Project Management Institute

Projects and project management in today's Russia

PMs

Concerns of Project Managers

This & That

INTRODUCTION

For the last 30 years in the Western countries, especially in the United States, a “Project Management World” has evolved. This “World” includes national and international professional associations; congresses; seminars and conferences; books and journals; experts, specialized companies and departments; software and other PM tools; and the transformation of PM methods into standards and routines of management.

Project management concepts and methods of the West appeared and initiated their spread in the former U.S.S.R. in the beginning of the sixties. However, for many reasons, the processes of PM development in the U.S.S.R. and in the West took separate courses. In the Soviet Union these methods turned out to be “unemployed”—the extant social-economic system simply did not need them. Project management in the U.S.S.R. was not accepted as a separate field of professional activity.

Some theoretical achievements and rare successes (for such a big country) in practice or implementation could be explained only by the enthusiastic efforts of specialists and managers.

The situation has remained that way until recently. Now, when great changes have been started in the former U. S. S. R., the demand for project management will rise to a much higher level. In our opinion, it will be impossible to successfully carry out many contemplated projects without PM, and especially the largest project—reforms of Russia's economy and social life.

The assimilation and promotion of other countries’ experiences, and integration into the world's economy are very important for Russia. The role of project management in this process is hard to overestimate. That is why the study of American PM knowledge and experiences and their transfer into Russia are essential for our country.

But there are two sides to the coin:

  • To implement projects in Russia and with Russians, American managers should know the peculiarities of today's Russian environment, principles and traditions of management
  • Some elements of our Russian project management methods and experiences (unknown in the West today) could become useful for American experts.

These circumstances motivated us to present the paper “America-Russia Cooperation in Projects and in Project Management: To Be or Not To Be” [1] at the PMI ’92 Seminar/Symposium in Pittsburgh. The paper is presented below with some changes and abridgements.

PM DEVELOPMENT IN THE FORMER USSR

Until recently in our country the term “project” generally meant design or engineering documentation only, and the term “project management” was not applied at all. However, a lot of projects were performed and many organizations and specialists were engaged in managing projects [2]. Project management in the former Soviet Union went through development stages rather typical for other countries. These stages are shown in Figure 1 [1] [2].

Main Stages of PM Development in the U.S.S.R

Figure 1. Main Stages of PM Development in the U.S.S.R.

Project management in the Soviet Union was deeply rooted in the industrialization of the thirties. The growth of the construction industry and expansion of serial production called for management subjects and methods. Project management development in our country went through the “network explosion” of the sixties, when many students, engineers and managers used to study network methods. Specialized departments were created in many organizations. Network techniques were (more or less) helpful for planning and control of many large-scale projects, especially in the fields of construction, space, and defence. At the same time the first Soviet PM software emerged.

Some years later, project management development moved from management of separated projects towards multi-project management of organizations/companies [3] and later to project management integrated systems which were connected with CAD systems and covered all project phases for various project participants [4].

Research in the field of PM methods in all stages represented above was stimulated by the works of Western specialists. However, some Soviet scientists obtained rather original results and invented some promising methods [1].

From the preceding it can be seen that the former Soviet Union has been actively involved in the process of developing project management. Groups of professionals were shaped, education and training were arranged, scientific research was undertaken, and software systems were developed. Project management methods were used in hundreds of organizations, and for thousands of projects. However, for a country the size of the U. S. S. R., PM methods were not spread widely enough, had little overall effect, and had little influence on management culture, or on economic development.

Why has this occurred in a country where such large numbers of projects were undertaken during the 1960-1990 period? Why did the period of enthusiasm of the sixties turn into a period of doubt and inertia in the seventies and eighties? (See Figure 2.)

Why Has This Occurred?

Figure 2. Why Has This Occurred?

FEATURES OF RUSSIA'S ENVIRONMENT TODAY

Weights of the Past: Negative Factors in the PM Sphere of the U.S.S.R.

