Formal
Estonian Business Culture and Informal Networks
Love,
friendship, and contacts among Norwegian and Estonian business people in the
1990s
Paper presented at the Fourth Nordic Conference on the Anthropology of Post-Socialism, April 2002
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The
Norwegian - Estonian context
The ideal Estonian business man
Contacts in business - the importance
of informal networks
Contacts in Estonia
Gossip
Friendship
Love and sex - don't mix business and pleasure
Conclusions
“Never mix business and pleasure,” is an often repeated warning to businesspeople, employers, and employees all over the business world. But even though there seems to be a popular agreement that roles in business and private life should not be mixed the warning statement contradicts much of the business literature and the actual business practice where personal contacts, networking, and the maintenance of relationships play important roles. Relationships and contacts in business are dependent on personal trust and need to be maintained and nourished just like other personal relationships. The nourishing of business relations and business networks cannot be done in a strictly formal way, and is dependent on things like small talk over a business dinner, Christmas presents to your colleagues, and concern about your business contacts’ family.
During my fieldwork in Tallinn in Estonia in 1996 I studied ways of doing business in 12 small Norwegian-Estonian companies with Norwegian Presidents or Directors. All the companies except for one were lead by men. Even though the Norwegian and Estonian businesspeople had different ways of relating to and taking advantage of personal relations in business; informal networks, friendship, and even love relationships played a major role in the process of doing business for these companies. This paper will examine the importance of different kinds of networks in the Estonian-Norwegian business context and look at how the Norwegian business people managed to navigate in this environment where contacts and personal relationships are so important.
The 12 Norwegian-Estonian companies in Tallinn were highly interconnected. Several of the Norwegian managers and presidents knew each other from Norway, or they had met through their Estonian counterparts. Some had done business together in Tallinn, and even some had been introduced through their Estonian lovers. The Norwegian-Estonian companies also shared skilled Estonian workers who for example were fluent in Norwegian and English, and therefore came highly recommended. The most successful Norwegian-Estonian companies had extensive contacts with various Estonian and Russian networks.
For the Norwegian businesspeople Tallinn and Estonian was a high-risk society, which they knew very little about on beforehand. The Estonians often claimed to be better at taking risks than the Norwegians, even though Norwegian businesspeople in comparative business studies often come out as courageous risk takers. But Tallinn was a new business territory for the Norwegians, and more often than not, the Norwegian business projects failed.
During the Soviet times businesses did not attempt to make profits in order to be more successful, but to meet government quotas that resulted in bonuses being given to the workers. Business in the USSR was characterized by two phenomena:
“Government ownership of all of the means of production, including land, labor, and capital … and centralized planning of all business activities by the government.” (http://www.cssd.ab.ca/tech/social/tut9/lesson_11.htm)
The strict control of businesses was also the case in the Soviet Republic of Estonia. But Estonians have always had an awareness of being different from Russians and at odds with Soviet ideology, even when they were a part of the Soviet Union. As a result Estonia was seen as a special place in the Soviet times by both Estonians and Russians, and was referred to as “Our West” within the Soviet Union. The Baltic States became a socioeconomic laboratory within the Soviet Union as early as in the 1960s (Mailand-Hansen 1988), and around 1970 Estonian salaries were paid on the basis of labor achievement, and production was decentralized.
After independence in 1991 it was important for the new Estonian governments to distance the official policies even further from the policies of the former Estonian Soviet Republic, and private business enterprises and free competition was supported by official policies. As a result, only Hong Kong had more liberal trade regulations than Estonia in the 1990s.
It also seemed to be very important for individual businesspeople to distance themselves from almost everything that was connected to the Soviet times. Estonian businesspeople would define business by contrast to how things were done during Soviet times. Estonians, they would say, fit the image of competitive and liberal-minded businesspeople perfectly. They would emphasize the intensely competitive nature of Estonian national character and contrast this to the communist ideology, under which, of course, Estonians as “natural entrepreneurs”, had suffered enormously.
