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Management in the USSR — Its present and future
European Matlagernent @ Europeatl Managrvmt ISSN 0263-2373 $3.00
]omtal Volutrre ]ourrlal 1986
4 No
1
Management in the USSR Its Present and Future J. M. Gvishiani Deputy Chairman, USSR Council of Ministers for Science and Technology and Vice Chancellor of the Academy of Management
Mr Gvishiani gives a full account of Soviet Management systems and practices, and concludes with an analysis of current adaptations. This article is based on a paper given at the Academy of Management meeting at Yevenko in late 1984 The seminars arranged by the International Academy of Management give us an almost unique opportunity to acquaint ourselves with the latest achievements of management theory and practice in different countries of the world. Of highest value is that at similar forums attended by leading scientists who represent differing socioeconomic systems, one has favourable conditions for a free exchange of opinions with respect to not only purely professional, but also a widest range of general problems. Here are born the premises for fostering mutually beneficial scientific contacts between the representatives of East and West. My presentation deals with a number of specific features in the functioning of the modern management system in the USSR, and points out some trends in the development and ways of its further improvement in the near future.
Western Scepticism Some management theorists and representatives of business circles of Western countries look upon the
successes of Soviet management science with a certain degree of scepticism. The main reason for this unjustly pessimistic attitude consists in that, in their view, the problems tackled by management science in socialist countries allegedly differ radically from those facing government agencies and corporations in the West. Hence, the methods fit for planned economies cannot be used in the countries whose economy is governed by different economic laws. I do not concur with this point of view. True, the laws of development and the conditions of functioning of a socialist economy differ considerably from the conditions of business activity in industrially developed countries of the West. However, there are areas where scientists representing different social systems work at similar families of problems. The results of research in these particular areas, it seems, may be of mutual interest in both basic and applied fields. Among these areas one may distinguish general theoretical and methodological problems of management organization in large-scale economic systems, problems of intraindustry and regional management on a national level, management of large-scale R & D and other types of programmes and a set of measures aimed at faster technological change. It will be no exaggeration to assert that management experience acquired by the USSR in this and other problem areas is of unique character and presents great interest to science. Besides, some specific developments of management science in this country may be of consider-
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able interest to world management practice, as they concern one of the world’s largest and most dynamic economic systems, its faster development and higher effectiveness of the functioning. and Operating
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of its improvement, In the light of all the aforesaid, we shall consider the operating management system of the USSR economy. The Economic
Economic
IN THE
System
Management
I would like to concentrate on two groups of problems only. First, specifics of organization of Soviet economic management (forms and methods currently employed), and second, the most promising paths of restructuring the operating management system those already initiated and intended to be continued into the future. Special attention should be given to the economic methods of management in our country. The accent on a wider application of economic methods in the Soviet economy does not necessarily mean that other methods are not involved in the Soviet national economic management - administrative, sociopsychological, ideological and others. They are all rather widely used in management practice. It is, however, mainly our economic methods of management that arouse the greatest interest in the West. As is known, in any country and at any stage of economic development there crop up new objectives (it is also true for science and culture). The successful achievement of these objectives depends on the improvement of management in the given sphere of activity. At the same time, management does not develop spontaneously, by itself. Its development is influenced by the requirement made on it by the operating system - in this case, by the economy. Therefore, it is expedient to begin the consideration of the management system in the USSR by characterizing the existing economic system and the requirements made on its management. It is necessary to emphasize that the requirements on the management system are not permanent, invariable. On the contrary, they change under the influence of the specific features of some or other stage in the development of society, its economic and technical potential. What then are the distinguishing characteristics of the current stage in the USSR economic development? They are two. First, the highly developed productive forces and production relations in the USSR, or what is referred to as developed socialism. Second, the functioning of our society is accompanied by modem technological change that takes place both in the USSR and elsewhere. These two major characteristics determine today’s approach to the development of management, the assessment of its role in the modern world and ways
The economic system of the USSR as the target of management effort is a collection of related branches of the national economy and conditions for their functioning and development. It is based on the public ownership of the means of production expressed through the state (public) and cooperative (farm) property. The principal element in the socialist economic system is the state property - the basic form of socialist property. The state property is characterized by the socialization of the means of production on a national economic scale, which are the common property of the Soviet people. The state property comprises 88 per cent of the fixed production assets of the country. The public property is a decisive factor of a planwise dynamic development of socialist production and continuous growth of people’s wellbeing. The maturity of this form of property - the state property - is characterized by a high level of production concentration and specialization. In 1983 the industrial enterprises, each employing over 1,000 people, accounted for 14 per cent of all the fixed production assets and 66 per cent of industrial output. The basic units of our industry are large modern enterprises, production amalgamations, combines, widely employing the latest achievements in science and technology. As of early 1984, there were 4,300 production and research-production amalgamations in this country whose output accounted for over one half of the total sales volume. These are large-scale industrial complexes with up-to-date technological equipment. The USSR economy functions and develops today as a unified powerful national economic complex comprising all the elements of nationwide production, distribution and exchange. This is a practical implementation of Lenin’s ideas of transforming the entire national economic mechanism into an integrated large machine, an economic organism, so that hundreds of millions of people were guided by a coherent plan. The national economic complex consists of material production branches turning out the social product, and the branches of non-production sphere providing services of non-material nature. One may judge the scale of the national economy of the USSR by the data on the structure of its material production.
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According to the adopted classification, there are 16 large industries (groups of industries) comprising more than 400 branches, subbranches and operations integrating over one million independent business enterprises and organizations. According to some estimates, the number of economic linkages exceeds lOI (ten to the twelfth). It is worth noting that as the number of enterprises independently participating in the national economic turnover increases, the volume of economic linkages rapidly grows - by some estimates, as the square to the increase of the number of enterprises. The complexity of the arising managerial problems grows too. All this sets more stringent requirements on the national economic management. Developed
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The attained level of the economy, the established economic, social and political environment of its development place a strong demand on an adequate management system. Content and Specifics of Soviet Economic Management The Soviet economic management system comprises both the operating and the control subsystems. The latter is the unified economic centre of the country.
Socialism
The basic speciality of the contemporary Soviet economy lies in that it is the economy of developed socialism. If one tries to identify the major features and specifics of the current stage in the national economic development, they will include: l
national wealth, i.e. fixed assets, exceeded (by mid1983) two trillion roubles, including the fixed productive assets amounting to over 1.3 trillion roubles.
an unprecedentedly large scale and high level of material production; an ever wide and intensive application of technological advances; a sophisticated sectoral structure of the national economy and balanced development of its branches; transformation of the national economy into an integrated complex by means of deep-going sectoral and regional division of labour; dramatic changes in the main productive force of society - working people; attainment of a qualitatively new, higher material and spiritual living standard of the people, compared with the time the foundations of socialism were laid down; active sharing in the international division of labour by the socialist economy.
