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Behavioral management: Meeting the challenge of performance improvement

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 European Management Journal Vol. 16, No. 4, pp. 466–475, 1998
Pergamon  1998 Elsevier Science Ltd. All rights reserved
Printed in Great Britain
PII: S0263-2373(98)00023-1 0263-2373/98 $19.00 + 0.00

Applying Behavioral
Management in Eastern
Europe
FRED LUTHANS, George Holmes Distinguished Professor of Management, University of
Nebraska, Lincoln, USA
ALEX STAJKOVIC, Visiting Assistant Professor of Organizational Behavior, University of
California at Irvine, Irvine, USA
BRETT C. LUTHANS, Assistant Professor of Management, Missouri Western State
College, St Joseph, USA
KYLE W. LUTHANS, Assistant Professor of Management, Bloomsburg University of
Pennsylvania, Bloomsburg, USA

As posed in the title, the authors make a case for
the use of behavioral management as a pragmatic
and effective way to help East European managers
improve employee performance. After providing
the cultural and theoretical grounding for the use
of a behavioral approach, the five-step O.B. Mod.
model is presented. The successful use of O.B. Mod.
in a Russian factory is given detailed attention and
then the case is made for using this approach in all
Eastern European organizations. Particular atten-
tion is given to the nature and power of contin-
gently administered social reinforcers to increase
employee performance at no cost. The authors con-
clude that this approach can help meet the competi-
tive challenges Eastern European management faces
now and in the future.  1998 Elsevier Science Ltd.
All rights reserved
Now, after almost 10 years, organizations in the
Commonwealth of Independent States (CIS) and
Eastern Europe continue to struggle to become more
effective so that they can better compete in the inter-
national marketplace. Much of the popular media
attention in the transformation process has focused
on political and economic issues and secondarily on
the need for technological advancement. Yet, like
other organizations everywhere, the people may
really be the key. As Stanford Professor Jeffery
Pfeffer (1994) concluded after years of research and
experience with companies around the world, the
only true, lasting competitive advantage comes
through human resources and how they are man-
aged. Or, as the head of automaker Chrysler recently
put it, ‘The only way we can beat the competition is
with people. That’s the only thing anybody has. Your
culture and how you motivate and empower and
educate your people is what makes the difference.’
Obviously, the political and economic environment
do and will play a critical role in the success of indi-
vidual Eastern European organizations, and so do
and will the strategies, structures, functions (e.g.,
marketing and financing), and technologies
employed. However, the starting assumption of this
article for the special issue on ‘Russia, Central and
Eastern Europe’ is that the people can make a sig-
nificant difference. A recent special report on ‘Busi-
ness in Eastern Europe’ in The Economist (November
22, 1997) notes that the transformation from ‘deca-
dent Communism to primitive capitalism was just
the first step.’ What is now needed according to this
comprehensive report is better managed companies
‘that enhances productivity rather than cripples it’
and ‘the biggest brake on productivity growth is
people.’
Organizations in the CIS and Eastern Europe operate
in different political and economic environments
(some relatively better, some a lot worse than others),
and of course have different degrees of success in
implementing various strategies, structures, func-
tions and technologies. But, importantly, all these
organizations have one thing in common, their
human resources. Not unlike most of their counter-

466 European Management Journal Vol 16 No 4 August 1998

 APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
parts around the world, the management of human
resources in CIS and Eastern European organizations
leaves, putting it mildly, considerable room for
improvement (e.g. see Kiezun, 1991; Ivancevich et al.,
1992; Hofstede, 1993). For example, The Economist
report cited above suggests that the biggest gulf
between Eastern European managers and their
counterparts in the West may be in the human
resources arena.
