Russia’s Succession Paradox STANISLAV SHEKSHNIA MANFRED KETS DE VRIES When the Czar has a cold, all Russia coughs.—Russian proverb With the wolves of the market place I refuse to howl.—Marina Tsvetaeva If you chase two rabbits, you will not catch either one.—Russian proverb I n the Soviet Union in 1987, the first pri- vate companies, disguised as ‘‘coopera- tives,’’ were formed, making Russian capitalism just over 20 years old. Since then, the Russian economy has gone through an astonishing transformation that has sub- jected the Russian population to a veritable emotional and financial rollercoaster ride— careening from the introduction of market prices, through skyrocketing inflation, through a period of privatization during which the former state-owned companies were restructured, through a serious finan- cial crisis that prompted a dramatic currency devaluation, and finally, to an economic rebound accompanied by the introduction of modern standards of corporate govern- ance. If that wild ride wasn’t enough to destabilize anyone’s mental equilibrium, the problem of founder–chief executive offi- cer (CEO) succession may do the trick. Pro- minent Russian business leaders such as Vladimir Yevtushenkov (founder of the multi-billion-dollar Sistema conglomerate) and Dmitry Zimin (founder of telecommu- nications giant VimpleCom), along with many others, are passing the CEO baton to professional managers, and thousands of fellow founder-CEOs are poised to be next in line. Few of these entrepreneurs are dealing with this issue very professionally, however; and many are dealing with it very badly. Succession planning has always been a sen- sitive topic, and managing the process is at best an inexact science. The way founder– entrepreneurs handle succession has a great influence on the future viability of their enterprises. Effective succession can spur creativity and new resolve, while poorly handled succession, a major contributing fac- tor to business failure, often causes plummet- ing financial results and organizational turmoil. Inevitably, succession always introduces a period of change. After a succession, cus- tomary patterns of interaction are typically disrupted, and organizational values, atti- tudes, and behaviors are often evaluated and revised. In addition, succession some- times affects an organization’s structure and transforms reporting relationships. Because of these dramatic consequences, the mere rumor that succession is in the offing creates a great deal of organizational anxiety. Given the relatively recent emergence of entrepreneurial activity in the former Soviet states, contemporary Russia has no history of founder succession. Having no expertise in this matter, and few native role models, many Russian founder-CEOs are dealing with the problem in an intuitive, ad hoc manner. Although this can be quite effective – Dmitry Zimin’s departure from Vimpel- Com is a good example – many departing leaders have struggled with this approach. In studying various succession scenarios in Russian companies, we have observed many troublesome signs. They suggest that the expected wave of successions will have a Organizational Dynamics, Vol. 37, No. 3, pp. 266–276, 2008 ISSN 0090-2616/$ – see frontmatter ß 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.orgdyn.2008.04.005 www.elsevier.com/locate/orgdyn 266