By the volume of industrial production the USSR is ahead of the Federal Republic of Germany, France and Great Britain taken together, and is behind only the USA. However, the gap (with respect to this indicator) is steadily diminishing. Nowadays the USSR accounts for one fifth of the world industrial output. Today this country’s output exceeds that turned out by the entire world in 1950. Since 1979 the gross national product of the USSR has amounted to more than one trillion roubles per year (in current value). The national wealth of the USSR the totality of material goods at society’s disposal (means of production and consumer goods) - reached by 1983 three trillion roubles (apart from the cost of land, mineral resources, forests). The main part of the
Under socialism, the necessity and significance of centralized management of economy, public production are stipulated by the public ownership of the means of production and unified economy-wide cooperation of labour. Accordingly, production becomes directly public in nature, and its principal characteristic is regularity in functioning and development. This underlies a conscious planwise management of business processes at all levels and in all units of the USSR economy. As is known, management is always exercised in the interests of the owner of the means of production. Under socialism, the role of economic centre is played by the state as the representative and spokesman of public interests in economic management. Management centralization on a national economic scale does not mean, however, that the state administrative bodies make all the business decisions, thereby substituting for the basic production management units. Centralized management proceeds from the fact that each management level has its authorities and responsibilities. Behind it is the very nature of the unified system of labour cooperation within the national economic complex of the USSR as an hierarchical system where each level constitutes a subsystem (or a totality thereof) of a superior hierarchical system. Thus, the centralized management of socialist production is a feature inherent in the cooperation of labour on a national scale. At the same time, though the state system of economic management is a centralized one, it cannot be reduced either to centralization alone or a combination of centralization and independence of enterprises . It is an integral management system acting as a unified complex and corresponding with the hierarchical organization of public production. It performs the functions of both the superstructure
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and basis, and covers all levels of management, the enterprise, the branch of industry and the region. All that means the extension of the production management function up to a national economic scale. The responsibility of each level is to ensure the most effective development of the respective system as a whole, given an optimal combination of the national economic interests and those of the subordinated business units. Basic Characteristics
Proceeding from this, one may formulate the following basic characteristics of the existing economic management system of the USSR constituting its essence. orientation towards the achievement of the goals of the adopted plans of socioeconomic development, ensuring a steady rise in material and spiritual standard of living of the Soviet people; l provision of a basis for a proportional balanced development of the national economy, its steady growth; 0 improvement of economic management, provision of adequate conditions through continuous improvement of organizational and managerial relations in all units of the economic system; l combination of centralized management and economic independence and initiative of enterprises, amalgamations and other basic units of the national economic system; l pursuance of a single state policy in the field of the technological change, capital investments, operations deployment, remuneration of labour, distribution of social consumption funds, pricing, taxation, finances, design and development of a unified records and information system; l an all-round development of democratic foundations of management; l strict and continuous observance of plan, finance, labour and production discipline, daily control of all aspects of business activities, elimination of localism and departmentalism in economic life; l simplification of management procedures and reduction of administrative costs through decrease in the body of managerial personnel due to optimization of managerial activity and higher level of office automation. l
In order to gain profound understanding of the gear characterizing the Soviet management system’s functioning, it is essential to look into the methods employed at different levels of economic management. These methods, though differing from the ones used in Western management, are based on the objective laws of management science and complex economic systems’ development. One can assert with
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confidence that in modem business practice the USSR puts to use both the latest achievements in Western management science and a number original management methods and mechanisms elaborated and applied with respect to the conditions of planned economy. It is precisely the latter that I would like to consider in depth. Methods
of centralized
planned
management
Methods of management imply the ways that the managing system uses to influence the operating system. The practice of the socialist economy includes various methods each differing in content. Of great significance are the methods of influencing the working teams, individuals and entire economic systems to make them fulfil the objectives of the given economic unit or management body. They are distinguished as economic, administrative and sociopsychological methods. The management methods are used as a complex of tools, not as isolated tools. Therefore the managerial activity is the resultant of diverse methods and ways of their employment. At the same time, each set of methods has its specifics, its unique forms of expression and frame of application. The central place in the above methodology belongs to economic methods. This is due to management relationships which are determined primarily by the economic relationships, and the people’s objective needs and interests underlying them. In accordance with the structure of economic relationships in the socialist national economy one may distinguish two groups of economic methods of management acting in unison: methods of direct influence on the participants of the economic processes and those of indirect influence. One may also distinguish between the centralized planned management and management on a profit-and-loss accounting basis that differ in the arsenal of economic tools used for their implementation. The first method is based on the direct social relations and direct allocation of materials, labour and financial resources, and operates via the directive targets established for planning and control of business units’ activity. The second method is based on the economic stimulation of production, economic, marketing and trade activities and operates through effective utilization of the economic incentives, reward and sanction, credit and financial systems, sound prices help develop economy and technology in the desired direction. This method features a harmonious combination of the centralization principle of planning and management with economic and operation independence of
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business organizations. It means that by using economic incentives, an attempt is made to ensure a rational balance between the administrative influence on the part of the central bodies of the state administration and the local initiative of enterprises. The centralized planning is the core of the management of socialist economy’s functioning and development, as well as of society at large. It implies: choice of optimal alternatives of both the national economic plan and those of individual industries and enterprises; distribution of the available resources in keeping with the chosen alternative of the plan; organization of material and technical supply, social division of labour, concentration of production, cooperation and combining; definition of the appropriate rates of the technological progress; intensification of the entire public production and strive for its higher effectiveness. Long, Medium
and Short Term
Currently the national economic planning in the USSR includes the formulation of the following medium-term and short-term system of long-term, plans. Comprehensive R & D Programme for a period of 20 years (broken down by five-year periods) elaborated by the USSR Academy of Sciences, State Committee for Science and Technology and State Committee for Construction. It is submitted to the Council of Ministers and the USSR State Planning Committee not later than two years before the next five-year period. Every five years The Comprehensive Programme is updated and the necessary corrections are introduced. Then it operates for the next five years. Draft Guidelines for the economic and social development of the USSR for 10 years (by five-year periods) elaborated by the State Planning Committee of the USSR together with the all-Union ministries and agencies and Councils of Ministers of Union Republics. They proceed from the long-term socioeconomic objectives and the Comprehensive Programme of the technological progress. For the first five years the targets of the Guidelines are broken down by years, and for the second five years - the key targets are indicated only for the very last year. Every five years the Guidelines are updated and then formulated in sufficient detail for the coming five years. The Draft Guidelines provide for the solution of major economic and social problems. This document is submitted to the USSR Council of Ministers one and a half years before the next five years. Plan Targets (broken down by years) for major indicator and economic standards for the next five-
