Managers of Russian State-owned Companies to Face New Productivity Test

The productivity of top managers of Russian state-owned enterprises (SEOs) will be measured by new key productivity indicators (KPIs) prepared by the Russian government, Vedomosti reported on Tuesday citing a decree signed by the Prime Minister Dmitry Medvedev.

While most of the old KPIs remain the same and target financial indicators and leverage, the changes seek tougher control over the implementation of the so-called May Decrees of Russia’s President Vladimir Putin. At the moment, the SEO managers reportedly risk their bonuses if certain goals of the decrees are not achieved.

Putin’s plan to revitalize the economy with 12 National Projects is off to a very slow start, according to Russian media. A recent audit by the State Duma committee concluded that over half of the national projects and adjacent programs are executed at less than 20%. 

The KPI was first introduced in 2014 and applies to over 80% of the companies, but has not been adopted by 43 out of 540 SEOs targeted.

The new KPIs related to the spending include investment to cash flow ratios. Kremlin hopes to boost investment to 25% of GDP by 2024, in a largely consumption driven-economy that started to balloon consumer credits amid falling incomes.

Other new control metrics for SEO managers reportedly include increase of competitive procurement, cutting non-profile assets, and industry-specific indicators. The monitoring and enforcement of the KPI will be entrusted to the Audit Chamber, headed by former Finance Minister Alexei Kudrin.

Analysts surveyed by Vedomosti believe that KPI calculation methodology remains unclear, and lacks clear government-defined strategic goals and mandate for SEOs, as recommended by OECD. Sometimes the government itself can drag on achieving certain KPIs, for example though delayed tariff indexation or passing social and infrastructural obligations on to state companies.