To explain this situation one must take into account the specific features of the Soviet environment and of surroundings of each project that determined and hampered project management development in our country. These features (we can call them “weights of the past”) have influence (with various extensions) today and will influence our country for a long time to come:

  • A dominance of state property
  • Centralized management of the economy, as if the whole country had been one huge company
  • A superiority of political goals over the economic ones
  • A priority of administrative compulsion over economic motivation
  • A monopoly of producers/contractors; a priority of a contractor/seller over a customer/buyer, which particularly stimulates maintaining high levels of costs and does not stimulate a completion of projects or orders on time or with minimum expenses
  • A dominance of solid bureaucratic structures; underdevelopment of flexible project-oriented structures
  • An imbalance between plans and real abilities, which leads to unbelievably long project life cycles
  • Weakly developed market infrastructure (banks, exchanges, insurance companies, agencies, consulting firms, etc)
  • Underdevelopment of information infrastructure, with inadequate provision for computers and communication networks; and
  • Maybe the most significant factor, the isolation of the Soviet economy from international experiences and world achievements.

In that environment, the low demand on project management methods was easily explicable. The Soviet economy was based on a highly centralized, administrative direction, where the authorities often made their decisions without taking into account either real conditions and limitations, or economic goals, but nevertheless forced managers and specialists to comply with their decisions. Officials and managers often acted to please their momentary ambitions, which almost never included reaching the economically effective decisions. They needed neither project management methods nor any management methods whatsoever. Thus it is natural that the PM methods did not play any noticeable part in our country. Successful applications of PM methods, as far as we know, became possible only thanks to the efforts of the enthusiastic specialists and managers.

Environment of the Reforms in Russia: New Negative Factors

However ineffective the economic system established in the former U.S.S.R. was, it had at least one advantage: It worked ! Thousands and thousands of projects (in particular, large construction, military and space projects) were implemented, although their completion required far too much effort and took far too long.

Weight of the Past

Figure 3. Weight of the Past

Today we have to establish a fact: The old system has been destroyed but a new one has not yet been created. This fact is perhaps the main characteristic of today's Russian environment. Some new factors are now added to the mentioned negative ones (that were referred to as the “weight of the past”). The main new negative factors which hamper implementation of long-term investment projects are:

  • Lack of economic stability
  • Lack of political stability
  • Lack of a developed system of laws and rules which regulate relations of property, especially related to land and deposits
  • Lack of fair guarantees and privileges for investors, especially for foreign participants

Needless to say, in such an environment the risks for investment projects seem rather high.

Environment of the Reforms in Russia: Positive Factors

However, some positive trends are now present. Things have changed considerably during a short period of economic transformations. It has taken only two to three years for an alternative economy to appear. The alternative economy is represented by independent companies and firms with property of different kinds, including private and joint ventures and joint stock companies. In 1991-1992 many of these enterprises went through the primary accumulation of capital, and are now ready to invest considerable amounts. The role of new alternative structures in Russia grows rapidly in spite of the fact that most property in Russia is still in the hands of the State.

Economic motivations started to play a decisive role for human behavior and for both private and State enterprises. Economic activity of individuals grows considerably. Price liberation and privatization undermined the monopoly of producers and contractors. And although in many fields monopolists are still in control, the process of breaking up the monopolies has started.

Some market mechanisms and structures, though far from perfect, have been instituted. A lot of “exchanges” of various kinds have been established (it looks curious but now there are more exchanges in Russia than in the rest of the world). The monopoly of the State Bank has been destroyed and a network of commercial banks has been established (some of these banks possess considerable capital and can even be trusted). Investment and insurance companies of the Western kind have appeared, as well as a great number of company sales representatives and advertising agencies.

The most essential result of recent transformations was the abolishment of the State monopoly on foreign economic activity and trade. The destruction of this economic barrier started the integration of our country into the world economy. In particular it stimulated inside prices to come closer to world prices.

If one looks on these positive trends, taking into account the huge potential of Russia's market, enormous richness in natural resources, as well as a rather highly educated and professionally trained population, one has reason to be optimistic about future investments in Russia.

The main features of Russia's environment today are summarized in Figure 4.

Russia's PM Environment Today

Figure 4. Russia’s PM Environment Today

START-UP OF THE MARKET OF INVESTMENT PROJECTS IN RUSSIA

Until only two or three years ago the State itself was the main investor in Russia (the so-called centralized investments). The State, based on local proposals and demands, assigned finances and material resources (often with a lack of balance between them), and then supervised expenditures (usually not very rigorous] y). Now the situation is radically changed.

First, enterprises should now finance their projects mainly by themselves or borrow money from commercial banks (at very high rates).

Second, the high level of inflation has decreased the value of funds accumulated by enterprises. And though some companies still have good investment abilities, the country itself cannot maintain the former level of investments, not mentioning the level required for considerable improvement of the standard of life and technical progress.