year period. They are elaborated by the USSR State Planning Committee in conformity with the Draft Guidelines of the economic and social development of the USSR and passed down to all-Union ministries and agencies, as well as to the Councils of Ministers of Union Republics a year before the next five years. Later the Targets are passed down to amalgamations, enterprises and organizations. The latter elaborate draft five-year plans of the economic and social development, broken down by years. Parallel with it, they do preliminary work together with the marketing organizations in order to define the range (assortment) of products eligible for contracting. Proceeding from the Plan Targets and draft five-year plans submitted by amalgamations, enterprises and organizations, the all-Union ministries and agencies and the Councils of Ministers of Union Republics formulate their draft five-year plans (with the targets broken down by years) and submit them to the State Planning Committee of the USSR. The latter, with due consideration of the sectoral plans, elaborates a completely balanced and harmonized in all indicators draft national five-year plan of the economic and social development, with indication of annual targets, and submits it to the USSR Council of Ministers not later than five months before the next five year period. Annual plans of the economic and social development of the USSR, formulated in conformity with the targets and economic indicators of the given year of the five-year plan, providing for the required specification of the above targets, implementation of the latest achievements of science and technology, as well as the economic and organizational steps to fulfil the five-year plan. The five-year and annual plans elaborated by the enterprises and amalgamations are based on the economic and engineering calculation - the system of scientifically based technical and economic norms and normatives by types of job, labour and material consumption, material, fuel and power resources, utilization of plant capacity and specific capital investments. Non-Deficit
Development
The balanced character and non-deficit development of the economy are focal for planning. The economic mechanism oriented towards higher efficiency of entire production can function successfully if there exists balance in the national economy, primarily, the consistence in the material/substance content of the manufactured product and its value (monetary) forms, in production and consumption, supply and demand. However, in the national economy, despite the continuous increase in production, there still
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exists a considerable deficit in numerous industrial products and consumer goods. In this connection in market economy countries they try to intensively advocate the idea that deficiency is immanent to planned, centrally managed economy. According to such theories, spontaneously developing market economy generates excessive supply and overproduction, whereas centralized planned socialist economy allegedly generates inevitable deficiency in goods, and causes the employment of their direct distribution methods. The former economy is ruled by the consumer, the latter by the producer. Hence, the bourgeois and reformist idea of liberalization of socialism, its evolution towards spontaneous market-centered methods of business activity as allegedly the only way of ensuring effective economy. These conceptions are reinforced by references to some assertions concerning systematic excess of effective demand over production growth being an advantage of socialism, the assertions that could be found in our general and special literature of the 1930s. Here it is necessary to point out the erroneous character and the falseness of the very premise of these “theories” of the deficiency phenomena, excess of demand over supply allegedly inherent in socialism. The reason for the deficiency (past and present) does not stem from the socialist way of economy but from the specific historical conditions and factors of development. As to the socialist economy proper, it creates the best possible conditions for proportional, balanced development of economy, the consistency between physical (substance) and value (monetary) forms of the social product that rules out the excess of both demand over supply and supply over demand. In the 1960s and 1970s intensive efforts were made in our country to improve the development of our economy, make it more balanced, improve the physical/value proportions. The explicit causes of deficit have been eliminated by now. However, owing to certain inertia and the desire to solve some or other urgent tasks at faster rates and in shorter terms than actually possible, this deficiency is still there. But it does not agree with - in fact, it contradicts to - the essence of the economic policy under mature socialism that includes, as its organic component, provision for balanced, stable, proportional development of the entire national economy. “Khozraschet” The USSR national economy employs an arsenal of economic methods of management known under a unified term “Khozraschet” (profit-and-loss account-
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ing). Western theorists engaged in studies of socialist economy occasionally criticize the set of measures aimed at more active utilization of economic methods of management in the USSR and other socialist countries, suggesting in their stead a wider use of market forces. It seems, however, that it is impossible effectively to manage such a complex system as a national economy only by means of less rigid control of the market forces and reduction of the state involvement in the economic development. One may assert that the optimal course to be pursued by management theory and practice of today is rational, balanced combination of centralized methods of planned management on the part of government bodies responsible for elaboration of strategic scientifically based goals for the development of industrial, scientific and technological potential, and the economic initiative of enterprises and amalgamations with respect to most effective achievement of these goals and plans. Search for concrete forms of such a rational balance between centralized management and the local initiative of primary production units is a salient feature of the present stage in the development of the management system of the USSR. Here are some principles underlying the economic (khozraschet) methods of management. To get a better idea of how these methods are used on different levels of the economic system, let us consider a schematic profile of Soviet industry. The planwise organization of socialist production consists of various structural interrelated levels, performing certain production functions. The primary level is an enterprise (production amalgamation, or combine). It is a primary cell in the functioning productive forces and production relations or, in other words, the economic unit of socialist public production. In the final count, its production activity determines the fulfilment of the plan targets with respect to the volume, assortment and quality of products, the cost of production, the efficiency of public production, the growth of the national income and revenues. The primary economic unit acts as the main khozraschet element of public production. After the primary level, comes the so called middle level of management - all-Union industrial amalgamations. These amalgamations are organizational blocks integrating and managing the activities of enterprises and organizations of one particular branch of industry or sub-branch thereof on a nationwide basis. The next-higher level in the management system of industry are ministries whose responsibility is to
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provide branches
for balanced of industry.
development
of respective
The coordinating functions of ministries are performed by the corresponding all-Union agencies and interindustry management bodies such as various commissions, programmes, etc. The economic methods of management on different levels of economic organizations serve to urge the enterprises (amalgamations) to fulfil the mandatory plan targets, on the one hand, and create conditions ‘for the employees to be continuously motivated to attain the goals with maximum effectiveness, on the other. Thus, khozraschet is organically linked with centralized planning, the plan playing the leading role in their interaction. Khozraschet also has a planned nature but at the same time, it provides the required conditions for the fulfilment of the plan involving the economic interest and sense of responsibility, initiative and independence of economic units. Khozraschet, as a system of economic management mechanisms is a method of planned management of public production. It is based on the employment of the commodity-money relations. Its essence is displayed through its principles - economic independence of the enterprises within the framework of the centralized plan, self-repayment and profitability, material incentives and responsibility and financial control of the production and economic activity. All these principles are involved to form a system of taxes, economic incentives, controlling and coordinating influence on the part of state administration bodies that could establish a sound correlation between the outcome of teams’ or individual employees’ activity and the material reward. Besides, in these conditions each economic unit of the unified production system, beginning with a working team and ending with the intraindustry management body (i.e. ministry) is fully responsible for the results of their economic activity and cannot hope to get any unjustified subsidies from the State. Intraproduction
Khozraschet
The results of enterprises’ economic activity depend on how well their basic structural units perform their functions: shops, centres, teams and services. The interrelationships of these units with each other and the enterprise as a whole should stimulate economical use of all production elements, and that constitutes the essence of intraproduction khozraschet. The intraproduction khozraschet, like that of an enterprise, is aimed at most effective economic man-
agement. However, it is quite specific in its content The economic relationships and organization. between the units are directly regulated by the plant administration. Since the intraproduction units are not engaged in marketing their produce, they have no revenues of their own. They have nothing to do with such elements of khozraschet organization as conclusion of economic agreements with other enterprises, framing their own balance, opening a bank account, or establishing direct relations with credit and financial organizations. The intraproduction khozraschet implies observance of correlation between the costs of a given volume of work with the plan norms and the material incentives for the employees for the achieved economy. Its organization includes planning the work of the structural units in relation to a certain number of indicators, control of performance against the above indicators as criteria, formation of incentive funds and a wage system providing for motivation for more effective performance of each unit and use of material sanctions in the intraenterprise relationships. When the structural unit is based on the khozraschet principle, special attention is given to establishment of sound normatives, better use of plant capacity accounting of consumption of materials, tools, fuel, power and better management of inventories. Coordination The effectiveness of the economic methods to a large degree depends on how the enterprises’ activities are coordinated. Within the sectors of the USSR national economy there function all-Union (or republican) industrial amalgamations. These are economic organizations built on principles of self-repayment, having material and financial responsibility for their activity, the fulfilment of the plans and agreements. The industrial amalgamations possess broad authority in matters concerning production, i.e. certain flexibility, as well as authority in using economic incentives both internally and in the relations with their suppliers and consumers within the framework of the single national plan. The khozraschet principle also underlies the organization of management of sectoral ministries to make them interested in higher efficiency of performance of enterprises (amalgamations, combines and all-Union (republican) industrial amalgamations reporting to them. They exercise material responsibility for the socioeconomic and technological development of the given branch of industry and ensure the required revenues. Both intraproduction khozraschet and that of higher levels are based on the same
