I
6
No.7 Copylk
MANAGEMENT OF THE SOVIET INDUSTRIAL ENTERPRISES'
Office of Research and Reports CENTRAL INTELLIGENCE AGENCY
BLANK PAGE
FOREWORD
The purpose of this report is to contribute to an appraisal of the strengths and weaknesses of the Soviet economy and of its capability to meet economic goals, both in normal times and during periods of national emergency, by investigating and evaluating those current managerial practices in the USSR which relate to the formation and implementation of economic plans. The report pays primary attention to the role assigned to the managerial staffs of individual enterprises within this scheme and examines the day-to-dayof management at all levels to the operating conflicts inherent in the needsentrally planned economy fordecision-making, for control, and for tangible results.
The research was conducted on an all-source basis.
was locused on the machine-building industry, because
of its economic and strategic importance to the USSR and because,substantial amount of information available and the wide varietyproblems illustrated. Although the findings of thisprimarily to heavy industry, the most favored sector ofeconomy,sources indicate that
managerial practices found in this sector also exist in other sectors.
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CONTENTS
Summary and Conclusions
* i
I..
II. Organizational Structure: of Soviet Industrial:
Management
A. Doctrinal
B. Policymaking Machinery
Executive and Administrative
Council of
Economic
The
III. The Individual Enterprise: Managerial Principles
.and.
of the
.
IV. Formulation of the Enterprise Plan.
s*
and Components. .
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RET
E. General Characteristics of the Present Planning
Procedure'
; F. Efforts to Improve Planningv.-
V. Implementation of the Enterprise.
of Supra-Plant Agencies in
and Control of Plant
Productionv
of Supplies and Equipment38
Control andii .:
of the
VI. Management of the Enterprise Labor SO
abor
noVDtsmieaai
and Salary Determination .
of the
VII. External Controls over Plan Implementation
l '
Short-Term tZ
Cash 65
of State
71
of Controls 73
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Appendixes
Appendix A. Methodology Appendix B.
Appendix C.
7 79
the USSR
2. Typical Organizational Structure of aEnterprise in the USSR
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(ORR)
MANAGEMENT OP THE SOVIET INDUSTRIAL ENTERPRISE*
1
Summary and Conclusions
To accomplish Soviet production goals the Sixth Five Yeargain calls for great increases in productivity, to be brought about primarily through better utilization of existingand labor as well as technological Improvements and automation. Achievement of the plan goals will depend largely upon the ability of management to carry through these measures successfully. Thus managementranking with land, labor, and capitalasic factor of productionis as essential to the centrally planned economy of the USSR as it isapitalist economy; indeed,efficiency may be even more important in the former than in the latter system. Soviet leaders have placed increasing emphasis in recent years on the need for good management and haveroad program for managerial improvement.
* The estimates and conclusions contained in this report represent the best judgment of ORR as of
In the Soviet economy the objectives of the regime are achieved by coordinating production and consumptionomplex system of centralized planning and administration operated by an intricate pyramidal hierarchy, the base of which is formed by thousands of firms, or enterprises. All higher echelons in the chain of command share responsibility for the performance of these firms. Themust conduct its operations in accordance with directives from superior organs and within the framework of an approved planoutput goals and input limits. The firm's activities are thus
coordinated with those of related supplying and producing enterprises, and various legal and administrative controls are imposed to ensure -that directives and plans are carried out.
Although each enterprise draws up its own draft plans, thoseconform to objectives previously fixed by central planning The planning process has become so complex andusually enterprise plans have not been approved finally untilafter the beginning of the period to which they apply. the government hasumber of measures tosimplify planning. In spite of some initial difficulties inthese measures apparently have shortened the planningleast for6
Soviet leaders have repeatedly .emphasized the importance
of giving plant directors authority commensurate with(the doctrine of vedinonachaliye.or one-manheir formal powers in fact have been limitedreater extent thaneem to be required evenentrally planned economy. Furthermore, in supervising enterprise execution of plans and supplemental directives, officials of the responsible ministry and chief directoratcfrequently have been accused of exercising "petty lutelage'? over the firm, to theof enterprise efficiency andIT;--
In view of thishe government-during the past several years hasroad program to increase the operational independence and economic efficiency of individual enterprises, as well as to streamline operations and partially decentralize decision-making throughout the administrative apparatus. The government'save resultedroad expansion, latef the rights of-enterprisencreased authority of the economicries in planning, allocation of resources, and financialnnual drives to simplify the organisational structures ofstrative organs and enterprises and to reduce the number ofpersonnel;easures to increase production specialization and cooperation among firmseasures which" are designed to reduce the excessive vertical integration in enterprises and ministries resulting primarily from malfunctioning of the supply and
ftp
system. Soviet spokesmen recently have reportedin the new program, but they also have admitted thatfor decentralization are not being implemented as rapidly
. Concurrently with its efforts to reduce centralization, tbehas been strengthening the powers of the principalof controlhe State Bank, the Ministry of State Control,"Communist Party. This conceivably may offset in someincreases in freedom of action granted to lower levelinterfere with the achievement of the intended gain inflexibility at.the enterprise
The Soviet system of centralized economic planning andis not as inflexible as it may appear. The central planning agencies have the authority and the ability to alter plans during the plan period if they deem this necessary. Also, officials of higher echelons may impose additional tasks on enterprises or order deviations from original plans. They have not hesitated to make use of these possibilities with or without formal amendments of plans.
The imposition of additional, usually priority, tasks does not release plant directors from the statutory obligation to fulfill the plan. In order to comply with both duties, they have been compelled toariety of expedient but illegal practices, especially inand financial matters. The fact that superiors often have condoned, and sometimes even suggested, such practices indicates that there Is little opposition to some degree of unofficial flexibility t the enterprise level.
In conclusion, the Btrong points of the Soviet system of centralized control over enterprises appear to be of greater significance than its weaknesses. During the present planontinued diminution of the elements of weakness may be expected, but no reduction of the elements of strength.
I. Introduction.
ree private enterprise economy, coordination of production and consumption is achieved through the mechanism of the market. Ultimately resources are allocated among alternative uses by the actions of innumerable consumers expressed through the price system. The operation of the market mechanism and price system thusines what goods will be produced, what complex of resources will be used in their production, and how the product will be distributed. In -the USSR, in contrast, the necessary coordination of production and consumption is achieved by deliberate design through the nationalplan. This plan determinesiven period how resourcesre to be allocated, what goods shall be produced and how, and the way in which income is to be distributed.
Broadly speaking, the primary goalree market economy is the achievement of the maximum output of goods and services demanded by consumers with the minimum expenditure of resources. The market mechanism probably could be used by Soviet rulers to obtain over-all economic coordination if their primary goal were the same. They have elected, however, to subordinate considerations of individual consumer demand to the attainment of various political and strategic ends. Since the operations of an unrestricted market would not necessarily bring about production and consumption patterns conducive to these goals, the USSR has felt constrained to substitute for the market mechanism an over-all economic plan which is deliberately formulated to attainobjectives. In essence the plans are directives to various parts of the economy telling them what to produce and allocating the necessary resourcesunctions which under free market economies are performed by individual producers acting in self-interest in response to price changeside variety of markets.
ree market economy, which has its own inherent,system ofentrally planned economy requires the establishment of control machinery to ensure that the purposes of the planners will be carried outhat is, that all economic activity will be directed toward fulfillment of then theystem these, indispensable controls are exercised through the Communist Party
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uge administrative bureaucracy. The ultimata purpose of the control apparatua is to force the adherence of all individual producing units to the economic goals established for them by tho state plan. With the passage of time and the consolidation of Party power this task has become primarily the responsibility of that part of the administrative bureaucracy concerned with economic management and control. Various other methods of control also are built into -the Soviet system; thus, liberal social and economic rewards are provided for fulfillment and overfulfillxnent of state goals, and severe penalties are meted out for failure to conform. At the same time, the planners seek by unceasing indoctrination and propaganda to get each level in the managerial hierarchy to work loyally and enthusiastically to attain state goals from ideological as well aa purely personal motives. .
Economic control through central planning, coupled with incentive-coercive enforcement measures, creates tensions and conflicts which pervade the whole structure of Soviet economic management. Each -level in the operating hierarchythe ministry, the chief directorate, the trust or combine, and the enterprise or firmlan which it must fulfillpecified period, and each level operates under constant pressure from those above it to attain or surpass the assigned goals. Since each administrator is judged in terms of his success or failure In meeting these goals, he strives for the assignment of feasible tasks and for an adequate allocation of resources. This struggleenable position is essentially political, and eachseeks to enlist the support of those in positions of power and influence. In effect, each sector in the managerial hierarchy strives to achieve an equilibrium position for itself; It seeks toenable balance between constant pressure from above for maximum output and resistance from below lo commitments believed to be lnfeaslble. The insecurities engendered at each managerial level by these cross-pressures and by the constant surveillance of control authorities have led to the adoption of an ingenious array of extra-legal practices devised by administrators to make their lot more tolerable.
In contrast with liberal economic systems, the individualis not directed, controlled, and administeredan internal managerial body having the right of final decisionthe appropriate use of resources to achieve optimum Management in the USSR ratherholethe Party Presidium, which establishes the over-all goalsmeans by which they are to be implemented, down to thethe individual factory which turns out the physical units ofthe tasks for each sector of the economy are set by an approvedhowever, the implementation of the planshat is, the-day.-r< management of that sectorevolves upon the responsibleministry and its components, and particularly, upon the- enterprises. To engender order and efficiency inof each economicoviet doctrine decrees thatauthority and responsibility shall reside in the headunit, and in him alone. Applicable to all levels in thethis concept (yedinonachaliye) postulates, in essence,head of each unit in the hierarchy shall be given sufficientmanage his unit in accordance with the plans and then shall be held.accountable for the results. It does not imply either that the .is free to act outside the general framework ofplans or that he is free from surveillance by
Ranking with land, labor, and capital as one of the four basicof production, management is as essentialentrally planned economy like the USSR as it is toeconomy. The importance of managerial efficiency may ven greaterlanned economy, because here the criteriaefficiency include the ability to.complete ontasks fixedegally binding plan, as well as totheminimum expenditure of productive resources.recent years, Soviet leaders have laid increasing stress onof the managerial factor and on the necessity Although the USSR has been aided in meetingproduction goals by the presencearge pool ofmanpower which could be channeled into industry, duringplan period.the country will face decreased
rop^cr
increments to the industrial labor force and will have to relyon technological advancement and on improvement in managerial efficiency to fulfill production goals.
II. Organizational Structure of Soviet Industrial-Management. -
A, Doctrinal -
Broadly considered, Soviet doctrine concerning economicenvisages both centralization of decision-making inpolicy matters and concomitant decentralization offunctions. In harmony with Communist principles ofhis means, morehat the -structure should be hierarchical, with strictof lower-to higher organs and with each higher level havingright to exercise direct supervision over all lower
hat each unit in the hierarchy is to be assignedhe sum of the plans of all units on one levelplan of the immediately superior level;hat theone-man authority and responsibility is to govern the worklevel. But these tenets are not to be regarded asSoviet managerial doctrine also contemplates Thus, with respect to higher levels in theprinciple of one-man management is tempered with anthe importance of collegia! decision-making, presumablytoider range of experience to bear on theproblems. And, although the-guidance and supervisionan organ over its subordinates Is to be concrete andon first-hand knowledge of operating problems, suchmust not extend to petty detail or encroach unduly on the
prerogatives assigned to these subordinate organs.
The system of managementierarchical structure, with centralization of authority and responsibility at each level, is used in both Soviet and capitalist economies. The hierarchical structure through which the Soviet state manages its enterprises, however, extends above the individual firm to include units of the central government. Moreover, each level of this public
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v
administrative structure is assigned tasks which are fixed and linked to those of other levels through central planning and are enforcedomplex network of overlapping checks and controls.
B. Policymaking Machinery.
Supreme policymaking power in the USSR rests with theof the Central Committee of the Communist Party. hasembers,f whom are also members ofexecutive body in the USSR, the All-Union Council All strategic, political, and economic policyhich are basic to the formation of the nationalare made by the Party Presidium, though majorare given formal ratification, usually ex post facto, by Party Central Committee and by the Supreme Soviet of thelocus of decision-making authority is indicated by the factchanges in economic policy are announced throughthe Central Committee of the Party or through joint decreesCentral Committee and the Council of Ministers. which become the basis for plan formation thedetermines such fundamental questions as thoproduction goals shall be set for important strategicwhich sectors of industry are to be given priorityhow the national income is to be divided between con-
sumption and investment, what are the more important measures which shall be taken to implement established goals, and what alterations must be made in aire any established plans to meet changed conditions or policies. Such basic policy determinations obviously are not madeacuum, for the Presidium hasto it the fact-gathering machinery of the entire administrative bureaucracy and may seek advice and counsel from whomever it wishes.
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C. Executive and Administrative Structure.*
1. Council of Ministers.
The highest executive body in the USSR, the All-Union Council of Ministers, is comprised mainly of the heads of ministries, and has final responsibility for carrying out policies set by the Party Presidium. ember Presidium of the Council is the locus of decision-making power; it is composedhairmanirst deputy chairmen. There areeputy chairmen.The Council approves the annual and quarterly oconomic plans, lssuos decisions and decrees relating to formation and implementation of planexercises general supervision over the economic ministries, and coordinates their workiew to the attainment of over-all economic and political objectives. In addition to supervising the ministries, the Council also oversees the work of various special agencies, most of which play an important part in economic
See Figureollowing* Most of the deputy chairmen have no specific ministerial assignment and devote their time to supraministerial problems of policy or coordination, generally in fields related to their individual background and experience. Since the death of Stalin tbegroup has become larger and more formalised, reflecting the increased emphasis on collegial rede In the Party andhole.
*** Insofar as economic management in the USSR is concerned, the most important of these organizations are as follows: the Stateof the Council of Ministers for Long-Xerm Planning of-tin-Nationalhe State Economic Commission of the Council of Ministers for Current Planning of the National Economyhe State Bankhe Mainfor Material Reserveshe State Committee for Construction Affairs, the Chief Directorate for Labor Reserves, the State Committee of the Council of Ministers for New Techniques, and the State Committee for Questions of Labor and Wages.
2. Economic Ministries.
The day-to-day management of specific segments of Soviet industry is assigned to various economic ministries. Each ministry is responsible for the activities of all enterprisesto it and may exercise its supervisory responsibilities directly through staff departments or indirectly through chief directorates (glavki*).
The term glavk (plural glavki) is variously translated as chief directorate, main administration, and chief administration. Further more, some of the ministerial departments are sometimes called fllavki. To avoid confusion.the following terminology will behroughout this report: chief directorate will refer to thoseuction-territorial glavki whichart of the chain of command between the ministry and the enterprise, and department will refer to the staff departments of the ministry which are organised along functional lines.
