They all agree that 2009 will be a year of challenges during which innovative, flexible, creative and focused players in the human capital sector will be more likely to survive. They also say that the global economic crisis will enforce more employee loyalty towards employers and create greater pressure on firms to retain their best hands and minds. Seeking answers to some of the topical questions facing the human resources (HR) sector, The Slovak Spectator spoke to Gerard Koolen, managing partner at HR management company Lugera & Makler, Mariana Turanová, managing partner at executive search company Target SK, Boris Lukáč, country manager at human capital consulting firm Hudson, Luboš Sirota, chairman of the board of directors of Trenkwalder, Dana Blechová, country manager at HR consulting company Iventa, and Andrea Horvathová, senior consultant with executive search company Arthur Hunt.
The Slovak Spectator (TSS): How do you think the global economic crisis will impact the human resources sector? What are the challenges that executive search, recruitment, temporary employment and HR consultancy firms face?
Gerard Koolen (GK): The challenges in the HR industry are substantial, though they also offer great opportunities. Personnel leasing companies are being hit the most, I would say, as customers with declining demand will first of all lay off their temps. Pure executive search companies will also suffer a sharp decline in demand and many executive search companies are already closing offices in Europe or decreasing their headcount. The crisis demands from the entire HR industry a changed approach towards their customers. Many HR companies are used to ‘big billing’ and poor customer service.
This year will certainly witness a big decrease in the number of HR service providers who have been performing poorly. Further, due to changing market conditions and changed demands from customers only those HR service providers showing a flexible and creative attitude will be able to survive and to keep (and even gain) market share. Internally, HR service providers have a big challenge to motivate and train their staff to be able to meet the new demands the market is making of them. Further, many HR companies introduced wide ranges of non-core HR services and they now, because they are not excellent in those services, they face big declines in demand. Other HR service providers are quickly introducing new services to compensate for their decreasing turnover, but will not be successful as they have not yet reached a level of excellence.
Mariana Turanová (MT): The crisis has already had one specific effect, which is the ‘hiring freeze’. Some companies received this message in September 2008 and some in November, but talking to companies daily I would say 80 percent have got the same message. We haven’t been in this situation for many years. Actually, looking back at the 10-year history of my company in Slovakia, this has never happened before.
The challenges are therefore clear: consultants need to tighten their focus on quality more than ever before; listen to client needs more carefully and make an extra effort to keep these clients or even win new ones. But first of all we have to accept that our clients aren’t in an easy situation and adapt accordingly.
Boris Lukáč (BL): The impacts on the human resources sector will have different dimensions. One of them is stronger loyalty towards the employer and a weaker tendency to change jobs in general. Employees will need stronger and more significant reasons for change. Another positive aspect could be a more significant differentiation of top-performers within the firm in order to retain these people and create new value within the firm.
The first material impacts of the crisis could be savings measures in the area of human capital such as training, education, identification of talent, measurement of people’s potential, and investment in further development. The economic condition of the firm and the caution of its managers will decide the scale of these measures. Paradoxically, for a company like ours, the current situation can bring an improvement in the quality of candidates. Besides, each firm active in the HR sector will have to show clearly its added value to the client.
Luboš Sirota (LS): The impact on the Slovak labour market will be massive, even if we do not expect problems as huge as in the Czech Republic or Hungary. Currently, HR is a sector under heavy stress. The worst-case scenario assumes that about 50,000 people might lose their jobs as a consequence of the crisis. The challenges that human resources specialists must solve now are mainly focused on the question of how to use the current crisis in the long term. In the same way that, in the first months of the outbreak of the crisis, temporary agency employees were the most endangered group, they will most probably be the ones who find jobs first as the crisis ends.
Employers will be more careful and will seek administratively simpler ways of employment.
In the area of consulting and education firms should first of all think about optimisation measures and investment in the education of their managers. Since it is the first crisis in independent Slovakia’s history, managers have not been and still aren’t prepared to operate under crisis or change management.