Modern, Western style business became part of the new Estonian identity and nation building. At the time of my fieldwork it was as if every Estonian was starting up a business or was involved in some area of the private business sector – or at least every young person. The liberal government adjusted laws and regulations in order to accommodate private businesses, and Estonian businesspeople often defined themselves as competitive businesspeople by nature. Business thus had an enormous effect on parts of the Estonian society. The 1990s was also a time when the Estonian society was starting to be divided and forming new social strata, and some areas of the Estonian society had very little contact or first hand information about the world of business. But nevertheless, private business was a major influence on the Estonian society at large and on the Estonian nation building.
In my thesis, A Place of Globalization. Cross-cultural Cooperation between Estonian and Norwegian Businesspeople in Tallinn, I have argued that many Estonian business people try to live up to an ideal type of “The Western Business Man”. There is of course no set definition of an ideal businessperson but some denominators are dominant and repeated in literature on business such as making a profit, competing, networking, and formal dress code. The typical Estonian businessperson seems to fit this picture surprisingly well. Estonians will be eager to tell you how they do business more properly than not only the Russians, but also than Scandinavians and other Europeans from countries which have at least 50 years longer experience in doing business than the Estonians. The Estonian way of doing business is also described as formal by both Estonians and foreign businesspeople. The business advisor Dun & Bradstreet also notes the Estonian formality and gives the following advice to businesspeople planning to do business in Estonia:
“The way of clothing in Estonia is formal. Without wearing a suit and a tie, you are running the risk of being taken for not fully competent to pass resolutions.” (http://www.dbsverige.se/sa/arkiv2.html#Estland - translated from Swedish)
As we have seen today’s Estonian businesspeople are eager to describe themselves as modern and somewhat ideal businesspeople, and their foreign counterparts share this description. But as any introductory book in business studies will tell us business is all about mixing business and pleasure or at least combining the mechanisms used to maintain personal relationships with business strategies. In order to succeed in business any businessperson has to relate to informal networks and personal relationships. In Tallinn in 1996 Estonian and Norwegian businesspeople took advantage of and gained access to various networks through business contacts, friendships, and love relations.
The coupling of business and personal relationships was noted by William Baron Scott, a British jurist, as early as the eighteenth century when he remarked that "A dinner lubricates business" (Scott 1745-1836). The importance of networks is emphasized in today’s literature on business: an article written for SAS’s flight magazine focuses on how men traditionally have better networks than women and thus do better in business and describes initiatives to teach women how to "network" better (Hervig 1998:22-23), a Norwegian journal for management and economy publishes articles about networks of knowledge within and between companies (Larsen 1998:73-79) and textbooks directed towards students of business and management deal with the importance of alliances and networks (Haugland 1996). During the high-profile "business day" held in Tallinn in 1996, in connection with the Norwegian Prime Minister’s official visit, the coffee breaks were called "network breaks". The idea was that participants could meet in a more relaxed atmosphere during the breaks and lay the groundwork for future cooperation and deals. The informal aspect of networking is also considered important in business, and my informants constantly emphasized the importance of having both formal and informal networks. By knowing, trusting, and sometimes even loving the persons one is «doing business» with one can reduce the risks involved. The possibility for informal contracts and deals also increases by having a large network. A good and extensive network may simplify the process of creating new business relations and the introduction of new projects in a business environment.
A network can be called a:
"...reservoir of social relations through which [an actor] recruits support to counter his rivals and mobilizes support to attain his goals" (Boissevain 1974: 25).
Networks in business can make it easier to make deals, they can function as sources of information, places to get favors, as safety nets, and minimize risk. Business networks can also function as instruments for preventing competitors from getting favorable deals, through for example spreading negative rumors about a person or a firm and can open or close access to niches. Responsibility and trust are important in the formation of and maintaining of business networks. One of the reasons for building good networks is to get in touch with responsible key figures in the business environment. If this is accomplished one can get access to useful information about the market and relevant actors through the network. In order to maintain one’s relationship to contacts within networks, one has to come across as trustworthy and be able to offer favors, thus showing in practice that one is reliable. Networks are often informal and much of what goes on in them is not meant for public consumption. The aspect of trust is thus also important in this respect.