** In-line with the emphasis on collegial rule in recentovernment and Party leaders have urged the ministers toore use of the ministerial collegia in order toange of experlon.ce to bear on the solution of problems. If (For
references, see At the
serially numbered
same time the ministers have been urged to show more initiative in decision-making and have been given additional authority to formulate and alter ministerial.plans and to allocate supplies and distribute output within the ministry. Similar delegation of authority has also been extended to the councils of ministers of the individual republics. 2/
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Each ministry is headedinister, who ia aided by deputy ministers, each in charge of specific functions, andollegium, an advisory body composed of the deputy ministers and the heads of important ministerial departments and chief The central headquarters of the ministry operate umber of departments established along functional lines. Though there are differences in organizational structure amonginistriea, they usually have the following staff departments: planning, production, technology, finance, accounting, supply.
GENERALIZED STRUCTURE OF ECONOMIC MANAGEMENT IN THE USSR*
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capital construction, personnel, labor and wages, and sales.hose ministerial departments areart of the formal chain of command between the ministry and the enterprise; hence officials of these staff departmentseneral rule are not supposed to deal directly with an individual enterprise without the approval of the appropriate official of the chief directorate immediately in charge of the plant. 4/
,addition to functional departments, the organizational -
structure of each ministry alsoumber of chief directorates, each of which has direct chargeumber of individualhief directorate may supervise all enterprises subordinate to the ministry locatedesignated geographic area (for example. Chief Directorate of the Cement Industry of Eastern Areas) or all thoseiven product (for example, Chief Directorate of the Combineunctioningind of subminlstryink in the formal chain of command between the ministry and thethe chief directorate has an internal structure similar to that of its ministry. ypical chief directorate has such departments as economic planning, supply, production management, technical problems, sales, and finance; 5/
3. The Enterprise.
The lowest level in the managerial structure is occupied by the directors of the individual industrial enterprises. In some industries, notably mining, construction, trade, and foodumber of individualfrequently grouped into trusts (tresti) or associations (ob"yedincniya) for the purpose of uniting producing, servicing, and distribution functions under common management.elated form of organization, the combine
* Most enterprises are put under the direct supervisionhief directorate. In some instances, however, large or important firms are subordinated directly to the ministry and are supervised by the ministerial production department. Sometimes, also, an enterprise which is failing to fulfill its plan may be removed from control of the chief directorate and placed under the ministry itself until the shortcomings are overcome.
-
s also used in some industries. The combine usuallyvertical trust, integrating under one management plants atof production, from raw materials to finishedhe:;Steel Kombinat is an .example. For all practicalthese trusts and combines function in much the same wayindividual enterprises subordinated directlyhiefmost typical arrangement. All three institutions trust, and combineall into the category ofmeans enterprise, business, or undertaking. Theof the enterprise is patterned in general after that of theand the chief
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DJ. The Individual Enterprise: Managerial Principles and Structure.
A. he,
In the Soviet economy, as in capitalist economies, the enter.-is the ultimate producing unit and as such has longby Soviet leaders as the "basic link" inhe firm is legally obligated to conduct itsovernment-approved plan which sets outputfixes input limits. Within the framework of its plan and ofstructure essentialentrally planned economy,Soviet firm carries on its producing activities as anin many respects not much different from its
* The internal organization of the enterprise is discussed in more detail in III, below.
nless otherwise stated, the terms enterprise and firm are used in this report to refer to an individual plant or factory subordinated directlyhief directorate or ministry.
-
counterpart. Every firm isupply of fixed (buildings, machinery, and theor which it is heldccountable. Likewise, it is supplied with working capital (fixed by tshich is credited to its account in Gosbank and which can be augmented if necessary by loans from the Bank. It pays for its- wn labor and materials from these funds and from receipts from the sale of its products, all financial transactions being cleared
through its checking account. Vested with legal personality, thesolely responsible for its own financial obligations,In formal or informal contracts, and may be sued infailure to fulfill commitments. Finally, the firm hires andown employees and establishes internal arrangements so as to production obligations set by
Unlike its capitalist counterpart, however, the Soviet' firm is state-owned and forms the final link in an administrative chain in which all links share responsibility for its performance.trict .sensethere are no areas in which the firm has complete autonomy, for higher administrative organs have the right to intervene in any and all enterprise activities to ensure plan ful-illment for the firm and for themselves.
The principal limitations on the independence of the Soviet firm are inherent in its subordination to central planning authority. The enterprise plan sets tasks with respect to quantity, quality, and assortment of production. The plan also fixes the amounts of materials that may be used in producing the prescribed output, the amount of fuel to be consumed, the number of workers to be employed, and the total wages to be paid. The firm's products are sold at prices fixed by the state to predetermined customers in accordance with contracts generally drawn up by the chief directorate or ministry. These organs usually also purchase supplies and materials and allocate them to the firm as prescribed in its plan. The firm may secure credit only for the purposes and in the amounts specified in its financial plan. Finally, the firm may not dispose of any of its fixed capital through sale or retirement without specificfrom superiors, nor may it divert working capital tonot called for by its plan.
Although the limitations on the autonomy of thestem from the fact that it is publicly .owned and from the Soviet need for central direction and control, the simultaneous provision for some degree of enterprise freedom and initiative stems from the concomitant need to achieve tangible results and to promote .
-
flexibility andhe firm is not.supposed to function as af -mere automaton, routinely carrying out the orders of superiors; rather, it is supposed to show initiative and to strive to surpass its formal commitments. Thus the firm is free to overfulfill its production lan and to produce goods of higher quality than the required . specifications, if it can do so without using productive resourcesn excess of those allowed by its plan. In fact, liberal bonuses for overfulfilment provide firm maii.inenient with the incentive io exercise such initiative. Likewise the firm is free to produce at, lower costs than permitted in its plan, thus increasing over-all economic efficiency. Within the limitations imposed by ite plan nd by regulations of supervisory bodies, enterprise management may organise its physical plant and productive resources as it sees it, and the more successful it ie in plan fulfillment, the moreom it is likely to have to manage its internal affaire with minimum interference. Plant management may make recommendations to superiors concerning production goals and allocation of materialshe plant and ia usually permitted to work out detailedt the plant level of general directives from superiorinally, the enterprise is encouraged to exercise initiative in improving methods of production, including development of new technological, devices.
B. Principles.
Soviet managerial doctrine provides three basic principles considered to be particularly applicable to individualhe first is that the enterprise director, or manager,eprer aentativc and authorized agent of .the government, can in no sense be completely independent. He isinkhain of command
* To achieve some sort of workable balance among these basic needs (for control, results, flexibility, and progress) is probably the most critical problem of Soviet managers at all levels. This problem is particularly evident in the relationships between plant directors and officials of the supervising ministry and the chief directorate. Some of the results of their attempts to solve this complex problem in day-to-day operations are examined in subsequent sections of this report.
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providing strict subordination of lower to higher organs; hence the"powers"rights".of.enterprise managers aresubject to rescission, and heads of the chief directoratesince they too share responsibility for the firm'shave the right and the duty to intervene in its internalthey deem.v.
The second principle is embodied in the doctrine ofhaliye, or one-man authority andoncept similar to that used in.the management of large capitalistsif.applied to the enterprise, yedinonachaliye means that the planthas full authority and responsibility within the plant. His formal powers and duties include the following: appointment and removal of employees, issuance of internal orders and instructions binding upon all employees, delegation of authority to the heads of shops and to other units within the plant, management and control over the plant's material and financial resources, and maintenance of discipline in all phases of operations. In return for these delegated powers the director is held responsible for the security of plant (state) property entrusted to his care and for operating his plant inay as to fulfill tasks established for the plant in its formal plan and through special
* As explained earlier (p.tbis doctrine applies to all. levels in the managerial hierarchy, although Soviet leaders have long stressed its particular applicability to the enterprise. The system of yedinonachaliye was put into effecteplacing the so-called "functional" system under which authority and responsibility were shared by the heads of various plant departments. The latter system had resulted in great managerial confusion and duplication.
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In reality, the doctrine of yedinonachaliye isormal device for centralizing authority and responsibility. Since the Soviet firm and its management are an integral partentrally planned economy, the giant director's managerial powers must be exercised within the total context of the Soviet system. Hence he is bound by directives and regulations issued by higher bodies; his activities are continually subject to checks not only by his immediate superiors in the chain of command hut also by
agencies especially charged with such responsibilities (the Communist Party, Gosbank, the Ministry of State Control, ande must pay attention to the opinions of the Party and trade union groups in the plant and to the suggestions of so-called "actives" and of thee must support-general policies and campaigns currently espoused by the Party and central government (such as the Stakhanovitend the encouragement of inventors and rationalizers) regardless of the impact on plant operations; and finally, since superior organs in the chain of command are coresponsible with the director for the plant's performance, he must expect varying amounts of personal intervention by superiors in the internal management of the plant when they. sider it necessary In order to ensure completion of the firm's-tasks.
* Though most enterprises operate on the basis of khozraschetthere are also some which are subsidized from the state budget, as are institutions (uchre zhdeniya) such as -postal and telegraph services, schools, and scientific laboratories.
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The third fundamental principle guiding the operations of Soviet firms is embodied in the concept of economichich means that the firm must use business accounting techniques and must manage its resources so as to realize maximum business profits within the framework of itshozraschet thusevice by which Soviet leaders seek toheir goalsinimum expenditure of productivelthough the firm's monetary production costs and profitpecified in its annual plan, one of plant management's primary asks is to strive for the largest possible reduction of actual costs below planned costs, thereby maximizing unplanned profits. The size of the differential between planned and actual costs, provided /product quality specifications are met, serveB as one of theeasures of the success of the Although eamod profits belong to theixed part is put at the disposal of the enter-prise to be spent for so-called "production-welfareost of the retained earnings are used for plant expansion and. additions to working capital,redetermined portion goes into
the "director's fund" to be spent for improvements in worker housing and community facilities and for bonuses to meritorious employees.
C. Structure.*
The internal organization of the enterprise varies somewhat, depending on the branch of industry, the type of product, the method of production, the size of the enterprise, and othern most industrial enterprises, however, the chain of command-extends downward from the director through the deputy director or chief engineer to the shop or department chiefs and foremen. Thedirector, who is appointed by the supervisory minister with Party approval, has full authority and responsibility within the plant. His principal duties have been noted above.
In industrial enterprises the.deputy to the director, usually the chief engineer, is likewise appointed by the supervisory ministry subject to Party approval and is in charge of the plant when the irector is absent, primarily responsible for the technical phases of production, the chief engineer exercises general supervision over all of the production shops and production servicee is regardedighly important plant official, frequently com-municating directly with officials of the supervising chief directorate andarge enterprise the chief engineer mayeputy (chief dispatcher) who plans and controls the daily scheduling of production.
Next in line of command are the chiefs of production shops, which are considered independent units for accounting purposes and hence must operate in accordance with the principles ofhe chief works out the plan.for his shop, sets norms and piece rates within prescribed limits, and has authority to hire and fire workers, impose administrative penalties, and award bonuses. The final link in the chain of command is the foreman, whoection within the shop and, nominally at least, is "the full powered supervisor in production section assigned to him carrying the responsibility for-5*
* See Figureollowing
fulfilling the plan in all of its/ All orders to individual workers are supposed to be channeled through theheduties include the following: supervision over the production process and the use of equipment in his section, assignment of workers to specific tasks, hiring and discharge of workers (subject to approval of the shopating of workers' efficiency, and qualifications, and administering of rewards and penalties within prescribedn practice, however, foremen have not been permitted to exercise, such broad powers in many plants, and the Soviet press has often pointed out the need for increasing the actual powers of
In larger enterprises the heads of staff departmentsgeneral administration and services are sometimes calledalthough they are not part of the chain of command,.are the more important auxiliary departments: planning,
which coordinates all enterprise planning activities and preparesannual, quarterly, and monthly plans; technical control,the quality of output for conformance to specifications;wages, which works out problems of norms and piece ratesof raising labor productivity; personnel, which ishiring, training, and discharge of employees; .and accounting,central bookkeeping for the whole enterprise. include finance, supply, sales, and capital construction.
IV. Formulation of the Enterprise
Soviet doctrine holds that th**formation of economic plans necessarily involves both "planning from above" and "planning fromhe former to provide central direction and coordinationhe economy and the latter to ensure that the plans will be realistic. The final plans do, in fact, resultombination of theinds of planning. Planning from above, is manifested through plan directives from the Party Central Committee and the Council of Ministers establishing over-all tasks for oach sector of the economy and through more detailed directives from ministries and chief directorates to individual enterprises fixing specific output goals and input limits to guide their detailed planning. Planning from below is that done by enterprise management in embodying these directives in
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TYPICAL ORGANIZATIONAL STRUCTUREEAVY INDUSTRY ENTERPRISE
IN THE USSR*
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a detailed plan for plant operation and, if deemed necessary, proposing modifications. Final plans are of course determined from above/
ear plans, representing perspective planning, are largely made from above.* These plans give formal expression toong-range policy of the regime, fix the principal areas of concentra-'; tion for the period, and establish goals to serveource of inspi-ation for the general public. The actual operation of the economy, however, is conducted on the basis of the annual national economic plan, whichomposite of the plans of all producing units and which, when approved by the Supreme Soviet, becomes the law of the land. For the individual industrial enterprise the counterpart of this plan is its annual technical-industrial-financial planhich serves as an initial blueprint for the year's operations. The procedure' by which this plan is formulated serves not only to illustrate the role played by enterprise directors in plan formation and the relative amount of planning from below in the total planning process, but also_ reveals many of the over-all problems inherent in present Soviet planning.
A. Functions and Components.
The functions of the annual enterprise plan sre threefold. First, lt provides supporting details for the broader plans drafted at higher levels, enabling the economic ministries and ultimately the highest planning agencies to evaluate and reflno their "respective drafts. Second, the enterprise pfan, after its approval by thoof Ministers as part of the ministerial plan,egalof control used by the ministry and the chief directorate in regulating the operations of the enterprise. Third, it is theby which internal enterprise management directs andall aspects of the operations of its plant.
* The enterprises havo recently been delegated authority todrafts of theirear
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The enterprise plan has seven major components, asroductionlan for utilization of productionechnical developmentlan forlan forlan for production cost,inancialach componentarge amount of technical detail whicha binding commitment on the enterprise.
A companion piece to the enterprise plan is the detailed(operativnyy) plan, which is ratified by the ministry every month.contrast to the enterprise plan, which fixes the plant technical,and financial tasks for each month, quarter, and year,plan establishes detailed assignments forour periods for the enterprise and for individualshifts. The operational plan regulates the beginning and endjob, the operating hours of each machine, the flow of production,
and the allowable repair time. It also establishes with respect totask detailed requirements for quantity, quality, andof other factors.rt
The requirements of the operational planiven month apparently need not necessarily be the same as those of the annual plan, for available evidence indicates that ministries have sometimes demanded higher monthly production than required by the plant'such practices presumably are means ofa cushion against future contingencies that otherwise might adversely affect the plant's fulfillment of the plan.
