25TH ANNIVERSARY OF CEEMAN
DEVELOPMENTS
BEFORE CEEMAN:
1985-1992

SECTION 1
Political Upheaval
The decade preceding the launch of CEEMAN was tumultuous, with the collapse of state communism throughout CEE. In 1985-86, facing a stagnant Soviet economy and society in disrepair, Mikhail Gorbachev proposed the policies of glasnost, to increase openness in government institutions and public discourse, and of perestroika, to restructure the Soviet political and economic system. In July 1987, the Supreme Soviet passed a law that made state enterprises self-financing such that revenues had to cover expenses and in the next spring enacted a law that permitted private ownership of businesses in the services, manufacturing, and foreign-trade sectors.

These economic reforms proved largely unsuccessful and government spending increased sharply to bail out unprofitable enterprises and provide consumer price subsidies. Meanwhile, there was strong criticism of the Communist Party and the media, freed from the grip of the Party, exposed problems of poor housing, alcoholism, pollution, corruption, and atrocities committed by Joseph Stalin. This undermined the faith of the public in the Soviet system and eroded the Party's power base, setting the stage for the dissolution of the Soviet Union and the election of Boris Yeltsin in 1991 as President of the Russian Republic.
The Revolutions of 1989 overthrew the communist leaders in various CEE states beginning in Poland and continuing through Hungary, East Germany, Bulgaria, Czechoslovakia and Romania. Citizens engaged in civil resistance to oppose one-party rule as Czech demonstrators launched the "Velvet Revolution," Slovaks the "Gentle Revolution," and East Germans the "Peaceful Revolution" which led to the demolition of the Berlin Wall on November 9, 1989. Violence marked the overthrow of Communist leaders in Romania.

The Baltic states of Estonia, Latvia, and Lithuania began their "Singing Revolution" a bit earlier but it gained momentum when roughly two million people joined hands to form a human chain spanning 600 kilometers across the three Baltic countries in August, 1989 calling for independence. In early 1991, there was fighting in Lithuania leaving 15 killed by Soviet tanks near Vilnius, and Latvians united behind barricades in Riga in a show of resistance. During the August 1991 putsch in Moscow, Soviet troops sought to occupy Vilnius and Riga but returned to their barracks when the coup failed.
Remember, too, that this era witnessed the Tiananmen Square protests of 1989, the election of F. W. de Klerk and release from prison of Nelson Mandela in South Africa, and the "NO" campaign leading to free elections in Chile. It also saw democratic elections in CEE that installed notables Lech Walesa as President of Poland, Václav Havel in the Czech Republic, and Milan Kučan in Slovenia. A nuclear power plant in Chernobyl melted down in 1986 and Hurricane Andrew in 1992 left $25 billion damage in its wake in the U.S. This era also heard the first public mentions of "global warming."
After the death of President Josip Broz Tito on May 4, 1980, the Federal Republic of Yugoslavia--comprised of Bosnia and Herzegovina (BiH), Croatia, Macedonia, Montenegro, Serbia, and Slovenia-- lost its unifying force and the subsequent collapse of communism in central Europe added momentum to its dissolution. Croatia and Slovenia had democratic elections in 1990 and joined Macedonia in declaring independence from Yugoslavia in 1991. But age-old ethnic tensions in the region grew. Slovenia preserved its independence during its 10-day war with the Yugoslav army (JNA) but conflicts between the Croatian government and ethnic Serbs erupted into war. President Milošević of Serbia brought the full force of the residual JNA army into the conflict and fierce fighting extended into Bosnia and Herzegovina between Bosnian-Muslims and Serbs.

In the Croatian war, Dubrovnik and its surrounds were under siege and bombarded until mid-1992 when that war ended. Roughly one-fourth of the Croatian economy was destroyed. Throughout BiH, Bosnian-Serb nationalists and the JNA began a systematic policy of "ethnic cleansing" to erase all vestiges of the non-Serb populace. The siege of Sarajevo in Bosnia was the longest in the history of modern warfare, running from April, 1992 to February, 1996.