The Norwegian business people in Tallinn related to at least three different types of networks. The most important networks were the network of local Norwegian businesspeople, the network of Western businesspeople, and the local Estonian-Russian networks. Access to the different networks was made available through friends, acquaintances, and sometimes lovers.
The network of Norwegian business people in Tallinn served as both a place to seek comfort and share gossip, and as a useful source of business contacts and a place to get concrete help in business matters. The wider network among Western business people in Tallinn provided for similar needs, but was in addition larger and consisted of a more diverse group of people. The arenas for these two networks were the pub and restaurant scene in Tallinn as well as more formal business settings. The Norwegian and Western business networks in Tallinn could, apart from social gatherings, provide informal loans, job offers, information on reasonable apartments, women, and money laundering. But the Western network could not offer certain local knowledge and did not have access to many of the local resources such as local bureaucracy. The third, and probably the most important network, was the network of local Estonian contacts. Both Norwegian and Estonian business people constantly emphasized the importance of local contacts. Local contacts also seem to be of crucial importance when doing business in Eastern Europe in general. According to a Norwegian consulting firm operating in North-West Russia, good contacts with key persons in local firms and authorities were essential in order to succeed in Russia and many of the problems experienced by Western firms in Russia, are attributable to lack of such contacts (Storvik 1997:49). In some cases good Estonian contacts could be the sole key to success. But for a Norwegian businessperson it is harder to get access to and maintain contact with the Estonian business networks, than to Western or Norwegian networks. One of the reasons is that Estonians are used to making the most of networks and that they do not trust Western business people easily. It can also be difficult for Norwegian business people to judge if Estonian contacts can be trusted off hand.
Gossip was a control mechanism within and across the various networks. Some of the Norwegian businesspeople failed to understand the importance of a good reputation and lost credibility and thus business contacts and deals.
Gossip is a common characteristic of Norwegian business networks in Tallinn. The Norwegian business environment in Tallinn was a small, transparent and closely knit social network, where the business people mostly knew each other or at least knew about each other via the gossip that ran through the network. The Norwegian businesses in Tallinn can be described as what Edward T. Hall calls a «high context society»[1] (Hall 1987). People in a 'high context society' have extensive knowledge about each other beforehand and communicate on a different basis than in more specialized 'low context' societies. If two Norwegian business people in Tallinn meet to negotiate a deal, part of the information will be made explicit. But the outcome of the negotiations will to a great extent be dependent on the unsaid information, which the actors have acquired through other channels, such as gossip. Whether the business partners are personal friends or whether they have dealt with each other previously are factors, which contain important information, which, though not made explicit, influence the negotiations. Edward T. Hall portrays members of a 'high context' society as follows:
"...it is their nature to keep themselves informed about everything having to do with the people who are important in their lives" (Hall 1987:8).
A popular story, which almost all of my informants knew a version of, was about the establishment of the first branch of Statoil in Tallinn and how they bought their first building plot. Almost every Norwegian businessperson in Tallinn took credit for pulling through the deal. Apparently the General Manager of Statoil had nothing to do with it. The stories, which were told about this man, were incredible. He supposedly had his personal supply of drinking water shipped from Sweden; he was patronizing towards the Estonians, and made enemies with the mayor of Tallinn so the company was initially denied a building plot. All the stories about his womanizing cannot be retold in this context. The factual basis of these stories was probably very weak. The point is rather that this and other stories were frequently mentioned and commented on among both Estonian and Norwegian business people. When I returned to Tallinn three months after the end of my fieldwork I was immediately informed by both Norwegians and Estonians of the current gossip.