Dana Blechová (DB): Employees will most probably value their work more and carefully consider any employment change. They will certainly be more careful with their choices, especially if they have a good job. For recruitment firms and HR departments it means a larger number of job applications, and more available labour on the market. On the other hand, it will be more difficult for executive search firms to persuade a potential candidate to make a career change.
Andrea Horváthová (AH): The current economic crisis will improve the quality of people employed by firms. Firms will not only eliminate over-employment, which has been tolerated because of the economic boom, but will also focus on strengthening their teams with the most effective people. The situation in firms and across the labour market will become more realistic. The market, which had been guided by demand for candidates and their often ambitious requirements, will again become more balanced and employees will be forced to place rather more value on their jobs and have a more careful approach towards future job changes.
TSS: What are the greatest challenges facing the Slovak labour market today? Is one still the lack of qualified labour?
GK: I would say that the greatest challenge of the Slovak labour market is indeed the lack of qualified labour. At the moment the massive layoffs are still mainly in the unqualified sectors. But we are already seeing qualified labour being laid off and this implies that the shortage will not continue this year. Also, many qualified workers who have been working abroad are coming back to Slovakia because of decreasing demand in western European countries. Approximately 60 percent of all the Slovak qualified workers in the Netherlands have been given notice. Another great challenge is to find all the unqualified workers other jobs.
MT: Despite the decrease in vacancies the market is still hungry for IT specialists and business developers. Sales people with relevant technical skills are also in great demand. The challenge, naturally, is to find new investors who will be able to absorb the many production staff now being laid off.
BL: Currently the market is recovering from a situation in which everyone who met the basic conditions was accepted for certain positions. There are signals that there are now more high quality candidates on the market at a more affordable price for firms. Qualified labour is not the number one topic right now, but that will change promptly after the first signs of a revival in the economy. Currently, the greatest challenge for firms is to find a way of retaining high-quality people because their release onto the market and the eventual effort to re-hire them will be several times more expensive than keeping them. The challenge for candidates is to find room for development in times of assumed or real crisis.
LS: Currently it is an excess of workers for any job. The greatest challenges in the HR area are paradoxically not faced by firms which do not have employees, but by investors who came here and, in return for the government incentives they received, are obliged to maintain employment for several years. These firms now face huge problems: how to employ people whom they are obliged to employ in exchange for government stimuli and how to tackle the massive drop in demand. This is why we are now seeing a number of proposals, including some from large employers, focused on how to maintain employment while in fact not producing.
AH: The challenge will be that people who were used to high payments not always commensurate with their contribution to the firm will have to learn to function under different conditions and with trimmed budgets, and will have to prove that they have added value for the firm. Wage levels will have to become more realistic and appropriate for given positions, while the responsibility of particular employees will widen, which could in fact mean more work and less money. Many employee benefits, which in the past were taken for granted, will now be limited. Firms will be stricter in evaluating the effectiveness of their employees and bonus-driven wage systems will be put in place.
DB: Last year it was difficult to find employees, while specialists’ positions were regularly filled through direct approaches. Now the demand for work grows and I can see room for outplacement services for firms which are laying off employees and want to help them find work through personnel consultancy firms. Certainly there are still sectors where there is a lack of qualified labour, for example in the IT sector.
TSS: What are the major weaknesses of Slovakia’s education sector today?
GK: This is an old topic which remains relevant: the lack of practical technical schooling. Furthermore, we are still confronted with a lack of IT professionals.
MT: My constant feeling is that the education system is still too far from real practice. So those students who only study and don’t find some meaningful part-time job, or who don’t combine local study with some international study-stay, don’t have a very good starting position.
BL: I have several times said that a stronger interconnection between schools and practical experience is missing. It is quite a luxury to have so many students of management and political science, and in the end it is difficult to find qualified logistics experts or analysts.
The state has been financing something that has no other function than to delay the entry of young people into the labour market because they already start studying with the notion that in the future they will be doing something completely different.