SECTION 2
Economic Turmoil
Coupled with political changes in CEE were moves from a centrally planned and managed economy to market-driven activity. Many countries in the CEE region underwent "shock therapy"--the sudden release of price and currency controls, withdrawal of state subsidies, immediate trade liberalization, and privatization of publicly-owned assets. One of its main proponents was Jeffrey Sachs, then a Harvard professor, whose methods had been hailed in the turnaround of Bolivia's economy in 1985. Sachs was an advisor to the Polish government in 1990 which had some eventual successes, and later to Russia where shock therapy was also implemented to dismal results.
There was a testy relationship between Sachs and Slovenes during this period.
Sachs berated the Slovenian parliament for passing a bill without his approval, and dismissed critics as "idiots" and "self-management imbeciles." World Bank economist David Ellerman, who challenged Sach's shock therapy prescriptions for Slovenia, remarked "Only the mixture of American triumphalism and the academic arrogance of neoclassical economics could produce such a lethal dose of gall."

By 1990, the annual GDP growth rate in the Yugoslav republics dropped to a negative 7.5%. In 1991, GDP declined by a further 15%, while industrial output shrank by 21%. With the collapse of the federation, and onset of shock therapy, nearly 2,500 industrial enterprises were liquidated leaving 1.3 million workers out of jobs. Other socially-owned enterprises survived by not paying their workers. Real wages fell dramatically, social programs were closed, and unemployment rose.
Each of the states of the CEE faced economic hardships in the early 1990s and each dealt with its own distinct socio-political and cultural challenges. These included:
Privatization

The Czech Republic, Slovakia, and Lithuania opted for "fast privatization." However, this generated neither revenue for the State nor new capital for enterprise development, creating problems in debt service and bringing many firms into collapse. Poland, Slovenia, Bulgaria, and Romania are considered "slow privatizers." Poland and Slovenia succeeded in commercializing and restructuring their former state enterprises, but at the cost of massive job destruction.
Rising Unemployment

Almost overnight, national economies in the CEE opened to the world and experienced a sharp decline in economic performance. Demand for labor dropped immediately and, after a short lull, employment also started to decline. According to the International Labor Organization, total unemployment (registered and not) rose to above 8% in Russia, 10% in Hungary, 14% in Poland, 16% in Lithuania, and 20% in Bulgaria.
Inflation

Because of cost-oriented pricing, many enterprise managers proceeded to raise prices, disregarding the prices of competing imports. The annual inflation rate in the CEE overall rose to nearly 30% and spiked in Russia in 1992 to 3,000%! This reduced the purchasing power of most people in CEE countries, especially that of retirees. Paradoxically, a decline in demand meant that many firms had to scale down production, thus contributing to a drop in GDP and eroding standards of living.
Competitive Challenges

Imports flooded into the CEE and domestic companies faced competition for customers. A case in point is that demand for cars produced in CEE declined rapidly while demand for foreign-made cars went up. Meanwhile many large CEE enterprises with export agreements with other COMECON (Council for Mutual Economic Assistance) countries saw demand dry up.

SECTION 3
CEE Managers and Transformation
Many (CEE) managers did not have the skills to adjust to and exploit business opportunities posed by the developing market economies…
Scholars who surveyed the institutional upheaval and responses in CEE during this time contend that managers faced more than a "transition" from a centrally planned to market economy. Rather, it required them to lead organizational "transformation." However, an interview study by Avraham Shama of managers in the Soviet Union, Czechoslovakia, Poland, and Hungary in 1989 found that "many managers did not have the skills to adjust to, and exploit, business opportunities posed by the developing market economies. This attests to one of the most significant impacts of market forces: management obsolescence. As most managers of state-owned enterprises were selected for their positions because of their links with the Communist Party, they are simply not equipped to work in the context of free markets."

Certainly there are caveats to this conclusion. For instance, many managers in Hungary and Slovenia had had experience in a competitive market economy before '89 and face-to-face interaction with foreign customers. Czech and Polish managers, by comparison, were less familiar with market dynamics. Management specialists from America who benchmarked practices in CEE in the early '90s reported, "Czechoslovak managers are prisoners of the past. They do not, and cannot, adjust to a market economy. Whereas in a market economy they are expected to take the initiative, Czech managers still wait for production and distribution orders which stopped coming."

Soviet managers were also unfamiliar with market dealings.
"The Soviet manager has grown up as a scientist or engineer, not as a professional manager who can go from industry to industry as in the West."
Andrei N. Bykov, top-ranking member of the State Committee for Science and Technology
However, Koźmiński's 1993 volume Catching Up? Organizational and Management Change in the ex-Socialist Block gave a more nuanced picture of indigenous management capabilities. He found managers in the region to be highly skilled at overcoming production bottlenecks and navigating bureaucracy. Yet few had key market-relevant skills in strategy, innovation, and change management.