Hans Henrik Philipsen has noted that gossip can provide order in an insecure business situation (Engdal, Enger, Hambro 1996). Similarly, gossip among Norwegians in Tallinn had an organizing effect. It answered questions such as who had contacts with the Mafia, who did irresponsible business, who was going bankrupt, who could be trusted etc. Gossip was an informal discourse, in which discursive objects such as «the Mafia», «Statoil», «Estonians», and «good» or «bad business people» were formed. Even though the stories that were told and retold were often unreliable, their very existence supported the actuality of the discursive objects; if every Western businessman talks about crime, crime has to exist and similarly if everybody thinks Estonians do not know how to do business, there must be some truth to it etc.
But businesspeople also need factual information, and gossip can be an unreliable source of information for people who are uncertain of how to interpret the truthfulness of the stories. A good network can provide access to significant people who know who and which rumors to trust. Jeremy Boissevain puts it this way:
"Network specialists, provide important links in networks viewed as a series of communication channels. They transmit, direct, filter, receive, code, decode, and interpret messages", (quoted in Whitten and Wolfe 1973:732).
The Norwegian and the Western networks can in some instances offer this, but contacts within local Estonian business networks can be of even greater importance in order to attain sound information and useful favors. Estonians have a long tradition in building and using networks. This tradition characterizes the way they form relationships even today, as we shall briefly see in the following example:
An Estonian businessman told me a story about how he had once visited his Norwegian business partner and friend in Norway together with some of his Estonian friends. The Norwegian was painting his house when they arrived. They offered to paint the house for him for free. The Norwegian refused the offer because he said that the neighbors might think that he was abusing their friendship by getting free labor. The Estonians did not understand this. The Estonian man said that Estonians always offered favors to their friends. This functioned as a give and take relationship.
“When you do a favor for someone he owes you something in return. In a way this means that we take advantage of our friends. But at least we know that if he is our friend he will return the favor.”
The example illustrates different Estonian and Norwegian ways of viewing friendship. Eric R. Wolf’s contrasting of emotional and instrumental friendship is similar to the differences between Norwegian and Estonian attitudes towards friendship (Wolf 1966). Emotional friendships are characterized by affection in personal relationships between two friends and is similar to the Norwegian way of regarding friendship. Instrumental friendships, in contrast, are described as relationships which in effect reach further than the dyad and connects the actors to other people: "Each participant is a sponsor for the other" as Wolf says (Wolf 1966:12). In the example above the Estonian found it natural to give and receive favors from his friends. He stressed the practical aspects of friendship, which sometimes is especially strong in societies with limited resources. The Norwegian, on the other hand, viewed friendships first and foremost as a personal relation and not as a relation that could be used to obtain services. He was afraid that other people and his Estonian friend would believe that he abused their friendship by letting him paint his house, and involving the Estonian’s friends would be even more questionable.
Instrumental friendships have a long tradition in Estonia and the former Soviet Union. Informal contact and extensive networks were important in order to obtain goods and information during the Soviet period. These networks ranged from friendly turns, to organized crime, to "corruption" in the bureaucratic system, and there was a continuity between the different levels; a family member or your neighbor could know someone in the local government or be a local politician himself and thus put you in touch with the people who could help you get a visa to travel or whatever it was you needed (see e.g. Mars and Altman 1983 and Nielsen 1996). The extended and developed networks from the Soviet period still exist today and can be of use. Potentially, everything can be done if networks are utilized properly. This is not to say that Estonians view friendship as purely utilitarian and that Norwegians only have friends as their soul mates.
But friendships play an important role in modern day Estonia, as Estonians have learned how to use friendships both professionally and emotionally. The former networks of friends can and are being used in business. One Norwegian company especially appreciated the importance of yesterday’s networks of friends, and kept an employee from the Soviet times who, in their mind, was unable to function satisfactorily in a modern business setting. The only ting this employee could offer was an extensive network of friends and contacts in governmental and official positions. His broad network, which was formed during the Soviet times, was more important than his total lack of computer skills or business training.