The neglected question for meeting the challenge of
improving performance may be: ‘How can organiza-
tions in the transformational economies manage their
human resources more effectively?’ Although many
answers could and have been offered to this question,
the purpose of this article is to offer behavioral man-
agement as a proven, practical way to help all CIS
and Eastern European organizations improve their
performance. After first providing the cultural and
theoretical foundation and spelling out exactly what
is meant by this behavioral approach to human
resource management (HRM), its application to all
Eastern European enterprises (start-up, privatized,
and still state-owned) are presented and analyzed.
Cultural and Theoretical Grounding
The proposed behavioral management approach for
organizations in Eastern Europe must be able to
make a cultural fit and be based on a logical theoreti-
cal framework.
The Cultural Fit
The success of any human resource management
approach will greatly depend on its cultural fit
(Adler, 1997; Dowling et al., 1994). Most analyses of
cultural fit use the Hofstede (1980) dimensions. At
least historically, Eastern Europe in general and Rus-
sia in particular have been depicted as high in power
distance, uncertainty avoidance, collectivism, femi-
ninity and short-term orientation (Bollinger, 1994;
Hofstede, 1993; Puffer and Shekshnia, 1996; Veiga et
al., 1995). However, more recent data by Trom-
penaars (1994) indicate that the CIS and at least the
Czechs (the two Eastern European areas/countries in
his sample of 28 countries) have high individualism,
not the traditionally conceived collectivism. This new
found individualism may be the result of the grow-
ing individually-oriented entrepreneurial spirit,
especially among the younger people, during the
transformation period (Johnson and Loveman, 1995;
McCarthy et al., 1993). For example, a recent Wall
Street Journal article describing how the Russian econ-
omy is finally showing signs of growth noted that
after privatization of a large manufacturing
enterprise in Ivanovo:
‘Three fresh-faced 28-year-olds took over the factory. The
European Management Journal Vol 16 No 4 August 1998
40-year old factory director, a former regional official in the
textile ministry, now works for them. The young financiers
set about finding customers, and now the factory works on
direct orders from them instead of a government ministry’s
five-year plan.’ (Liesman, 1998, p. A-11)
In addition to individualism, Trompenaars (1994)
also found the CIS to be quite high on the cultural
dimension of particularism. This is the belief that the
situation dictates how practices should be applied
and the focus is on interpersonal relationships.
An argument could be made that either the tradition-
ally assumed collectivist cultural values or the appar-
ently emerging individualism and particularism in
Eastern Europe is compatible with cognitive theoreti-
cal groundings and assumptions. Either collectivist or
individualistic cultural values could provide support
for the use of cognitively-based theories such as the
hierarchy of needs or the more modern exchange,
expectancy or equity theories of work motivation to
study human resources in Eastern Europe. All these
motivation theories can certainly help to better
understand the complexity of human behavior in any
workplace, including Eastern Europe. Unfortunately,
these cognitive theories neither provide specific tech-
niques for implementation nor relate very well to
employee performance (e.g. see Cotton et al., 1988;
Pervin, 1985; Wahba and Bridwell, 1976).
An equally persuasive argument could be made that
there is a fit between the collectivist and emerging
individualistic and particularistic cultural values in
Eastern Europe and the use of a behaviorally-based
theoretical framework. Behavioral theory may not
lead to as deep an understanding of the complexity
of employee behavior as the cognitive motivation
theories. However, we would suggest that the tech-
nique of organizational behavior modification (O.B.
Mod.) that comes out of behavioral theory (Luthans
and Kreitner, 1975, 1985) is directly applicable to the
management of human resources in Eastern Euro-
pean organizations and makes a cultural fit. Specifi-
cally, Kiezun (Kiezun, 1991, p. 84) suggests that East-
ern European workers’ collectivist values would
support the use of rewards to increase performance
because the improvement becomes materially worth-
while for the individual and, more importantly, the
common good.
The emerging individualism and particularism
values may be even more compatible with behavioral
theory and application than would be collectivist
values. As will be discussed next, the assumption
under the behavioral framework is that Eastern Euro-
pean individual workers’ behavior is a function of
contingent consequences. This behavioral premise
makes an especially good cultural fit with individual-
ism and particularism (situational interpersonal
relations).
