THE RED EXECUTIVE:
A Study of the Organization Man in Russian Industry
BY DAVID GRANICK
Doubleday & Company, Inc.
Garden City, New York
[SAC Editor has added bold-face text to certain passages, and
hypertext links to SAC
Original page numbers are indicated in brackets]
Here are some hypertext hops, by way of table of contents =
1. BROTHERS UNDER THE SKIN? [pp. 3-10]
Some years ago [in the 1950s] I finished writing a book about Soviet managerial practice. In the reading of Soviet industrial daily newspapers and the Russian trade magazines, I had discovered a world of management behavior which varied radically from the formal structure described in Soviet textbooks. I was excited. Here, I felt, was the straight story concerning a system of administration completely different from American practice. Certainly this picture bore little relation to generalizations about American business in books I had read on economic theory and on formal organizational procedure.
Then I began talking to people much more knowledgeable than I about American business practice. They also were astonished at my picture of Soviet management. But the reason for their surprise was just the opposite of mine. Why, the Russian managers use the same gimmicks as we do! they said. The Russians have the same organizational problems, and the same ways of handling them. Their managers get around the formal rules of their firms in the same ways as we. I had rediscovered the American world of management, they said.
I was reminded of this experience of mine the other day in reading of an interview with Anastas Mikoyan, the Russian trade czar. The American reporter felt that if Mikoyan were in an American business, he would soon end up owning it. At first glance, this speculation seemed improbable; but when one thought about it, it became quite reasonable. For Mikoyan is a man who has risen high, and has long remained a kingpin in a bitterly competitive managerial system. If Soviet informal management structure is rather like American, one would expect fairly similar types of men to be top executives in both countries. [3/4]
An American scientist-administrator, back from a Geneva conference on nuclear energy, recently told me that the Russian delegates acted like capitalists. They worried about the cost of producing power by atomic energy versus the use of coal and water power, and their talk was all in rubles and kopecks.
In the summer of 1958, while visiting Russia, I asked a regional industrial administrator how plant managers were persuaded to change their behavior in line with shifts in administrative rules. He spoke of a variety of devices, but a key one was that of closely tying the bonus system for managers to their adherence to the new rules.
I talked with the director of a Moscow manufacturing plant about how he elicited worker suggestions for production improvements. He said that a method used in his plant was to give a bonus not only to the worker making a suggestion, but also to the worker's foreman. The director was here trying to wrestle with one of the real problems found in American industry in operating worker-suggestion systems: the foreman may look at any suggestions coming from his men as a reflection on him for not having thought of the idea first. The Russian management was trying at least to neutralize the antagonism of the foremen, and was using a device which American firms might well consider.
That same summer, Soviet colleges were preparing for a drastic shift in their admission procedures. Where formerly almost all freshmen came directly from high school, now the vast majority were to enter only after an intervening two years at work or in the Army.
I spoke about this change to the administrative officer of a major economic institute, comparable to one of our business schools. His institute had partly shifted over in the previous academic year. Candidates who had worked since graduation from high school were admitted if they passed the entrance exams with a "C" average. But those coming directly from high school had to enter into a competition in which there were twenty applicants for each opening in the freshman class.
Noting this difference in entrance standards, and being heavily under the influence of American magazine articles [4/5] which had lauded the high and serious purpose of Soviet students, I assumed that students with work experience would drift toward the bottom of the class. No indeed! I was assured. The institute's experience was that students with a background of work were indeed academically below the others during the first semester, having entered under vastly lower standards of admission, but that they were already ahead by the second semester. The reason I was given was one which would sound familiar to any American college teacher: freshmen directly out of high school were not attuned to serious study, were vague as to their future career interests, and in general were not prepared to settle down to working. In short, business-school freshmen in the Soviet Union were—in this respect—like business-school freshmen in the United States.
