Change management in transition economy: Serbia

ID-100183158(Image courtesy of AKARAKINGDOMS at


Serbia is a small Balkan country which is still straggling with privatisation of inefficient and often loss-making parastatals of previously nationalized industries by offering opportunities for foreign investors in the ownership, concessions and management. In the same time the government is trying to develop local private sector which is weak, disorganised and uncompetitive abroad.

Change is long overdue. It is necessary in both state and private companies. Irrespective of ownership (state or private) businesses are generally inefficient, organisationally outdated, without sound business strategy, not competitive internationally and consequently without capacity to grow and employ more people which is essential for the economy. Both state-owned and private companies have negative attitude toward risk as Serbia straggle to move away from its old socio-economic prerogatives. People simply don’t like change or competition.

Parastatals enjoy protected market position and are mostly managed by party apparatchiks, not immune to corruption, who find common interest with syndicates to protect the status quo as the best guarantee for own positions. Significant portion of employees got their jobs using family, friends and/or political influence what resulted in lack of energy, innovativeness and willingness to change. One can easily identify a wide gap between managers and their subordinates with the exception of some younger industries.

On the other hand, local private, mainly family-owned businesses of all sizes are still run by their founders or first post-privatisation owners and their families who lack previous free market experience. These managers still mix market with socialist economy techniques coupled with authoritarian culture enabling owner(s) to micromanage in most areas. Although they commit to employing young professionals new entrants quickly fit into the existing organisational mechanisms and end up as “doers” rather than “achievers”. Employees expect to be given precise directions for their assigned tasks so that there is no question what is expected. In general, subordinates do not expect their managers to seek their concurrence. It also implies general lack of ideas and innovation.

So what to do if you end up with a task of turning one of these companies around in order to integrate it in your international supply chain? Or “just” to make it internationally competitive as a stand-alone entity? This is exactly what is happening at the moment as a result of privatisation triggered FDI activity and regional M&A. The Government is hoping for more to happen.

Foreign investors shouldn’t be discouraged after reading my first few paragraphs! Even the situation sounds gloomy at first, it actually hides significant growth and profit opportunities if you know what and how to change. Workforce is skilled, educated and easily trainable in new work processes. They haven’t been encouraged until now for bringing new ideas or measured for individual performance what doesn’t mean they don’t have the capacity to adapt and excel under new conditions.

Your main challenge is how to deal with a fear of job loss among employees as it generates negative energy and prevents good performance. This is particularly true in parastatals as state used to act as a guardian. Expect organised resistance which can only be overcome through intensive communication at all levels and negotiation regarding staff reduction if need be. The seller (Government) can assist you there.

Start with training local leaders, especially those who should be directly involved in change implementation afterwards. They must clearly understand the benefits of a takeover for employees and local community – both short and long term in order to pass this message down the line. Those guys will then help other employees to better understand the need for the change and the rationale behind the decisions, as well as the ways the change may affect them. In addition those leaders must be trained in problem solving and weighing pros and cons when making decisions to be able to steer their teams in the right direction when they encounter obstacles.

To help overcoming resistance, encourage open communication from the very beginning. It will probably be something new in employee relations what people would notice and respect. I recommend using daily stand-up meetings and frequent retrospectives coupled with more storytelling. Problems are inevitable, but one must have the ability to foresee potential issues and take proactive steps to prevent them.

Next key challenge is to change the culture to encourage new ideas, innovation and risk taking. An organisation must build a process of ideas gathering at team level and embed it across the whole organisation. If you become successful here your ROI should exceed all expectations. As I mentioned earlier in this article people is Balkans are generally followers and doers at work but very innovative and problem solvers outside formal employment. One must just figure out how to attract those existing talents to materialise during working hours.

All those efforts require informed and experienced change management practitioners. In particular, western free market business and change management experience coupled with deep understanding of local mentality.

Due to complexity and wide spread of change process organisations should use formal change management methodologies that provide structure and consistency, allowing for easy adoption. This approach provides a common language and toolset, making application of change management accessible and achievable to all, to each level of the organisation and to each individual. In essence organizations have to recognize the need for change management as a core competency.


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