An Inside Perspective: Candidates’ View of the Industry Labor Market

Irina Olkhovenko
Director of ANCOR Healthcare and Pharmacy

The crisis that began in the second half of 2008 overset the Russian industry labor market: It eliminated the notorious overheating of the economy and made the prospective employee and employer directly dependent on each other, with both having to take the interests of the other into account. The areas to have suffered the most from the crisis are manufacturing, metallurgy, construction, real estate and development, and banks, partly. When the crisis began, most companies had to seriously reconsider their development plans and sharply cut, or “freeze,” new hires. However, one cannot speak of a general recession — the situation can be described as a market reversal. For example, the consumer goods (mainly fast-moving) manufacturing and sales sector is flourishing, as well as pharmaceuticals.

The main difference from the 1998 crisis is that of all sectors, it was healthcare and pharmaceuticals that turned out least protected then, whereas today this sector feels quite confident and remains the candidate’s — not the employer’s — market.

Despite the fact that the situation in the pharmaceutical market is more stable than in other sectors, employees of pharmaceutical companies do not take the matter of changing employer less seriously than others, as there is a risk to make rash steps and lose out. It is no secret that those primarily affected by layoffs are recent joiners. As the candidates have grown more prudent, in a number of companies with a historical turnover rate of 20 percent per year the picture has changed dramatically and the turnover rate has decreased to 2-3 percent.

A new poll conducted by ANCOR, which surveyed 1,000 specialists of the healthcare/pharmacy sector throughout Russia, helped identify employer values as viewed by the employee, values that promote staff loyalty in today’s economic conditions. The majority of respondents mentioned an unsatisfactory pay level as the primary incentive for changing employer. Indeed, a candidate’s compensation package is one of the important motives in changing employer, but it is not the only one. For example, during the transition period, professional and career growth, or at least opportunities for such growth in the future, are analyzed, and one form of professional growth for candidates is their transfer from one product type to another (from OTC to prescriptions, from generic to original, etc.) and additional training. Career growth is evidenced by any promotion from the medical representative level, an expansion of functions and responsibilities. Not an unimportant factor in the consideration of an offer is the company’s image, the quality of products, an interesting portfolio of medications, prospects for the emergence of new medications and new business lines. Nonmonetary factors can occasionally be motivators as well. For example, in addition to career and professional growth, candidates may be attracted by a start-up project, namely a company expanding to a new region, launching a new product, i.e. developing a territory “from scratch.” They view this as an opportunity to unveil their potential, apply the experience they have accumulated, and produce results as soon as during the start-up phase of a project.

Currently, there is no turnover in the pharmaceutical market. Many candidates truly believe that 3 to 5 years is the optimum period for engagement with one employer, provided, though, that the company not only trains and develops its employees, but promotes them as well. For most employees it is important to know if a company hires managers from outside or promotes its own from within the company.

As for employers themselves, in the beginning of 2009 all representative offices of international pharmaceutical manufacturers carried out a traditional indexation of salaries of about 5 to 15 percent. At the same time, they cut their HR costs through other elements. For example, we see some companies being very careful in allocating budgets to various kinds of HR programs, e.g. to additional programs related to personnel assessment and training. Many companies are taking an interest in outstaffing opportunities, especially where restrictions on the staffing list prevent hiring new staff, while the interests of the business require them to do so. Outstaffing services are now in larger demand than they were six months ago. However, pharmaceutical companies have always extensively used outstaffing and outsourcing by taking people off staff, when necessary, or leasing them.

For a long-term outlook, it should be noted that the pharmaceutical market, in particular its retail part, will most likely feel the breadth of the crisis. Consumer demand in drugstores may decline, especially for OTC medications, vitamins and skin care products. Eroded profits will make companies save, possibly leading to the introduction of certain limitations on marketing initiatives.

At the same time, we do not anticipate any serious disturbances in the pharmaceutical market. It can be assumed that the situation will eventually deteriorate, but the negative consequences of the crisis will most probably not affect the entire pharmaceutical market but rather its selected areas.

Therefore, despite the unstable economic situation, the Russian healthcare and pharmaceutical market is actively growing in comparison with all other sectors.