Russell was interviewed for the position but missed out to Crusaders assistant coach Mark Hammett.
Hammett won the hotly contested position and will fill the shoes of Colin Cooper, who is moving on after eight years in charge.
Russell (47) has an impressive coaching background, having coached Wairarapa-Bush to a title, and he has since been in charge of Hawkes Bay for the past three years during which it has made the semifinals of the national provincial competition each time.
But those credentials were ignored, with the New Zealand Rugby Union going with Hammett.
"It was disappointing to be honest. I had some expectations going in and I thought my interview went well. One of the better ones I've had," Russell said.
Russell said he was surprised Hurricanes technical adviser Alama Ieremia would become the assistant coach and assistant coach Jono Phillips would become the high performance manager.
Russell said he could not understand why a new head coach was appointed yet his two assistants would be coaches who were already at the franchise.
If he had been appointed he wanted to bring in some fresh blood.
"That was where I was coming from. But it didn't happen and I'm over that and now I just want to move on from that. I'm fully focused on what the Highlanders are doing."
The Highlanders have spent the week in Cape Town and will fly up to Pretoria today to face the Bulls at altitude tomorrow morning.
They have had some relaxing times in Cape Town, with a group going swimming with sharks (the sharks were behind cages of course).
Another group visited Robben Island, just off Cape Town, where Nelson Mandela was kept captive for 18 years.