467
APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
Behavioral Theory
As is sometimes forgotten, behavioral theory as an
explanatory framework for human behavior started
with the pioneering Russian physiologist Ivan Pav-
lov. In the famous experiments with laboratory dogs,
Pavlov developed the notion of classical conditioning
(the S-R connection) which has served as the basic
building block of connectionist learning and behavi-
orism. B.F. Skinner’s operant conditioning was built
upon Pavlov’s seminal work and he readily acknowl-
edges borrowing the term reinforcement from Pavlov.
Skinner states in a book about his life:
‘I got the word from Pavlov and feel that it has a distinct
advantage over ‘reward’ by identifying the effort of a
consequence of behavior in strengthening the behavior —
that is, in making the behavior more likely to occur again.
The old idea of pleasure and pain and Thorndike’s adjec-
tives ‘satisfying’ and ‘annoying’ refer to feelings which, in
my point of view, is quite off the track.’ (Bjork, 1997, p. 99).
Most recently, behavioral theory has evolved from
Skinner’s operant or reinforcement theory to Albert
Bandura’s more complex social cognitive theory and
self-efficacy.
Social cognitive theory contains both cognitive and
behavioral dimensions. Specifically, Bandura (1986,
1997) identifies basic human capabilities such as sym-
bolizing, forethought, vicarious learning, self-regu-
lation and self-reflection as the core of social cogni-
tive theory. We have recently proposed that this
eclectic theory provides the most comprehensive
understanding of organizational behavior (Stajkovic
and Luthans, 1998). The derivative of social cognitive
theory is self-efficacy and is defined by Bandura
(1986, 1997) as an individual’s belief (or confidence)
about his or her abilities to mobilize motivation, cog-
nitive resources, and courses of action needed to suc-
cessfully execute a specific task within a given con-
text. We have found that this self-efficacy has a
strong positive relationship with work-related per-
formance (Stajkovic and Luthans, 1998).
Although social cognitive theory and self-efficacy
seems to hold considerable promise for the future, at
this stage of the transformation in Eastern Europe,
behavioral theory seems more appropriate. The prac-
tical application of behavioral theory, the premise
that behavior is a function of its contingent reinforc-
ing consequences is most relevant. Specifically,
behaviors that are followed by positive reinforcers
will be strengthened and become more frequent.
Behaviors that are followed by punishers will
weaken and become less frequent. Behaviors that are
followed by no consequence (extinction process) will
also weaken and decline in subsequent frequency. In
other words, applied to any workplace in any coun-
try, ‘You get what you reinforce!’
Even the advocates of cognitive theories will not
argue with these ‘laws of behavior.’ For example,
468
pioneering expectancy theorist Victor Vroom
(Vroom, 1964, p. 13) declares, ‘without a doubt the
law of effect or principle of reinforcement must be
included among the most substantiated findings of
experimental psychology and is at the same time
among the most useful findings for an applied psy-
chology concerned with control of human behavior.’
Importantly, we would maintain that the behavioral
laws and principles hold across cultures.
Our position then is that behavioral management is
directly applicable to employees in all East European
organizations. The premise is that all behavior,
regardless of culture, is a function of its conse-
quences. However, we would be quick to add that
the specific type of country culture, organizational
culture, and the reward that is used may result in a
differing impact on employee performance. In other
words, our position is that behavioral theory and its
principles/laws will hold across cultures, but, as the
rest of the article will discuss, the nature of the cul-
ture, the specific organization and the type of
rewards that are used may have a different, but still
positive, impact on employee performance. After first
explaining behavioral management through the steps
of the organizational behavior modification (O.B.
Mod.) model, the findings from our recent meta-
analysis are presented, and then a specific application
of O.B. Mod. in a Russian factory are reviewed.
The Steps of O.B. Mod.
