Productivity And Motivation Are Hot Topics In A Cool Economy


Falling productivity and a shortage of skilled managers are crucial issues for companies in 2013. Recruiters emphasized the need for mid-level executives who can motivate people and drive change.

Despite a weakening economy, it is taking companies much longer to identify the best candidates. The hiring process continues to lengthen and companies are struggling to find skilled staff, according to a survey of recruiters by The Moscow Times. With companies chasing talent, candidates retain the upper hand in negotiations but that is not necessarily translating into higher salaries, recruiters said.

In 2008, the last year of the boom in Russia, the average timespan for hiring, from advertising a vacancy to signing a contract, was two-and-a-half weeks. Now it is 11 weeks, according to Andrey Chulakhvarov, Head of General Staffing at Coleman Services. "First there is the unavailability of candidates, then companies are not hiring indiscriminately and that compensation is not very attractive to the people who are qualified to do the job. The trend is deteriorating and it's going to get worse."

Employers are not in a rush to hire: most executives say the lack of staff will not affect their customers or investors according to recruitment agency ManpowerGroup in its latest Talent Survey. Since the depths of the downturn in 2009, companies have learned to do more with less.

Output Gap

However productivity may become an issue, which will require the hiring of more managers skilled at driving through change without damaging motivation, said Felix Kugel, Vice President & Managing Director of ManpowerGroup Russia & CIS. "A lot of organizations are facing uncertainty or increased competition which in turn demands increased productivity, which in turn requires them to look at each and every task and ask what productivity levels this or that person operates on."

Andrey Chulakhvarov of Coleman Services said there is a growing mismatch between candidates' expectations and the desire of employers to put cost savings first. "If you are three or four years in the same job you are looking for a move, it may come as a surprise that there are not very many opportunities. The most you can be offered is the same position you currently occupy, with the same set of responsibilities and pretty much the same compensation. So what's the incentive?"

The pool of candidates with experience in western companies, who speak reasonable English,
is stable, and demand exceeds supply.

Companies will respond by promoting internally, rather than meeting a candidate's salary demands. Cost per hire may then fall as the vacancy is filled at a lower level. The buzzword of 2013 will be retention, said Chulakhvarov.

Some companies will practice "targeted" staff firings aimed at improving their business, said Alexey Mironov, director of the strategic development at ANCOR. But he expected neither major layoffs nor mass hirings. The staffing market grew by 20 percent last year but the pace of growth decreased steadily in the second half and was only now recovering.

However, many international organizations have identified Russia as one of their strategic development markets and that means they continue to hire staff, said Hays Russia Managing Director, Alex Shteingardt. Most specialisms, including finance, fast-moving consumer goods, pharmaceuticals and telecoms saw increased hiring activity in March, compared to the same period a year ago.

Economic Outlook

Companies face the uncomfortable reality of a weakening economic environment combined with a low rate of unemployment, at least in Moscow and St Petersburg, where it stands at just over 1 per cent. Nationally, the unemployment rate fell to 5.8 percent in February according to the Federal State Statistics Service, Rosstat. In the goods producing industries, firms cut staff for the fifth month running in March, according to Markit and HSBC, who base their Purchasing Managers' Index on a survey of employment, new orders, output, supplier delivery times, and the level of stocks of items purchased.

One reason for low unemployment is that Russia's economy has been less exposed to the global economic crisis than, for example, the euro zone. Output in Russia's goods producing sector has risen every month since July 2009. However that is changing: the pace of expansion is close to the weakest rate that HSBC has measured over that 44-month period.

Government data reflects the change: Gross Domestic Product weakened sharply in the first quarter of 2013, to about 1 percent, which is the slowest pace of growth since 2009. Economy minister Andrei Belousov forecast in April that full-year growth would range from 3.0 to 3.2 percent, down from his previous forecast of 3.6 percent. Industrial production contracted sharply at the start of the year hurt by flat commodity prices, declining exports and weakening household consumption in Russia. Consumer confidence has been declining since the second half of 2012.

The Ivanovs

However, the outlook for consumption may be brighter than the official data suggests. Retail revenues will grow by just under a quarter in 2013, according to the bullish research of Sberbank. The research is intended to boost the case for investing in Russia but it highlights some data that might surprise casual observers.

Domestic consumption, rather than extractive industries like oil and gas, has generated 80 percent of Russia's economic growth in the past decade. Russia has a bigger middle class than Brazil, India or China yet it is not a mature market, meaning that many people still aspire to furnish their homes and acquire consumer goods and services. Russia is, Sberbank asserts, on course to become the largest consumer market in Europe and the world's fourth largest by the end of this decade.