A last example. On the same trip, I chatted in his Moscow office with one of the country's leading academic authorities on managerial organization. He described an important administrative simplification in the procedure of control over plant managements by higher authorities, and said that it had already been generally put into effect. Yet, when I inquired in administrative rather than academic channels, I learned that this simplification was not in use in any of Moscow's industry, and I received the distinct impression that it was not widely used elsewhere. Russian academic authorities seem to be quite as hazy about Russian management practice as our own people are with regard to American practice. One hears the same complaint from researchers on both sides of the Iron Curtain as to the difficulties of really studying factory structures in depth. In institutions where it is claimed that this has never been a real problem—as in the topflight Leningrad Engineering Economic Institute—research opportunities seem to be a result of close personal contacts between school and plant personnel, with continual consultant arrangements acting as an important sweetener to the relationship. The issue of whether an industry is governmentally planned, or is run as a private enterprise, seems to be rather beside the point in many management areas.
When one thinks of the underlying constraints common to both the American and Russian industrial systems, it is not [5/6] really so surprising to find similarities between management practices and environments. In both countries, a rapidly growing, modern industrial structure has been built. Both nations have been dominated by frontier aspirations, with a worship of size, speed, and material success. Both share the common traditions of a European-dominated culture.
I am, of course, not saying that Russia and the United States are spitting images of one another. While both are "democratic," Soviet democracy refers essentially to the right of all Soviet citizens to espouse and work for the current line of the Communist Party hierarchy. The constitutions of both countries guarantee freedom of speech, press, and assembly. But the Soviet Constitution explicitly guarantees these freedoms "in order to strengthen the socialist system," and it is the Communist Party Presidium which decides what will strengthen or weaken the socialist system. Although both countries have trade unions, strikes—the American union's ultimate weapon—are virtually unknown in Russia; the only strike heard of in recent years was within the forced-labor camps shortly after Stalin's death. In both countries, consumers receive money income which they can spend, or not, as they please. Yet in Russia it is the government that decides which goods will be available for them to choose from.
The list of fundamental differences between the American and Russian ways of life is a long one, and there is little need to spell it out here. But there are also similarities, and one finds them in particular when looking at the ways of administration and business management.
In going to any foreign country for a period of time, or even when moving into an unfamiliar social environment within the United States, I have generally noted three stages in my own reactions. My first impression is of strangeness and difference. But once I pierce the surface dissimilarities, my reaction shifts to the opposite extreme. Everything now appears fundamentally the same. All that I can see are the underlying identities, although it is true that these take different forms in different settings. It is only in the third stage, I would suggest, that real knowledge begins. For now I search anew for differences, but this time for those subtleties which are im- [6/7] portant in structuring the environment and the personalities of people rather than for the obvious elements which first hit the eye of the tourist.
In this book, we must try to operate on the third level of reaction. Let me offer an example. [First level=]
Soviet managers have been trained in technical institutes narrowly geared to a single industry. They have lived their lives in a tightly planned economic structure, constantly responding to bureaucratic pressures. They are Communist Party members, operating in a world whose lodestone is "Party activity and belief—above all and before all!" What a difference between the Soviet and American manager!
But let us press deeper. [Second level=] Take the director of the Moscow Electric Meter Plant. A man of about forty-five, he was educated as a mechanical engineer—presumably in an institute attached to the optical industry. He worked as assistant foreman, superintendent of a machining shop, and finally as chief engineer in a Moscow optical plant. His career opportunity came when it was decided to convert a toy plant into one producing electric meters; it was he who was chosen to take over the enterprise and build it up. When I met him, eight years later, a fairly progressive plant organization had been developed under his leadership.
Here was a man starting out in one industry, working his way up within it, and then switching to another for major advancement. His technical training was in mechanical engineering, but his current work is in electrical engineering. Narrow specialization? Or not too dissimilar from American managerial experience?
Consider the planning environment within which our director works. Is this so different from the milieu of a plant superintendent, or even of a division head, in a large American corporation? Is it clear that the Russian director's degree of autonomy, within the rules of his organization, is so much less as to put him into the category of "bureaucrat" as compared to the American plant superintendent who plays the completely different role of "independent decision-maker"?
Or consider the Moscovite's Communist Party membership. Does this really matter? Do his views on surplus value and [7/8] Communist China affect the way he produces electric meters? Clearly he is not primarily a politician who just happens to be running a plant. Does the political issue have any relevance at all?
Yet . . . yet. We must push further. [Third level=] Given the similarities between the Russian and the American manager, what are the differences?