One area of controversy involved research suggesting that older managers who had been trained and socialized in centrally planned economies could not adapt to market logics or learn the necessary commercial, as well as communication and interpersonal, skills. Several experts therefore advised firms to develop and promote less experienced managers who would not have to "de-memorize" management practices cultivated in the socialist system.
What kind of management could successfully activate market economies in CEE?
The Russian sociologist Aleksandr Zinovyev coined the term "Homo Sovieticus" to describe the impact of seven decades of totalitarianism on the populace in his home country oft expressed in this Soviet-era joke: "they pretend to pay us and we pretend to work." A number of comparative studies suggested that low productivity in Russia and other socialist economies in this era was due in part to the wage structure (high non-wage and low wage compensation). But this raises broader questions concerning motivation and underlying assumptions about human nature embedded in the capitalist versus communist system.

In Management in Socialist Countries: USSR and Central Europe, Witold Kieżun makes the case that American managers operate from the logic of "homo economicus," assuming that people are motivated by their individual self-interest. The logic of "homo sovieticus," by comparison, assumes that people have stronger social motives and assume obligations to the collective or, in this frame, the socialist state. What kind of management could successfully activate market economies in CEE?

SECTION 4
"Western-style" Management to CEE
Advice to managers in CEE during this turbulent era: Adopt marketing and management practices from the West.
The International Monetary Fund and World Bank, the management and business press, and many academics and business school deans gave this advice to managers in CEE during this turbulent era: Adopt marketing and management practices from the West. Among the prevailing prescriptions: Become more market-oriented and consumer-responsive; improve product design, quality, assortment, and packaging; increase merchandising and promotional activities; institute competitive pricing and price discounts as appropriate.

Companies as varied as ABB, Digital Equipment, Ernst & Young, McDonald's, Pizza Hut, Saatchi & Saatchi and Toyota moved into CEE looking for market opportunities and hiring local management and staff. The gap between western standards and CEE capabilities was apparent to indigenous managers.
We don't have real managers—only old thinking. What we need is new thinking. /// Our managers are selfish and unconcerned with the enterprise. . . . They don't have any people management skills.
Shama's interviewees
Many educational initiatives were launched to reduce this gap. Under the aegis of the Kohl-Gorbachev Agreement, hundreds of Russian managers came to Germany to take part in the Manager Training Program hosted by the Carl Duisberg Gesellschaft. Harvard Business School, Duke University, the University of Minnesota, and many other universities in both the U.S. and Europe developed training programs for CEE managers. The University of Michigan made a $30 million grant to scholars to study "economies in transition."

The U.S. government funded management education grants to "institutionalize political democracy and economic pluralism" in CEE countries. A $50 million USD program invited 50 business professors from CEE countries to the U.S. to visit Harvard, Stanford, and the University of Chicago, among other institutions. In turn, legions of consultants and educators came to CEE to lead trainings on subjects like accounting, marketing, and human resource management as well as seminars on corporate governance, joint-ventures, etc.
$30'000'000

Was granted by the University of Michigan to scholars to study "economies in transition"
50

Business professors were invited from CEE countries to the U.S. as part of a $50 million USD program
1990's

The time that the European Foundation for Management Education (EFMD) turned its gaze eastward
Finally, the European Foundation for Management Education (EFMD) turned its gaze eastward in the 1990s. Started in 1972, the EFMD is a network of business school deans, MBA program directors, executive education administrators, and select companies formed to enhance management education in Europe—meaning Western Europe in its first two decades of operation. By the 1990s, it was sending, from member schools, hundreds of faculty into CEE countries, and in 1991 it held its annual meeting in Vienna, Austria featuring American management guru Tom Peters.

SECTION 5
Management Education in CEE
There is no word for "management" in the indigenous languages of most countries in CEE.
There is no word for "management" in the indigenous languages of most countries in CEE. According to Czech management consultant Michal Čakrt the word translates into control (управление) in Russian, to steering in his land, and to administration as well as "waste management" (zarządzanie) in Polish. Professor Ichak Adizes adds that he has found no literal translation for "management" in almost any language (upravljanje or rukovodjenje in Slavic languages; administracion or direcion in Spanish). "What does that tell you?" he asks. "The concept is culturally bound. It should not come as a surprise that most of the books on management originate in America."