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principles as the khozraschet of enterprises but their organizational formats differ. Introduction of khozraschet or a special system of economic incentives of all-Union (republican) industrial amalgamations and sectoral ministries does not belittle the role of khozraschet at enterprises (amalgamations). Division of functions, vesting each level with their own material resources, authority and responsibility, provide for the unity of economic interests of ministries, industrial amalgamations, production enterprises (amalgamations) and society at large. They make it possible successfully to solve the major problems of the nation’s economic development. The foregoing gives a general picture of the operating system of Soviet economic management that has ensured such rapid development of our country’s scientific and technological potential. Pressures for Improvement and Development At present, in the condition of an increase of the influence of intensive factors of economic growth, the management system is faced with new and more sophisticated challenges, with a constant need for further improvement. Hence, the continuous striving for improvement of the management system, making it more adequate to confront new requirements and objectives. This urge for the economic management system’s improvement is one of the organic elements and an essential condition of the nation’s socioeconomic development. It should be emphasized that the current stage in the improvement of the management system and the economic mechanism features comprehensiveness, multifaceted character, profound scientific support of the decision alternatives and their thorough testing by experiment. Nowadays our country is engaged in an intensive search for new forms of management organization in various spheres of activity and on different levels of the Soviet economic system. It seems appropriate to consider some specific paths for improving the national economic management mechanism. Its main objectives are as follows. Shifting the accent from administrative forms and methods of management to economic incentives. and motivation of participants of public production; 0 Greater economic independence of the primary economic units, the amalgamations, enterprises and organizations, in the planning of their activil
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ties and the utilization of their resources, with greater responsibility for the final results of their work; Greater responsibility for all the economic management bodies (from lower levels to sectors and regions) for achieving national economic goals, including higher industrial output, improved quality, wider assortment, better use of plant capacity, as well as of labour, material and fuel/energy resources; Greater encouragement of local initiative and active involvement of working people in the management of production and the solution of socioeconomic problems; Selection of the most effective courses for developing the national economy, for finding the most promising fields that would contribute to the intensive growth of the nation’s economy; as well as the improving the adequacies strategies of the management system and its strategies.
It seems, with the above restructuring and development of the economic management system, it will be possible to have a dramatic effect in the near future. Among these effective factors are greater economic independence of the basic economic units, the production amalgamations, enterprises and organizations. This is of utmost importance, first, for the creation of the most favourable economic and organizational conditions for the activity of the primary level of public production, and, second, for the rational distribution of functions, authority and responsibility among the amalgamations, enterprises and organizations of the higher levels of management, for the higher effectiveness of the entire organizational/economic mechanism of management. Experimentation In order to find a faster solution to this problem, a large-scale economic experiment is being undertaken in the USSR. It is aimed at practically testing a set of measures for the extension of the authority of the basic units of industry, the production amalgamations of enterprises, in the planning and implementation of their activity, and their adoption of greater responsibility for the results of their work. It will allow the selection of the most effective measures and their application to other branches of industry, beginning with 1986. It will also make it possible to prepare the Plan Targets and a draft plan of socioeconomic development for the Twelfth Five-year period. The main objective of all these measures is to provide an optimal combination of self-supporting independence and responsibility on the part of production amalgamations and enterprises.
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The experiment is required to ensure a substantial reduction in the number of plan targets needing directive approval. To make the Five-year plans an effective instrument in the utilization of scientific and technological achievements, it has been decided that they should include only strategic goals for the development of production, and the achievement of its higher effectiveness. Another impo;tant aim of the experiment, contributing to faster technological change, is the creation of new opportunities for modemisation of technology and restructuring of enterprises and amalgamations at the expense of their own resources, acquired from their profit. They are granted greater rights to use the production expansion fund, i.e. the share of profit the enterprises may use to purchase a new equipment without the approval of the higher level bodies. Optimisation Another avenue for improvement of the management system in this country is optimisation of the organizational structure on various levels of the national economy. In the last decade a lot has been done to this effect. The master schemes of sectoral management have been developed and applied, mainly in industry. At present there are about 30 master schemes elaborated by industrial ministries, that provide for a respective rational reshuffling of the given branches of industry. This effort is aimed at greater concentration and specialization of production, closing unprofitable enterprises and integrating and retooling (using new technology) the enterprises that have become less efficient. This structural reshuffling will arrive at further integration of sectoral higher level units horizontally, and reduction of the number of management levels vertically. The development of the economic mechanism is expected to play a signficant part in this process. Most intensive work is being directed to this. As was mentioned earlier, the main task is to provide for a wider use of economic methods by alI levels of the national economy, including sectoral ministries. They will be given an opportunity to plan the main proportions of the development of the respective branch, concentrate and distribute the financial resources, apply economic incentives by compiling special funds of material reward. They will also have the authority to regulate the wage level depending on the productivity of labour, quality of products, reduction of costs and other indicators. With the help of some evaluation criteria, there is an opportunity for an II priori increase in the funds intended for various
premiums to performance is greater role will failure to fulfil
the the be the
economic organizations whose most effective. At the same time, a played by different sanctions for a production and delivery plans.
Serious attention is given in the USSR to regional management and the management of the Union republics’ economies. It is achieved through delegating greater authority to both the republic’s and the local bodies, mainly in the management of branches producing consumer goods, and in the non-production sphere. In ter-Zndus try Management In present conditions, the development of interindustry management is rather urgent. It implies the improvement of production and R & D cooperation and implementation of harmonized R & D and investment policy in groups of related industries. This is being achieved not only by interrelated development of the corresponding economic and organizational mechanisms, but also by establishing interindustry and multifunctional amalgamations. These may be agroindustrial, industrialtrading, production servicing, transport, construction-assembly or other types of amalgamations specializing on performing a complete set of economic functions. Under socialism there is being created an objective basis for effective and planwise solutions to largescale national economic problems. We possess a most effective instrument for this, an organizational and economic mechanism of goal-orientated programme management. The country has accumulated vast experience in programme management through handling interindustry R & D problems. For the Eleventh Five-year period and for the period ending in 1990 there have been formulated 170 national R & D programmes. The management of the national power system development employs programme methods and forms. They are also employed for the management of food programmes and for the formation of regional production complexes. Improvement of organizational/economic forms and methods of accelerating technological progress takes a special place in the overall process of management improvement. This is the most important direction in the intensification of public production. We have accumulated interesting experience of not only state regulation of this very important area, but also of the application of advanced forms of R & D acceleration directly in production amalgamations. Here the main tendency is the elaboration and implementation of
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especially stimulating measures for a more assimilation of new technology and processes.
active
I would like to emphasize that the management improvement process also has a planned character. It implies a balanced development of all its elements, its organizational structure, the management methods,
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the economic mechanism, and soon, it is precisely this approach, it seems, that can guarantee a maximum effect in the long term perspective and mobalise the reserves in the field of management for accelerated technological and economic development of the country.
