Igor Khodachek, PhD student at Bodø Graduate School of Business (Norway)

“Back to the future? Governance reforms and organizational changes in Russia’s regional
government”

Abstract

The paper presents a process study of ongoing public sector governance reform in Russia. The
study focuses on two specific elements of the larger public sector reform: changes in
governmental budgeting recognized as the introduction of “program-based budgeting” and the
new regulation on forecasting and strategic planning for Russia’s public sector and state-owned
enterprises. The main interest is to describe and understand what changes the reform brings to
day-to-day organizational practices in one of regional governments in the Russian North-West –
Leningradskaya oblast’ (also named as Leningrad region).

Introduction

Around three decade ago, the Western research community has witnessed the emergence of
new approaches to understanding the relations between the state and the society shifting the
focus from national governments to transnational or global governance (Djelic and Sahlin-
Andersson, 2006; Bevir, 2011). There are several thinkers, who may be named as the prophets
of this new world order (Kissinger, 2014) in many areas of thought. In political science, it is an
American author Francis Fukuyama, who advocated western liberal democracy and free market
economy as inexorable global trends, presenting them as the final stage of societal evolution
(Fukuyama, 1992). In media, it is a French military journalist and philosopher Bernard-Henri
Lévy, who criticized socialist and communist regimes and supported military interventions for
securing human rights (New Republic, 2001). In social sciences, the ideas of post-modern global
governance are often built on the works of French philosophers Michel Foucault, Jacques
Derrida and Jean Baudrillard. In a way the post-modernity discourse and the western model of
globalization becomes a universal worldview, supported by economic influence, military power
and ideological pressure. Fundamentally rooted in philosophy it spreads into other areas of
thoughts, disciplines and societal practices. For example, the Governmentality concept, initially
proposed by Foucault to understand the relations between a person and a state (Foucault,
1991) penetrates into other different areas like accounting (Spence and Rinaldi, 2014; Bigoni
and Funnell, 2015), international relations (Newman and Sanding, 2010), geography (Elden,
2007; Akçalı and Korkut, 2015) and even forestry (Arts, 2014).

However, the ongoing crisis in international relations, the demise of supra-national institutions
and the revival of a national state as the key actor in security, welfare and politics challenge the
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existing order of things as well as question the post-modern mainstream literature. Kissinger
(2014) suggests that political and economic organizations of the world are in variance: although
the economic system has become global, the political structure remained being based on a
nation-state as the main unit of the world order. In turn, think tanks close to European Union
and Russia’s administrations, such as European Council of Foreign Relations and Valdai Club
present the rise of sovereign state as one of strongest features of the nearest future (ECFR,
2015; Valdai, 2015). The developing economies are seen to be the main change-makers, most
powerful of which form BRICS bloc: Brazil, Russia, India, China and South Africa. Although the
supra-national institutions, promoted by BRICS countries are in principle designed similarly to
those, engendered by the Western countries, they possess a key difference. Instead of trying to
re-order the globe through imposing unified standards in capital markets, financial reporting or
public administration, they secure each countries’ spheres of influence and build parallel
governance system (Korostikov, 2015). The examples are BRICS development bank, the Russian-
backed Euro-Asian Economic Union and Shanghai Cooperation Organization, promoted by China
just to name a few.

Shifting the economic gravity center to the Wider Asia region challenges the existing
approaches in capital markets and political economy. The demise of global significance of G7
format after Russia quit the G8 and the emergence of G20 forum aimed at balancing the
interests of OECD and developing countries illustrates the described above global trends for the
international relations discipline (Valdai, 2015). The nationalization of public sector governance
reforms (Pollitt and Bouckaert, 2011) and the emergence of contextual models [at least in
research] (Drechsler, 2013) illustrate the wider changes in post-modern global order for public
administration and government accounting disciplines. This creates sufficient rationale to pay
attention at the contextual peculiarities of the emerging pillars of the new world order. Russia,
with its vast territory, historical and cultural background, world’s 5 th largest economy1, own
regional integration project and growing political ambitions represents an interesting context to
study. Strong centralized Russian state plays a key role in what Russia is today and where it goes.
As an element of Soviet heritage, Russia has a huge and developed public sector. Besides, the
Russian state is a significant actor in the national economy, directly or indirectly controlling in
total around 50% of its GDP through state-owned enterprises (OECD, 2013).

The governance of state, public sector and state-owned enterprise sector is extremely
sophisticated and faces continuous attempts to reform it by top political leaders. The global
ideology of New Public Management (NPM: Hood, 1991) seem to have influenced the content
of reform concepts and policies in Russia (Timoshenko, 2008). However, research shows that
recent public sector reforms remind more of adaption rather than adoption (Bourmistrov,
2001), pursue the legitimacy of Russian state on the international arena rather than enhance
instrumentality for local users (Timoshenko, 2008) and although satisfy well top political agenda
come into contradiction with existing traditions (Antipova and Bourmistrov, 2013). Most recent
studies report the nationalization of NPM-like reforms and the emergence of regulatory hybrids,

1 in terms of purchasing power parity (BRICSPost based on World Bank report, 2013)
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accommodating different ideas from various reform ideologies as well as a strong influence of
Soviet heritage (Khodachek and Timoshenko, 2015).