Although there are several models or approaches to
behavioral management over the years (e.g. Gilbert,
1978; Komaki, 1986; Scott and Podsakoff, 1985), we
propose the application of organizational behavior
modification or simply the O.B. Mod. model first pro-
posed by Luthans (1973) and fully developed by
Luthans and Kreitner (1975, 1985). O.B. Mod. is a
step-by-step problem solving, analytical, and action-
oriented approach for the identification and contin-
gent management of high impact performance-
related employee behaviors. The full model is shown
in Figure 1. Briefly summarized, the five major steps
are as follows:
1. Identification of performance behaviors. The first step
of the O.B. Mod. application model is to identify
the critical, observable performance-related
behaviors. The objective of this first step is to
identify high impact behaviors that may account
for most of performance outcomes. The identifi-
cation of the performance behaviors can be carried
out by those closest to the job in question — the
jobholders themselves and/or their immediate
supervisor. Another approach to identifying criti-
cal behaviors is through a systematic behavioral
audit in which each job in question would be ana-
lyzed using job analysis techniques. Regardless of
the method used, for a behavior to be identified
as critical and appropriate for O.B. Mod., there
European Management Journal Vol 16 No 4 August 1998
 APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
Figure 1 O.B. Mod. Application Model
must be a positive answer to the questions (1) can
it be measured? and (2) does it have a significant
impact on a performance outcome?
2. Measurement of the behavior. The second step is to
measure the baseline frequencies of the critical
behaviors identified in step 1. This baseline meas-
ure is obtained by determining how often the
identified behavior occurs under present con-
ditions. These measures can be determined
through direct observation or more often by
obtaining the information from the products of the
behavior (e.g. quality or quantity data) gathered
from archival (existing) records. The purpose of
the baseline measure is to provide objective data
to determine if there is indeed a problem or
deficiency and to monitor performance after the
intervention step. This measurement step separ-
European Management Journal Vol 16 No 4 August 1998
ates O.B. Mod. from other, more subjective,
human resource management motivation or lead-
ership approaches.
3. Functional analysis of the behavior. The third step of
the model is a functional analysis of the ante-
cedents and contingent consequences of the
behavior. Antecedents of the target behavior must
be identified to determine what factors cue (not
cause) or set the occasion for the behavior to be
emitted or carried out. If the antecedents, such as
the equipment, technological processes, job
design, clarifying goals, and/or training are not
present, then the employee cannot exhibit the criti-
cal behaviors. However, the more important part
of the functional analysis is to identify the contin-
gent consequences. The antecedents only assume
stimulus control properties (take on power to emit
469
APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
the behavior) in the presence of reinforcing contin-
gent consequences. Most often the ‘front-end’
antecedents of the behavior are in place (there is
adequate technology and equipment, the
employees know what they are supposed to do,
and they are trained how to do it). Yet, the com-
mon problem is that they are not doing it. Thus,
the identification of the reinforcing consequences,
or lack thereof, becomes crucial to managing the
performance behavior.
4. Develop and implement an intervention strategy. The
objective of this action step is to accelerate and
strengthen the identified functional performance
behaviors or decelerate and weaken the dysfunc-
tional behaviors (those that detract from
performance). The main intervention strategies
that are used involve positive reinforcement to
increase the functional behaviors and corrective
feedback to decrease dysfunctional behaviors fol-
lowed by positive reinforcement or the desired
alternative behaviors. Positive reinforcers can be
anything that increases performance behavior, but
those most often used in O.B. Mod. are monetary,
performance feedback and social attention/
recognition. The performance feedback attempts
to be positive, immediate, graphic, and specific. In
rare circumstances, the use of punishment to
quickly weaken and decelerate undesirable
behaviors (such as unsafe behaviors) may be
unavoidable. However, to keep on a positive
approach, if a negative consequence is deemed
necessary, the desirable alternative behavior (such
as safe behavior) is positively reinforced at the
first opportunity.
