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TitleOrganisational Change in Post-Communist Europe: Management and Transformation in the Czech Republic (Routledge Studies of Societies in Transition, 11)
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Total Pages270
Table of Contents
                            Book Cover
Preface and acknowledgements
1 Studying organization and management change in the Czech Republic
	The Czech transition in perspective
	The four enterprises
	The economic transition and enterprise behaviour
	Developing institutional theory
	Terminological caveats
	The research process
	Moving on
2 Institutions, organizations and management
	Economists, structures and action
	Institutions, institutionalized forms and institutionalized practices
	Legitimation, social support and institutional reproduction
	Organization and management as economic institutions
	Institutional change
	Summary and conclusions
3 The Czechoslovak state socialist economy
	The economic goals and institutional principles of communism
	The economic reform processes in the ČSSR
	Formal institutions in the Czechoslovak command economy
4 State enterprises and their management in Czechoslovakia
	The socio-economic reality of state enterprise management
	Normalization and the management of managerial legitimacy
	The technical problems of central planning
	The premises of enterprise management: Hierarchy, fear and conformity
	Management strategies: Discretion, networks and fiddles
5 Czechoslovak management and organization
	Economic and managerial legacies of state socialism
		The state of the economy
		The state enterprise as organization
		The nature of enterprise management
	Czechoslovak state socialism: The widening institutional gap
		Economic institutions: The hierarchy of hierarchies
		Managerial behaviour in state enterprises
		The institutional gap and the end of state socialism
	The transformation as institutional change
6 The post-communist context of organizational transformation
	The Velvet Revolution and the politics of the transition
		The events of 1989
		The politics of the economic transition
	Institutional change and the economic transition
		Transition management
		The process of Czech(oslovak) privatization
7 Management, enterprises and institutional change
	The post-communist managers
	The changing enterprises
	Deinstitutionalizing state socialist enterprise and management
8 Continuity and inertia in enterprise transition
	Socio-economic transience and the strategy of survival
	Waiting for new owners: The power vacuum
	Internal and external networking
	Organizational restructuring: The first moves
	Management responses to organizational changes
9 The redefining of Czech management and enterprise
	The enterprise as private company
		Boards of directors, management discretion and corporate governance
		Organizational restructuring continued
		Establishing structural units
	Redefining management
		Processes of management learning
		Personnel management and managing the personnel function
		Developing a marketing orientation and function
		The pursuit of quality
10 Economic transformation as institutional change
	Reviewing the arguments
	Czech organization and management: Historical limitations and future possibilities
		Inter-enterprise differences
		Key organizational issues in the Czech transition
	Patterns of Czech organization and management
Document Text Contents
Page 2

Organizational Change in Post-Communist

Recent transitional developments in the former communist countries have
aroused considerable interest among economists and political scientists alike.
Yet relatively little attention has focused upon the ways in which these significant
changes have impacted the micro realities of life within the transforming state-
owned enterprises.

Organizational Change in Post-Communist Europe provides a unique and
detailed examination of the complex processes of transformation in former state-
owned enterprises in the Czech Republic. Drawing on in-depth case studies of
organizational transformation, this book adopts a social-institutionalist approach
to the study of organizational change, applying it in order to develop an
explanation of organizational restructuring and management redefinition during
the early transition period of 1990–1996. In particular, the authors highlight how
these processes have been shaped by continuing historical state-socialist legacies
and the powerful role played by senior managers in their efforts to fashion the
new privatized organizations in their own interests.

By successfully re-balancing the prevailing disposition towards macro-
economic research into the post-communist transition in Central and Eastern
Europe, this volume constitutes an important work for all those interested in human
resource management, organizational behaviour and the management of change.
Ed Clark is Principal Lecturer in Organisational Behaviour at Nottingham
Business School, Nottingham Trent University. Anna Soulsby is a Senior
Lecturer in Organisational Behaviour at the same institution. Their joint work on
the post-communist transition has been published extensively in European and
American journals, including Organization Studies, The Journal of Socio-
Economics and the International Journal of Human Resource Management.