Today’s Russia faces the harshest consequences of the emerging global turbulence: the
increasing normative impact of the European Union on its border states in Europe, the rise of
Islam as new kind of religious ideology in Central Asia and the economic expansion of China into
its Far East and Siberian regions. Among all, the regional perspective of the described above
changes becomes significant. Unveiling how Russia’s regions, geo-economically inscribed into
various trans-national supply chains adopt governance reforms, designed at the federal center
may bring new insights to our understanding of the ongoing global changes.

The existing studies of Russia’s governance reforms focus on regulations and norms (e.g.
Timoshenko, 2008; Khodachek and Timoshenko, 2015). This study aims to understand the
practice side of state governance. The focus is made on the process of introduction of program-
based budgeting and strategic planning into the work of a regional government organization.
How new governance practices emerge and institutionalize in day-to-day routines and mundane
activities of bureaucrats, working for one or Russia’s regional governments is the main focus of
this paper. The purpose is to unveil, describe and analyze the emerging (or re-emerging) sources
of legitimacy of the Russian state for a Russian civil servant. The perspective, taken for the study
is the perspective of people working in a government unit, responsible for the implementation
of these reforms.

The remainder of the paper is structured as follows. In the next section author gives a brief
introduction into program-based budgeting and strategic planning reforms and describes the
concept of Russia’s regional government. This is followed by the theoretical section, connecting
governance theories and governmentality concept with institutional work approach, a note on
methods, empirical section, discussion and conclusions.

Program-based budgeting and State strategic planning in Russia’s regional government

Budget is the core of a public sector (Bandy, 2011). According to the legislation, Russian budget
system has three levels: the federal level, the regional level and the municipal level. According
to the Constitution of The Russian Federation, the constituents (regions) and municipalities may
manage their finance in any appropriate way. However, the federal legal framework leaves little
space for innovations or creativity in government budgeting and accounting. The variations
among regions are mostly limited to the number of instruments and technologies adopted from
the set offered by the federal center. The same applies to municipal finances. Since 2001, there
have been several attempts to introduce NPM-like mechanisms into the work of all three levels
of budget system coordinated by International Monetary Fund and World Bank (Timoshenko,
2008; Khodachek and Timoshenko, 2015). There are clear elements in the reform concepts that
have been adopted on the federal and to some extent on regional and municipal levels. Those
are performance-based budgeting, medium-term expenditure framework and program-based
budgeting (Khodachek and Timoshenko, 2015). The leading role in designing and promoting
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these mechanisms belongs to federal Ministry of Finance. Before 2014 the adoption of
program-based budgeting or, so-called state programs, was voluntary for regional governments.
Since 2014, in fact it became obligatory (reference). When talking about the Russian version of
budget programs, one should take into account that this is not budget programs that we know
from Sweden (Czarniawska?, 1996). In the Russian version, the focus is made on the
expenditure part of budgets, and the income part is decoupled from program targets and
program funds (reference).

At the same time, an important role in the state governance in Russia belongs to federal
Ministry of Economic Development (later - MED). Being a former planning and forecasting
government body in the Soviet Union, known as Gosplan (reference), among other (more than
20) activities it is responsible for macro-economic forecasts, the coordination of state
investment activities and governing so-called state property. The latter refers to various kinds of
assets, owned by Russian state, including shares in state-owned and semi-state-owned
enterprises. A special function of MED is the approval of state programs. After adopting federal
law on Strategic planning MED became responsible for state strategic planning. The latter is yet
a vague, but potentially an extremely powerful tool binding together in a single huge
governance system all three levels of budget, public sector entities, state-owned enterprises
and, although indirectly - private companies that have so-called “strategic significance for
national security and economic development”. The legislative framework for strategic planning
on the federal level practically consists of the federal law “On strategic planning in Russian
Federation” #172-FZ, adopted 28/06/2014. This comprehensive regulative act defines key
concepts of strategic planning, e.g. aim, task, result (outcome), forecasting, programming,
monitoring, system of strategic planning, etc. However it does not define what is meant by
strategy, planning and development. The law defines key principles of strategic planning,
describes the documents that are to be issued on all levels of governance for the
implementation of the law and regulates interrelations among the participants of strategic
planning. The so-called, system of strategic planning emerges as an extremely sophisticated set
of forecasts, strategies and plans, aimed at coordinating state, regional and local budgets with
socio-economic development of Russia, its regions and municipalities.