5. Evaluate to ensure performance improvement. This
final step of O.B. Mod. systematically evaluates
the effectiveness of this behavioral approach to
performance improvement. This step focuses on
all four levels of evaluation: (1) reaction, (2), learn-
ing, (3) behavioral change, and (4) performance
improvement. The reaction level assesses whether
O.B. Mod. was liked and well received by those
involved in the process. The better the reaction,
the better the chance of its being used effectively.
The learning level of evaluation assesses the
understanding of the background, meaning, and
assumptions of O.B. Mod. The directly observed
behavioral change level is assessed in relation to
the baseline measure obtained in the second step.
Finally, the most important level of evaluation,
performance improvement, assesses hard meas-
ures mostly on quantity and quality of products
or services, but can also deal with turnover, absen-
teeism, or even number of customers served. This
bottom-line performance improvement is the pur-
pose of the O.B. Mod. approach.
Research Evidence That O.B. Mod. Works
The O.B. Mod. model, as shown in Figure 1, and
briefly summarized above has been researched for
470
over 20 years in all types of organizations
(manufacturing, service, and not-for-profit). For
example, the O.B. Mod. approach improved perform-
ance in diverse US organizations such as a manufac-
turing plant making shelving for stores, the largest
meat-packing plant in the world, a factory manufac-
turing water beds, a large urban department store, a
bank, fast-food restaurants, a very large hospital, and
a Federal Deposit Insurance Corporation office. As
presented next, it was also directly tested in a large
Russian factory.
We (Stajkovic and Luthans, 1997) recently conducted
a meta-analysis of 19 studies that met the inclusion
criteria of using the O.B. Mod. approach. A meta-
analysis quantitatively synthesizes, tests and com-
pares the impact of the O.B. Mod. intervention across
all the available studies. Specifically, in this primary
meta-analysis (see Hedges and Olkin, 1985 for the
procedures used) we investigated the research ques-
tion: What is the average treatment effect of O.B.
Mod. on task performance? The results indicated a
highly significant 17 per cent average improvement
in performance (Stajkovic and Luthans, 1997). To put
this finding in perspective, this represents a higher
positive impact on performance than has been found
in meta-analyses of widely recognized cognitively-
based techniques such as goal-setting (Wood et al.,
1987).
The meta-analysis soundly indicates that O.B. Mod.
does indeed lead to performance improvement
across a wide variety of US organizations. Now the
question becomes whether such a behavioral man-
agement approach will generalize to organizations in
Eastern Europe.
The Russian Factory Study
A few years ago, we (Welsh et al., 1993a) conducted
an in-depth study in the then largest textile mill in
Russia. The purpose was to see if US-based organiza-
tional behavior/human resource management tech-
niques would work in a Russian factory. Specifically,
through a sophisticated experimental design, we
tested the impact that both a participative and O.B.
Mod. approach (independent variables) would have
on Russian worker productivity (dependent
variable). The participative technique involved ask-
ing the workers (by the researcher without their
supervisors present) for input relevant to enriching
their jobs around the widely recognized Hackman
and Oldham characteristics of identity, significance,
variety, autonomy, and feedback. There is consider-
able evidence that this participative job design
approach leads to motivation and performance
improvement among American workers (Fried and
Ferris, 1987; Levine, 1990; Luthans et al., 1987).
The O.B. Mod. approach, with a different, but equiv-
European Management Journal Vol 16 No 4 August 1998
 APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
alent, sample of workers from this same factory, used
two interventions — extrinsic rewards and social
rewards. The extrinsic reward intervention provided
valued American products (e.g. adult and children’s
clothes, jeans, t-shirts with popular logos, music
tapes and hard-to-get foods) to workers contingent
upon their performance improvement. The social
reward intervention contingently administered atten-
tion, recognition and feedback by trained supervisors
to workers performing specific identified perform-
ance-related behaviors (e.g. checking looms, doing
repairs, monitoring fabric quality, and helping out
others). The specific details of this behavioral
approach were spelled out under the previously dis-
cussed O.B. Mod. steps.
