Leaders are important in any society, and by making their followers rise to new heights, they drive economic and social progress at macro and micro levels. Such leadership also provides meaning for employees. These roles are universal; however, the way people enact them differs from country to country.

Russia has a tradition of strong and powerful charismatic leaders. However,Russians' expectations of foreigners inleadership positions are complex. The formal title of CEO does not guarantee its holder the same level of compliance from Russian subordinates as if a Russian held that position. Respect and conformity will come only if the leader demonstrates superior competence and delivers tangible results. Foreign executives must live up to a higher ideal than Russian managers since the general belief in Russia is that foreigners are more progressive and can do more for their staff than Russian bosses. When the above conditions are met, Russian employees led by foreign managers can perform wonders. When these conditions are not met, problems are likely to occur.

Robert Sheppard became Sidanco's de-facto president in February 1999 shortly after one of Moscow's courts declaredthe company, owned by Russian private shareholders and BP, bankrupt. One could hardly imagine a more difficult time to take over the leadership of a company. However, when Sheppard left Sidanko in 2002, the company was probably the most advanced oil major in the country - with hefty profits, a new business model, and as internal surveys showed, extremely satisfied employees. Sheppard changed the company by practicing effective leadership - a strong and highly-involved executive leads from authority gained from the followers by virtue of competence rather than through the power of the position.

It is important how a leader gains authority. Entering the company where turmoil and despair reined, Sheppard remained cool, listened much to employees, traveled to regional subsidiaries, and did not rush to give orders. After this initial reconnaissance he concentrated on a limited number of issues that werekey for the company's survival and onestablishing his authority. Sheppard picked low-hanging fruit by introducing simple financial controls, centralizing cash management, and sending reliable people to key jobs in the regional subsidiaries. At meetings with Russian executives in the head office and in the regions, he demonstrated superior industry knowledge and established himself as a high authorityon the oil business. He met with key external counterparts and spoke with confidence about Sidanco's future and BP'scommitment to the company and the country. Sheppard hired a few capable Russians and expatriates and moved out some crooks and drunks. He made it clear that he was the sole point of contact for board members and shareholders and shielded his management from such forces. Using his contacts at BP, Sheppard restructured Sidanco's debt. Improved resultsfollowed his efforts - by the beginning of 2000, Sidanco had returned to the black. Its oil production was on the rise, costs were declining, and salaries and taxes began to be paid on time. People inside and outside of the company recognized success and associated it with the new leader. Sheppard had firmly established his authority, and he moved on to reform the company.

Having both significant power and a clear vision of what he wanted the new Sidanco to be like, he nevertheless decided to involve his subordinates in the process of designing the new organization, planning the change process, and carrying out the transformation. A team consisting of key executives from the head office and the regions met regularly and debated available options, agreed on action plans, and followed up on previous decisions. From day one of the change program, Sheppard emphasized the importance of extensive communication about the change process. To support it and ensure success, Sheppard became the speaking head for the transformation process. He communicated about the changes byfrequent articles in the company's magazine, conducting town-hall meetings in the regions, and meeting with governors, suppliers, and unions. To support the change program, Sidanco made significant investments in employee development and created a corporate university where Sheppard was president and an instructor.

Sheppard launched the change program, established the general direction, set limits, and developed well-definedtargets and criteria for success, but he left his subordinates enough room for creative implementation. In addition, Sidanco's newly-created compensation and review systems reinforced the spirit of executives' individual and collective accountability.Gradually withdrawing himself from day-to-day management, Sheppard spent much time and effort selling the change program to the board and winning its support. As Bob Sheppard said:

I could fix one or two things single-handedly, but I never would have succeeded in implementing the vision of"Operational Excellence" alone. There was no choice but to get other people involved. And they, at the end, responded very positively, even though initially they spent an enormous amount of intellectual energy explaining to me why that could never be done in Russia. But, you have to be firm in important things and use your authority. Later in details you can, and even should, be very flexible.

By contrast, those who ignore to choose the right leadership style have suffered a lot in Russia. Here is an example. RonChapman also led a multinational company's expansion into Russia. The company swiftly established a number ofjoint ventures (JVs) with local partners, and Ron decided to appoint representatives of the Russian parents to be General Managers (GMs) of the JVs and manage the Russian operation through them. A seasoned international executive with experience in the US, Japan, Taiwan, and Western Europe, Ron believed in delegation of authority, management by objectives, and a hands-off approach. He worked with his GMs through semi-annual country meetings usually held in resorts outside of Russia, annual performance reviews, casual visits to the factories, and informal meetings over a meal. He never interfered with operational issues but left these to the GMs. He judged the managers by year-end results. When the results were not as good as hoped for, Ron blamed them on unfavorable external conditions that were likely to improve in the future and thus recommended to pay his GMs full bonuses. Chapman felt that his Russian GMs were his key asset and tried to do everything to support them. For example, he helped one general manager to send his daughter to the US to study; financed an apartment for two other GMs; and arranged medical treatment abroad for the fourth one. When expatriatedeputy GMs criticized their bosses or brought to Ron's attention problems at the JVs, Ron publicly sided with the GMs and then tried to address the issues behind closed doors.

Ron Chapman was overall pleased with the way the business was developing in Russia when he received his first unexpected blow. One of his GMs left the company to return to his old factory which he had secretly privatized. This factory modernized its product, launched an aggressive sales campaign, and became a significant competitor for the multinational. Just one year later an internal audit found that another GM had used company assets for personal enrichment and had conducted some questionable transactions with suppliers. Ron was furious. He felt that he was personally betrayed by his protg and immediately fired the GM. But unfortunate events continued. All young high-potential managers left thecompany's largest Russian JV, citing the authoritarian style of its GM as the reason for their departure. Just a month later three senior managers followed suit and started a service company to compete with the JV. The multinational'smarket share started to decline rapidly and it lost its leading position. Soon its financial results began to worry its parent company. Ron was transferred to managing another country, and the JVs were consolidated into one legal entity, which is still struggling.

One of the GMs who worked for Ron described him as "a nice guy, but a weak leader who did not know or care about the business." Ron's subordinates took his informality for weakness, hands off style for lack of professional knowledge, andempowerment for lack of interest. Having established that diagnosis early on, they went on to work on their own agendas,which often had little to do with the multinational's vision for Russian operations. Ron chose a style that was unknown, andtherefore incomprehensible, to his followers. In contrast, Sheppard chose to establish his authority first and to teach his followers his style from the position of authority. These cases indicate that it is important to match leadership style withfollowers' expectations and readiness.

CASE QUESTIONS:

What leadership styles had been adopted by Robert and Ron respectively?

In which situations could Ron's leadership style be appropriate and effective?

What mistakes did Ron make? What suggestions would you recommend for Ron to improve his leadership style?

What can we learn from this case?