B. Governing
Annual planning at the ministerial level is governed by pecific assignments (oreveloped by higher planninggencies. These indexes establish minimum requirements for^ production by value and by volume for each major commodity. They also specify the amount of materials, equipment, manpower, and financial resourcesinistry will be permitted to use for current output and for capital investment. These specifications are based on the assumption that each ministry will bo able to achieve certain projected rates of improvement in labor productivity.
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technical efficiency, and net cost. In the initial planning stage this underlying assumption is binding upon the ministries, although thepportunity to raise questions may arise in the review process.
Each ministry divides the projected production tasks and V. resources among subordinate units. According to doctrine, the ministry distributes assignments In the form of plan directives to he chief directorates, which in turn reassign them to subordinate enterprises. In practice, however, the ministry frequently issues assignments td the larger-enterprises as well as .to thehe ministerial Rjan directives, are binding on .chief, directorates and enterprises during this stage of the procedure. Although the directives do not elaborate on technical or operational details, they specify for each firm the annual production quotas (withuarterly, .and monthly;breakdowns) and determinellowable amount of materials, manpower, new equipment, financial expenditures, and capitallan directives from the ministry also prescribe the amount of technical detail to be included in the individual enterprise
* In Soviet usage, technical capacity is defined as the amount of work which can be performed on given equipmentrescribed work areaiven labor shift. Productive capacity is defined as the number of parts or units which can be producediven shop or section fully exploiting its technical
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In the determination of plan quotas, established norms for production and utilization of resources are customarily taken into consideration. According to basic Soviet doctrine, these norms must be based on technical and productive capacity* rather than on statistical data of pasthis Specifically precludes the situation inew plan is necessarily based on the norms underlying an old plan. In many'radustries, moreover, plan directives reportedly require higher norms each year byraising the plant's production goalsixedlthough chief directorates may discuss such new norms with.individ. ual enterprises, this consultation does not enable plant managements to exert much influence on their determination of norms, since the
discussions take place after production goals .have already been fixed at higher levele. Furthermore, any request for lower norms would necessarilyuggestion to scale down production goals established by higheruggestion which there isreluctance to make. The ministrieshich decide whether the plant's proposal* for norm revision arehave tended to insist on the application of norms as initially fixed, in order to force higher production goals in accordance with over-all national policy.
C. Drafting.
1. Participants.
Over-sll planning responsibility at the enterprise level rests with the enterprise director and may not be delegated. Tbe actual drafting of the plans, however, is done by the adminlstrative and technical departments of the enterprise-. Tho plant's planning department usually compiles the detailed data submitted by the technical departments into summary economic and financialand actseneral coordinator in all planning matters. Soviet literature emphasises that shop leaders and workers likewise participate in the planning process in large measure and that the Party and trade unionsguiding and mobilising" influence on/ Since drafting of the plans isechnical job and has to be performed with tight deadlines, it is doubtful whether there is more than token participation by the rank and file. The plant Party organizations, being coresponsible for fulfillment or nonfulfillment of enterprise plana, apparently are inclined to support management protests against difficult norms or production assignments and usually do not interfere in the planning process, provided the enterprise manager has made the appropriate gestures to ensure their.
Planning commissions of local government executive committees may also be held responsible for faulty planning in enterprises falling under their territorial jurisdiction.ccordingly, they have taken an active interest in planning by
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these establishments, but in general have tended to confineto steps considered necessary in the local public
2. Procedure,
',
Officially, preparation of the draft plan begins when thereceives from the chief directorate figures establishinggoal's and input limits. Such control figures are notuntil March or April (or, in some cases, as late asJAaythe year preceding the plan year, too late to enable the plant toits complete draft plan on schedule. Nevertheless the plantwith preliminary drafting of its plan and is able to do so most managers can secure informal indications of themagnitude of their future production quota. With orfigures, the plant must begin preliminary planning earlyyear because certain measures which are essential to theexecution of the plan require considerable lead-time,capital goods requirements of the enterprise.I
| |work on the norms for the next year begins as early as
February and continues for severaly March the plant usually begins to face deadlines for submitting its plannedfor equipment for the following year. Requirements for new construction likewise receive considerable attention during the preliminary planning
The chief concern_of the individual plant in the early drafting stage is to develop in detail the various commitments in the enterprise plan and to supply the chief directorate and the ministry with the detailed information requested. Proper sequence is particularly important in drafting the several parts of theplan. Plans for plant capacity (new equipment and structures) precede all other sections because they establish physical limits on production. Plans for production, utilization of capacity, and technological development follow, each worked out in considerable detail. This much of the plan must be developed before plans for production inputs (labor, power, materials, and financialcan be prepared, because the production and technical sections of the plan establish the requirements for detailed
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enumeration of production inputs. Estimates of requirements for electrical power, for example, depend on the production assignments and technical processes adopted for the various shops of the plant.
Responsibility for developing the technical details of different parts of the production plan usually falls to an experienced engineer or group of In consultation with production shops and other plant departments these engineers consider all questions concerning capacity, production methods, and norms. If design specifications are impracticalroduction standpoint, changes arc requested. Questions which cannot be settled at the lant level are usually referred to the ministry. After careful review by the chief engineer and chief technician, the work of the engineers is compiled to form the draft plans for production, utilization of capacity, and technical development. Properof these .sections is particularly, vital because lackapacity and technical difficulties are usually the only grounds upon which the plant management can successfully obtainin productionn fact, plant capacity and planned technical development are considered so important that higher authorities sometimes send representatives to theto make on-the-spot investigations while the draft plan is being
Both the chief directorate and the ministry participate in supervision of the drafting process. Although the former has immediate supervision over the enterprise in this respect, the ministrylose check on the progress being made, particularly in the more important plants, and does not hesitate to intervene if delays
The economic and financial sections of the planthat is, those dealing with labor, power and materials costs andand other financial mattersrc, as indicated above, derivative in nature and cannot be drawn up in detail until theand technological sections have been approved at higher levels. Although an attempt is made to complete these derivative sections well before the end of the year preceding the plan
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top Secret
they are frequently not finally approved for several months after the beginning of the plan year
D. Review.
The enterprise draft of the annual plan is submitted to the chief directorate for review as soon as the production and technical sections have been worked out in detail. (The economic and financial sections, as stated above, are tentative at thisenerally speaking, the planning schedule of the Soviet economy appears to call for submission of enterprise plans to the chief directorates by the end of June. Individual enterprises, however, seldom seem to meet theirrobably largely because of the late receipt of specific plan directives from superiors. omplete draft does not arrive in time, officials at the higher level immediately begin to demand submission of at least the completed parts, so that submission is apt to beiecemeal
For the plants examined in this study, review of draft plans at the chief directorate and ministerial levol was carried on from late June until about the middle of August. This iseriod of intense activity, during which the chief directorate asks for much additional information from the enterprises, but makes few requests for decisions from thenterprise officials arc frequently called to-Moscow*lo participate in the formal review of their draft plans. During this period the chief directorates are also preparing their own sections of the ministerial plan forto Gosplan and to the Council of Ministers. Although evidence regarding tbe precise timing of this presentation is fragmentary, indications are that lt takes place in late August or early
Although in the past, as noted previously, review and approval of the annual plans at the highest level often have not boon
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completed until well into the plan,n effort, ia, made toat least the first-quarter plan in all details before of the new plan year. The central planning agency,the ministerial draft plan, issues to the ministryfor revising the whole annual plan and morecovering the first quarter. The latter enable tbesend to the enterprise directives specific enough to makeformulation of the first-quarter enterprise plan. Theseusually reach the enterprise between late September andalthough on occasion delays in resolving basicthe annual plan may cause planning for the first quarter tointo the plan year.
The ministries revise their plans on the basisdirectives given them and resubmit the plans. After finalof the revised draft plans the central planning agency sub-the completed national economic plan to the Council offor approval.. Upon ratification by the Council, the planwhole (specifically incorporating the detailed annual plans of allsand enterprises) is promulgatedaw by the.
Procedure.
In spite of an apparent orderliness in tho timingreview process, order ia nototable characteristicprocedure. Nor is there inlear separation ofof the several echelons involved. Chief directorateslittle responsibility for decisions even in theall stages of planning, moreover, members of theand other ministry officials frequently bypass the chief and deal directly-with enterprise, managers.
officials of Gosplan may concern themselves with some of the detailed minutiae of the plant's plan.
* It is reported that Qn the majority of ministries the development of technical industrial-financial plans4 was completed only in the second quarter| /
While awaiting approval of the basic parts of thoplan, plant officials must complete the economic and financial sections and proceed with the draft of the operational plan. They must prepare also the specific details of materials requisitions and contracts for the plan year. These activities are carried forward on the assumption that the basic parts of the plan will be approved
as submitted. In fact, however, these parts are often substantially, changed by higher authorities during the review procedure, thus
necessitating extensive revisions of the operational, economic, and
financial
Since the review procedure takes so much time and so many changes must usually be made in the original draft, theplan often is not completed and approved until well into the plan Under these circumstances tbe enterprise has to proceed on the basis of informal indications from ministry officials of the probable production schedule and resourceuring tbe period of operation without an approved plan the plant has no formal legal claim to labor, wages, supplies, or finances. Hence the plant suffers delays in securing supplies and funds for payment of wages and other financial obligations, since special authorisation from higher authorities is usually needed in such instances. Even after approval of the plan the enterprise remains in this difficult positionhile, because the approved plan must be registered with Gosbank and the Ministry of Finance before.
financial resources called for by the plan will be released.*
An approved final annual plan for the firm does not neceessrily remain unchanged throughout the year. irm's total production obligations may be increased or the product mix alteredesult of changes in plans for the whole economy, particularly in the priority status of its various sectors. Also, the enterprise production plan may sometimes be revised by central planning authorities if it becomes obvious that essential materials or
* In plants examined for the purposes of this report, registration with.these agencies requiredonth after final approval of the enterprise plans.
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component parts cannot be made available. In unusual circumstances, suchajor fire or other natural catastrophe, the plant'sitments may even be reduced.
E. General Characteristics of the Present Planning Procedure.
.
From this analysis of the process of enterprise planation it is clear that Soviet planning procedures are heavily weighted in favor of planning from above. Although enterprise managements supply central planners with the estlmatos and detail concerning plant productive capacity indispensable to realistic planning, moat of the basic decisions affecting each firm's plan are made by the ministry and other higher authorities, and apparently the firm-has relatively little influence on these decisions. The original draft planc by tbe firm must conform to control figures fixed by higherties, who may make major revisions at any stage of the drafting and review procedure. Although enterprise officials arc consulted frequently concerning the firm's plan, consultation often amounts to no more than requests for information. The plan as finally approved may bear little resemblance to that originally submitted and may be -unrealistic in terms of the capacity of the enterprise to fulfill it. *Consequently) because both the success of the firm and the Income of its managerial officials depend on plan fulfillment, the whole planning process becomes somethingug-of-war, with enterprise managers striving to establish plan goals which they think they can fulfill, and central planning authorities seekjng to get the maximum possibleout of the plant. Officials of the ministries and chieftend to support the latter in this struggle.
* The unrealistic nature of the plans for some enterprises mayof the reasons why so many firms fail to fulfill their
According to Bulganin, "The proportion of enterprises which did not fulfill their annual plans amounted1 toercent;2 toercent;3 toercent;4 to
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.Both draft and final plans of the enterprise include aamount of minute detail,eneral policy of close control
by superior organs over each facet of the firm's operations.* The procedure by which these detailed plans are developed from initial directives and draft proposals to finally approved plans becomes so complex and time-consuming that enterprise plans often have not been approved until after the beginning of the plan year. Such delays, coupled with the probability that the final plan will differ from the draft plan, lead to inefficiency in plant operation because the director cannot lay out production schedules in advance on the basis of stable expectations concerning tasks and resources. Furthermore, preparation of such detailed and complex plans tends to inflate the planning staffs of enterprises and diverts managerial and engineering personnel from production work for long periods of time. In the plants studied for this report, plant officials seemed to be engaged in planning activities throughout the entire year, for no sooner had the belatedly approved plan for one year been received than the plants would receive control figures for the next year's plan.
F. Efforts to Improve Planning Procedure.
* Apparently the ministries have required enterprises to submit an enormous amount of detail in their annual plans. It is reported, for example, that the Tckhpromfinplans for cement-plants had (in
9 forms, and those for peat enterprises
t is significant to noteecent study of Soviet industrial
management based largely on information fors describes the same shortcomings in planning as.were found bytudy to be still
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Soviet leaders have recognizedong time the serious shortcomings in the established procedures for formulatingplans and from time to time have taken steps to correct some' of thepparently without great, according to officialumber of new measures were adopted to improve the quality of plans and to shorten the plan-formulation period. Most notable of these was the divisionf Gosplan into two committees,"one concerned with short-term planning and the other with long-term planning. In addition, the
RE7
number of indexes, or. objectives, included in the national economic plan and also in the plans of the ministries and chief directorates was greatly reduced. According to Finance Minister'Zverev,5 Plan containedercent fewer indexes than4he effect of such reductions is to limit the amount of detail that is planned centrally and thus to enhance the rights of the ministries, which now can give final approval to many details formerly requiring the approval of Gosplan or the Council of Ministers. At the same time the number of forms and the amount of technical detail which the miniatries must submit with their draft plans have beenreduced. Finally, the ministries have been given the right, before transmitting the indexes in the state plan to individualto make partial changes in respect to quarterly breakdowns and cost outlays for individual
. Similar decentralization in planning also has been extended recently to the enterprise level. ear plans were initiated and almost exclusively drawn up by the ministries; now the enterprises are to prepare first drafts of theirear plans. With respect to the annual plan, the enterprise now must submit to the ministry proposals and estimates relating toimited number of basic indexesfor example, production output expressed in monetary costs and in natural units, number of workers and employees, total wage fund, and percentage increase in labor62/ These estimates and proposals are submittedhe joint signature of the enterprise director, the secretary of the plant Party organization, and the chairman of the plant trade union committee. In case of disagreement concerning planhese organisations may submit dissenting opinions and alternative/ Following approval of the basic indexes in the enterprise plan (by the ministry and by central planningas part of the over-all nationalhe plant itself works ut details of its complete technical-industrial-financial plan,which is given final approval by the enterprise director and which is then sent to the ministry merely for control purposes. The detailed enterprise plan must bo completed not lateronths after approval of the national Finally, the
ministries have been charged with the responsibility for reducingof forms and the amount of-detail required in
' Although at least some of these changes in planningwere supposed to have been put-into effect3 ofPlan in the firms investigated into require-about as much time as in previous years, bbj evidence concerning the difficulties and delays in.'
meriting-the hew, somewhat decentralized planning
afforded by Finance-Minister Zverev's statement late4 that,in spite of increased authority in the planning field, the ministries were continuing to refer many petty questions to highere sharply censured them for attempting to anticipate every detail of enterprise operations, pointing out that the resultant demands for large amounts of detailed data unduly prolonged and complicatedthe planning It appears, however, that the newhave had some effect in accelerating and simplifying the drafting of the plansor according to Moscow radio, the national economic plan was approved by the governmentnd "each enterprise and construction site was informed of its tasks before the beginning of the
V. Implementation of the Enterprise
Plan fulfillment is the primary standard used in evaluatingpersonnel at each level oi*the hierarchy, and failure to fulfill the plan may entail legal, political, or economic sanctions on all responsible parties. The emphasis on plan fulfillment and over- : ulfillment pervades the Soviet system to such an extent that managers at all levels tend to weigh each decision on this balance. For the enterprise director, an added incentive is provided by the fact that his personal income is substantially dependent on the firm's accomplishment with respect to the plan. When production difficulties, threaten plan fulfillment and cannot be overcome through official channels, the director has the difficult choice of deciding whether to use illegal or officially disapproved means to attain his objective.