The college training of the Russian is that of an engineer. He has had to pick up his accounting, some statistics, and his ideas as to organization and administration mostly while on the job. His American counterpart would more likely be a business-school graduate. Both may have ended up with the same background, but they have got it in reverse order.
Will this different ordering in the learning process, this difference in formal education, affect what the Russian and American managers think is important? Will it influence the choice of long-run problems which get to the top of their desks instead of remaining buried in the papers? It is hard to dismiss these differences as irrelevant.
Will it matter that the prototype of the previous generation of top management was radically different? For the American, it was the "cut-and-try" businessman, scornful of theory and eggheads, interested in his own operation and caring little for society as a whole. For the Russian, it was the dedicated professional revolutionary, moving into whatever line of endeavor the Communist Party sent him, knowing little about the technical details of his industry, convinced that proper theory —both in social events and in the natural sciences—is the salvation of mankind. Are these differences as to the history of management in the two countries unimportant? Will they not affect the behavior of current managers, whether by their acceptance or rejection of the earlier traditions?
Let us return to the planning environment within which the Russian manager functions. Marketing is not a problem; he can sell everything he produces. Salesmanship, advertising, product design to meet the competition and make obsolete last year's model: all of these major American problems disappear. But procurement! The placing of unscheduled orders [8/9] for materials in the middle of the year! Here is a genuine Soviet problem area.
Is it really evident that we can ignore the Communist Party membership of the Soviet director? But then, how about indoctrination in large American corporations? Are the differing emphases as between American firms irrelevant to their operational behavior? Can we dismiss the question of whether a firm's policy is to strive for safety through high cash reserves or for expansion and commitment of funds? Whether its major concern is for immediate or long-run problems? What its attitude is toward labor relations, or toward the proper degree of centralization of management? In the continuing process of striving for conflicting subgoals—subordinate only to an often nebulous "profit" objective—can we disregard the differences in subgoals which are stressed by the various firms?
If American firms are deeply concerned with having a policy for their management teams, and if these differences in policy really matter, would we not expect the factor of indoctrination to be at least as vital a source of contrast between the United States and Russia as between individual American firms? Particularly since the Russian indoctrination goes back in the manager's life to adolescence and even to childhood?
In this book, we shall concentrate on two aspects of the managerial problem. Who are the managers? What is their education, their politics, the base point from which they view the world? Secondly, what are the pressures and incentives which circumscribe their world? What do the managers have to accomplish, and how do they do it? How do Russian managers and their environment differ from what we see in America?
At this point, I must frankly confess to being opinionated. The management world in all countries is heterogeneous. Which are the dominant trends, which the minor ones? Often no one knows, even about American industry. Definitive research has not been done [as of 1960]. The observer has impressions; doubtless they are often biased or simply wrong. But in comparing countries, it is precisely the dominant trends in each which are of key importance; the overlap of individual cases around these trends will be wide indeed. So I feel no need to [9/1O] apologize for the fact that it will often be debatable whether my "dominant trends" are truly the most important, or even whether they are trends. I am aware of the problem, and I hope that the reader will remain aware of it also. One comforting thought: it is probably no more difficult to pick out the dominant trends in the field of Soviet management than in that of American management.
18. BUSINESS HANDS ACROSS THE IRON CURTAIN [pp. 266-278]
In the days before the First World War, all knowledgeable men were aware of the fact that lengthy fighting between major nations on the continent of Europe was a political impossibility. Incredulity as to major war was fostered by the fact that there were two great forces in Europe which, although perpetually at each other's throats, shared in common the absence of strong national ties. One was the powerful Second Socialist International, whose members owed their allegiance to the internal working class rather than to any particular nation-state. The second force was large-scale business management, whose interests covered the world and whose allegiance was strictly to its international investments. Neither of these powerful groups would permit the politicians to involve them in self-destructive warfare. [Check out the "father" of this utopian "technocratic" vision, Saint-Simon]
The dream of international brotherhood of the working class seems, by now , to be dead. But the concept of "business without a country" lingers on. Consider, for example, the early-1959 visit to the United States of Anastas Mikoyan. Mikoyan apparently believed that there were special advantages to be gained from his addressing himself to American businessmen. As one businessman to another, he could appeal to their deepest interests. Apparently, this approach was expected to be far more persuasive than would be that of a Russian trade unionist appealing to American union leaders, or of a Russian diplomat dealing with American diplomats. 