]omtal Volutrre ]ourrlal 1986
4 No
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Management in the USSR Its Present and Future J. M. Gvishiani Deputy Chairman, USSR Council of Ministers for Science and Technology and Vice Chancellor of the Academy of Management
Mr Gvishiani gives a full account of Soviet Management systems and practices, and concludes with an analysis of current adaptations. This article is based on a paper given at the Academy of Management meeting at Yevenko in late 1984 The seminars arranged by the International Academy of Management give us an almost unique opportunity to acquaint ourselves with the latest achievements of management theory and practice in different countries of the world. Of highest value is that at similar forums attended by leading scientists who represent differing socioeconomic systems, one has favourable conditions for a free exchange of opinions with respect to not only purely professional, but also a widest range of general problems. Here are born the premises for fostering mutually beneficial scientific contacts between the representatives of East and West. My presentation deals with a number of specific features in the functioning of the modern management system in the USSR, and points out some trends in the development and ways of its further improvement in the near future.
Western Scepticism Some management theorists and representatives of business circles of Western countries look upon the
successes of Soviet management science with a certain degree of scepticism. The main reason for this unjustly pessimistic attitude consists in that, in their view, the problems tackled by management science in socialist countries allegedly differ radically from those facing government agencies and corporations in the West. Hence, the methods fit for planned economies cannot be used in the countries whose economy is governed by different economic laws. I do not concur with this point of view. True, the laws of development and the conditions of functioning of a socialist economy differ considerably from the conditions of business activity in industrially developed countries of the West. However, there are areas where scientists representing different social systems work at similar families of problems. The results of research in these particular areas, it seems, may be of mutual interest in both basic and applied fields. Among these areas one may distinguish general theoretical and methodological problems of management organization in large-scale economic systems, problems of intraindustry and regional management on a national level, management of large-scale R & D and other types of programmes and a set of measures aimed at faster technological change. It will be no exaggeration to assert that management experience acquired by the USSR in this and other problem areas is of unique character and presents great interest to science. Besides, some specific developments of management science in this country may be of consider-
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able interest to world management practice, as they concern one of the world’s largest and most dynamic economic systems, its faster development and higher effectiveness of the functioning. and Operating
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of its improvement, In the light of all the aforesaid, we shall consider the operating management system of the USSR economy. The Economic
Economic
IN THE
System
Management
I would like to concentrate on two groups of problems only. First, specifics of organization of Soviet economic management (forms and methods currently employed), and second, the most promising paths of restructuring the operating management system those already initiated and intended to be continued into the future. Special attention should be given to the economic methods of management in our country. The accent on a wider application of economic methods in the Soviet economy does not necessarily mean that other methods are not involved in the Soviet national economic management - administrative, sociopsychological, ideological and others. They are all rather widely used in management practice. It is, however, mainly our economic methods of management that arouse the greatest interest in the West. As is known, in any country and at any stage of economic development there crop up new objectives (it is also true for science and culture). The successful achievement of these objectives depends on the improvement of management in the given sphere of activity. At the same time, management does not develop spontaneously, by itself. Its development is influenced by the requirement made on it by the operating system - in this case, by the economy. Therefore, it is expedient to begin the consideration of the management system in the USSR by characterizing the existing economic system and the requirements made on its management. It is necessary to emphasize that the requirements on the management system are not permanent, invariable. On the contrary, they change under the influence of the specific features of some or other stage in the development of society, its economic and technical potential. What then are the distinguishing characteristics of the current stage in the USSR economic development? They are two. First, the highly developed productive forces and production relations in the USSR, or what is referred to as developed socialism. Second, the functioning of our society is accompanied by modem technological change that takes place both in the USSR and elsewhere. These two major characteristics determine today’s approach to the development of management, the assessment of its role in the modern world and ways
The economic system of the USSR as the target of management effort is a collection of related branches of the national economy and conditions for their functioning and development. It is based on the public ownership of the means of production expressed through the state (public) and cooperative (farm) property. The principal element in the socialist economic system is the state property - the basic form of socialist property. The state property is characterized by the socialization of the means of production on a national economic scale, which are the common property of the Soviet people. The state property comprises 88 per cent of the fixed production assets of the country. The public property is a decisive factor of a planwise dynamic development of socialist production and continuous growth of people’s wellbeing. The maturity of this form of property - the state property - is characterized by a high level of production concentration and specialization. In 1983 the industrial enterprises, each employing over 1,000 people, accounted for 14 per cent of all the fixed production assets and 66 per cent of industrial output. The basic units of our industry are large modern enterprises, production amalgamations, combines, widely employing the latest achievements in science and technology. As of early 1984, there were 4,300 production and research-production amalgamations in this country whose output accounted for over one half of the total sales volume. These are large-scale industrial complexes with up-to-date technological equipment. The USSR economy functions and develops today as a unified powerful national economic complex comprising all the elements of nationwide production, distribution and exchange. This is a practical implementation of Lenin’s ideas of transforming the entire national economic mechanism into an integrated large machine, an economic organism, so that hundreds of millions of people were guided by a coherent plan. The national economic complex consists of material production branches turning out the social product, and the branches of non-production sphere providing services of non-material nature. One may judge the scale of the national economy of the USSR by the data on the structure of its material production.
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According to the adopted classification, there are 16 large industries (groups of industries) comprising more than 400 branches, subbranches and operations integrating over one million independent business enterprises and organizations. According to some estimates, the number of economic linkages exceeds lOI (ten to the twelfth). It is worth noting that as the number of enterprises independently participating in the national economic turnover increases, the volume of economic linkages rapidly grows - by some estimates, as the square to the increase of the number of enterprises. The complexity of the arising managerial problems grows too. All this sets more stringent requirements on the national economic management. Developed
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The attained level of the economy, the established economic, social and political environment of its development place a strong demand on an adequate management system. Content and Specifics of Soviet Economic Management The Soviet economic management system comprises both the operating and the control subsystems. The latter is the unified economic centre of the country.
Socialism
The basic speciality of the contemporary Soviet economy lies in that it is the economy of developed socialism. If one tries to identify the major features and specifics of the current stage in the national economic development, they will include: l
national wealth, i.e. fixed assets, exceeded (by mid1983) two trillion roubles, including the fixed productive assets amounting to over 1.3 trillion roubles.
an unprecedentedly large scale and high level of material production; an ever wide and intensive application of technological advances; a sophisticated sectoral structure of the national economy and balanced development of its branches; transformation of the national economy into an integrated complex by means of deep-going sectoral and regional division of labour; dramatic changes in the main productive force of society - working people; attainment of a qualitatively new, higher material and spiritual living standard of the people, compared with the time the foundations of socialism were laid down; active sharing in the international division of labour by the socialist economy.