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Hie choice ia influenced by the knowledge that plan fulfillmentsins, but failure, even without fault of his own. ia seldom ._
Once the enterprise plan has been approved, the director must proceed to carry it out in all detail that is, he must see to it that the plant produces goods in the specified quantity, assortment,uality in tho designated time with the prescribed productive resources. But for the most part he cannot expect to program the year'ssolely on the basis of the plan and to carry it out as he sees.fit,ince Soviet planning necessarily must bee facetpossibility that his plan may be changed during the year, or, morerobably, that he will be required to deviate from the plan toriority directives from superiors. He must also expectuperiors, particularly officials of the ministry and chief directo- ate, to intervene to influence his day-to-day management of. plant when they consider such action necessary, for their own success depends on success.at the enterprise level.
, *i
A.. Role of Supra-Plant Agencies in Coordination and Control .
of
Tbe Council of Ministers, as the top executive board for Soviet industry, not only approves the annual enterprise economic plan and subsequent formal changes in it, but also establishes cur -rent priorities to govern speclfic.nroduction tasks. In addition, it regulates operational practices, checks on progress in carrying ut specific production orders, and sometimes provides support for solving operational problems. To implement newrograms and revisions in policy the Council first issues broadeneral decrees and follows them with detailed decrees fixing pecific new assignments and revised resource allocations required by the new From time to time the Council also issues^ special decrees, each applying solely to an individualuch decrees are usually issued to meet some especially critical situation and may order priority for deliveries to designated industries or impose deadlines for shipments of certain items to hose
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In addition to issuing such decrees, the Council of Ministers may use less formal methods to order changes in official plans and allocations in order to cope with spot The Council also initiates national drives to Improve unsatisfactory operational practices, such as slow loading and unloading of railroad cars at plants, and orders ministerial officials to follow up Council decrees with specific instructions to subordinate chief directorates and Finally, the Council issues regulations to govern enterprise production procedures and practices, dealing with even such detailed matters as the issuance of liquor to certain categories of outdoor workers, the minimum coal reserve to be maintained at the plant, and the reduction of scrap metal balances at shops and loading By means of these various techniques the Council of Ministers is able to achieve some measure of flexibility in the implementation of over-all plans and to make such plans dynamic. Should production problems of great urgency.arise or should plan revisions become imperative, the Council can quickly mobilize the resources necessary to meet the situation.
Each industrial ministry maintains direct control overenterprises and makes many basic operationalthem. Not only does it require elaborate and systematiceach enterprise, but also many of its officials keep close checkstatus of the production program and provide needed support to The minister himself sometimes intervenes inaffairs of an individual plant to bring the weight ofto bearpecific problem, Tnis
directives to plants are in many instances the result of hie contacts with other minlatries and their enterprises and with the Council of Ministers. His directive may, for example,ush production order, an order reflecting criticism heard in the Council ofers, or general or detailed instructions relating The deputy ministers, as well as tho minister, may also become involved in any and all phases of plant Finally, the minister also receives complaints from plant management concerning auch matters as "rejectionequeat or failurehief directorateinisterialto provide adequate support to the plant. Such complaints are sometimes successful and sometimes not.
The ministerial collegium considers all majorontinuing check on plan implementation. At thethe plan year the collegium apparently.reviews in some detailin each individual enterprise, especially those whichto encounter difficulties; it follows up these initial reviewsduring the plan year and may require plant officialsat collegium sessions in Moscow to answer specific questions.it may modify enterprise operational plans, considerof major officials of plants consistently failing to meetdeal with specific productionlthough important'are settled at formal collegium meetings, most oisurveillance and control functions areby those deputy ministers and heads of chief directorates,( direct line >
The production department of the ministry is the staff armt of tho minister, having over-all responsibility for ensuring completion of the ministerial production plan. Although not in the direct chain of command between the minister and the plant, officials of thedepartment often behave as if they were agents empowered with direct supervisory authority. This department handles problems immediately related to the implementation of current productionf subordinate enterprises. Its ability to coordinate the assignment! of production orders among plants is limited, however, since itreject demands from higher levels for acceleration of delivery schedules or changes in priorities. Nevertheless, it can sometimeslant by giving advance warning of impending changes in orders or by supporting plant officials in their dealings with the
, In Its efforts to assure fulfillment of both specific priority rders and of the production programhole, tbe production department chocks on timely delivery of raw materials ando the enterprises and analyzes systematically their If an enterprise is behind schedule, or other operational problems arise, representatives of the department will investigate to ascertain the causes and, through discussions with plant officials, determine whether the problems can be resolved without outsidef worse comes to worst, officials of the production
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department may even suggest subterfuges designed to create the appearance of compliance with the Near the end of each -month, quarter, and year, the production department If necessaryinal plan fulfillment drive using exhortations and threats in addition to last-minute
if, despite theselamV^Vf*
underfulfills its monthly plan, the production departmentto an almost ritualisticirst, aof official wrath is displayed, and written explanations Thereafter, representatives of the productioniscuss the situation with officials of the enterprise. If can legitimately be attributed to technical factors: delinquency of suppliers, the discussions are relativelynot. officials of both the department and the plant.tryto assignitheto one another by referring to previous directives or appeals help. -H
As noted previously, the chief directorate,eparate link in the chain of managerial command, is frequentlyin ministry-enterprise relations. This practice has apparently resultedonsiderable amount of duplication of effort in tho day-to-day implementation of plans. The principal difference between the activities of the chief directorate and those of the minister and ministerial production department seems to be one of intensity rather than subject matter. The measures usually taken by the chiefprobably are more specific and continuous. The routine operations of the chief directorate include thorough examination of plant preparations for executing the production program,checks on the progress of all phases of work under the plan,and occasional on-the-spot Issuance of categorical orders to fulfill or overfulfill the planrominent feature of chief directoratehese orders often set -forth detailed instructions, and the chief directorate mayepresentative to the plant to check upon In some -casos the directorate also can decide what part of the plant'selivery schedule may be modified in order to Jill unforeseen priority Finally, the directorate attempts to ensure completion
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of all production orders on schedule, acting in thisexpediter in supply
a high-
Plant Production Scheduling.
Ministries, chief directorates, and enterprises alike base decisions concerning production schedules upon the annual plan and its quarterly and annual production quotas. They must also observe any supplementary directives of governmental and Party organs. The annual production quotas set in the enterprise plan can be changed only by the Council of Ministers, but considerable flexibility existseepect to quarterly and monthly production and delivery schedules. -The formal production schedule of the enterprise originates in the ministerial operational plan, which contains itemized monthlyand delivery schedules for all subordinate plants and is transmitted to the plant in the form of approved monthly operational plans. On the basis of these plans the planning department of the enterprise drawsday operational plans for each production shop and for the plantroduction progress report must be submitted to the chief directorate and to the ministry forday
If an enterprise cannot meet production schedules, it may petition its chief directorate and its ministryhe ministry may grantetition within the framework of the national plan, by deferring production from one month or quarter to the If approval oleferral would threatenof the annual enterprise plan, however, the ministry may efer too petition to the Council of Ministers
svidenco concerning the plants studied In this report indi-
* Some plants are required to submit routine reports more frequently than everyays. Daily reports are required of cement plants, for example,ay reports must be submitted by oil refineries.
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cates that failure of an enterprise to fulfillday plan will entail immediate inquiries by the chief directorate or ministry, which may then require the enterprise to submit reportsays or even every The intent of such close control is tolast-minute difficulties or underfulfillment.
.Fudging by Ihe experience of some plants I
planned production scheduling and scheduling control in
the enterprise is frequently interfered withanner irreconcilable with orderly production. On the average, these plants receivedozen orders each month from de'puty ministers or from officials of the ministerial production department and the chief directorate requiring the manufacture and shipment of items irrespective of planned delivery Press criticism of such practices suggests that the experience of these plants may be fairlyhe plant director may protest to the ministrygenerally without success, however, because such special orders usually result from pressure by top Party and governmente must then deviate from the planned production schedule and prepare for the consequences as best he can. Under these circumstances, established production schedules are less meaningful in practice than they are in appearance.*
s M
The plant's planned production schedule also often has to be rearranged to meet demands of the ministry or chief directorate that the plant overfulfill its/ Although these demands are usually couched aslant officials can ill afford to ignore them. SuCh requests are frequently used by the ministryeans of shifting assignments from less efficient to more efficient producers who are expected to be able to cope with the added production load.
Finally, radical rescheduling of plant production mayby shifts in over-all national economic policy.
soonew policy is announced, ministe-
* Such unscheduled orders and revisions in plans may explain in part the prevalence of shturmovshchina^ (storming) in Soviet industry,planned output is accomplished mainly during the last half of the month rather than being distributed evenly throughout the period. Irregular and belated delivery of supplies also contributes to this practice./
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rial and chief directorate officials.attempt to implement.it at once by issuing directives to the-enterprises to adjust production and deliverypparently, detailed planning, for these necessary.'
adjustments does not usually precede public.announcement. For example, when an increase in agricultural and consumer goods productionecided uponachine-building plants were pressed to begin immediate delivery of equipment and other products needed tohrough the new policy. / Since plans apparently had not been adjusted in advance of the changed requirements, production wasduring the time that new schedules were being developed. Soviet leaders apparently considered such temporary disruptions not toorice to pay for the psychological benefits to be derived from the speedy announcementew economic policy, thus permitting inauguration of public drives for its immediate implementation.
C. Procurement of Supplies and Equipment.
Strict central control is exercised over allocation of supplies and equipment required by the individual enterprise in implementing its plan. ong list of criticalundedas in.the past been directly allocated by Gosplan in accordance with the national economic plan; presumably this function is now performed byecently established Gosekonomkomissiya, To secure allocation ofunded commodities, the individual enterprise includes in its draft plan specific material requirements which are reviewed andn the ministry and then are submitted to the central planningas part of the annual plan. Finally approved commodity allocations are made by means of special vouchers, first to the ministries and then to enterprises in accordance with norms or "coefficients" fixed in the plan. Severe penalties are provided for using funded commodities for purposes other than those specifically approved./arge category of items somewhat less scarce than funded commodities) may be sold by producing ministries directly toministries without specific central government approval of each
* From time to time tho USSR has attempted to reduce the number of funded commodities. It is reported, for example, that some time3umber of items of equipment andre being taken, off the Council of Ministers' controlled list and transferred to the jurisdiction of the Ministers/
- 38
sale. Ministries, in turn, allocate such goods to subordinateand firms in accordance with specifications in Other commodities may be procured by ministries andenterprises directly from producing cooperatives andplants without formal allocation."
Besides this formal system of allocating materials and equipment, the Soviet government also maintains centrally controlled reserves, which maybe used to meet unforeseen supply problems. "Reserves of the Council ofart of the plant inventory, may be used (with special authorization from the Council) to satisfy needs arising in the process of carrying out the plan for example, to meet unplanned assignments or tothe plan./ In addition, state reserves are maintained by the Chief Directorate of State Material Reserves for mobilization and similar emergencies and may be made available to enterprises for critical current production requirements, with the approval of the Council of Ministers.
procurement of allocated goodsthat is, their physical acquisition by the enterprise is closely controlled tVy the ministrytaff department of supplyfter receipt of orders from chief directorates or enterprises, Glavanab negotiates "general economic or business contracts" (khozyayetyennyy dogovor) with.supply/ These contracts stipulate the quantity and assortment of materials to be supplied and their specifications, delivery dates, and penalties fo**nonfulfillment. In some cases chief directorates of the consuming industry also conclude general contracts with suppliers through their own supply departments.
* GLavsnab is sometimes also referred to as chief directorate of -supply or main administration of supply. For the sake of clarity the term "department of supply" will be used in this report.
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In the case:of-standardized articles, enterprise management participates in the negotiation of the contract only if its requirements differ significantly from the kind of goods available from supply
departments oi superior organs and covered by their In the case of nonstandardized articles the consumer nterprise may negotiate (with the permission of its ministerial supplyocal contract directly with the producing-enterprlse. -Such local contracts,erely supplement tbe general con- -tracts by stipulating detailed technical and sales terms, including the conditions under,which orders may be canceled or damages claimed for contract violation. The ministerial supply department,fixoaamount of goods that may be bought and designates the supplier for the
Goods acquired through general contracts negotiated bydepartments of the ministry or chief directorate usually areo them and distributed to consumer enterprisesf regional offices, depots, and/ Other., are delivered directly to the ultimate consumers.**
quantitative or qualitative adjustments in goods supplied under contracts usually require specific approval of tbe epartment of supply, whether the goods are delivered to Glavsnab or to the/
i, .;
Top officials of the ministry play an active role with
respect to procurement. Tbe minister himself sometimes appeals
to higher governmental authorities on behalf of consumer firms
* For many years, consumer enterprises frequently negotiated contracts directly with producers. owever, the Council of Ministers directed khozraschet enterprises (those operating under cost accounting) to minimize direct contracting, which allegedly had resulted in inadequate control, wasteful precontract negotiations, and other/ Since then, direct contracts have been confined primarily to special casesfornstances in which equipment is manufactured on the individual specifications of the consumernd such contracts sre now subject to careful review by ministerial/ ** Enterprises are required to submit regular inventory reports to the supply department of the ministry. These reports enable the ministry to redistribute scarce materials among subordinate enterprises when necessary.
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/
under his supervision, in order to expedite supplies from producer ministries./ Also he may order subordinate producer firms to make priority deliveries tn designated consumers and whenay actigh-level expediter in supply/ He also-decides disputes over allocations and priorities submitted to him from'.lower levels. Deputy ministers and collegiurmmemberssimilar tasks. In dealing with spot problems of enterprises, they act regularly as expediters (especially in interministerialdjust priorities, and sometimes allocate specific items to an enterprise directly or through its supervisory chief/ They also give special attention to the control and the maximum utilization of enterprise inventories, supervise interplant programs* under which enterprisesurplusiven commodity must upon request relinquish it to those in short supply, and intervene if an enterprise shows reluctance to/
*programs are interministerial as
well as intraministerial in character. This fact probably explains why they are under the direct supervision of deputy ministers.