Page 135

former FTOs losing the last vestiges of control in February 1991, when the need
for special export and import licences was restricted to only a small range of
products (Frydman et al., 1993, p. 49; Jeffries, 1993, p. 390; Mejst ik and
Hláva ek, 1993, p. 68). In 1988, only fifty FTOs had been legally permitted to
engage in foreign trade, a figure which, corresponding to the number of formally
registered companies, increased to over 26,000 by May 1995 (Bohatá, 1996a, p.
23). At the same time that prices were freed from central control, the government
made the Czechoslovak crown internally convertible, thereby allowing businesses
to conduct foreign trade more freely. The liberalization of prices and of domestic
and foreign trade were critical steps along the path to a market economy, but they
had repercussions throughout the whole economy, with prices taking on the role
of market signals rather than mere units of account.

In April 1990, the 1988 Law on State Enterprises was amended in order to
reflect the greater strategic and operational independence required of enterprises
working in more deregulated environments. This law, and its companion on joint
stock companies, created a transitional framework for the corporatization of state
enterprises, moving ownership from the all-encompassing state to a concrete
founding organ (usually a ministry), while leaving effective management in the
local hands. The strategic management of corporatized or marketized enterprises
was to be conducted by an executive board of directors (p edstavenstvo), and
overseen by a supervisory board (dozor í rada) whose structure and membership
was approved by the founding organ. Until the end of 1990, when the
transitional debate on state enterprises shifted track to the agenda of privatization,
the founding organ could transform its state enterprises into ‘state-owned joint
stock companies’, in which the new legal entity had full control of profits and
financial independence in decision-making (Rychetník, 1992, p. 121; Frydman et
al., 1993, pp. 52–4; Mejstik, 1993, p. 135).

The increased decentralization of economic decision-making to individual
enterprises was partly created by these legal moves, but the very atmosphere and
expectation, not to mention the chaos, of the early transition period was
sufficient to effect real changes in the giganticist structure of the economy. Lízal
et al. (1995, pp. 21 1ff) identify the tendency for the large monopolistic state
enterprises to break up without policy or legislation being put in place. They
identified some 700 industrial enterprises which employed more than twenty-five
people at the start of 1990, but by mid-1992, mostly through break-ups, some
2000 enterprises had been created. Furthermore, the institutional vacuum left
room for enterprise managers to search for and strike deals with foreign investors
(Mann, 1993, p. 963).

Further processes of formal deinstitutionalization are important in
understanding the changing context of state enterprises in the early transition
period. First, the collapse of the CMEA structures had major consequences for
Czechoslovak industry, especially in the heavy engineering sectors. It was
decided in January 1990 that, as of 1 January 1991, all CMEA trade would be
conducted on the basis of world prices, and transactions would be settled in hard


Page 136

currencies. This instantly disadvantaged the Czechoslovak economy by
increasing the prices of energy and raw materials, mainly imported from the
Soviet Union, which were used for the manufacture of machinery and
metallurgical products which, in turn, dominated its export structures. This made
these already uncompetitive products more expensive and more difficult to sell
either to former clients in the East or to new Western markets. In fact, on this
basis, the Soviet Union found it difficult to repay its net debts to virtually every
CMEA nation, leading to the collapse of many existing CMEA contracts
inherited from the 1980s. Because their exports had made leading contributions
to CMEA projects, Czechoslovak enterprises in the heavy engineering branches
were especially hard hit by the impact of bad loans and withdrawn credits when,
in July 1991, the structures of the CMEA were formally dissolved (Hrn í , 1993,
p. 307). The early 1990s therefore saw an enormous reorientation of trade away
from the Soviet Union and the transitional economies as enterprises sought new
markets for their products, especially those that had accumulated as unsold
stock, and the safe haven of hard currency trade (Havlik, 1995; Lavigne, 1995,
pp. 102ff; Mitov, 1995; Bohatá, 1996a).

Second, as a consequence of new political priorities, and reinforced by the
economic reality of the wider post-communist world, there was a dramatic
shrinkage of the military/arms industry of Czechoslovakia. Czechoslovak
military expenditure had accounted for 3.7 per cent of GDP in 1989, when over
75 per cent of military output, worth k s22.7 billion, had been exported, making
Czechoslovakia the world’s seventh largest exporter of such products. The
defence agenda of the new government had massive effects on the mechanical
engineering industry of post-communist Czechoslovakia, with 60 per cent of the
‘damage’ occurring in Slovak industry (Jeffries, 1993, p. 390; Kiss, 1993).