Thus a very specific market has appeared in Russia—the market of investment projects.

Commodities, Sellers and Buyers

Commodities on this market are various projects which are in various phases of their life cycle.

Sellers on this market are “owners” of projects. By “owners” we mean companies as well as municipal and State organizations that have an idea, concept, design documentation, an uncompleted or under-reconstruction building, a lot of land, raw materials and goods for future manufacture, and so on, but do not have enough money.

Buyers on this market are potential investors.

Russian sellers today usually have no intention of deserting their “commodity.” They prefer to invest what they have as a share in a joint venture (with the buyer) project. That is why numerous joint ventures and joint-stock companies are now appearing.

We cannot present detailed analyses of these projects here, nor can we classify this market by regions or branches of industry. In Figure 5 there are just a few fields where thousands of small, medium and large projects are already on the market or will be brought to market in the near feature.

It Is Start-Up Only

Just to complete the uncompleted construction projects, our country needs more investments than our national gross income. The total amount of investments should be at least several times as large. Russia does not possess any additional internal sources for investments, so it is vitally important to involve external sources, which means to engage foreign investors.

This obvious conclusion leads to the less obvious consequences discussed in the next section. However, we must clarify that this Russian market of investment projects is now only in its start-up phase. That is:

  • Few projects are “for sale,” due largely to unsolved property problems.
  • Few buyers, including foreign investors, act in this market, due largely to the “new negative factors” listed above.
  • Infrastructure of this market is just forming.

However, we are convinced that economic reforms and technological progress in Russia are hardly possible without development of the market of investment projects.

Market of Investment Projects in Russia

Figure 5. Market of Investment Projects in Russia

THE PERSPECTIVES OF PROJECT MANAGEMENT IN RUSSIA

Now, after dealing with the general situation, we can return to the project management problems. Though these problems alone are important to Russia, we think that today their priority is related mainly to the necessity for engagement of foreign partners.

The Role of PM Methodology

First, one cannot engage a serious partner in a project without at least working out a conceptual plan, and without presenting project proposals in accordance with usual requirements elsewhere in the world. Unfortunately, in previous years when investments were centralized, our organizations did not need to count State money carefully and used to prepare feasibility studies and other base project documents mostly to fulfill formalities. So, the manner of project presentation in our country has been far from the international standard. That is often a reason for failure to attract investors.

Second, creation and transformation of companies that are to act in the Russian market of investment projects (including contractors and home investors with “new money”) as well as the development of the market infrastructure (e.g., creation of investment and real estate agencies, improvement of information, engineering, and management services) are closely connetted with the project management methodology.

Third, PM is acknowledged in the Western countries to be a methodology of project implementation. Russian management traditions and standards are rather different. Even the terminology is different. However, really effective cooperation of Russian and foreign project participants is hardly possible unless their management approaches come together. The “PM language” could be and should be the basis for creating this mutual concept.

Thus, project management in Russia today could help first of all to:

  • Present project proposals in accordance with international standards in order to attract investors
  • Develop the market of investment projects, especially with respect to infrastructure
  • Find a language of mutual understanding for implementation of joint venture projects

In order to use project management for these purposes we need to transfer Western PM knowledge and experiences into Russia and to promote them all over the country.

However, we hardly believe that we could use Western knowledge in Russia directly as a finished product. It is necessary to:

  • Adapt existing PM methods and tools to the specific Russian environment
  • Develop new PM methods and tools, taking into account the scale and the novelty of Russian projects.

Some ideas concerning new PM methods and tools are discussed in [5]. Here, we would like to note only that the methods being developed will be of some use not only to Russia but also to other countries.

Ways of PM Promotion in Russia

So, we can conclude that today the most essential areas for PM promotion in Russia are:

  • Project management education and training
  • Adaptation of Western project management methodology to the Russian environment
  • Development of new project management methods and tools
  • Joint project management within joint venture projects
  • Creation of a market for project management services in Russia

Our hopes for further PM development are connected with:

  • Transition to the market economy that should bring project management methodology into demand
  • Large-scale participation of foreign partners in projects in Russia that would initiate large-scale transfer of project management experiences into our country.

Russian Project Management Association-SOVNET

There is one more positive factor of today's Russia environment: Increase of interest in project management. As a result, the Soviet (now Russian) Project Management Association (SOVNET) was founded in 1991. SOVNET organized the first international PM Symposium in Moscow in 1991 (with more than 40 foreign and 150 Soviet participants) and will organize the next one in September 1993, “Projects and Project Management in Russia” (we expect many more participants).