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Although procurement officially is chiefly the responsibility of higher echelons, in actual practice individual enterprises must take many steps of their own to ensure that required materials will be available when needed. They must oftenuitable supplierocal contract is to be made and must persuade the supply department to make necessary contract arrangements. Enterprise officials'usually must follow up requests for allocation and delivery of goods in order to make sure that needed raw materials andwill be/ When such action does not lead to timely delivery, enterprise directors sometimes appeal to top Party and government/ Enterprises also have often found it necessary to follow up interventions made by superiors in their behalf byepresentative to the supplier to ensure the timely production and delivery of ordered goods, and even ministerial officials sometimes have urged enterprises to do/
In spite of efforts of this kind, supply problemsdisrupted production, even in relatively favored sectors of/ ecent Soviet survey of tberevealed thatercent of. the idleness of workers in that -had been due to ill-timed provision of materials. .The of the important Stalin Motor Plant In Moscow has stated he sometimes has to spend as much as nine-tenths of his day on supply problems.
Under such circumstances it is not surprising tbatfrequently resort to aupply practices which are improper Soviet rules. One of the most common is torequirements in preparing annual and quarterly
A second practice is the employment of "pushers" at supply organs and important supplier plants; their job is to see to ithe firm gots ordered materials on schedule. Still another widely used technique is the use of blat (improperhereby managerial officials of one plant attempt to persuade those of another to supply needed items by promising to grant special favors in/
Another practice arising from tho uncertainties and , . of regular supply channels is the tendency of indue-.enterprises to produce many of their own materials and parts, though they could be made more cheaply by outside suppliers.factory frequently operatesn small foundry or
shop, for example, in spite of the fact that it can obtain such com- from other firms at lower cost (though probably with During the past year, Soviet leaders have shownover the growing tendency toward such verticalindustry. peech to the plenary session of the Central Com- -of the Communist Party inremier Bulganinthis problem at some length and urged the ministries toto increase the number of specialised plants./ the points made by Bulganin. the Central Committeeobligating the ministries and central planning agenciestake steps to increase specialization in Soviet industry.
eliminate unjustified and inefficient instances of vertical production. /
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Other resolutions also obligated these organs and the enterprisesmeans for regularizing provision of supplieseasuressuccessful, would remove one of the main motives for firmstheir own raw materials and
In any attempt to dctormtne the causes of the supplydiscussedt must bo recognized that the USSRtoaximum rate of economic growth andproduction from the given production establishment. Attempts maximize growth inevitably lead to limitation upon certaincapital expansion and encouragement of others. etailed system allocation and distribution of critical materialsrogram of forced growth. Given the absence ofand conventional market controls, moreover, amusttructure to substitute for the
mechanism. The system of allocation employed by tbe USSR is capable of effecting the distribution of production materials, although it is cumbersome comparedimple market system.**
* It is significant to note that the shortcomings in the supply and<dls-trlbutton system found to be currently prevalent in the USSR are essentially the same as those foundecent study to be prevalent durings./
t should be implicitly recognized that the expenditure entailed in maintaining and reporting upon elaborate central and regionalis tremendously high andost the USSR avoids by the existing organization. The recurring difficultiesontinuous flow of supplies areesult of Soviet pressure to forceroduction from the economy than they are an indictment of theor the procedures.
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Although tho system undoubtedly has injected some semblance of order into plan implementation, it does not appear to function nearly so smoothly as Soviet leaders intended. Part of the malfunctioning Is inevitable in an economy operating at full capacity with scarce resources, but part also seems to be attributable to inadequate planning for materials distribution and to overlapping and duplication of effort among supply agencies of ministries, chief directorates, and enterprises. In the procurement field, probably more* than any other, the individualhas had to use its own ingenuity to assure itself production
materials, with tho resultide variety of illegal and officially censured practices haveegular feature of the system. The sufferance of such practices by top Soviet managersacit admission that it is considered expedient to permit the development of needed flexibility in this way.
D. Quality Control and Inspection.
The principal technique for quality control In the USSR is the establishment by the government of legally binding standardshat is, rules snd technical specifications for the measurement of quality for all important products. The prevailing quality standardiven product is the All-Union State Standardhich defines technical properties and sets minimum quality requirements to which the product must conform. ublished COST will usually include theescription Of thehysical and mechanicalampling rules or testing methods;ules for packaging, transportation, and/ Where GOST standards do not apply, technical specifications, consistingetailed description of the product and constituent materials, are fixed by contract between producer and consumer enterprises.
Top Party and government echelons have attached great importance to quality control. The State Committee foration, Measures, and Measuring Instruments (attached to the Council of Miniate ra) enforces compliance by the ministries with the rules governing technical standards, while ministries and chief directorates supervise the inspection systems and practices in the plants./ Each industrial enterpriseepartment of technical control (OTK) which operatesind of dual subordination, in that the chief of the OTK. though administratively subordinate to the enterprise director, receives substantive instructions from the chief of inspection in the ministry and may correspond on matters of quality and rejects directly with the ministry and other outside agencies./ His reports go to both the enterprise director and the chief of inspection. The enterprise director may rescind decisions of the OTK chief, but the latter may appeal to the ministerial chief of inspection if he considers the director's action unwarranted./
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In practice, ministries apparently tend to restrict their quality control activities to establishing general inspection policies and to acting as arbiters in technical questions. Xhe actual control of plant inspection activities seems to be primarily in the hands of the chief directorates, which specifically supervise testingand inspection of major production items. If it becomes necessary to deviate significantly from established specifications, owever, both chief directorate and enterprise usually will refer the matter to the ministry for decision./
The OTK performs three general types of inspection activities. The first is the preliminary inspection of semifinished parts and assemblies for the purpose of preventing furtherof poor-quality items. The second involves spot checks to ascertain the observance of technological rules and to prevent violations which might increase the rejection rate. The thirdomplete examination of finished products, including checks on the thoroughness of preliminary and intermediate inspections and tests to determine compliance with dimensional tolerances, material specifications, and other technical standards. Before the OTK check the production foreman makes his own examination and affixes his personal stamp. Especially complex units also require stamping by the shop chief. After final inspection the product is stamped by the OTK control foreman and either sent to the shop warehouse or shipped to the customer.
Defective products are classified as total or as correctable rejects. Total rejects arc placed in special locked bins orunder the control of designated OTK officials./ejection certificate is made out stating the nature and cause of tho defect and designating responsible individuals who are then usually billed for the direct cost. Thus,achinist performing the final operationart was at fault, he is billed for allwork, including the cost of the materials. Similarly, if the technical staffaulty special reamer usedathe operator with the approval of the foreman, the cost of the resultant rejects is levied against the designer, lathe operator, and foreman. In practice, the costs often exceed'the individual ability to pay, and the plant makes up the difference./ Correctable rejects are
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returned to the shop with specific instructions for correction and usually are reworked, even though the cost'of reworking may exceed the cost of/
Since the OTK is responsible for the prevention as well as the detection of substandard production, itirect interest in keeping the number of rejects down, an interest which it shares with the rest of the/ Accordingly, the OTK chief and the-enterprise director may informally agree upon the number of rejects that can be safely reported, and the OTK may occasionally ignore defective products which are not too far below standard. Such manipulations can be carried through successfully only if the plant has funds and supplies sufficient to replace the concealed/
Customers and purchasing agencies examine finishedand testing procedures in plants from which they buy. If the order is for large or particularly important equipment, acceptance of the goods may be handled by an ad hoc committee composed of representatives of the customer, the supervisory chief directorate) andentral governmental designnd the/ Military customers also may exercise continuing supervision over the production of ordered items. isagreement about the qualityelivery cannot be settled at the plant level, it is taken up by the chief directorates or ministries concernede referred for final decision to the State Arbitrationttached to the Council of Ministers.
The enterprise central accounting officeopy of each OTK rejection slip and charges net reject losses to the cost '" of the production order. Rejects may not be included in planfigures, nor is allowance for the cost of reworkingrejects made in the enterprise/ Delivery of low-quality
* Specialized central design bureaus are attached to industrialries to assist chief directorates and enterprises in solving particularly difficult technical problems. Their role is primarily that of aand their recommendations generally are not put into force without prior acceptance by the chief directorate and the enterprise concerned.
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or incomplete products not onlyrime for which the enterprise director, chief engineer, and OTK chief may be imprisoned, bnt isreach of contract, obligating the enterprise concerned to rework or replace the rejects and toine to the customer or to the government in the case of illegally concluded contracts./
E. Role of the Manager.
*
Soviet doctrine concerning economic administration envisages that the individual enterprise shall be "centrally managed" but bopera-tionally independent." Centralized management, expressed principally through the planning process, is essential to ensure coordination of enterprise activities with the rest of the economy, .and operational independence Is necessary to achieve maximum efficiency in the use of scarce economic resources by encouraging initiative at thelevel. These principles are considered to be not conflicting, but complementary, and establishment of the proper interrelationship between them isecessary condition for successful operation of socialist/
Achievement ofroper balance has proved exceedingly difficult, and in day-to-day implementation of plans the operational independence of firms, until recently, has tended to give way to centralised management. Evidence of this shift is provided in two ways. First, the formal rights allowed the enterprise director in carrying out the work of his plant have been severely limited. For example, until late5 he dH^not have the right to transfer administrative and technical employees from one shop orto another, nor could he usually alter their salaries; he could not on his own initiative use working capital funds to purchase needed items of equipment costing moreubles; and manywere placed on his use of the director's fund. In recent years plant managers, as well as top Soviot loaders, have frequentlythat such restrictions on the powers delegated to enterprise directors hamper initiative and prevent the speedy solution of urgent problems arising almost daily in tbe plant. They have stressed the need for increasing the rights of enterprise managers
and the importance of tbe principle of one-man management on the enterprise level.
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/
Inecently (inhe Plenum ol the Centralommittee of the Communist Partyesolution callingxtension of the rights of enterprise/ Shortlytbe powers of enterprise managers were considerably broadened, and it was announcedew statute was being prepared to define in more complete detail the status of the individual enterprise and the rights of its director. Although only fragmentary information is available concerning the nature of the newly granted powers, they are known to include thehe enterprise may accept orders for production of goods from materials supplied by theurner or from the firm's own supplies, provided such acceptance will not interfere with planorking capital funds may be used to purchase certain kinds of equipment costing not morehe technological process of production may be altered, provided product quality is not impaired or production costselivery schedulesuarter may be modified, in agreement with thehe structure of the staffs of shops andents may be established and altered within the limits-of the firm's plan forage funds saved during one quarter of theay be used to pay wages in subsequent quarters;nderconditions, surplus materials and equipment not used by the enterprise may be sold.
Second, the nature of the day-to-day relationships between the enterprise and its supervising agencies provides further evidence that in practice the principle of centralized management hasto triumph over that of operational independence. In supervising plan implementation and the execution of supplemental directivesy the enterprise, officials of the ministry and chief directorate have frequently exercised what the Soviet press terms "petty
over the firm.
officials have bombarded the enterprise managements with directives, quasi-directives. arid detailed instructions'for carrying out the orders, which sometimes have been conflicting. The extent and closeness of such supervisory activity seems to be related tohe success of the enterprise in fulfilling its assigned tasks; superior organs tend to leave successful firms alone, but tounsuccessful ones in minute detail.
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Though enterprise management has tended to regard many of the activities of ministry and chief directorate officials as unwarranted interference in the internal affairs of the firm, many such actions undoubtedly were justified from the broader point of view of these superiors. To ensure fulfillment of the plan for the ministryhole, ministry officials sometimes have had to shift assignments or materials allocations from one plant to another. Such shifts may be disastrous from the point of view of tho plant directors concerned, but necessary from the point of view oi the ministry. The tendency of superior organs to keep cloee watch over subordinate firms and to intervene in their activities when deemed necessary stems from the fact that these organs, too, are Judged on their success in fulfilling assignedirm's failures are their failures, which they seek to prevent by all possible means.
Even without the burden of excessive interference by supervisory organs, the position of the enterprise manager in* tbe USSH is not enviable. Smooth and orderly operation of the plant according to plan is seldom possible. Among the factors likely to cause interruptions of planned production schedules are the following: difficulties in obtaining trained manpower; belated delivery and poor quality of supplies and equipment; and numerous requests for information and reports from central and local organs, requiring much time in preparation. In addition to these more or less chronic difficulties, the plant isrequired to deviate from its plan in order to fulfill higher priority orders levied by superiors. Sometimes its plan may be formally changed or additional resources allocated, but more often than not the firm must complete both the plan and the priority orders as best it can.
The fact that industrial enterprises usually manage nevertheless to fulfill assignments attests to the ingenuity of enterprise management and to the large measure of flexibility that in practice has become an informal part of the Soviet system. To fulfill both planned and unplanned tasks, enterprise managers often have to resortariety of improper and illegal practices, which are overlooked by superior organs so long as the plant ia
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igher authorities apparently try to select as plant director! persons whom they expect to. display Initiative and assume responsibility for getting things done in one way or/
The new powers granted to enterprise directors followingPlenum are Intended to increase the operational independence Likewise, the broader authority in the field of planningof resources which was recently accorded theis designed to reduce centralization of management Through these measures for limited decent rail-of economic management, Soviet leaders evidently hope toover-all economic efficiency by encouraging initiative atlevel and by reducing delays and waste motion causedconstant referralost of minor problems tolevels for decision. Tbe realization of these hopestho extent to which lower and intermediate-levelexercises its increased authority. Enterpriseto being closely controlled and to coordinatingwith higher authorities may be reluctant to act on theofficially accorded them. Similarly, officials ofchief directorates may hesitate to give up close controlaffaire, since they still retain over-all responsibilityfulfillment, and the consequences of failure are serious. recent statements by Soviet leaders suggest that thefor decentralization are not being implemented
VI. Management of the Enterprise Labor Force. ,
*
A plan for labor is one of the basic components of the enterprise. Tekhpromflnplan. It includes measures for increasing laborestimates of the total labor force and the number in each important occupational group, the total wage fund and the averagefor each worker category, the plan for training workers, the sources for recruitment of additional personnel, and the plan for social and
* See, above.eebove, .
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TOPSECRET
cultural benefits for workers. Implementation of these planside range of activities and responsibilities of plant management, the most important ones being the following: establishment of the plant's table of organization and recruitmentabor force; training, assignment, and dismissal of employees; remuneration of employees; maintenance of internal plant discipline; andand maintenance of channels for worker-management In some of these areas the plant director has been allowed wide latitude for action, but in other&.his .authority is. limitedreater or lesser extent by provisions of Soviet labor law; by proscriptions imposed by supervisory organs; and by controls, both latent and actual, exercised by Party, trade union, and finance agents.
