Executives Must Be Nimble In The Face Of Sanctions and Flagging Growth

Ford Soller, YalabugaFord Sollers has cut production at two plants including Yelabuga which produces the seven models such as the Kuga.

If last year was challenging, 2014 is turning out to be an "interesting time" according to the Chinese definition.

The threat of tougher Western sanctions, foreign exchange volatility, dwindling growth and above-target inflation create a challenging reality for employers. Business leaders will have to be flexible and quick-witted when it comes to decisions on whether to expand and recruit.

"Sanctions would hit everyone so, yes, we are thinking about it. Can we do anything to be prepared? Working in Russia we have learned to adjust at a moment's notice, more so than in developed markets", said Felix Kugel, ManpowerGroup vice president and managing director, Russia and region.

The economic background is more of a concern than sanctions, recruiters said. Russia's central bank raised interest rates to 7 per cent in March to counter inflation, which remains above target. Central Bank governor Elvira Nabiullina expects the country's economy to grow by less than 1 per cent this year.

Russia's car market shrank more than 5 per cent last year. The Ford Sollers joint venture in April announced it's letting go one quarter of its 2,700 staff at its Vsevolozhsk car plant outside St. Petersburg and another 250 staff in Yelabuga, Tatarstan. Avtovaz announced it would cut 7,500 jobs or one tenth of its staff in January. Total car sales fell 6 per cent that month, the Association of European Businesses reported, and 2 percent in February, though sales stabilized in March.

Wholesale and retail trade grew was among the better performing sectors in the final quarter of 2013 and so far this year consumers have spent more than most analysts expected. Retail sales rose 4.1 per cent in February, compared to 2.4 per cent in January, according to Rostat.

The best performing sectors at the end of 2013 were finance, agriculture and forestry followed by manufacturing. Construction contracted faster than expected, however, and mining and raw materials output showed almost no growth.

Over the past year, the end of the commodities boom has seen redundancies in the raw materials sector. Norilsk Nickel restructured its head office last year resulting in significant redundancies. Miners Petropavlovsk and Nordgold announced plans to cut production. Severstal said in February it aims to reduce staff by 2 to 3 per cent this year.

The government's refusal to let state monopolies raise tariffs would likely lead to staff reductions at companies such as Gazprom and Transneft, said Maxim Kaurov, Executive Director, Head of Oil & Gas and Industrial sectors, Staffwell.

Some raw materials companies, Kugel said, were finally deciding to shape up and rid themselves of "fat", moving from rigid to flexible structures and learning to do more with less.

Each industry has its own dynamic, driving salaries and benefits. "We do not see significant changes in benefits packages. The main benefits still are medical insurance, cell phones and perks," said Ivan Struzhkov, Manager, Compensation and Benefits Group, People Department at KPMG.

Among the strongest industries for recruiters are pharmaceuticals as local players become more competitive. Russian legal companies have also been expanding in the areas of corporate, tax and customs laws, according to Inna Alpaidze Executive Director at Staffwell and in charge of the legal sector.