Another aspect of the networks during the Soviet period was that they often were illegal. Estonians therefore had learned to keep information about what was going on within the networks secret and this made it even more difficult for Norwegians to get access to Estonian networks. As networks sometimes were illegal friendships were often based on absolute trust. Betraying a friend could have brutal consequences, and as Ladislav Holy puts it:
“Friendships literally meant putting one’s security or even one’s freedom into another’s hand” (Holy 1996: 24).
This is one aspect of networks or friendships that has not been important in Norway since maybe the national resistance during the Second World War.
The business process is sometimes compared to a love relationship. You hear things as: love your customers or love what you do. But mixing love and business is not seen as the norm. But in a high-risk society, as Tallinn was for the Norwegians, the Norwegians sometimes looked for someone to trust in the form of a lover. As mentioned above several Norwegian businessmen had love relationships with Estonian women, and many of them were married with children in Norway. These relations could be a based on love or it could be more formal agreements that involved sexual favors coupled with dinners and social entertainment. In any case the Estonian women often received money or other sorts of material compensation from their Norwegian partners.
Almost all of the Estonian women and the Norwegian men who were involved emotionally or sexually also had a business relationship. There was for example one Norwegian president of a company who had a long time love relationship with his manager, and one Norwegian who promoted his secretary and lover to project manager. The women quite often knew each other across the companies and functioned as mediators and contact points between companies. Because of their acquaintances with the other women they sometimes could provide their men, or a nosy anthropologist, with useful information about a competing company.
At first glance the Estonian practice of infidelity and sexual affairs seem very obvious in the eye of a Norwegian. It seems as infidelity and extra marital affairs are more openly practiced and accepted. This is not to say that infidelity exists to a lesser degree in Norway. But to point out that in the Norwegian–Estonian business setting love affairs played an important role for at least the Norwegian businessmen in terms of emotional support and business information.
In addition to the love metaphor business relationships are often compared to personal relationships. Several business advisors stress that successful business is accompanied by close relationships. Linda Marks for example points out that:
“At the heart of good business are good relationships. People and relationships, she says, are the very fabric of business…”. (http://www.ofspirit.com/lindamarks18.htm)
But even though using networks through friends and contacts and building trust through nourishing business relationships are accepted and familiar business techniques; these techniques may be confused for a Norwegian businessman in Tallinn in the mid 1990s, where he feels insecure and is on foreign turf.
In order to succeed you need to know how to combine business and personal relationships. The Norwegian businesspeople mixed business and pleasure, but in an unknown setting the Norwegians can be easily hurt or make mistakes as they do not know who to trust, and have a different way of utilizing friendships, networks, and love relationships. And in fact very few Norwegian businesses were successful in their business projects. The Estonian and Norwegian businesspeople were in many ways doing different things. The Estonians were naturally more committed to their work as they were in their home country. The Norwegians were mostly trying to create order in an insecure setting. The Norwegians could have reduced the risk element in Tallinn by using networks and personal contacts, but instead they failed to have a professional distance to their partners, and in many ways relied too heavily on their contacts – and as a result they mistook professional relationships with emotional friendships.
There is a fine line between taking advantage of business relations and networks and becoming too close to your business partners. Some of the Norwegians ended up being hurt not only financially but also emotionally as they sometimes viewed the Norwegian-Estonian business setting including the Estonian women as their family and not as their business associates. The Estonians on the other hand, seemed to be able to move between the different networks and use friendships in a business setting without loosing the emotional part of their friendships in other more private settings. As the sociologist Jan Yager points out:
“…casual not close or best friendships are preferable in business. Caution should also be exercised against revealing too much or too soon to a co-worker, superior, subordinate, or mentor at work or in business. Yet friendship in business is crucial and beneficial”. (http://www.selfgrowth.com/articles/yager.html)
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1. Hall uses the term 'high context society' to distinguish between cultural differences on a national level, this can easily be criticized by anthropologists. I am on the other hand using his terms on a small and local environment.