... [268/269] ...
The "Managerial Class"
Just as Anastas Mikoyan seemed [in 1959] to hope for greater success from a Russian appeal to American businessmen than could be achieved by a similar call on American trade unionists or politicians, so too there are those in the West who regard Soviet business managers as the carriers of the world's prayers for peace.
The view is not infrequently voiced that a managerial class has arisen in the Soviet Union, and that the dust of world politics should gradually settle as this class takes over the reins of power in the Soviet Union. For, it is argued, these managers are reasonable business folk, concerned with running their own factories and industries, and having strong vested interests in the status quo. They see the world much as do businessmen anywhere else, and this similarity of viewpoint is bound to increase. Soviet managers are not Party fanatics, like those who have ruled the Soviet Union up to now and who link their [269-270] fate with that of world revolution. It is hoped that, as the new management class captures increasing power, ideological differences between the Soviet Union and the United States are bound to diminish and to lose their cutting edge. [Check out the popular idea of the 1950s and 1960s, "Convergence"]
The idea that there exists a special managerial class in the Soviet Union needs examination. For, if no such class exists, the above position falls to pieces. But what is meant by "class"?
The view of class which is expounded by Marxists is quite straightforward. One must only look at the relationship between individuals and property, and use this relationship as the distinguishing mark. Those who own property and hire people to work for them, who earn a profit on their investments, belong to one class; those, such as independent shoemakers, who own their own shops but employ no labor, belong to a second class. The third class—the proletariat—is composed of those who work for wages.
Here is a very simple and purely economic concept of class, quite easily applied to categorizing the population of a capitalist country. No public opinion polls are needed; a man's class is an objective fact, not a matter of what he thinks it is. But, quite evidently, those Westerners who talk of the existence of a "managerial class" in the Soviet Union do not attach this meaning to the term "class." The Soviet factory director and minister are hired by the government just as much as are the factory workers. Moreover, unlike American officers of large corporations, their incomes come almost entirely from salary and bonus rather than from earnings on investments.
The concept of "managerial class" stems from a different definition. In this sociological usage of the term, "class" refers to a set of people who consider themselves to be distinct from other groups in society. This feeling of similarity among the members of the class is caused by the fact that they share certain things in common. It may be that what they have in common is a similar annual income or the means by which they earn this income; but the feeling of similarity may also be based on the sort of neighborhood in which people live, the type of education they have been given, the style of furniture they own, or even their politics. In England, it is commonly claimed, the truly distinguishing mark of class is the accent [270-271] with which a person speaks his native tongue. It has been found, at least in Western societies, that all of these various marks of a distinctive social grouping are rather closely related to one another. When this is so, we can call the grouping a social class. This concept of social class obviously bears some relation to the Marxist definition of economic class, but it differs from the Marxist definition in that it rests upon persons' beliefs as to their place in society rather than on an objective measure of this place.
The sociological concept of class has still another aspect. If classes are to exist, then there must be reasonably sharp boundaries between these classes; people cannot move too readily from one class to another, nor can there customarily be rapid class movement between the generations. For, if there is very high mobility between classes, then the feeling of unity within a class and of its separateness from other classes breaks down.
Using this sociological concept of class, we can distinguish sharply between Soviet industrial managers and run-of-the-mill Soviet workers.
Soviet managers receive incomes which are many times that of an ordinary Soviet worker. The director of a plant with a labor force of one thousand employees may earn five to six times as much as the average Soviet worker. In the steel industry, where workers are highly paid compared to those in other industries, the director of a very large plant earns five times as much as a semiskilled worker under him. Certainly, an income differential of this size must lead to sharp differences in consumption patterns.
The Soviet educational differential is no less sharp. Present-day medium and top industrial management share in common the fact that most have completed college training. Moreover, the great majority of these have had an education in straight engineering, with a second group which is substantially smaller having gone through a business-engineering program. Contrasting Soviet with American backgrounds, we find that a considerably larger proportion of Soviet than of American industrial managers are college-educated. In addition, American managers have graduated from widely diverse types of college programs, while Soviet managers share what was a more sim- [271-272] ilar experience in their college years. Finally, the proportion of the nation's adults who have a college background is much larger in America than it is in the Soviet Union. All in all, it is much more true in Russia than in the United States that the manager is set off from the mass of the population by the amount and type of education which he has had.
