Research Results of Rukhman Adukov

Measures to foster development of the agro-industrial sector and Russia as a whole. These measures were recommended to the federal authorities for further elaboration (the relevant methodological support and/or pilot testing may be carried out by “Governance in AIS and Rural Development” Department of VNIETUSH in cooperation with the corresponding authorities).

  1. To strengthen local self-government in Russia. To deal with this objective it is recommended to devise and to implement a project to test the recommended self-government model in a specific locality.
  2. To create favorable business conditions for commercial agricultural producers (the list of such conditions has been identified). To improve the governance system in the agro-industrial sector
  3. To produce the Food Map of Russia. This will enable to assess the food production potential of the country and its regions and to rationalize the use of natural resources.
  4. To create favorable conditions for agricultural marketing (gradual reduction of food imports, government procurement of over 50% of grain output of commercial farm operations, demonopolization of food markets, including Moscow market via their transfer to regions and districts).
  5. To set up model large-scale farms (agricultural technological centers) to test and to disseminate the world best agricultural production practices.
  6. To set up state-owned federal holdings specialized in seed growing and livestock breeding.
  7. To create federal and regional clubs of the best agricultural workers.
  8. To design large-scale farm models (including such characteristics as specialization, size, business management system, staffing, farm machinery, technologies, etc).
  9. To determine managerial staffing standards and composition for large-scale farms.
  10. To encourage socially-oriented integration model in the agro-industrial sector (when an enterprise-integrator enters into cooperation agreements with private farms, household farms and small-scale farms).
  11. To encourage agricultural producer cooperation via creation of associations and unions.
  12. To involve experienced professionals in management of lagging large-scale farms via transfer of farm shares.

Manageability theory (new approach)

According to the generally accepted interpretation of the manageability theory the average statistical manager of an enterprise or department is incapable to manage efficiently more than 8–12 people. If this standard is exceeded, the enterprise (and the whole industry) performance tends to decline. This statement reflects the core of the manageability theory. In our opinion, this is only one of the manageability theory elements.

We have proposed a different approach relating to this theory. A manager’s potential capabilities are the main internal reserve of business development. The more people, who are capable to manage an enterprise, are vested with the right to conduct business independently, the more economic reserves are utilized.

The reduction of the economy efficiency, observed as the average enterprise size in the industry increases, is caused by two reasons: increased number of people, who are capable to lead the enterprise, but who work under someone else directions (since the number of enterprises tend to decrease as their size increases), reduced manageability of enterprises (there are not many people, who are capable to manage large-scale enterprises).

As the number of independently performing people having managerial skills grows, the amount of responsibilities and commitment tends to increase, and, consequently, the managerial potential strengthens. This leads to improved efficiency of an enterprise and of the industry as a whole.

In addition, we have arrived at a conclusion that enterprise manageability and performance efficiency depends on the number of management tiers. Two-tier enterprises are the most manageable and efficient.

An assumption is formulated that the competition in the national economy is the result of accumulation of the certain (critical) mass of realizable managerial potential.

Governance system formation principles

Key factors, which constrain the agricultural development in Russia, have been identified (lack of favorable environment for farming, lack of self-government system in the country). The underlying principles for governance system formation have been formulated. In particular, it was established that the agricultural sector can develop only if the business environment (rules of play) created by the government are tailored to enterprises, headed by managers with average capabilities.

Methodology for governance system establishment and enhancement

It has been revealed that the existing methodology for governance system establishment in the agro-industrial sector that predominantly relies on industry-specific approach is inefficient in the market environment. The new methodology has been recommended; it has been named the problem-focused functional approach to the management system design. The core of this approach is that the government authorities should focus on key problems of the sector, territory, enterprise. Individual researchers and practitioners from various regions (Oryol, Nizny Novgorod and other oblasts) have been already applying the methodology in their activities.