The Results of the Russian Study
The results of this study had interesting implications
for cross-cultural management in general and East
European management in particular. The particip-
ative technique did not work, but the O.B. Mod.
approach (both the extrinsic and social reward
interventions) led to highly significant increases in
the performance of these Russian factory workers.
The participative intervention seemed to have a
counter productive effect on the Russian workers’
performance for cultural reasons rather than because
of the technique per se. At first glance, because of the
assumed traditional collectivist cultural values of the
old communist system, the participative approach
would seem to have been a good fit and should have
worked. However, we found that even though the
workers in this factory had been given the opport-
unity to participate under the old system, little came
of their suggestions, and in some cases, there were
even political repercussions. Thus, the workers’ past
experience may have been the reason for the failure
of the participative intervention in this study.
In explaining the failure of the participative tech-
niques, the researchers noted:
‘By not improving or by deliberately holding back, they
could avoid the frustration of being rejected or ignored. In
addition, by not truly participating or giving meaningful
suggestions in front of outsiders, the workers would not
put themselves in the position of expressing problems
inhibiting performance, comments they may have feared
would be received as complaints regarding co-workers.’
(Welsh et al., 1993a, p. 74).
In other words, the cognitively-based participative
technique did not work, at least in this setting,
because of complex cultural (and perhaps even
political) issues.
By contrast, in the same culture, the O.B. Mod.
approach had a very positive impact on the workers’
performance. Both the administration of desired
extrinsic rewards and the trained supervisors deliber-
European Management Journal Vol 16 No 4 August 1998
ately providing attention, recognition and feedback
contingent upon the workers exhibiting the high
impact behaviors identified in step one of the O.B.
Mod. led to highly significant increases in perform-
ance. Importantly, since this was a field experimental
research design, we can confidently conclude that the
O.B. Mod. was indeed the cause for the performance
to significantly improve.
Implications of the Russian Study
Obviously, on the basis of this one study we cannot
conclude that participative techniques will not work
in East European organizations and behavioral man-
agement will. As we point out above, the particip-
ative technique as applied in this Russian factory was
subject to considerable historical and cultural com-
plexity. This may or may not be unique to this parti-
cular study site, but this is our point. Most, if not all,
of the complex cognitively-based motivational con-
cepts and techniques, such as participation systems
and job design, seem to greatly depend on the spe-
cific cultural situation (by country and even by
organization, group, and individual). The fact is, this
participative technique did not work in Russia, in this
factory, at this time. In another Eastern European
country, in another organization, with different indi-
viduals, at another time, it may have worked.
By the same token, we cannot conclude on the basis
of this one study that the behavioral management
approach will work across all cultures in Eastern Eur-
ope. However, we would argue that because of its
cultural fit and theoretical framework discussed earl-
ier and the overwhelmingly positive results in all
types of settings with all types of workers, including
the study of the Russian factory workers, the
behavioral management approach may indeed hold
across cultures, organizations, groups and especially
individual employees in Eastern Europe.
The Case for the Use of O.B. Mod. in
Eastern European Organizations
Since early 1992, the first author has been working
extensively with East European managers not only in
Russia, but also in former East Germany, Albania and
Macedonia. As part of on-going US Agency for Inter-
national Development projects, we have trained over
2000 CIS and East European managers both at the
University of Nebraska and in their home country.
In addition, we have visited on-site and interviewed
managers in organizations in Russia, former East
Germany, Albania and Macedonia. Based on this
direct experience (from the biggest, Russia, to the
smallest, Albania, and those in-between) and a num-
ber of research studies besides the Russian textile fac-
tory, Luthans and colleagues have analyzed a num-
471
APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
ber of issues facing East European management
during the transition period (e.g. see Luthans, 1993;
Luthans et al., 1992, 1993, 1995, 1996; Luthans and
Lee, 1994; Luthans and Riolli, 1997).