A. Establishmentabor Force...
t The size and distribution of the plant's labor force is governed by the limits set forth in its annual plan for labor and by its approved:table of organisation. The stSf&jig pattern mustto that established for comparable enterprises by the ministry and the State Tables of Organisation Commission. * Tbe plant's table of organization (applicable only to administrative-management personnel) must be registered annually withfinance offices of the city or rayon governmenftsandia subject to-close surveillance by these organs. To circumvent the stringent controls over the employment of such nonproductlon wovkers, plant managers haveariety of ingenious and illegal measures for inflating administrative-managementf discovered,ractices are forbidden, and the guilty officials may be fined or imprisoned. To cope with this recurrent problem of inflated white-collar staffs, not only in the enterprises but throughout the state apparatus, the government in recent years also has ordered flat percentage reductionsercent annually) in the number
* The State Tables of Organization Commission, formerly attached to the Council of Ministers, was subordinated to the Ministryinance
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msb)
of such positions. * These orders sre implemented at the enterprise level by the plant director, "who must abolish the prescribed number of positions in the designated time, dismiss the 'employees affected and find other jobs for them, submit detailed progress reports to the ministry, and transfer payroll funds saved in this way to the state budget-./ Failure to carry out such orders is punishable by reprimand, fine, or
1 r. -'>
Following approval of the plant's labor plan and table of organisation the plant director must employ workers in strict accord with these directives.he plant's labor force lo drawn primarily from the local population; like their Western counterparts, Soviet firms In need of workers advertise in newspapers or over thehough recruitment is the responsibility of the enterprise director, -he may obtain important assistance from the supervising chief directorate, ministry, and other agencies concerned with centralised direction of the labor force. Engineering and technical workers graduating from universities and other acbools are allocated among enterprises by the economic ministries and the directors of the schools. In order to secure such specialists the enterprise must submit annual lists of requirements to the ministry. In addition to' placing recent graduates, the ministry, through its department of supervisory personnel, assists the enterprise in obtaining managerial employees and others with special skills./
* eport to the Supremo Soviet on the proposed State Budgetinance Minister Zverev stated, "The number employed in the administrative apparatus of enterprises, establishments^ andhas been cut in the course of two/ by. 'A considerable number of these have been transferred from the administrative apparatus'to production. Savings connected^ with the above reductions amounted to overillion rubles per/
** Innterprise managers were given the right to "establish and alter the structure and staffs of shops and divisionslant administration within the limits of the enterprise's plan for labor" and to" "economize on tho wage fund received in the preceding quarters for the payment of wages in the subsequent quarters of the same/
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A plant unable to obtain unskilled or semiskilled employees locally may request the ministry to recruit such workers through the organised recruitment program. This program is operatedationwide basis by the Chief Directorate for Organizedent of Manpowerhrough local units attached to city, kray, and oblast oxocutive committees. Workers are recruited under individualear employment contracts inith the specifications of the enterprise. In connection with this program, ministries and their chief directorates distribute recruits among the enterprises, handle complaints, and generally act as intermediaries between the enterprise and local offices of Glavorgna-bor./
Although the plant director is allowed wide latitude inof rank-and-file office and plant workera, hismany managerial and technical positions in the plantof the ministry and the Party. Accordingsuch
approval is required for the following: the chief accountant, the chief engineer, the chief metallurgist, the chief technologist, and the chiefs of important plant/ In addition, the ministry appoints recent graduates from the universities andschools, assignments of particular individuals often being made in accord with the wishes of Party officials.
B. Assignment. Transfer, and Dismissal of Plant Employees.
The enterprise director distributes manual employees among the various.departments and positions in the plantanner which, in his opinion, will ensure efficient operation and plan fulfillment. Shop chiefa and foremen, under the general supervision of tbe director, do tbe same within their domains. The director's liberty to take personnel action, however, la
limited by the provisions of Soviet labor law and other regulations in much the same way aa the freedom of his Western counterpart ia limited by law and by provisions of collective bargaining agreements. Soviet labor law provides that, except under explicitly defineda Soviet worker may not be transferred from one Job to another or from one plant to another without his consent./ Young specialists assigned to the plant from the universities and technical schools may not be transferred to administrative work or to jobs outside their/ The plant director may not send administrative-management employees (including engineering-technical workers) on detached duty without permission of the chief directorate.
|indlcate that ministries, chief directorates,
and even the Council of Ministersariety of orders to the enterprise which affect utilisation of its labor force. In their efforts to ensure over-all plan fulfillment, ministerial officials sometimes order temporary transfers of workers, both skilled and unskilled, from one enterprise to another within the jurisdiction ofn particularly critical cases of underfulfillment of plans, both interministerial and intraiministerial transfers of workers may be ordered by decree of the Council of Ministers. , for example, the Ministry of the Timber and Paper Industry, inwithouncil decree designed to improve output in the logging Industry, ordered extensive transfers of workers from paper mills, match factories, and woodworking trusts to loggingand the lattor wore ordered toaximum number of workers from secondary and auxiliary operations to basic logging' operations./
* upreme Soviet decree of6 gives employees the right to leave their jobs by merelyeeks' notice to theirector.
The plant director may not dismiss an employee against his will except on grounds specified in Soviet labor law. Until recently,an employee could not quit his job without authorisation of his employer, who had full authority to refuse any requestelease not based on legal grounds making release mandatory
(health) personal hardship, or entrance in school). Although plant directors were responsible for ensuringthat approvalequest for release did not adversely affect the interests of the enterprise, they apparently exercised their authority quite freely, judging from press reports of high labor turnover in Soviet factories./ Skilled workers, being less easily replaceable, were undoubtedly released with much more reluctance than were unskilled workers.
|the release or discharge of higher level administrative and technical employees had to be approved by the ministry and chief directorate./ Also, officials of these organs and of the Communist Party sometimeslant director toesignated employee or to "freely release" those who volunteered for work on high-priority
C. Training.
Securing of manpower trained to run machines and factories has boon one of the. critical, problems of Soviet industrial During the early decades of industrialisation tho training of workers was, of sheer necessity, primarily the responsibility of the plants where they were to work, but the government has gradually takenajor share of this responsibility. Generally speaking, it may be said that two training systems are now in operation, one formal and the other informal. 'The formal system comprisesschools under the direction of the economic ministries and the Ministry of Higher Education and labvV reserve schools under the Chief Directorate of Labor Reserves.* Certain types of labor reserve schools are often attached directly to industrial enterprises. Plant managers, consequently, must take care of them to some extent, even though they have no over-all responsibility for their administration./
In addition to formal training of young omployees in special schools, workers receive informal training in the plants, partly on-the-job and partly through course work. Provisions for
* Attached to the Council of Ministers.
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training new personnel and "raising of .workers! skills"f the annual enterprise plan and must be implemented and fulfilled like the other parts. Enterprise managers seem to have considerable latitude in working out training programs and to take an activeonstructive interest in them./ Ministries also aid in training by establishing special courses to teach Stakhanovite work methodsew techniques.
D. Wage and Salary Determination.
Enterprise directors have only limited authority to fix wages. The compensation of employees is determinedage and salary system established by the economic ministries on the basis ofiples laid down by the central government. White collar workers are usually paid flat monthly salaries fixed by the ministry and set forth in the enterprise plan and table of organization. Themanager may not change these rates, though under certain conditions he may sometimes be allowed to grant "personalhich exceed the official rates. If he wants to depart from the overnmental rules under other circumstances, he must relyne of the various methods which managers have developed tothe existing stringent/ In the case of production workers, however, he has more leeway to manipulate .he compensation of individuals, since he determines the jobclassification and wage category of the worker as well as the work-norms, and since, further, the minisYerial standard schedules cannot in practice take care of each individual situation.
In addition to the basic wage or salary, employees may receive various bonuses and premiums which are financed either rom the director's fund or from special funds. The enterprise ,. irector supposedly may pay the bonuses, within the legalas he thinks best. In practice, however, his discretion is
* The chronic problem of over expenditure of wage funds andonsequences, as well as recent efforts to cope with the problem, is discussed in more detail onelow.
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limited by the necessity in some cases to consult with the plant's trade union, and by interferences of the chief directorate and/ Bonuses for top managerial personnel in the plant {the director, deputy director, chief engineer, chief accountant, and chiefs of planning and production) are awarded by the ministry.
Plant employees also receive overtime pay and various fringe benefits. ule, the enterprise director must secure advance authorization for overtime work from both the chief directorate and the central committee of his workers' trade union. He Is apparently authorized to order emergency overtime-work on his own initiative, however, provided he has wage funds covering the cost and the plant trade union committee approves. Although the prerequisite of trade union approval appears toere formality, the union may intercede if it believes that the amount of overtime work is excessive./ Major changes* in the workday or week may be imposed by order of the Council of Ministers or the ministry./ Fringe benefits (such as night shift bonus and vacation pay) are fixed by law or ministerial regulation, and plant management may not deviate from them.
E. Labor-Management Relations.
Soviet labor law defines the actions of workers whichviolations of labor discipline and fixes penalties for them. The managerial staff in individual enterprises has tbe right and the duty to punish contravening employees. Failure to do so may result in imposition of reprimands, fines, or prison sentences. Although the internal plant managements apparently have authority commensurate with this responsibility, they seem to have been lenient whenever they considered this expedient. They have been particularly reluctant to punish every instance of absenteeism or unauthorized changing of jobs and thereby have taken the riskeing punished/ Plant trade union committees must support management's efforts to. maintain labor discipline, since safeguarding of the latter is ono of the major functions of Soviet unionism. Individual workers may file appeals against disciplinary punishment with the intraplant conflidts commissidns and the people's courts.
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ore positive means of creating and preserving ansuitable to promote maximum output, the internal enterprisemanagements attempt to maintain communications systems designed, not only to get their point of view to the workers but also to get the lattere' point of view to management. Communications channels are inherent in the established chain of command and in the role played by the factory trade union committee (zavkom). In addition, widespread use is made of the "productionhich may be called at the initiative of management, the trade union, or the Party group in the plant. These conferences are held regularly or intermittently toreports by management concerning production and workers' welfare matters and to discusa production problems, operational changes proposed by management, and workers' suggestions and criticisms. Though somo of these arrangements have beeno criticism, they seem, by and large, to have functioned fairly satisfactorily and to have provided an element of strength in the operation of Soviet/
Since it is obvious that wherever employees have to perform work under the direction of superiors, the will of one man isto that of anothnr. and friction cannot be avoided, irrespective of the prevailing economic, social, and political system, the same conflicts or grievances arise in the day-to-day working relations of Soviot plant managements and workers as arise between Wostcrn employers and their personnel, and similar methods or grievance procedures are used to adjust them.e standard method provides for the submission of complaints to successively higher levels until they are adjusted or referred to final decisioneutral agency.-In the USSR the grievance is first presented to the plant trade union organiser, who may take it up with the plant trade union committee or discuss it directly with management. If the matter cannot be adjusted In this stage, it may be submittedore formal manner to the plant appraisement and conflicts commission (RKK). This bipartite body is composed of representatives of the union and of management in equal numbers and may be invoked not only by labor but also by management to obtain, for example, punishment of workers for violating rules of employment or for damagingproperty. Decisions of the RKK, which must be unanimous.
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are binding. nanimous decision cannot be reached or if theis not satisfied with the award, the issue may be referred for final decision to higher levels of the trade union or to the people's court. The commission, in addition to settling grievances, has the power to decideorker may be discharged for lack of qualification or reasons of health. Without its affirmative decision,ischarge is not legally/
The general practice of attempting to settle issues outside of prescribed channels, already noted In connection with production and supply matters, is also present in the field of Labor-management disputes. Workers have complained directly to the Kremlin, the All-Union Central Council of Trade Unions, and the ministry, not only in matters over which the RKK and the courts have nobut also concerning issues which shoud have been settled through the grievance procedure. Officials on high administrative levels have accepted such complaints and have channeled them back for investigation.y and large, however, extensive use is apparently made of the grievance machinery. Some sources state that workers have been fairly successful in grievance proceedings, though other observers declare the system to be/ On balance, the operation of the machinery for settlement of disputes probably affects worker morale favorably and thereby contributes to labor productivity.
F. Function of the Manager. *a
umber of issues have been considered not suitable to beby the RKK and have been excluded from its jurisdiction. Examples are disputes about norms set by management, dismissal and reinstatement of certain types of managerial employees, changes in official wage and salary scales, and discharges due to reduction in force.
A steady increase in the productivity of labor hasontinuing objective of Soviet economic policy; an increase ofercent is scheduled for the industrial sector of the economy during the Sixth Five Year Plan period. Although the principal .
methods of increasing productivity are throughproduction and supply scheduling, importantalso be made through improving the management of laborthe plant level the director is responsible for implementingfor increasing labor productivity, and in many aspects ofho has been accorded commensurate authority andof action. His rights to deploy his labor force withinand to reward individual effort, however, haveecent delegation of authority.in thislessened these
Plant trade union and Party groups having the sameobjective as managementamely, plan fulfillment support management efforts to train workers, to promote maximum output at minimum cost, and to maintain labor discipline. There Is no evidonce that trade unions interfere in areas that are management prerogatives or attempt to assume managerial responsibilities. The Party intervenes in personnel matters, thus posing an actual or potential limitation on management's right to hire and fire employees. On the other hand, both the Party and the trade union aid management by mobilizing workers in support of production objectives and other tasks.
VII. External Controls over Plan Implementation.
In Soviet ideology the concept of oontrol signifieshe process of checking on fulfillment of central government and Party decisions by individuals and institutions and their adherence to relevant laws and regulations and to the various forms of "Socialist discipline"he imposition of necessary rcstrainta. As already evident, state control over plan implementation in the-individual industrial enterprise is obtained primarily through the day-to-day exercise of the supervisory functions of the responsible chief directorate and ministry. Besides the controls normally inherent in an established chain of command, two other direct means are employed: one is the "control by the ruble" exercised .
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by banking and financialnd the other is the inspection system of the Ministry of State Control. Less formal and direct, though no loss effective, are the all-pervasive surveillance and control activities of local and territorial units of the Communist Party. The cost of maintainingomplex control apparatus ia considerable, but is indispensableentrally planned and centrally administered economy such as that of the USSR.
A. Gosbank.
The State Bank, or Gosbank,s the central Soviet banking institution and as such servesaster clearing house for Soviet industry. The Bank's principal task is to perform normal banking functions for its customershat is, to execute settlemententa between enterprises, to provide them with cash, and to extend short-term credits. Each industrial enterpriseank account (settlement or clearingn which are deposited the working-capital funds allotted by the annualplan, the receipts from the sale of goods and services, and the proceeds of loans suthorised in the firm's credit plan or otherwise approved.