It seems to be that the background of the law is based on the idea of rational planning
approach, associated with the art of war, where the most authoritative thinkers were Sun Tzu
and Carl von Clauzevitz and the works of Igor Ansoff, most well-known of which was Corporate
Strategy book, first published in 1965 (Carter et al, 2013). Although the focus of Ansoff and his
successors was mainly on how to make a corporation to compete more successfully, the main
idea of rational decision-making as well as the implementation of these decisions corresponds
to main ideas of the law. However, reviewers of strategy research tend to criticize the
mainstream literature that takes rationality of human actions for granted. Carter et al. (2013)
claim that the modern alternative approaches have roots in the thoughts of Machiavelli. In turn,
Vaara and Whittington (2012) suggest studying strategy-as-practice. Thus the focuses is shifted
to the people and their actions.
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…

Theoretical framework

Governance: Stoker, Hufty, Bevir

Researchers depict the state in Russia as not only looking differently comparing to the West, but
also having different nature. In the West historically the word state, derived from le stato in
Machiavelli’s The Prince or status regni in Justinian’s code meaning the upstanding position of
the sovereign or the order of things was finally detached both from the people and from the
person of the prince, while Russia did not adopt the Latin term for the same purpose. In Russian
the concepts gosudar’ and gosudarstvo for long signified deep personal connections between
the ruler and the subject, depicting the quality of being a ruler and the territory of his rule. The
proper translation of gosudarstvo would be the domain from Latin dominatio – a regime of
domination, frequently implying personal possession. Both the state and gosudarstvo have
transformed from meaning the personal domination of the prince to describing an apparatus of
government, but this transformation happened in different historical periods and in different
manners that helps us to understand the semantic distinctions they still probably have today
(Kharkhordin, 2005). Although the Russian tradition of autocratic statehood has always been
distinctive from those of the West, the strong state Russia is building in the post-Soviet period is
going to distinct also from its past forms (Tsygankov, 2014). The idea of historical reliance on the
strong state caught pretty well by current Russian leader:

“Our state and its institutions have always played an exceptionally important role in the life of
the country and its people. For Russians a strong state is not an anomaly that should be gotten
rid of. Quite the contrary, they see it as a source and guarantor of order and the initiator and
main driving force of any change” (Vladimir Putin cited in Tsygankov, 2014, p. 6).

This paper attempts to put this key distinction of the Russian way of understanding and
mobilizing the state into the framework of contemporary accounting theories, connecting the
features of emerging Russian state governance system to the model, developed in Peter Miller’s
works on management accounting, informed by Foucault’s idea of governmentality.

The idea of governmentality (Foucault, 1991) derives from the basic distinction between
sovereignty and government. Sovereignty aims at securing the rule of law over a certain
territory as an implication of the power of the Prince. While government has primarily an
economic dimension and seeks to ensure the greatest possible amount of “good” for the
governed, having its roots in the economy of family. Foucault (1991) claims that the state has
governmentalized, narrowing political struggles to the problems of governmentality and the
techniques of government that in turn allows it to survive.

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Institutional work approach (Lawrence and Suddaby, 2006; Lawrence et al., 2009, 2011)
reorients the discussion on how institutions precondition action into how action affects
institutions. It suggests that ongoing intentional efforts of regional public sector executives to
create, enhance and repair institutions may be an important part in the processes of
accommodating organizational changes initiated in a top-down manner. Being distanced from
reform designers situated in Moscow, regional civil servants face challenging choices. Resource
constraints, the requirement to follow the rules in a highly centralized governance system of
today’s Russia as well as different agenda comparing to the federal level may lead to the
prevalence of a kind of sense-making strategy in accommodating and promoting changes in
regional governance. Thus, reforms may be mocked, sabotaged or they may be relatively
successfully accommodated into practice if they are seen to satisfy the ambitions of regional
executives to make the regional government organizations more understandable, manageable,
effective and efficient.

How the work of civil servants, responsible for executing the introduction of program-based
budgeting and strategic planning changes and develops identities, construct resources and
creates, disrupts or repairs institutions is the main theoretical interest of this paper.

Methods

The main methods of data collection are document search, observation and qualitative
interviews. Observations and interviews are done during author’s internship in the regional
government. Prior to that the author performs the document search, aimed at creating the
understanding of main features of the reform and building a kind of vocabulary for
comprehending data collected by observation and interviews. The respondents are selected
from regional government executives and middle level public sector managers to study whether
and eventually how their day-to-day mundane activities change and create taken for granted
organizational practices and routines, recognized as institutions.

The internship, presupposing continuous physical presence in the office of the regional
government allows the use some elements of ethnographic approach to data collection and
interpretation. This means that the author “establishes a direct relationship with social actors;
staying in their natural environment; with the purpose of observing and describing their social
actions; by interacting with them and participating in their everyday ceremonials and rituals;
and learning their code (or at least parts of it) in order to understand the meaning of their
actions” (Gobo, 2011 in Silverman, 2011, p. 17).

The author uses such technique as shadowing also known as “structured observation” or “direct
observation” – “following selected people in their everyday occupations for a time”
(Czarniawska, 2007, p. 17). In this study regional government executives, heads of departments
and civil servants are being followed during their work in their offices, on the meetings and

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informal conversations with their colleagues. Shadowing allows to understand the nature of
their work, (re-)construct their identities and thus trace the process of institutionalization of
organizational practices.

In-depth interviews, aimed at providing an understanding of organizational changes should

account the contexts they are inscribed into (Miller and Glassner, 2011 in Silverman, 2011).
Reflecting on this, the author tries to stay beyond the subjectivity-objectivity dilemmas and
report the knowledge he obtains in the interviews.

Empirical section

Discussion

Conclusions

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