SOVNET has started project management promotion activities in all areas mentioned above.

In a short period of time SOVNET became a member of the International Project Management Association (INTERNET) and established contacts with many national project management organizations in Europe, as well as with the Project Management Institute (PMI). Now we can say that the period of isolation of Russian PM from the “PM World” is over.

AMERICA-RUSSIA COOPERATION IN PROJECT MANAGEMENT

The United States and Russia have a lot in common: their borders, nearly the same climate areas, comparable territories and population, natural resources, scale of economics, etc. Our countries have a long history of relationship and manifold cooperation. The recent changes that have occurred in the world have brought us hopes that much deeper and closer contacts are possible. Cooperation in project management could be an important part of such contacts and could serve as a bridge for joint projects. In the above, we tried to give the background and outline some possible ways of this cooperation.

The first (and very important) step has already been done: PMI and SOVNET signed a Cooperation Agreement. This agreement first of all stipulates information exchange, joint publishing activity, and participation of one party in important PM events organized by the other party. PMI and SOVNET will establish a small but effective joint committee in order to promote the above activity and to propose possible joint projects in project management (for example, an American-Russian seminar, training courses for Russian specialists, publication of Russian-English and English-Russian PM terminology vocabularies, and the like).

We, as well as other SOVNET members, appreciate very much PMI's willingness to cooperate with our young organization.

ACKNOWLEDGMENTS

We wish to thank Mr. Brian Fletcher, who started PMI-SOVNET communications; Mr. David Pens, who is a pioneer of active America-Russia cooperation in the field of Project Management Mrs. Mary Devon O‘Brien and the PMI Board, for support and acceptance of the PMI-SOVNET Cooperation Agreement. We would like to express our appreciations to organizers of PMI ‘92 for providing us with an opportunity to attend that Symposium. We are also grateful to Dr. Francis Webster, who invited us to prepare this paper.

REFERENCES

1. Scheinberg, M. and Voropajev, V. 1992. America-Russia Cooperation in Projects and in Project Management: To Be or Not To Be. Proceedings of Project Management Institute Annual Seminar/Symposium. Drexel Hill, PA: Project Management Institute.

2. Voropajev, V. and Scheinberg, M. 1991, Project Management Theory and Practice in the Soviet Union. Proceedings of Australian Institute of Project Management Conference.

3. Scheinberg, M. 1992. Planning of Portfolios of Projects. Project Management Journal, vol. XXIII, no. 2 (June), pp 31-36.

4. Ivaniv, V. and Smirnov, V. 1992. Management of Large-Scale Projects Executed by Tyazhpromexport. Proceedings of 11th INTERNET World Congress on Project Management. Florence, Italy.

5. Voropajev, M. and Scheinberg, M. 1992. Project Management Methods and Tools for 21st Century: The SOVNET View. International Journal of Project Management, N4 (November).

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Mark Scheinberg is vice president of the Russian Project Management Association (SOVNET). He was educated as a mathematician (M.Sc., Ph.D.) and worked for 20 years in various research institutes related to construction, earning extensive experience in project management software development and in project management consulting. Mark took part in a number of large-scale projects in Russia and in developing countries. He began his international activity in 1990. Since then he has attended World Congresses in Project Management in Vienna and Florence, the INTERNET conference in Zurich, the AIPM Conference in Sydney, and the Project Management Institute Seminar/Symposium in Pittsburgh. Mark has published 20 articles on various aspects of project management in Russian publications and has published a number ofpapers in proceedings and international journals. He is a member of the INTERNET Council of Delegates and of the Project Management Institute.

Vladimir Voropajev is president of the Russian Project Management Association (SOVNET), vice president of INTERNET, and deputy director of the Russian State Research Institute on Economics and Management. After receiving his M.Sc., Vladimir worked for several years as a project manager on construction sites. He then worked as a researcher and consultant in the field Of construction management (Ph. D.) and in management information system development (second Doctor of Science degree). Vladimir is an author of 80 articles and several books in Russian as well as a number of papers in English. He is professor of Moscow Institute (University) for Civil Engineering where he runs a course on project management. Since 1991 Vladimir has taken part in various project management forums, including INTERNET ’91 in Zurich, the World Congress in Florence, and PMI ’ 92 in Pittsburgh.

 

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

APRIL 1993

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