Model of public governance vertical in the Russian agro-industrial sector

Using the above described methodology for management system establishment to be based on AIS state governance functions optimization the market-oriented model of the Russian AIS state governance structure has been recommended. The structure includes the federal, regional and local levels. The model is composed of 8 cross-cutting problem-focused functional blocks.

Self-government model for the Russian Federation

Institutional and economic measures aimed to establish efficient self-government system in Russia have been formulated. In particular, the model envisages building of inter-level (inter-budget) relationships based on territorial self-supporting principles (economic governance methods). The recommendations on local self-government improvement in Russia (including the mentioned model) were recognized as the best economic research results in Russia in 2004.

Recommendation on inter-budget relationships

A conclusion has been made that Russia development is impossible without the decentralization of inter-budget relationships. To address this challenge it has been recommended to establish inter-budget relationships based on territorial self-supporting principle. For instance, it has been proved rational to distribute total tax revenues of a rural settlement in the following proportion among the settlement, the district, the region and the federal level: 60%, 20%, 10% and 10% correspondingly. The rural settlements contribute only 1.6% of the consolidated budget of the Russian Federation; therefore, the implementation of this approach will not substantially affect the budget expenses. The implementation of this approach will require to increase rural settlements expenses to 1% of the budget expenses. Taking into consideration that the recommended measure will enable to improve the social and economic conditions in the rural areas dramatically (covering 27% of population and 2/3 territory of Russia) these expenses are justifiable.

Recommendations on tax system improvement

The expediency to replace three taxes (VAT, profit tax and gross income tax, including uniform agricultural tax) by the sale tax has been justified. This measure will add such merits to the national economy as liberalism, transparency, and will create favorable environment for business development. It is recommended to impose taxes only on three items in agriculture: outputs, land and labor. In this case farm enterprises will pay 3 taxes: the sale tax, the land tax and income tax.

Methodology for staff appraisal and selection

The primary characteristics — blocks, which form the personality of each worker, have been identified (all other characteristics are synonyms or a result of synthesis of these primary characteristics). The characteristics are called basic, and they are used to elaborate models of manager, subject-matter specialist and other employees. A method to appraise staff conformity to these models has been elaborated. The methodology has been successfully tested in Moscow, Tula, Svedlovsk and in other oblasts. In 1989 the methodology was recognized by the RSFSR Ministry of Agriculture as the best one (out of all Russian and foreign methodologies translated into the Russian language) and was recommended for application in all Russian regions.

Methodology for student appraisal and carrier guidance

The methodology was based on the above mentioned worker’s basic characteristics similar to the methodology for staff assessment and selection. The recommended approach enables to identify a business area, where a person will be able to demonstrate maximum of his capabilities. The methodology has been tested in a number of schools in Ryazan Oblast, as well as in selected military colleges (since it reveals the leadership capabilities) and has been highly appreciated by trainers and other participants.

Recommendations for justification of optimal farm size

The accepted approach to identification of the optimal size of the enterprise usually is limited to the size of cultivated area. The unsoundness of that approach has been demonstrated. It has been established that the number of farm personnel and management tiers should be the optimization factors. It has been determined that taking into account the manageability norms the optimal are large-scale farms with 2 management tiers and personnel number of 90–100 people. The expediency to increase the number of such enterprises is explained by the fact that in that case the sector structure would better match the social and psychological structure of workers.

Methodology for farm financial revitalization

The methodology comprises a package of measures to overcome crisis and to improve farm business performance using cost-efficient methods. The focus is to enhance farm business management system. The methodology has been tested on large-scale farms in Moscow, Samara, Oryol and other oblasts and proved to be highly efficient.

Methodology for intra-farm relationship improvement (including inter-tier relationships at large agricultural firms), including incentive systems

The expediency of relying on economic methods in farm business management has been justified. The methods envisage distribution of sale revenues between management tiers and farm units. This approach simplifies the relationship system; it does not require correction of business plans of the farm or its divisions during a year (due to the permanent input price growth) and offers other benefits.