Third, it has been argued that the command economies differed most from
their market counterparts in the nature of their financial systems (e.g. Székely,
1995, p. 200), because of the simplicity of their role in central planning. In that
the development of a capital market as a efficient conduit for channelling savings
into investment is a prerequisite for the operation of a market economy (Hrn í ,
1993), it was critical at an early stage to deinstitu-tionalize the monobank system.
Early in 1990, a two-tier system on a Western model was created from the State
Bank, some of its property being divided between seven new operating banks.
These banks inherited the portfolios of the former monobank, which included
both non-performing loans and low-interest bearing credits, some of which were
the bad loan legacies of pre1989 foreign trade. As such, the process of
deregulating and demonopolizing the former financial system reproduced in the
new banking institutions a technical insolvency and consequent operating
fragility (Hrn í , 1993, p. 307; Drábek, 1995, pp. 259–60).

Finally, the new government needed to tackle issues arising from the legacy of
state socialist social policy, whereby the state, directly or through its local
representatives, channelled social and welfare support, often through highly
subsidized pricing regimes, to the population (McAuley, 1991, pp. 100ff). The


Page 269

payment inability 126, 168
performance-related pay (PRP) 206
personnel function:

disbanding of personnel 158;
redefining personnel 197–5, 204–5;
state-owned enterprise 66, 158

pink managers 144, 166, 199, 235
post-communism 18–19, 106–8
power vacuum 168ff
Prague Spring 56, 57, 101
Prague Stock Exchange 133
p estavba 57, 113
privatization 116, 120, 123, 127ff;

basic privatization project 130;
competing projects 130;

large privatization 127, 129ff;
Ministry of Privatization 123, 127, 129;

privatization waves 130–31;
reprivatization 127;
restitution 127–128;
small privatization 127, 129;
voucher scheme see voucher

production function before 1989 65

quality management 212ff;
ISO 9000 212–10;

total quality management 213–11

rationalization 31–2
recentralization 57ff, 185
redefinition processes 139, 223, 236;

management 201ff;
management learning 201–204

reinstitutionalization 17, 40ff, 108, 123ff,
186, 221, 221

research process 19–3
resistance to change 181ff
Restitution Fund 128, 129
retelling the past 154–3

Screening Act (Lustration Act, 1991) 119,
143, 153;
renewal 229

Šik, O. 55
sink structures 200
social crisis 42, 103, 221

social transience 40
social welfare:

deinstitutionalization 121–20, 207,

enterprise role 64, 73–5, 97, 99–100;
productivization of social assets 199–7,

state socialism economic legacies 91–6;
enterprise level problems 74–9;

macroeconomic inefficiency 69, 102;
see also command economy

strategic management 156, 198
strategy of survival 163ff, 229
Strom sto 10–11
structural contradiction 41

coerced 36;
negotiated 35;
normative 35;
passive 34;
social 33ff

system crisis 41, 103, 221

trade unions:
after 1989 207;

before 1989 66–8
transformation 17, 18, 105–8, 221ff
transience 40, 164–2, 178, 185, 222
transition 14–16;

future possibilities 224–30;
as institutional change 17, 40, 105ff,
macroeconomic view 15;
main policies of transition 116ff;
role of the state 134–4, 232–30;
transitional structures 123–3;
versus transformation 18

transition management 108, 122ff, 221;
economic stabilisation programme 121–2
transitional environment 161, 215, 221:

progressive elements 161–60;
regressive elements 161–60

Urbánek, K. 115

Velvet Revolution 113ff, 148
VHJ 55, 61ff, 99;


Page 270

and post-communist networks 173ff
Visegrád group 94, 108n
Volna 7

employment 167;
gradualist approach 195, 225;
management characteristics 140ff;
ownership 189;
post-communist managers 140ff;
privatization 143ff, 189;
social welfare 7;
state-owned enterprise 6–9

voucher privatization:
Centre for Voucher Privatization 123;
criticisms 132–2, 228–6;
voucher scheme 129–32


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