It gives you a good overall idea about the business and HR’s role in other departments. In other cases, if there’s an opportunity for people to work in a different region across the same function, that’s a good idea too.

Acknowledgement

We would like to thank Elena Surmeyko of Boyden Russia for making this edition of Boyden’s Leadership Series possible.

The views and opinions expressed here do not necessarily represent the views of Boyden; only those of Tatiana Kozhevnikova.