When we turn to political activity, the same phenomenon is noted. Virtually all top managers are members of the Communist Party. Data of 1936 showed that 98 per cent of all factory directors in heavy industry were Communist Party members. The proportion for responsible management above the factory level ran between 97 and 100 per cent in the various major industries. It would be a fair presumption that much the same proportions still hold today. Communist Party membership is a virtual requirement for a top-management job. Men who are not Party members do hold key management posts—for example, the assistant head of construction activities in Moscow is not a Party member—but such people are rare.
While management is recruited almost completely from Party ranks, only some 4 per cent of the total population are Party members. Even among industrial workers, the proportion is probably close to the range of 14 to 19 per cent which I observed in two factories. Soviet managers share in common Communist Party membership and activity, and in this respect—just as in income and in education—they are distinct from the masses of the Russian people.
Finally, it seems reasonable to expect that, as between the managerial group and the population as a whole, there is a pattern of youths being more likely to remain in their parents' class, whatever that may be, than to move out of it. Soviet data of the 1930's showed that much of such social stability had developed even then; in all probability, this stability of social-class structure has since further increased. For the reasons discussed in Chapter Three, primarily those of training and motivating children within the family, the Soviet Union seems no exception to the generalization that the son of a professional man or manager is himself much more likely to become a manager than is the son of a worker.
There can be no question that managers comprise a group [272-273] which is both highly differentiated from the general Russian population and is recruited very unevenly from among the different occupational levels of Soviet society. Are these characteristics sufficient to permit us to speak meaningfully of a "managerial class"?
The answer, in my opinion, is no. The concept of "managerial class" is intended not just to differentiate managers from ordinary workers and peasants, but more particularly to distinguish them from Communist Party officials and other subgroups within the stratum at the top of the Soviet ladder of power, prestige, and income. The real question is not whether we can differentiate Soviet managers from the base of the Soviet population, but rather whether the managers comprise a group quite separate from the full-time Party functionaries.
Party functionaries would seem to have incomes reasonably in line with those of management personnel. As to education, although that of the full-time Party official is certainly somewhat less on the average than that of industrial managers, it is still vastly more than the norm for the population. Already in !939, 59 per cent of the heads of all regional Communist Party bodies in the country had at a minimum completed high school. Moreover, this figure seems to have been growing rapidly. In the Ukraine, the proportion of regional Party heads with a minimum of a high-school education was 63 per cent in early 1938, and had risen to 81 per cent by early 1940. In all probability, most of these Party secretaries had graduated not only from high school but also from college. It seems a fair guess that, in 1959, a substantial majority of high-ranking full-time Party officials in the Soviet Union are college graduates. Moreover, for most of the college-trained group of Party officials, college has meant the same five-year engineering school to which the managers have gone.
To a considerable extent, therefore, industrial managers and full-time Communist Party officials are the same type of people. Members of both groups must normally be trusted Party members, active politically; their incomes are similar; even their education is not too different.
To push the matter even further, they are frequently not only much the same type of people, but are identical individuals [273-275, with a TABLE on p. 274] at different stages of their career. Remember the director of the major steel plant in Chelyabinsk, mentioned in Chapter Two, who a few years earlier had been the full-time Party leader of that area! Remember the tendency to recruit Party secretaries of factories from practicing engineers!
[NB! Thirty years after Granick’s study, Boris Yeltsin, an ex-manager of large enterprises Chelyabinsk became President of the Russian Republic]
An interesting illustration both of the extent to which Soviet upper-class individuals alternate hats, changing from one type of job to another, and of the major role within the Party of those who are not themselves full-time Party officials, is given in the table [not included here]. This table summarizes the available biographical information as to the backgrounds of full members of the Central Committee of the Soviet Communist Party elected at the national Party Congress in 1956. These 133 people stand at the head of the Communist Party and of Soviet society; they comprise the group which made the decision between Khrushchev on one side and Malenkov, Molotov, and Kaganovich on the other.