By the volume of industrial production the USSR is ahead of the Federal Republic of Germany, France and Great Britain taken together, and is behind only the USA. However, the gap (with respect to this indicator) is steadily diminishing. Nowadays the USSR accounts for one fifth of the world industrial output. Today this country’s output exceeds that turned out by the entire world in 1950. Since 1979 the gross national product of the USSR has amounted to more than one trillion roubles per year (in current value). The national wealth of the USSR the totality of material goods at society’s disposal (means of production and consumer goods) - reached by 1983 three trillion roubles (apart from the cost of land, mineral resources, forests). The main part of the
Under socialism, the necessity and significance of centralized management of economy, public production are stipulated by the public ownership of the means of production and unified economy-wide cooperation of labour. Accordingly, production becomes directly public in nature, and its principal characteristic is regularity in functioning and development. This underlies a conscious planwise management of business processes at all levels and in all units of the USSR economy. As is known, management is always exercised in the interests of the owner of the means of production. Under socialism, the role of economic centre is played by the state as the representative and spokesman of public interests in economic management. Management centralization on a national economic scale does not mean, however, that the state administrative bodies make all the business decisions, thereby substituting for the basic production management units. Centralized management proceeds from the fact that each management level has its authorities and responsibilities. Behind it is the very nature of the unified system of labour cooperation within the national economic complex of the USSR as an hierarchical system where each level constitutes a subsystem (or a totality thereof) of a superior hierarchical system. Thus, the centralized management of socialist production is a feature inherent in the cooperation of labour on a national scale. At the same time, though the state system of economic management is a centralized one, it cannot be reduced either to centralization alone or a combination of centralization and independence of enterprises . It is an integral management system acting as a unified complex and corresponding with the hierarchical organization of public production. It performs the functions of both the superstructure
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and basis, and covers all levels of management, the enterprise, the branch of industry and the region. All that means the extension of the production management function up to a national economic scale. The responsibility of each level is to ensure the most effective development of the respective system as a whole, given an optimal combination of the national economic interests and those of the subordinated business units. Basic Characteristics
Proceeding from this, one may formulate the following basic characteristics of the existing economic management system of the USSR constituting its essence. orientation towards the achievement of the goals of the adopted plans of socioeconomic development, ensuring a steady rise in material and spiritual standard of living of the Soviet people; l provision of a basis for a proportional balanced development of the national economy, its steady growth; 0 improvement of economic management, provision of adequate conditions through continuous improvement of organizational and managerial relations in all units of the economic system; l combination of centralized management and economic independence and initiative of enterprises, amalgamations and other basic units of the national economic system; l pursuance of a single state policy in the field of the technological change, capital investments, operations deployment, remuneration of labour, distribution of social consumption funds, pricing, taxation, finances, design and development of a unified records and information system; l an all-round development of democratic foundations of management; l strict and continuous observance of plan, finance, labour and production discipline, daily control of all aspects of business activities, elimination of localism and departmentalism in economic life; l simplification of management procedures and reduction of administrative costs through decrease in the body of managerial personnel due to optimization of managerial activity and higher level of office automation. l
In order to gain profound understanding of the gear characterizing the Soviet management system’s functioning, it is essential to look into the methods employed at different levels of economic management. These methods, though differing from the ones used in Western management, are based on the objective laws of management science and complex economic systems’ development. One can assert with
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confidence that in modem business practice the USSR puts to use both the latest achievements in Western management science and a number original management methods and mechanisms elaborated and applied with respect to the conditions of planned economy. It is precisely the latter that I would like to consider in depth. Methods
of centralized
planned
management
Methods of management imply the ways that the managing system uses to influence the operating system. The practice of the socialist economy includes various methods each differing in content. Of great significance are the methods of influencing the working teams, individuals and entire economic systems to make them fulfil the objectives of the given economic unit or management body. They are distinguished as economic, administrative and sociopsychological methods. The management methods are used as a complex of tools, not as isolated tools. Therefore the managerial activity is the resultant of diverse methods and ways of their employment. At the same time, each set of methods has its specifics, its unique forms of expression and frame of application. The central place in the above methodology belongs to economic methods. This is due to management relationships which are determined primarily by the economic relationships, and the people’s objective needs and interests underlying them. In accordance with the structure of economic relationships in the socialist national economy one may distinguish two groups of economic methods of management acting in unison: methods of direct influence on the participants of the economic processes and those of indirect influence. One may also distinguish between the centralized planned management and management on a profit-and-loss accounting basis that differ in the arsenal of economic tools used for their implementation. The first method is based on the direct social relations and direct allocation of materials, labour and financial resources, and operates via the directive targets established for planning and control of business units’ activity. The second method is based on the economic stimulation of production, economic, marketing and trade activities and operates through effective utilization of the economic incentives, reward and sanction, credit and financial systems, sound prices help develop economy and technology in the desired direction. This method features a harmonious combination of the centralization principle of planning and management with economic and operation independence of
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business organizations. It means that by using economic incentives, an attempt is made to ensure a rational balance between the administrative influence on the part of the central bodies of the state administration and the local initiative of enterprises. The centralized planning is the core of the management of socialist economy’s functioning and development, as well as of society at large. It implies: choice of optimal alternatives of both the national economic plan and those of individual industries and enterprises; distribution of the available resources in keeping with the chosen alternative of the plan; organization of material and technical supply, social division of labour, concentration of production, cooperation and combining; definition of the appropriate rates of the technological progress; intensification of the entire public production and strive for its higher effectiveness. Long, Medium
and Short Term
Currently the national economic planning in the USSR includes the formulation of the following medium-term and short-term system of long-term, plans. Comprehensive R & D Programme for a period of 20 years (broken down by five-year periods) elaborated by the USSR Academy of Sciences, State Committee for Science and Technology and State Committee for Construction. It is submitted to the Council of Ministers and the USSR State Planning Committee not later than two years before the next five-year period. Every five years The Comprehensive Programme is updated and the necessary corrections are introduced. Then it operates for the next five years. Draft Guidelines for the economic and social development of the USSR for 10 years (by five-year periods) elaborated by the State Planning Committee of the USSR together with the all-Union ministries and agencies and Councils of Ministers of Union Republics. They proceed from the long-term socioeconomic objectives and the Comprehensive Programme of the technological progress. For the first five years the targets of the Guidelines are broken down by years, and for the second five years - the key targets are indicated only for the very last year. Every five years the Guidelines are updated and then formulated in sufficient detail for the coming five years. The Draft Guidelines provide for the solution of major economic and social problems. This document is submitted to the USSR Council of Ministers one and a half years before the next five years. Plan Targets (broken down by years) for major indicator and economic standards for the next five-