Talent at Slovak schools, with very few exceptions, for which we should all be grateful, is determinedly brought down to the average from the early years of school. An average and dogmatic pedagogue is not nurturing a person very different from himself. This is why the education system, and with it the whole of society, needs to support modern, progressive and creative teachers. It needs to strengthen the atmosphere of demands and the appreciation of results. At the same time, sloppiness, indifference, plagiarism and the occasional dominance of power over the students needs to be rejected.
LS: Education is currently only of secondary importance when seeking jobs. But one has to be aware that Slovakia still is and will remain for many years a workroom of Europe. Investment in the knowledge-based economy is not the same as in the production field and firms have had to tackle a lack of manual workers. Positions like metal workers are almost impossible to fill with new graduates. A lot of schools have taken the easier path and opened classes focused on business and administration while so-called blue-collar work is gradually dying out due to lack of interest from graduates.
DB: The weaknesses of the education system are unchanged: lack of flexibility and a failure to react to the needs of the labour market while being far too academic.
AH: Unfortunately, in Slovakia it is still the rule that the employee’s value and experience is not dependent on which university they graduated from. Since the education sector is of a more formal character in Slovakia, with its curricula insufficiently interconnected with real life and practice, education is seen only as a mark of having achieved a certain level, and the knowledge acquired is often irrelevant to business. Efforts by particular firms to build tight cooperative relationships, be they at the university education or vocational training level, should be supported by the state.
TSS: HR experts say that the HR sector is in need of innovation. How do you envision that process, for the segment in which you operate and for the type of services you provide? What new is needed in HR practices?
GK: That is exactly what I meant when I said that the present situation offers opportunities. I am constantly surprised at how many HR service providers refuse to offer innovations to their customers. In Slovakia, for example, around 90 percent of all recruitment companies don't have specialised recruitment software and still work with Excel sheets and files. There is little innovation with respect to flexible fee systems, modular recruitment and other HR services. The biggest innovation in the HR sector will be in the field of faster delivery at higher quality and, through new software systems, at a lower cost for the customer. New forms of personnel leasing are emerging, and big companies will start outsourcing their recruitment activities to HR partners with state-of-the-art recruitment software which is accessible to the customer. It means that the customer can see online and in real time each and every activity of the recruitment consultant and directly manage the entire process being outsourced.
MT: If you consider professional work, a high quality approach, a customer service attitude, a drive to deliver using the best methods such as knowledge management systems and online tools including proper candidate-client feedback as an innovation, then yes this is exactly what is needed. In other words we don’t need to reinvent the wheel: we just need to make sure we use the most effective tools and don’t forget to personalise any project we do, for both our clients and candidates.
LS: The HR sector needs innovation; however, not innovation in the traditional sense of the word. We still see that HR is relatively rigid. The time when you had loyal employees are gone and now new team management methods are surfacing which are moving from directive ways of working with human capital towards more liberal ones. Now the importance of mentoring, tutoring and coaching will increase and, along with this transformation, the importance of education will also rise. Despite the fact that innovations are finding their way very slowly in Slovakia we can observe the most innovative projects by Slovak firms through our annual competition for HR specialists. The quality of the projects submitted has increased. However, in terms of human capital the greatest reserves are still in the state administration. If we look at innovations from the point of view of the services provided by personnel agencies, then services linked to outsourcing, such as payrolling, are gaining importance.
AH: The current situation in the market should bring a return to quality, which has for a while been substituted by quantity among HR companies. They should focus more on improving the selection process for employees and the situation where the work of an internal employee has been completely substituted by an agency, which should be replaced by a very tight relationship between the client and the supplying agency. Real consultancy should become important as well, which means not just forwarding a number of CVs, but subsequent consulting in the area of rewards and coaching during the selection process as well as after the candidate’s entry to his or her new job, with the external view of the consultant being preserved.
DB: The HR sector must be more creative and find new ways of searching for candidates and motivating employees, while HR people should have a more active approach towards the strategy and leadership of firms. We can also observe that in recruitment there has been a switch from passive to active involvement.