Introduction
How do managers maintain or improve worker morale? Despite unanimous agreement in
the existing literature about the importance of morale in influencing worker performance and hence
firms’ profits, neither a well-defined theory nor a well-defined set of factors that contribute to a high
level of employee morale has emerged (Howitt, 2002). Numerous studies identify select worker and
workplace characteristics that appear to influence morale, but to date, the literature continues to 1
measure morale in a variety of ways, making comparisons across studies and thus the formulation 2
of an appropriate and effective managerial strategy to improve worker morale somewhat
problematic.3
In Russia, identifying the factors that contribute to employee morale is particularly
important. Russian firms face difficult financial challenges imposed by the decade-long economic
and political transition that began in January 1992. Financial constraints, initially driven by 4
unstable macroeconomic conditions and under-developed financial institutions, worsened in the
fallout from the global financial crisis in 1997. Misguided domestic economic and financial
policies, combined with the rapid flight of short-term funding, obliged Russia’s government in
August 1998 to default on domestic and foreign debt and devalue the ruble. Russian firms in every
sector had been speculating in the short-term government bond market. The vast majority lost out
in the subsequent financial crash (Brady, 1999; Westin, 1999; Ivanova & Schoors, 2000). Despite
signs of macroeconomic recovery as early as 2000, Russian firms continued to confront difficult
financial conditions (Krueger & Linz, 2002). Financial constraints limited their ability to reward
productivity improvements or worker effort with additional pay. Throughout the 1990s, one in
every three firms found it difficult to make timely wage payments for labor services rendered. As
recent as 2004, one in every five Russian workers reported experiencing delayed wage payments