This experience and research in Eastern Europe, and,
more importantly the overwhelming positive
research results that O.B. Mod. has demonstrated to
have on all types of organizations, we feel confident
in our recommendation of behavioral management to
Eastern European managers. However, we want to
add that behavioral management, nor any other man-
agement concept or technique, will be the ‘magic bul-
let’ to solve all the challenges currently facing East
European managers. We also found in our meta-
analysis that O.B. Mod. does seem to have differential
effects depending on the type of organization and the
type of reinforcer that is used (Stajkovic and
Luthans, 1997).
Specifically, the meta-analysis found that O.B. Mod.
worked significantly better in manufacturing organi-
zations (33 per cent) than in service organizations (13
per cent). This was largely because it is more difficult
to identify, measure and thus effectively manage per-
formance-related behaviors in service than in manu-
facturing organizations. This same contingency guid-
eline for behavioral management concerning the
difference between manufacturing and service
organizations has also been found to apply to Eastern
European organizations (Welsh et al., 1993b).
As to the type of reinforcer that is used, the meta-
analysis indicated that all three general categories of
reinforcers — monetary, non-financial (objective per-
formance feedback), social (attention/recognition)
and in combination — had a significant, but different,
impact. For example, in manufacturing organizations
there was no significant differences between the three
types of reinforcers that were used. In service organi-
zations, although the monetary reinforcers had a big-
ger impact than the nonfinancial (e.g. performance
feedback), they were about the same as were only the
use of social (attention/recognition) reinforcers. The
biggest impact was when the monetary was com-
bined with the performance feedback. This is a very
important finding for the application of behavioral
management because it says that although the use of
monetary reinforcers do lead to significantly
improved performance in both manufacturing and
service organizations, they may not have any more
effect than the use of social reinforcers.
The previous discussion noted that the social
reinforcers and feedback had as big an impact as the
extrinsic rewards (costly valued goods) on the
improved performance of the Russian factory work-
ers. The implication of these findings from the meta-
analysis and the Russian study of managers in East-
ern Europe being able to improve performance with-
out the use of monetary incentives seems self-evi-
dent.
472
Well designed compensation systems, including
adequate base pay, are absolutely necessary to
attract, motivate, and retain the best employees in all
Eastern European countries (e.g. see Puffer and
Shekshnia, 1996). However, the fact remains most
East European organizations (and those in the West
for that matter) simply do not have funds available to
provide monetary reinforcers as a way of improving
employee performance. On the other hand, Eastern
European organizations can easily train their super-
visors and managers at little or no cost in the steps
of O.B. Mod. and have them contingently administer
social reinforcers to their employees’ identified func-
tional performance behaviors.
The Nature and Power of Social
Reinforcers
Once again we need to emphasize that we are not
implying that Eastern European managers should
substitute recognition and attention for pay or that
pay is not important. Obviously, in many Eastern
European situations, an acceptable living wage is yet
to be reached, and cultural values toward compen-
sation and how it is administered must be con-
sidered. For example, in their in-depth analysis of the
fit between Russian culture and compensation, Puffer
and Shekshnia note that ‘due to the emphasis on the
short term in their cultural background and their tra-
ditional compensation schemes, Russians have a
strong preference for short-term incentives, favoring
cash and material goods’ (Puffer and Shekshnia,
1996, p. 237). In other words, once acceptable com-
pensation and benefits systems are in place, which
are absolutely necessary to obtain and retain the best
people in both the United States and Eastern Europe,
to enhance day-to-day performance and gain a com-
petitive advantage through people, our meta analysis
indicates behavioral management using social
reinforcers may be as effective as using costly
reward systems.