In February Sberbank Investment Research launched a new survey to measure consumer confidence every two months. It tracks a hypothetical family, the middle-class Ivanovs, using data which Sberbank says is broader than the consumer confidence survey conducted by the government. The inaugural survey, conducted by market research agency Cint, suggests consumers are more optimistic and 44 percent expect their personal financial situation to improve in 2013. Ninety-two percent own their home, and 42 percent say they will change their car over the next two years, though most people are not confident enough to make major purchases immediately. Consumers are also increasingly price sensitive, 37 percent saying price is the key factor in their purchase decisions.

Top Sectors

If industry and consumers are cautious, the job of recruiters is to find the bright spots. The Russian consumer is more upbeat, in the eyes of ManpowerGroup's Felix Kugel. Russian banks have increased the availability of consumer credit, allowing people to borrow and spend. The wider economy is feeling the benefit: "That creates a huge need for a blue collar workforce which in turn is quite scarce, though that varies geographically. When Looking at the white collar workforce we know that IT skills are always in demand, sales people, the pharmaceutical companies are moving along nicely and when we look at the micromanagers the change managers in every industry are in demand and not only in Russia."

Consumer confidence impacts a range of sectors including agriculture, telecoms, finance companies and the motor industry. Looking at what this means for sectors like real estate, Glenn Rufrano, President and CEO of Cushman & Wakefield, a global real estate services firm, gave this view on the outlook of the investment community when he visited Moscow in March 2013: "What we're finding around the globe is people are searching for yield. In 2011 and 2012 they were more risk averse because of what had just happened in 2008 to 2010. But they became a little less risk averse in 2013. They are not going haywire, yet they will take a little more risk."

Banking has seen a wave of consolidation, led by Otkrytie, VTB and Sberbank, which have led to job cuts. January saw the launch of a new wave of layoffs from banks around the world and Russia was no exception. The result, says Teri Lindeberg, CEO of Recruitment Firm Staffwell is a surplus of senior manager candidates and a lack of mid-level and specialist candidates. Senior managers in the insurance industry also face a shortage of positions and may have to consider other industries.

Healthcare companies, like banking and legal companies, increasingly handle their own recruitment but are having to offer more complex packages including pension schemes and fringe benefits, Lindeberg said. Consumer goods companies, both food and non-food, are growing and require specialists, but they, too, are introducing more tools to retain people, including training opportunities and bonuses linked to the turnover of the company.

As well as FMCG, marketing, information technology and industry remain "steadily active" in recruiting new personnel, said Tatiana Dolyakova, General Director of Penny Lane Personnel.

Skills in Demand

There are longstanding shortages of mechanical and civil engineers, and of people with scientific, technical, engineering and mathematics skills. Some of these shortages are due to the decline of vocational and technical training programs, but also due to salary expectations in the main Russian cities and recruiters are looking abroad to meet demand.

"There is a shortage of middle mangers and certain specialists and companies are trying to relocate these specialists from different places in Russia and the former Soviet Union," said Marina Simonova, General Manager of Ventra. "There are a lot of IT specialists in Belarus and Ukraine and eastern Europe, like the Baltics and Latvia. You can find qualified people but not with high salary demands so companies are trying to bring those people in." This applied not just to IT, she said but to other sectors like banking, where there is a trend to attract managers from abroad.

The drive by government departments in Russia to shift much of their work online continues to absorb information technology professionals. ManpowerGroup's latest Talent Survey shows IT staff climbing to fifth place in terms of shortages, up from eighth place at the start of 2012.

Candidate's Market

Good candidates may find themselves considering several offers. "Russia is a candidate-dominated market. The pool of candidates with experience in western companies, who speak reasonable English, is stable and demand exceeds supply. Each finalist normally has at least two or three more offers. Every second candidate has a counter offer from the current employer," said Alex Shteingardt of Hays. A winning offer will not simply entail a competitive salary but may also mean considering a candidate who has not previously held the role but perhaps lacks promotion opportunities in his existing firm

This does not necessarily mean a higher salary, Teri Lindeberg of Staffwell said. "There is no trend of increasing salaries and salaries have been kept to more or less the same level during 2012. After the crisis of 2008 employers are not inclined to buy out candidates by offering them a higher salary." Only some sectors are seeing increases: in banking, salary growth is not more than 30 percent and only when a candidate changes job. Human resources, marketing and sales have seen salaries rise by 20 to 30 percent and the oil and gas sector has seen salaries rise about 10 percent, according to Staffwell.