* Control by the rubleroad concept, embracing essentially all aspects of control'that stemfrom the facta that money (the uble) is usedeans of account in the Soviet system and that' monetary units are employed to measure success of enterprise operations* Thus the concept includes not only controla over credit and cash expenditures exercised by the banks, but alsoexercised through budgets, cost-accounting, and/ ** Attached to the Council of Ministers.-
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Virtually all payments between individual enterprises must be transacted through debits and credits to the appropriate bank ccounts, cash being used usually only for payment of wages. Tbe enterprise must use its financial resources for purposes specified in its plan or otherwise authorized. If tho balanceirm's settlement account becomes insufficient to meet all its obligations.
Gosbank will insist upon observance of the priorities established by the governmentesolution ofhich assigned first priority to wage payments, second to debts due otherand third to repayment of bank/ This order of payment priority emphasizes the fact that in the Soviet economy, considerations related to continued production and unhampered operations in the enterprises take precedence over financial
Through performance of its normal banking functions, however, Gosbankuch larger measure of control over the affairs of industrial enterprises than do the banks in capitalist economies. In administering the settlement account of an enterprise the Bank must make sure that the firm is observing its production and financial plans and that payments are being made only forauthorized purposes. This form of control by the ruble isthrough exercise of the Bank's authority to extenderm credit and regulate cash expenditures.
1. Short-Term Credits.
* Enforcement of contract obligations is the responsibility of the State Arbitration Commission and not of Gosbank. Should an enterprise refuse to payurchase, however, the bank is supposed to check on the legality of such* Long-term'loans for capital construction and other purposes are madepecial institution, Prombank. which exercisesespect to such loans controls over the enterprise similar toxercised by Gosbank with respect to short-term loans. Thus Prombank sees to it that loan, proceeds are used for the purposes designated, that price lists are observed, and that investment projects are undertaken and completed in accordance with the enterprise plan for capital construction./
-
Gosbank grants .credits to individual enterprises in accordance with the limits and purposes stipulated in the annual enterprise plan or on the basis of supplemental authorizations of the supervising chief directorate and ministry. ** Loans may be granted
to augment working capital, to finance goods in transit, and to pay for above-norm raw material stocks, inventories, and production expenses./ Individual loans are usually granted for specified purposes, bear interest, and are secured by approved collateral. In connection with such secured loans the enterprise mustull disclosure to the Bank with respect to collateral, to supplement the Bank's almost complete knowledge of the firm's transaction pattern. In addition to credits specifically authorized in theplan, the Bank may grant unplanned loans for special purposes, upon authorization of the enterprise's supervising chief directorate or/
In giving credit to an enterprise the Bank is empowered to inquire into the firm's financial position and its utilization of physical production resources. The Bank may investigate towhether excess inventories or stocks of raw materials are being maintained and'whether the enterprise is fulfilling its obligations to other enterprises, to the Bank, and to the state on schedule. The Bank makes monthly checks of the security of its loans by detailed examination of enterprise operational/ Finally, the Bank must make sure that loans are used for the purposes authorized.* The effectiveness of such bank control overaffairs is enhanced by the Bank's right to apply credit sanctions and to debit the firm's settlement account when deemed necessary to force repayment of loans or other obligations.
* One method used by the Bank to ensure that credits are used for the purpose authorized is the issuancelimitedhich can be used as scrip to purchase only one type of service, usually/
-
In order to strengthen the hand of Gosbank, the extension of credit between enterprises is strictly proscribed. The control functions of the banking system are further enhanced by provision for the Bank to supply throughpecified proportion of the normal working capital funds for thosechieflyeavy industry and trade, that do not experience seasonal variations in working capital requirements. The effect
bX-thie provision is to give theixed share'in-every purchase, of materials' and in all of the firm's: goods in process and inventories, with the'cnncomitant right to Keep uoac wulrh.ovfr the firm's.isiv .
In its loan activities, Gosbank also strives tofinancial efficiency of the enterprise. For this purpose itthree "regimes ofamely, thethe "regular"nd the/ Enterprises which are fulfilling their profit andplans and maintaining thoir working capital may bethe preferential regime, thus enabling them to obtainrelatively easily in time of financial strain. Firms whichany of these tasks but nevertheless fulfill their production planunder the regular regime. Inefficient enterprises (that is,to fulfill their plans or to repay creditors) may bethe "special regime of crediting" (osobyy rezhimwhich financial pressure is applied "to improve efficiency orenterprise out ofirm is placedspecial regime by order of the Bank, and while in this statusobtain creditpecific guarantee from itsor ministry. In the absenceuarantee the Bankall credit to the firm and recall credits previously issued;are tantamount to declaring the firm bankrupt. Evenguarantee from higher administrative organs is received, theintensifies its observation of the firm's operationsvarious kinds of sanctions if malpractices are found. example, the firm defaults on payments to suppliers, theimpose the "system of responsibley which thecharged by bank order with the safe custody of the goods inpayment ishis means that the goods cannotproduction. The Bank also may require an enterprise underregime to pay suppliers for ordered materials in advance
If an enterprise improves its operations sufficientlyonths after having been placed under the special regime, it is restoredegular regime status. Otherwise the Bank will either
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continue the special regime or declare*the enterprise bankrupt./ In the latter case, the enterprise loses its right to dispose freely of current income, and Gosbank may stop credits, control settlement account expenditures closely, sell material assets, and directStrictly according to/ In addition, responsible officers of the enterprise may be publicly stigmatized by the Soviet press for inefficiency and malfeasance in office. Finally, the. Ministry of State Control (Goskontrol) may take up the case for investigation and appropriate legal action.
The controls exercised by Gosbank areinistry or^chief
directorate can cause the Bank to continue credits to anits guarantee, even where the Bank previously hadrevoke them,/inistry may have the Bankvexdue .loans/ againstTits//
chief directorate may exert pressureocal
branch of Gosbank in behalf of an enterprise by threatening to complain to Gosbank's board of directors or to the Ministry of State/
2. Cash Operations.
Except for small petty cash funds used by enterprises for minor expense items, all cash transactions of industrialare subject to control by the banking system. The only important use of cash by enterprises is for payment of wages andnd Gosbank disburses cash for this purpose in accordance with the wage plan of the enterprise. To secure the necessary cash, the enterprise must present two documents to the Bank each month: one is the registration card received from the appropriate local agency of the Ministry-of Finance indicating the proper registration of the plant's table of organization and other details of its annual
* Cash disbursements for wages seam to average aboutercent of Gosbank's total cash outlay each year and sometimes rise as high asercent./
-
labor and wagend the otherertificate, signed.by the enterprise director and the senior accountant, setting forth the planned wage fund, the wage obligations actually incurred, and the percentage of plan fulfillment during the/ By checking the Information contained in these documents against the wage fund allotment under the cash plan, the Bank can determine the correct amount that should be disbursed from the enterprise account, making due allowance for the extent of plan fulfillment.
Disbursements may exceed the planned wage fundmonth to the extent warranted by overfulfillment of theplan. According to the basic decree governingsuch overexpenditures may be covered automatically byfor the first month; afterinisterial guarantee Provision is also made to coverreasons other than plan overfulfillment. For anya month in which the enterprise did not exceed itsthe Bank may permit an over expenditure uphe allotted monthly wage fund (primarydisbursements require authorization from theministry,/ which either will supply thefrom its own resources or will order the plant to makeoverexpenditure by using funds allocated .
* Agents of local.finance agencies exercise important control over, enterprise staffs and wage funds, particularly those involving administrative-management employees. In this connection thesexamine in detail the registration statements of the enterprise and may order changes in the proposed tablesheck on enterprise compliance with government decrees ordering reductions in administrative-management staffs,onduct periodic inspections in the enterprises to uncover violations of approved staffing patterns and expenditures. *edistribution of funds within the ministry will generally be arranged to make up for the unplanned wage expenditures./
-
Thus.recurrentlwaga overexpenditurcs.aze possible,or without simultaneous overfulfilment of plans and withspecific ministerial sanction. Judging from | |
] wage fund overexpenditures, it
would appear that chief directorates and ministries authorize them rather freely in casesinisterial guarantee is required. The ministries seem to be more concerned with maximizingthan with strict compliance with fixed wage fund limits and therefore tend to lend assistance to enterprises in financial difficulty.
Overexpenditure of planned wage funds has been a
ia
recurrent problem in the USSR, f estimates that
total wage overexpenditures during thoonths3 ran into ^millions of/ Above-plan wage payments ofagnitude contribute to inflationary pressures in the Soviet economy, where consumer goods have been perennially.in shorto cope with the problem of wage fund overexpenditures and otherproblems in the labortate Committee for Questions of Labor and Wages (attached to the Council oi Ministers) was established in This Committee is engagedasic revision of the whole wage structure, for the purpose, among others, of-reducing the pressure for wage-fund overpayment which stems from the nature of the wage system. The Committee also undoubtedly will approach the problem in another way through exercise of its duty "to inspect and check the work of Ministries departments and enterprises on questions of labor and/
In spite of the possibilities for exceeding planned wage allotments, enterprise managers apparently have found thever staffs and wage funds to be relatively tight. Accordingly, they have engagedariety of illegal and improper practices in order to provide more flexibility in staffing and to enhance their ability to offer financial incentives to obtain workers and to reward performance.
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iiuwifey/
Some of these practices include the manipulation of gross output figures so as to justify higher wage outlays, the diversion of funds for leave pay to cover regular wage payments, and the padding of payrolls and improper upgrading of workers./ ogether with agents of the Ministry of State Control and the Ministry of Finance, is empowered to inspect the premises of enterprises for possible violation of financial and table of organi--zation discipline and to report any discrepancies to the supervisory ministry for appropriate/
D. Ministry of State Control.
The Ministry of State Control (Goskontrol)with the Ministry of Finance and the Committee onof the Party's Central Committee inbureau-red tape, laxity of direction, and the embezzlementfunds and material/ Goskontrol has themake on-the-spot inspections, audit books, and operate aperiodic control over industrial enterprises and all other The purpose of the inspection system is tofulfillment of government decrees and production goalsand elimination of defects in the financial andof enterprises.A
Goskontrol schedules routine quarterly,or :annual inspections of enterprises, covering mainly financial and production aspects of plant operation. Since Goskontrol is pri-raarily concerned with questions of management andowever, its financial audits are less detailed than those of the Ministry of Finance, except in cases of suspectod embezzlement orn connection with routine inspections, Goskontrol is. '
* There.are some indications that Goskontrol may be able to influence future governmental budget allocations to ministries and enterprises by budget recommendations to the Council of Ministers derived from experience gained in its financial audits of these enterprises and/ The extent of such. however, is not clear.
- 68
empowered to oxamine in detail all phases ol enterprise operations. Its inspectors thus are constantly on the lookout for malpractices, such as production of goods not specified by the plan, padding of production norms, unnecessary increases in the amount of raw materials used in manufactured articles, and overproducingcomponentsroduct and underproducing/ Inspectors also determine whether the productive capacitylant is being fully utilised and may suggest means for utilising idle capacity and recommend the introduction of new production/ Goekontrol's routine inspections arethey cover the following, for example: adherence to quality standards (particularly for consumereneral storage facilities, stockpiled raw materials, and fuel reserves; the condition and use of equipment; the shipment of manufactured goods, including reasons for any delay; tho preparedness of the enterprise to receive new workers; and dining room, dormitory, and medical/
In addition to regular routine inspections, Goakontr'ol also conducts unscheduled or special inspections of enterprises and other state institutions. Such inspections usually resultomplaint concerning illegal practices or operating deficiencies or from an administrative order toiven/ Local government and Party organs apparently have the right to request unscheduled inspections at any time and for almost any reason. Inspection orders are also issued by Die Council of Ministersusually for the purpose of improving, theapparatus and procedures of state/ In addition to verifying tho execution of Council decrees calling for reductions in administrative-management staffs and expenditures; Goskontrol sometimes is also directed to conduct independent investigations of the managerial apparatus of an enterprise or other agency and to make appropriate/
If illegal practices or serious operational defects are found in the course of either routine or specialetailed report, called an Inspection akt, is prepared by the responsible/eport amountsill of
- 69
indictment and not only contains findings of .fact, but also attempts to determine tho causes of shortcomings and to.assign/ All statements in the report must be supported by appropriate financial and production data and by photostat copies of relevant documents. Copies of the akt are sent to Goskontrol headquarters, to the director of the enterprise concerned, to administrative agencies supervising the enterprise, and to local government and Party/ Managerial officials are given an opportunity to offer explanations for defects in enterprise operations reported in the akt./
The inspection akt serves as an order to theto correct the operating defects designated andfor that purpose. Compliance with theubsequent inspection and if necessary.force" the agencies supervising the enterprise It also has the right to issueto ministries directing them to remedyeither in their own operations or in those/ If these measures are not sufficient orquestions of legality are. involved, Goskontrol mayor reductions in salary on responsible officials, mayCouncil of Ministers for their dismissal, or mayof courtesult of findingscourse of regular or special inspections or on specifictho government. Goskontrol may institute continuousproduction activities in individuaLienterprises. Suchreferred to variously as sistematicheskiy (systematic oroperativnyynd povsednevnyyactivities involved, however, are probably about the same / The measure, which is initiated byoskontrol officer in the field directing him to expeditea designated lagging enterprise, establishes directGoskontrol supervision over production. is improved satisfactorily and quotas are met, thecontrol is discontinued, and Goskontrol returns toof periodic
control indicate that it was undertaken to overcome specific difficulties in meeting production/ In many of these situations the order to Goskontrol to exercise continuous control probably emanated from the Council of Ministers itself and represented its attempt to obtain an expeditious solution to some critical production problem. Thus Goskontrol seems to functionind of trouble-shooter to deal with emergency situations, as well as an agency toontinuing check on theof government and Party decisions. *
C. Communist
The territorial and local organs of the Partystill another means through which Soviet leaders checkimplementation of government and Party decisions andof state institutions and Soviet citizens to all phasespolicy. With respect to the individual enterprise,and territorial organizations of the Party**as examiners, trouble-shooters, andParty organizations share responsibilities for planwith the enterprise management and its superiors,keep continuous watch over all aspects of enterpriseaid in case of difficulties, and keep superiors in theParty command informed concerning activities at the
*certain unspecified functions of Goskontrol.were:
ferred to Gosbank in connectionroad reorganizationdecentralization "of.banking/
part of the reductions in administrative management staffthroughout the government. peech made inowever, Khrushchev Stated:that:the Ministry of State Control "must be used more fully" with respect to the government-wide drive to increase production and economic/pecial Party representatives, responsible directly to the
Party Central Committee, are sometimes stationed in strategic
plants subordinate to All-Union ministries.