It is noteworthy that, of these Central Committee members, only 53 per cent have full-time Party jobs. Of those Central Committee members who are full-time Party officials, the careers of no more than half have been exclusively within the Party. In short, at least three quarters of the Central Committee members have, either now or in the past, held major career positions outside of the Party itself.
However, it is also quite clear from our table that only 20 per cent of the Central Committee members have ever engaged in industrial careers. This fact would seem to indicate that, by and large, industrial management is at the moment a relatively poor road to the heights of Soviet power. But doubtless, if we were to consider a Communist Party group at a lower level of influence than the Central Committee, we would find that industry makes a more substantial contribution to the total membership.
Another Party group worth examining is the Presidium of the Central Committee of the Communist Party, the peak group chosen out of the Central Committee. In view of the transformation of the membership of this body between the 1956 and 1959 national Communist Party Congresses, let us consider separately the backgrounds of those men who re- [275-276] mained in the Presidium, those who were dropped, and those who were added during these years of internal Party strife.
Looking at these statistics [presented in a TABLE “Members of the Presidium of the Central Committee”, not included here], we can readily see that the Party strife of 1957-58 enlarged the proportion of Presidium members whose known careers have been entirely within the Party bureaucracy. Moreover, it reduced from five to one the number who had had careers within industry. In this sense, the changing membership of the Presidium might be interpreted as a defeat for the industrial managers of the Soviet Union.
On the other hand, it would be very wrong to draw strong conclusions from a shift in the membership of such a small body as the Presidium. With only tiny numbers of individuals involved, it may easily have been coincidence that the new and old members should have such differing backgrounds.
What strikes me as more impressive and meaningful than the change in industrial backgrounds is the fact that the Presidium has not, either now or earlier, been dominated by men whose careers were solely inside the Party. In 1956, there were no such men. Today, there are still only three out of fourteen.
Considering all the evidence together, there seems to be no sound basis for differentiating between a "management class" and a class of "full-time Communist Party officials." The two [276/277] groups are highly similar in income, education, political activity, and even in the fact of having as members the same individuals at different stages of their career.
Moreover, there seems no reason to categorize the Party official as the fire-eating ideological fanatic, thus contrasting him with the businesslike manager who has strong vested interests in existing society. The Party official, after all, is also primarily an administrator—normally concerned with all the problems of his specific geographic region. He can perform this function quite well even if he is not particularly acquainted with or interested in the fine points of Marxist ideology, world revolution, or foreign policy. He may indeed have such special intellectual interests, as may the manager of a factory or the head of an industry; for both, however, such interests are essentially extracurricular.
It may well be that the present-day Soviet leadership has more of a desire to preserve the status quo and to build further upon it than was the case in earlier periods of Soviet history. It may be, as is often argued, that the Soviet Union can be expected to move even further in the direction of "settling down." But if these theories should in fact turn out to be correct, it will not be due to the rise of a Soviet "managerial class." Instead, it will be a result of influences which affect all of the Soviet upper class—Party as well as industrial.
If we turn our glance to American business, much the same conclusions would seem to hold. It is difficult to delimit a specifically "business" class whose members have far more in common with one another than with other upper-class individuals in our culture. A specifically "business" ideology—particularly as it relates to foreign affairs—would be even harder to identify.
As to the strength of American business in dominating American politics, it is true that businessmen have lately shown increasing political appeal. The 1958 nomination of the scions of two of America's great fortunes as candidates for governor of our most populous state is a political phenomenon which would hardly have seemed possible twenty-five years earlier. Yet the great changes in government which were heralded as the expected fruits of the Elsenhower "businessman's government" have failed to materialize. This is particularly the case in the [177/178] area of foreign affairs. Businessmen have, in fact, shown increasing reluctance to take up government posts. The glorious days of 1952, with the expectation of major change now that business at last was in the saddle, are long past.
Thus, both in Russia and the United States, the dream that businessmen comprise a very special and powerful force for peace seems to remain only a dream. Moreover, in neither country is there a noticeable tendency for business interests to grow markedly in their political power. In neither country is there reason to believe that business groups respond to international politics and crises in ways which are peculiar to themselves, and different from those of other members of the upper class of their society. In short, it seems to me that business plays no special role in either soothing or exciting the waves of emotion and national interest which disturb the peace of the world.