year period. They are elaborated by the USSR State Planning Committee in conformity with the Draft Guidelines of the economic and social development of the USSR and passed down to all-Union ministries and agencies, as well as to the Councils of Ministers of Union Republics a year before the next five years. Later the Targets are passed down to amalgamations, enterprises and organizations. The latter elaborate draft five-year plans of the economic and social development, broken down by years. Parallel with it, they do preliminary work together with the marketing organizations in order to define the range (assortment) of products eligible for contracting. Proceeding from the Plan Targets and draft five-year plans submitted by amalgamations, enterprises and organizations, the all-Union ministries and agencies and the Councils of Ministers of Union Republics formulate their draft five-year plans (with the targets broken down by years) and submit them to the State Planning Committee of the USSR. The latter, with due consideration of the sectoral plans, elaborates a completely balanced and harmonized in all indicators draft national five-year plan of the economic and social development, with indication of annual targets, and submits it to the USSR Council of Ministers not later than five months before the next five year period. Annual plans of the economic and social development of the USSR, formulated in conformity with the targets and economic indicators of the given year of the five-year plan, providing for the required specification of the above targets, implementation of the latest achievements of science and technology, as well as the economic and organizational steps to fulfil the five-year plan. The five-year and annual plans elaborated by the enterprises and amalgamations are based on the economic and engineering calculation - the system of scientifically based technical and economic norms and normatives by types of job, labour and material consumption, material, fuel and power resources, utilization of plant capacity and specific capital investments. Non-Deficit
Development
The balanced character and non-deficit development of the economy are focal for planning. The economic mechanism oriented towards higher efficiency of entire production can function successfully if there exists balance in the national economy, primarily, the consistence in the material/substance content of the manufactured product and its value (monetary) forms, in production and consumption, supply and demand. However, in the national economy, despite the continuous increase in production, there still
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exists a considerable deficit in numerous industrial products and consumer goods. In this connection in market economy countries they try to intensively advocate the idea that deficiency is immanent to planned, centrally managed economy. According to such theories, spontaneously developing market economy generates excessive supply and overproduction, whereas centralized planned socialist economy allegedly generates inevitable deficiency in goods, and causes the employment of their direct distribution methods. The former economy is ruled by the consumer, the latter by the producer. Hence, the bourgeois and reformist idea of liberalization of socialism, its evolution towards spontaneous market-centered methods of business activity as allegedly the only way of ensuring effective economy. These conceptions are reinforced by references to some assertions concerning systematic excess of effective demand over production growth being an advantage of socialism, the assertions that could be found in our general and special literature of the 1930s. Here it is necessary to point out the erroneous character and the falseness of the very premise of these “theories” of the deficiency phenomena, excess of demand over supply allegedly inherent in socialism. The reason for the deficiency (past and present) does not stem from the socialist way of economy but from the specific historical conditions and factors of development. As to the socialist economy proper, it creates the best possible conditions for proportional, balanced development of economy, the consistency between physical (substance) and value (monetary) forms of the social product that rules out the excess of both demand over supply and supply over demand. In the 1960s and 1970s intensive efforts were made in our country to improve the development of our economy, make it more balanced, improve the physical/value proportions. The explicit causes of deficit have been eliminated by now. However, owing to certain inertia and the desire to solve some or other urgent tasks at faster rates and in shorter terms than actually possible, this deficiency is still there. But it does not agree with - in fact, it contradicts to - the essence of the economic policy under mature socialism that includes, as its organic component, provision for balanced, stable, proportional development of the entire national economy. “Khozraschet” The USSR national economy employs an arsenal of economic methods of management known under a unified term “Khozraschet” (profit-and-loss account-
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ing). Western theorists engaged in studies of socialist economy occasionally criticize the set of measures aimed at more active utilization of economic methods of management in the USSR and other socialist countries, suggesting in their stead a wider use of market forces. It seems, however, that it is impossible effectively to manage such a complex system as a national economy only by means of less rigid control of the market forces and reduction of the state involvement in the economic development. One may assert that the optimal course to be pursued by management theory and practice of today is rational, balanced combination of centralized methods of planned management on the part of government bodies responsible for elaboration of strategic scientifically based goals for the development of industrial, scientific and technological potential, and the economic initiative of enterprises and amalgamations with respect to most effective achievement of these goals and plans. Search for concrete forms of such a rational balance between centralized management and the local initiative of primary production units is a salient feature of the present stage in the development of the management system of the USSR. Here are some principles underlying the economic (khozraschet) methods of management. To get a better idea of how these methods are used on different levels of the economic system, let us consider a schematic profile of Soviet industry. The planwise organization of socialist production consists of various structural interrelated levels, performing certain production functions. The primary level is an enterprise (production amalgamation, or combine). It is a primary cell in the functioning productive forces and production relations or, in other words, the economic unit of socialist public production. In the final count, its production activity determines the fulfilment of the plan targets with respect to the volume, assortment and quality of products, the cost of production, the efficiency of public production, the growth of the national income and revenues. The primary economic unit acts as the main khozraschet element of public production. After the primary level, comes the so called middle level of management - all-Union industrial amalgamations. These amalgamations are organizational blocks integrating and managing the activities of enterprises and organizations of one particular branch of industry or sub-branch thereof on a nationwide basis. The next-higher level in the management system of industry are ministries whose responsibility is to
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provide branches
for balanced of industry.
development
of respective
The coordinating functions of ministries are performed by the corresponding all-Union agencies and interindustry management bodies such as various commissions, programmes, etc. The economic methods of management on different levels of economic organizations serve to urge the enterprises (amalgamations) to fulfil the mandatory plan targets, on the one hand, and create conditions ‘for the employees to be continuously motivated to attain the goals with maximum effectiveness, on the other. Thus, khozraschet is organically linked with centralized planning, the plan playing the leading role in their interaction. Khozraschet also has a planned nature but at the same time, it provides the required conditions for the fulfilment of the plan involving the economic interest and sense of responsibility, initiative and independence of economic units. Khozraschet, as a system of economic management mechanisms is a method of planned management of public production. It is based on the employment of the commodity-money relations. Its essence is displayed through its principles - economic independence of the enterprises within the framework of the centralized plan, self-repayment and profitability, material incentives and responsibility and financial control of the production and economic activity. All these principles are involved to form a system of taxes, economic incentives, controlling and coordinating influence on the part of state administration bodies that could establish a sound correlation between the outcome of teams’ or individual employees’ activity and the material reward. Besides, in these conditions each economic unit of the unified production system, beginning with a working team and ending with the intraindustry management body (i.e. ministry) is fully responsible for the results of their economic activity and cannot hope to get any unjustified subsidies from the State. Intraproduction
Khozraschet
The results of enterprises’ economic activity depend on how well their basic structural units perform their functions: shops, centres, teams and services. The interrelationships of these units with each other and the enterprise as a whole should stimulate economical use of all production elements, and that constitutes the essence of intraproduction khozraschet. The intraproduction khozraschet, like that of an enterprise, is aimed at most effective economic man-
agement. However, it is quite specific in its content The economic relationships and organization. between the units are directly regulated by the plant administration. Since the intraproduction units are not engaged in marketing their produce, they have no revenues of their own. They have nothing to do with such elements of khozraschet organization as conclusion of economic agreements with other enterprises, framing their own balance, opening a bank account, or establishing direct relations with credit and financial organizations. The intraproduction khozraschet implies observance of correlation between the costs of a given volume of work with the plan norms and the material incentives for the employees for the achieved economy. Its organization includes planning the work of the structural units in relation to a certain number of indicators, control of performance against the above indicators as criteria, formation of incentive funds and a wage system providing for motivation for more effective performance of each unit and use of material sanctions in the intraenterprise relationships. When the structural unit is based on the khozraschet principle, special attention is given to establishment of sound normatives, better use of plant capacity accounting of consumption of materials, tools, fuel, power and better management of inventories. Coordination The effectiveness of the economic methods to a large degree depends on how the enterprises’ activities are coordinated. Within the sectors of the USSR national economy there function all-Union (or republican) industrial amalgamations. These are economic organizations built on principles of self-repayment, having material and financial responsibility for their activity, the fulfilment of the plans and agreements. The industrial amalgamations possess broad authority in matters concerning production, i.e. certain flexibility, as well as authority in using economic incentives both internally and in the relations with their suppliers and consumers within the framework of the single national plan. The khozraschet principle also underlies the organization of management of sectoral ministries to make them interested in higher efficiency of performance of enterprises (amalgamations, combines and all-Union (republican) industrial amalgamations reporting to them. They exercise material responsibility for the socioeconomic and technological development of the given branch of industry and ensure the required revenues. Both intraproduction khozraschet and that of higher levels are based on the same