-
Bome recent cutbacks'.in.Goskontrol-field,personnel as
ECRE1
TOrVSEC
level. In addition to direct plan fulfillment. Party organizations are also coresponsible with management for the execution of all other government orders, decrees, and campaigns.
*1 *
The role of local Party groups in relation to enterprise -management, however, is somewhatn the one hand, they share the plant manager's interest in successfulof the plant in all phases of its activities. To thisthey often provide important aid by ^mobilizing" plant employees in support of production goals, expediting gie receipt of necessary raw materials, aiding in the solution of financial problems, and. assisting in obtaining additional employees for the/ Party channels provide enterprise management with an avenue through which to direct complaints or to attempt the solution of problems not remediable through regular administrative/ In this aspect of its activities the Party group not only must uncover operating shortcomings which may threaten the success of tho plant, but also must render assistance in overcoming them by "doing all it can to help the/
On the other hand, the Party groups must act on the basis of interests which are broader than those of the immediate plant anagement and may.even be antagonistic. "Because these groups' respond to pressures along Party lines rather than administrative lines, they muSt support- over-all Party goals of maximizing totaL output in indicated'directionsinimum expenditure of resources. Hence they exert pressure on management to increase
its plano overfulfil! its plan, to
Stakhanovites and rationalizers with the ultimate purpose of
raising worknd to uncover and expose instances of vio- ations of Socialist discipline in all its ramifications. In carryingout these aspects of their activities the officials of localroups have no authority to over rule decisions of plant/ for in accordance with the doctrine of yedinonachaliye the director's decisions are binding within the plant^ These groups, nevertheless, areosition to exert great influence on his decisions and even to bring about their reversal. esult of the Party's checking-and "mobilizing" activities; for example,-the
-
director may have to include goals in the draft plan which he thinks unwise or adopt, "suggestions" for changes in work processes which he may <no* like. Moreover, his appointments and dismissals of key lieutenants usually must conform to Party/
In carrying out their dual role of partner and controller in relation to the enterprise, local Party officials must steer some kindiddle course. They must not usurp the powers ofdirectors or goad them unduly, since they will share the blame for any subsequent failures. On the other hand, they must not pass up opportunities for uncovering and "mobilizing" hidden productive reserves. Their task is probably facilitated by the fact thatdirectors are usually Party members and presumably are subject to some of the same pressures as those to which local Party officials respond./ In practice, however, this middle course apparently has proved difficult to achieve. In his report to the Plenum of the Communist Party inulganin criticized local Party units for excesses in bothccordingly, subsequent resolution of the Party Central Committee called for measures to be taken to "raise standards of Party guidance of/ In order to maintain adequate control whilesome measure of decentralization in economic planning and plan implementation, the role of local Party units apparently is to be strengthened in ways not yet made/
ffectiveness of Controls. ^*
In managing their Socialist economy, Soviet leaders have substituted planning and highly centralized administrationarket (price) mechanism and haveomprehensive, rigid, and complex structure of controls designed to channel day-to-day activities of enterprises in accordance with predetermined
directors are gaining in Party
status, for some of them have recently been appointed toin local Party and government organs.emphasis on Party affil-
iation in recommendations for appointment seems to have been declining/
policies. The enterprise is subject not only to controls imposed by superior organs in the chain of administrative command, but also to inspections, supervision, and constraints exercisedumber of external agencies established primarily or even exclusively for that purpose. In sotructure there is bound to beand duplication of activities. Plant management has often complained of the "petty tutelage" over its operations exercised by some of the controlling agencies and has alleged that they cause unwarranted work for plant managerial personnel and interfere with plan/
.".
Soviet rulers have attempted periodically to cope with tho problem of high costs of administering direct controls by reducing the number of controllers, but not the number of controls. Indeed, the role of the principal external controlling agenciesosbank, the Ministry of State Control, and local units of thepparently is being increased concomitantly with theof responsibilities for planning and plan implementation that is taking place in the hierarchy directly engaged In managing Soviet industry. The burden of increasedjcontrbls may offset in some respects the added authority and responsibility given to lower-level management and frustrate the hoped-for gain in efficiency and flexibility at the enterprise level.
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APPENDIX A
METHODOLOGY
For this initial all-source study of the functioning of Sovietmanagement an intensive background examination was madedoctrine as expressed in the Soviet press and speechesleaders and as developed in more detail in journals and To balance this somewhat theoretical or formalroad study was made of tbe information and opinionsSoviet returneeshad participated in or observed
Soviet management brpTacnce. impressions obtained from foreign
men, the USSR were also noted.
others during visitsew areas of
top/ecret
APPENDIX B
respect to the principles, aM-opcranon^Tftaai itrial management and of managerial
in general in the USSR, is the relative scarcity of information on the application in practice of the extensive body of Soviet doctrine dealing with Soviet management. Such knowledge is requiredasis for arriving at firm conclusions concerning the strengths, weaknesses, and long-term potential of Soviet managerial officials operating at all levels of the Soviet system, especially that of the producing enterprise. ertain amount of suchis available with reference to the prewar period, it is quite limited in scope of treatment of managerial functions and in representativeness of coverage with regard to sectors of theeconomy. Little postwar information is available except inpublished Soviet criticism.
The broad range of managerial functions and problemswithin the general subject area of industrial management relates to organizational structure of the enterprise, internal and supervisory chain of command, economic plan formulation,management, manpower management, and control by Party and other outside agencies.
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BLANK PAGE
Evaluations not 'otherwise designated are those appearing on the cited document; those designated "RR" are by the author of thiso "RR" evaluation Is given when the author agrees with the evaluation on the cited document.
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FBIS, Daily Report (USSR and Eastern54. OFF USE. Eval. Doc.
ravo, no_
U. Eval. RRravda, U. Eval. RR 2.
Ya. Planirovaniye promyshlcnnogo proizvodstva
(Planning Industrial. U. Eval. RR 2.
sovetskaya entsiklopediya (Great Soviet Encyclo-
ded,. U. Eval. Doc.
U. Eval. Doc.
Savinskiy, A. Kurs promyahlennoy statistiki (Course of Industrial. U. Eval. RR 2.
sovetskaya entsiklopediya (Great Soviet Encyclo-
8,
d ed,val. Doc. 7; . U. Eval. Doc.
ctBasts of Socialist Organi-
of an Enterprise and Control of Production, p.. Eval. Doc. (tr of Mashinostroyenlye entsiklopcdicheskiy spravochnik,oscow. U) 9. Granick, David. Management of the Industrial Firm in the USSR, New.. U. Eval. RR Arakelian, A. Industrial Management in the USSR.
Washington, U. Eval. RR 2. (tr from
L.
R. Eval. Doc.
12. ovetskoye administrativnoye
pravo'(Soviet Administrative.f. U. Eval. RR 2.
-
R. 9rganization ofin the USSR. R. Eval. RR 3. (trL. Rozenfel'd,. ; - .
20.
; R. Eval. Doc.,. 8. R. Eval. RRrud, U. Eval. RR 3.
BIS, Daily Report (USSR and Eastern Europe),
. DD-7. OFF USE. Eval. RR 3.
7. OFF USE. Eval. RR 3.
6. OFF USE. Eval. RR 3.
nd Malinova, R. O. lanirovaniye predpriyatiy tsvetnoy metallurgiiand Planningerrous Metallurgy U. Eval. Doc.;
State, Moscow. . OFF USE. Eval. RR 1.
Kontorovich, V. Tekhpromfinplanrcdpriyatiya (Technical-Industrial-Financial-Plan of the Industrialoscow, p.. U. Eval. Doc.
24.
G. V. Qperativno-proizvodstvennoye planirovaniye na mashinostroitel'nykh zavodakh (Operational-Production Planning in Machine-Building. U. Eval. Doc.
26.
CIA. Ibid.
C. Eval. RR 2.
29. CIA.
1. C. Eval. RR 3.
Planovoye khozyaystvo, no. U. Eval. RR CIA. | Eval. RR 2.
32.
44.
-
WM
46.
47.
48.
49.
FDD Translationho System of TJafional Economic Plan Indexes, OFF USE. Eval. Doc. (trofB. dusker and P. Krylov. Planovoye khozyaystvo, no 5, Ul
ret
-
55.
56.
61.
62.
"ztr
FBIS, Daily Report (USSR and. OFF USE. Eval. RRFDD Translationp.. U. Eval. RR 4mproving andState Administration Apparatus, p. OFFRR:
12.
OFF USE.
^FDD Translation,FF USE. Eval. Doc.,
RR 3.
0raining Personnel in the Spirit of Initiative and Businesslike Methods, p.FF USE. Eval. Doc. (tr of Partiynaya zhizn', U)
70.
, above), p.. OFF USE.
Eval. RR 3.
FBIS, Daily Report (USSR and Eastern. CC 6. OFF USE. Eval. RR 3.
top sbcret
/
topjiecret
97.
99.
Eval. RR 3.
.
Moscow. R. Eval. RR 2.
Sheyn, P. A. Materiarno-tckhnicheakoye snabzheniye
mashinostroitel'nykh zavodov (Material and Technical Supply of Machine-Buildingoscow,. U. Eval. RR 2.
'-.ft*
-
TOP^ECREl
.
P. A. Material'no-tekhnicheskoyc snabzheniye . otsialisticheakoRQ promyshlennogo predpriyatiya (Material and Technical Supply of the Socialist Industrial. U. Eval. RR 2.
Sheyn, P. A. Material' no-tekhnicheskoye snabzheniye mashinostroitcl'nykh zavodov, Moscow, .. U. Eval. RR 2.
Vucinich, Alexander. Soviet Economic Institutions. Stanford U. Eval. RR 2.
.
C. Eval. RR 2.
-
.
CIA.
C. Eval. RR 2.
VoprosyR 2.
Times,. Eval. RR 3.
C. Eval. RR 2.
CIA.
|
Gram>lt- "f- fit, fi. ahnval
CIA.
FBIS, Daily Report (USSR and Eastern0. OFF USE. Eval.. Pravda, U. Eval. Doc. .
. U. Eval. RR. C. Eval. RR 2.
OFF USE.
C. Eval. RR 2.
.
. 2. C. Eval. RR 2.
Eval. RR 2.
-
Eval. RR 2.
.
. Eval. RR0he Legal
Eval. RR 2.
.
.
of an Industrial Enterprise. OFF USE. Eval. RRtr of V. A. Dozortsev. Sovetskoyeravo, no U) U. Eval. RR0 -U. Eval. RR.
I FBIS, Daily Report (USSR and Eastern0.. OFF USE. Eval. RRravda_, U. Eval. Doc.
FDD Spec laiDDJ '
ic. 'Evil/ RRabove>.
FBIS, Daily Report (USSR and Eastern3. OFF USE. Eval. RR 3.
FBIS,-Daily Report (USSR and Easternlement, pt OFF USE. Eval. RRIA. OO,. 9. S. Eval. RR 2.
.. OFF USE.
Eval. RR 2.
. OFF USE. Eval. RR 2.
FBIS, Daily Report (USSR and Eastern Europe),
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14S,
y.hizn', U. Eval. RR 2,
CIA.
S. Eval. RR 2.
.
. U. Eval. RR. Sovetakoye trudovoye prayo (Soviet Laboroscow... U. Eval. Doc.
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TOP SECRET
-
Summary,FF USE.R 3.
S. Eval. RR 3.
By CKonormgi. tip 8, U. Eval. RR 2.
.
S. Eval. RR 3.
,U, K. Eval. Doc.
.
OF Ibid. CIA. CIA. Air.
USE. Eval. RR, nd,Oct S.
d,
R 2.
54. OFF USE. Eval. RR. Eval. RRuman Resources Research Institute. "Aspects of
Informal Social Organisation of Russian. Berliner, Technical Research Report, no. U. Eval. RR 3. (hereafter referred to as Air, Human Resources Research Institute)
-
nd Yugow. A. Management in Russian Industry and Agriculture. London',
Eval. RRval. RR 3.
U. Eval. RR 3.
rtiai
'uiA,New
ines, 3
Eval. RR 3.
U. Eval. RR 3.
.
KK t. CIA.
PravdWr-gQ Jul M
S. Eval. RR. Eval. Doc. S. Eval. 2.
^
v.te'dit SSSR. (Finance and Credit theoscow.. "U. Eval RR 2.
S.
ai..RK
anking Systems. NewU. Eval. RrT
Shumov. N- Kratkosrochnoye kreditOvaniye promyshlennoeo predpriyatiya. (Snort ^Term Credit-of the Industrial Enteroscow.val. RR 2.
I'did,.
-
USE. Eval. RR 2.
S.
R. Eval. RR 2.
.
, cit./b.p.p.
U. Eval. RREval. RR 2.
U, Eval- RR 2.
Eval. RR 2.
CTAT
tjpgrativiiayaoabanke
Bogusi^rvH^rryTTWr SSSR; (Operative Technique and Accounting in. U, Eval. RR 2.
.
.
.
Bogus1 CIA. Hoi zi
Shumov, op.9
.
op.povcj,. U. Eval. RRogUslavskiy, U. Eval. RR 2.
-
.
no 6,
Necoayev, G. "Usilifl kontrol'-gosbanka nad raskhodovaniyem fondov zaplaty" (Strengthen Gosbank Control over the Expenditure of the Wageredit U. Eval. RR 2.
Pravda, U. Eval. Doc.
RR 2.
>. jbvaJ.
.
Human Resources Researchbove),
,,. TJ. Eval. RR. U. Eval. RRechayev. op. TJ. Eval. RRsvetkov. P. "Reeul'taty proverki raskhodovaniya fondov
zarabotnoy" (The Result of Checking the. Wage Fund
redit, no.f. TJ.
Eval. RR 2.
L_
Vyshinsky, Andrei. Law of the Soviet State. New. U. Eval. Rfe<2.
FDD Translationtate Control in the USSR, 9,
R. Eval. RR 2. (troscow.
auvctSKoyaravo.. Sovetskoyeravo, no. Eval, RR 2.
FDD Translation.
RR 2.
.
.
vasil'yev, N. M. "Akt-osnovnoyosudarstvennogoAct-Fundamental-Document of Audit and Inspection of Stateovetskoyeravo. no. U. Eval. RR 2.
bovctsKoyeravo,. Eval. RRovetskoyeraMj,U. Eval. RRaail'ev, op..
DD Translation R.
l-val. RR 2.
ravo, U.
f. Eval. RR 3.
FDD TranslationR 2.
Eval. RRIA.
"Ev
Current Digest of the Soviet Press, vol3 U. Eval. RR 2.
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TOP SECRET
Pravda, U. Eval. Doc.
. Eval. RR_ ,In ipi IrftlX ca
.
FBIS, Daily Report (USSR and EasternU.. OFF USE. Eval. Doc. Pravda. U. Eval. Doc.
off use.
Eval. RR I.
. Pravda, U. Eval. RR0 U. Eval. RR U. Eval. RR 2.
Original document.
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