It is also important to note that the social reinforcer
suggested here is not insincere praise (the standard
‘pat on the back’ or ‘thanks for coming to work on
time’), or the old communist approach of pinning
medals on workers’ chests (sometimes for political
rather than performance reasons), but rather involves
contingent attention and recognition for exhibiting
identified behaviors that improve performance. To
acknowledge cultural values (e.g. the possibility of
collectivist values especially for older employees), we
also do not recommend individual public recognition
(e.g. singling out individuals in front of the group or
naming an ‘employee of the month’). The exception
for using public recognition would be where objec-
tive criteria are used that everyone agrees with (e.g.
sales or production numbers directly attributable to
an identifiable individual or group).
European Management Journal Vol 16 No 4 August 1998
 APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
The attention and recognition that we are rec-
ommending is usually administered one-on-one by
the direct supervisor/manager in the course of day-
to-day activities. This importance of close, constant,
interpersonal relationships in the implementation of
behavioral management is very compatible with the
previously discussed particularistic cultural values
that Trompenaars (1994) found in the CIS.
Some simple examples of what we are talking about
would be when the supervisor/ manager recognizes
and gives attention to an individual employee for a
particular behavior such as punctuality during bad
weather, unusual customer service, staying late with-
out pay to finish a report, or correcting a product
defect without being told. In essence, under this
approach the individual employee ‘Knows that his or
her supervisor/manager knows.’ The supervisor/
manager does not have to give ‘sugary’ praise, but
instead may simply make statements such as the fol-
lowing:
‘I noticed that you were the only one who made it to work
on time during the bad snowstorm.’
‘I saw how you handled that customer’s problem. She has
a big account with us.’
‘I saw that you stayed after quitting time to finish that vital
report that I gave you at the last minute.’
‘I want you to know that I noticed we no longer have a
sticky valve problem, that the engineers were not able to
solve, coming out of your work-station.’
If managers in Eastern Europe deliberately, and sys-
tematically, provide such recognition and attention,
contingent upon key performance behaviors in both
service and manufacturing organizations, our
research would indicate that performance will
improve. This approach is very simple and makes
common sense, employees never get tired of recog-
nition and attention for a job well done, everyone can
apply it at any level in any type of organization, it
doesn’t cost anything, and, best of all, it works!
A Final Word
Eastern Europe currently faces an extremely complex
economic, political, technical and cultural environ-
ment. These complexities need to be recognized and
dealt with at the country, organizational, group and
even individual level in order to make the successful
transition to a market economy and compete in the
global marketplace. For now, however, Eastern Euro-
pean managers also need some pragmatic guidelines
and techniques to help them immediately improve
the performance of their organizations. They cur-
rently have one thing in common with the rest of the
organizations in Eastern Europe and the rest of the
world — human resources.
The premise of this article has been that strategic
European Management Journal Vol 16 No 4 August 1998
planning, structure, functions such as finance and
marketing, information technology and more are
needed to effectively manage today’s and tomor-
row’s Eastern European organizations. However,
their human resources, and how they are managed,
is often overlooked, but at present and in the future,
may be most important to competitive advantage,
sustainability, and even survival.
Based on 25 years of basic research, direct experience
and applied research in Eastern Europe since the
beginning of the transition, and the in-depth experi-
mental study of the Russian factory, we proposed
that behavioral management can most pragmatically
and quickly improve performance in Eastern Euro-
pean organizations. Behavior is a function of its
consequences, and the five steps of O.B. Mod.
(identify, measure, analyze, intervene, and evaluate)
can be effectively and easily applied regardless of the
culture. We have hopefully provided a clear answer
to the question in the title of this article: ‘Yes,
behavioral management can help meet the challenge
of performance improvement in Eastern European
organizations.’
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European Management Journal Vol 16 No 4 August 1998
 APPLYING BEHAVIORAL MANAGEMENT IN EASTERN EUROPE
BRETT LUTHANS,
Department of Manage-
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European Management Journal Vol 16 No 4 August 1998
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KYLE LUTHANS,
Department of Manage-
ment, Bloomsburg Univer-
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17815, USA.
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Professor of Management at
Bloomsburg University of
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Management,
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ship Studies and has research interests in high per-
formance HR practices and in managing HR across
cultures.
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