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principles as the khozraschet of enterprises but their organizational formats differ. Introduction of khozraschet or a special system of economic incentives of all-Union (republican) industrial amalgamations and sectoral ministries does not belittle the role of khozraschet at enterprises (amalgamations). Division of functions, vesting each level with their own material resources, authority and responsibility, provide for the unity of economic interests of ministries, industrial amalgamations, production enterprises (amalgamations) and society at large. They make it possible successfully to solve the major problems of the nation’s economic development. The foregoing gives a general picture of the operating system of Soviet economic management that has ensured such rapid development of our country’s scientific and technological potential. Pressures for Improvement and Development At present, in the condition of an increase of the influence of intensive factors of economic growth, the management system is faced with new and more sophisticated challenges, with a constant need for further improvement. Hence, the continuous striving for improvement of the management system, making it more adequate to confront new requirements and objectives. This urge for the economic management system’s improvement is one of the organic elements and an essential condition of the nation’s socioeconomic development. It should be emphasized that the current stage in the improvement of the management system and the economic mechanism features comprehensiveness, multifaceted character, profound scientific support of the decision alternatives and their thorough testing by experiment. Nowadays our country is engaged in an intensive search for new forms of management organization in various spheres of activity and on different levels of the Soviet economic system. It seems appropriate to consider some specific paths for improving the national economic management mechanism. Its main objectives are as follows. Shifting the accent from administrative forms and methods of management to economic incentives. and motivation of participants of public production; 0 Greater economic independence of the primary economic units, the amalgamations, enterprises and organizations, in the planning of their activil
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ties and the utilization of their resources, with greater responsibility for the final results of their work; Greater responsibility for all the economic management bodies (from lower levels to sectors and regions) for achieving national economic goals, including higher industrial output, improved quality, wider assortment, better use of plant capacity, as well as of labour, material and fuel/energy resources; Greater encouragement of local initiative and active involvement of working people in the management of production and the solution of socioeconomic problems; Selection of the most effective courses for developing the national economy, for finding the most promising fields that would contribute to the intensive growth of the nation’s economy; as well as the improving the adequacies strategies of the management system and its strategies.
It seems, with the above restructuring and development of the economic management system, it will be possible to have a dramatic effect in the near future. Among these effective factors are greater economic independence of the basic economic units, the production amalgamations, enterprises and organizations. This is of utmost importance, first, for the creation of the most favourable economic and organizational conditions for the activity of the primary level of public production, and, second, for the rational distribution of functions, authority and responsibility among the amalgamations, enterprises and organizations of the higher levels of management, for the higher effectiveness of the entire organizational/economic mechanism of management. Experimentation In order to find a faster solution to this problem, a large-scale economic experiment is being undertaken in the USSR. It is aimed at practically testing a set of measures for the extension of the authority of the basic units of industry, the production amalgamations of enterprises, in the planning and implementation of their activity, and their adoption of greater responsibility for the results of their work. It will allow the selection of the most effective measures and their application to other branches of industry, beginning with 1986. It will also make it possible to prepare the Plan Targets and a draft plan of socioeconomic development for the Twelfth Five-year period. The main objective of all these measures is to provide an optimal combination of self-supporting independence and responsibility on the part of production amalgamations and enterprises.
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The experiment is required to ensure a substantial reduction in the number of plan targets needing directive approval. To make the Five-year plans an effective instrument in the utilization of scientific and technological achievements, it has been decided that they should include only strategic goals for the development of production, and the achievement of its higher effectiveness. Another impo;tant aim of the experiment, contributing to faster technological change, is the creation of new opportunities for modemisation of technology and restructuring of enterprises and amalgamations at the expense of their own resources, acquired from their profit. They are granted greater rights to use the production expansion fund, i.e. the share of profit the enterprises may use to purchase a new equipment without the approval of the higher level bodies. Optimisation Another avenue for improvement of the management system in this country is optimisation of the organizational structure on various levels of the national economy. In the last decade a lot has been done to this effect. The master schemes of sectoral management have been developed and applied, mainly in industry. At present there are about 30 master schemes elaborated by industrial ministries, that provide for a respective rational reshuffling of the given branches of industry. This effort is aimed at greater concentration and specialization of production, closing unprofitable enterprises and integrating and retooling (using new technology) the enterprises that have become less efficient. This structural reshuffling will arrive at further integration of sectoral higher level units horizontally, and reduction of the number of management levels vertically. The development of the economic mechanism is expected to play a signficant part in this process. Most intensive work is being directed to this. As was mentioned earlier, the main task is to provide for a wider use of economic methods by alI levels of the national economy, including sectoral ministries. They will be given an opportunity to plan the main proportions of the development of the respective branch, concentrate and distribute the financial resources, apply economic incentives by compiling special funds of material reward. They will also have the authority to regulate the wage level depending on the productivity of labour, quality of products, reduction of costs and other indicators. With the help of some evaluation criteria, there is an opportunity for an II priori increase in the funds intended for various
premiums to performance is greater role will failure to fulfil
the the be the
economic organizations whose most effective. At the same time, a played by different sanctions for a production and delivery plans.
Serious attention is given in the USSR to regional management and the management of the Union republics’ economies. It is achieved through delegating greater authority to both the republic’s and the local bodies, mainly in the management of branches producing consumer goods, and in the non-production sphere. In ter-Zndus try Management In present conditions, the development of interindustry management is rather urgent. It implies the improvement of production and R & D cooperation and implementation of harmonized R & D and investment policy in groups of related industries. This is being achieved not only by interrelated development of the corresponding economic and organizational mechanisms, but also by establishing interindustry and multifunctional amalgamations. These may be agroindustrial, industrialtrading, production servicing, transport, construction-assembly or other types of amalgamations specializing on performing a complete set of economic functions. Under socialism there is being created an objective basis for effective and planwise solutions to largescale national economic problems. We possess a most effective instrument for this, an organizational and economic mechanism of goal-orientated programme management. The country has accumulated vast experience in programme management through handling interindustry R & D problems. For the Eleventh Five-year period and for the period ending in 1990 there have been formulated 170 national R & D programmes. The management of the national power system development employs programme methods and forms. They are also employed for the management of food programmes and for the formation of regional production complexes. Improvement of organizational/economic forms and methods of accelerating technological progress takes a special place in the overall process of management improvement. This is the most important direction in the intensification of public production. We have accumulated interesting experience of not only state regulation of this very important area, but also of the application of advanced forms of R & D acceleration directly in production amalgamations. Here the main tendency is the elaboration and implementation of
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especially stimulating measures for a more assimilation of new technology and processes.
active
I would like to emphasize that the management improvement process also has a planned character. It implies a balanced development of all its elements, its organizational structure, the management methods,
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the economic mechanism, and soon, it is precisely this approach, it seems, that can guarantee a maximum effect in the long term perspective and mobalise the reserves in the field of management for accelerated technological and economic development of the country.