Indeed, many American management "educators" rushed in to CEE countries to offer workshops and trainings in this era. In her 1992 edited volume, The Russian Management Revolution: Preparing Managers for the Market Economy, Northeastern University Professor Sheila Puffer, who earned a diploma from the Plekhanov Institute for National Economy, takes a dim view of the many incoming "academic opportunists."
Many individuals attracted by the opportunity to 'make a quick ruble' have skimmed the market by offering seminars that do not in fact provide in-depth and practical information to course participants.
Sheila Puffer, Prof., Northeastern University
In the volume, a chapter by Evgenii I. Komarov highlights the challenges of women in Russian management, and one by Anatolii V. Zhuplev makes the case that it will be impossible to speed the former USSR's transition to a market economy or advance effective management education without the "intensive cooperation of Western countries, in particular the United States."

Thus it should not surprise that American management schools reached out to their CEE counterparts to help them educate managers for transforming their enterprises. The University of Pittsburgh's Graduate School of Management launched an MBA program in St. Petersburg in the fall of 1992 after its efforts in Budapest (The International Management Center, 1988) and in Prague (1991). The State University of New York (SUNY) in Buffalo worked with the Riga Technical Institute to create the Riga Business School in 1992; the University of California, Berkeley helped to launch the Graduate School of Management at St. Petersburg State University in 1993; and Michigan State University, among many other schools, sent faculty members and students to study business in CEE.
Schools from Western Europe were active, too. From Italy, Bocconi launched a joint venture for research in management with the State University of St. Petersburg and the Nomisma institute helped to found the Higher Business School MIRBIS in Moscow. Faculties from the London Business School and from Manchester and Middlesex advised on curriculum, taught courses, and began research projects with CEE schools and faculty. IMl-Kyiv Management Institute opened its doors in January, 1990 as a nonprofit joint venture between the IMI/Geneva/IMD Institute in Switzerland and the Institute of Economics of the Academy of Sciences of Ukraine.

In addition, there were several east-west collaborations to promote entrepreneurship in CEE. The World Bank supported several business incubators in the region in the late 1980s, although as studies indicated, these often resulted in no more than a "desk and a phone" at a university or chamber of commerce. More significant was the European Forum for Entrepreneurship Research (EFER).
About EFER

The origins of EFER trace to Dr. Bert Twaalfhoven and a group of Harvard Business School alumnae in Europe who were dismayed that European professors taught entrepreneurship through case studies of small businesses based in the U S. They assembled a group of interested sponsors, including European entrepreneurs and venture capitalists, to create EFER which "promotes research and teaching in the field of entrepreneurship at institutions of higher education across Western and Eastern Europe."

From 1987-'97, EFER sponsored case research projects in Western and Eastern Europe, held case writing and teaching workshops, and "teach the teacher" programs in Prague (1992) and Budapest (1993) among other locales. Among the case contributors in 1992 were Danica Purg and Nenad Filipović from Slovenia, Andrzej Koźmiński from Poland, Alexander Naumov from Russia, Milenko Gudić, then with the Institute of Economics of Belgrade, and Derek Abell, editor of the case writing program. All would feature in CEEMAN's launch a year later.

Finally, there were several privately run management schools launched in CEE in this era:

IMC – International Management Center in Budapest, financed by American/Hungarian philanthropist George Soros, founded in 1987.

Estonian Business School. Originally the Estonia Management Development Institute, this private enterprise was founded by Professor Madis Habakuk in 1988 and initially connected to business education in Canada. EMS offered Bachelor's, Master's and Doctorate level programs in the field of business and public administration.

Kozminski University. The Akademia Leona Koźmińskiego of Entrepreneurship and Management (LKAEM) was a private, nonprofit business school in Warsaw, Poland, named after Leon Koźmiński, a Polish professor of economics and entrepreneurship, and father of Andrzej Koźmiński, who was the founder and the first rector of the school.

International Executive Development Centre - IEDC. Founded as the Executive Training Center already in 1986, this independent school, established by the Slovene Chamber of Economy, was located in Brdo pri Kranju and later moved to Bled, Slovenia, and became IEDC-Bled School of Management. In the media, founder Danica Purg, proclaimed "Like all Eastern European countries, we believe that management is not a profession, but a function. To turn this around we needed to professionalize management through management education."

The story of CEEMAN's founding starts with Danica Purg and her experiences at IEDC in Slovenia.

The first home of CEEMAN at Brdo pri Kranju, 1993

Credits
Text — adapted from the book "CEEMAN - 20 Years of Creating History" by Philip H. Mirvis and Arnold Walravens, 2013

Production and Design — Artyom Ushnichkov, 2018