HR MANAGERS AND FIRMS DEAL WITH TIGHT BUDGETS AND NEW ISSUES

Facing the challenges of change

Companies forced onto a strict financial diet by the global downturn have trimmed down their human resources budgets – putting immense pressure on the HR industry, where now only the strongest and most adaptable firms are prepared to move forward. Both clients and HR consultancies and personnel search firms have had to reach back to the fundamentals of the field but they have also needed to fully deploy their skills in innovation and creativity to respond to the new challenges of the labour market.

HR firms must adapt to a changing economic environment. HR firms must adapt to a changing economic environment. (Source: TASR)

Companies forced onto a strict financial diet by the global downturn have trimmed down their human resources budgets – putting immense pressure on the HR industry, where now only the strongest and most adaptable firms are prepared to move forward. Both clients and HR consultancies and personnel search firms have had to reach back to the fundamentals of the field but they have also needed to fully deploy their skills in innovation and creativity to respond to the new challenges of the labour market.

The Slovak Spectator spoke to Igor Šulík, managing partner of Amrop Hever Slovakia, an executive search company; Gerard Koolen, managing partner of Lugera & Makler, a recruitment company; Vladimír Koša, managing director of Consilium Consulting, an executive search and HR consulting firm; and Drahomíra Kutňanská, area manager of Randstad, an executive search company. These four experienced executives in the human resources field spoke about the most important issues resonating in their line of work and the challenges that they expect the coming years will bring to human resources development and management.

The Slovak Spectator (TSS): What are the most important changes that have emerged within the human resources field over the past year? How has the global economic downturn affected the field?
Igor Šulík (IŠ):
The global turmoil has affected the human resources area quite intensively. We have been witnessing growing unemployment, cuts in HR budgets, only marginal or no wage increases, many cost-saving measures beaing taken – there is a lot of uncertainty among the working population as well as among professionals operating in the field of human resources consulting.

The HR departments have been under pressure, dealing with issues that they were not so much accustomed to. Many HR services that they had been outsourcing they tried to internalise and do in-house. Some had good outcomes; some have proved to not be good decisions, leading to even greater problems. Adapting to the new situation has not been easy for HR managers. HR managers need to show their creativity and ability to innovate, to tackle the side effects of the downturn by combining approaches that focus not only on saving money but above all on engaging, developing and retaining top performers and talents. As many companies have tried to save on costs, their HR budgets were put under intense pressure as this area seemed to be the one where firms could save money. That has led to a decreased volume for the HR consulting industry, which means that only the strongest and more adaptable ones will cope effectively with the changed market situation.

Gerard Koolen (GK): The most important change we have seen is that clients and HR agencies went back to basics. Only bsolutely necessary services were being requested by clients. All “glitter & glamour” services were rapidly abandoned. Furthermore, prices have been reduced considerably and competition has increased. Also, because many clients were buying only at the lowest price, the quality of services has gone down due this price pressure. All human resource service providers I know have reduced their staff.

Vladimír Koša (VK): In these times it is crucial that HR managers become respected partners within businesses. It has always been important that they are empathic towards the needs of business; however now this relationship must be much tighter. While the expectations towards HR are much higher, top managers are also more willing to listen to HR managers. Many HR managers understand this situation and have started being proactive: they are not waiting for requests from leadership but are submitting solutions and putting new ideas on the table. For example, in the case of layoffs they have guided managements not to rush into hasty layoffs only to improve their numbers when key employees and specialists might also leave the firm, resulting in further decline of the business. They have promptly initiated personnel audits and launched projects of talent management which has started being a very strong trend not only globally but also locally.
Of course, this is linked to the change in the model of benefits and the system of rewards but at the same time it is systematically focused on key people of the firm, meaning not only managers at top levels but also key people at mid and lower management positions and specialists.

Drahomíra Kutňanská (DK): One of the most significant changes is that most firms have appreciated the existence of their internal personnel departments or help of external consultancy or personnel firms. It was a year when companies had to review every single employee and monitor their effectiveness. The companies optimised their organisation structure and installed a reward system based almost entirely on performance, they merged departments, even combined several positions which of course resulted in negative responses from employees. On the other hand, human resources experts got the green light in 2009 and proved their importance for the companies while becoming an equal partner for managements.

The worst impact of the global crisis in the human resources area was, of course, the layoffs of employees. However, one must note that the crisis isn’t and it was not the sole reason. Other aspects of the market contributed as well; for example, pressures on cutting prices, increasing efficiency, and reducing the total expenses of the company. The market has been cleaned both on the part of the employers and employees as well. Only the strongest remain.

TSS: What are the main challenges that executive search, recruitment and HR consultancy firms will face in 2010? What will be the strongest issues resonating in the area of human resources during the upcoming years?
IŠ:
As the economy will slowly recover from the downturn, the same applies also for HR consulting firms. Once the companies on a broader scale start to realise that the current situation provides an opportunity for upgrading their teams, this will create increased demand for search services. As an Amrop survey conducted last year outlined – 43 percent of the surveyed organisations believe that attracting and recruiting top talent for key positions will be as difficult or even more difficult during the next five years, despite the current downturn, in comparison to the past fast-growth context of the region. Talent discovery (internal as well as external), retention of key people, and creating a working environment that will allow for realisation of people’s full potential: those are the challenges that HR will have to address in the near future.

GK: The main challenge for many consultancy firms will be to adapt to the new economic environment in which the agency has to deliver more, has to deliver a higher quality, has to deliver faster and must do all this with fewer employees and at a lower price, and thus at lower margins. Further, clients need their consultancy firms to be pro-active in cost-reduction activities, to be a close partner for them in determining which cost-structures are openly communicated, and deciding which activities clients can take over from their consultancy firms.

VK: Successful personnel-advisory companies and consultancy companies that focus on executive search understand that during these times their relations with the clients must be even tighter. The crisis has resulted in an amazing clean-up of the HR sector. Over the past 10 years, companies emerged which claimed that they were providing very demanding executive search services but all they were offering was intuitive mailing of CVs. In the market influenced by recession, clients have understood that these intuitive services are no longer acceptable. Without professional depth and the personal maturity of consultants, these firms which lack experience will not survive. The success of executive search companies will also this year, more than ever before, be generated by consultants who have several years of experience and can offer detailed knowledge of the market, not only for clients but also for candidates.

The trend is that several consultancy firms, which in past provided only consultancy in the area of executive search, have currently widened their activities based on the needs of their clients and have also started providing personnel audits, training and coaching. These companies must professionally handle situations when the selection process within the business of a client stretches through several months, while shareholders even enter the process and the number of rounds increases. Sometimes it even happens that the leadership decides due to another wave of recession that the positions won’t be filled at all, and the organisational structure will change instead. Another trend is that clients no longer seek only ambitious young managers but they have also started betting on mature and experienced managers. Before, there was a trend of seeking out managers from other fields to bring winds of change; now however, there is a demand for experienced managers from the given sector who can immediately throw themselves to work and produce instant results.

DK: In the past months it has become obvious that firms have started to more frequently use the form of personnel leasing and I expect that this service will become one of the most sought after personnel services. Companies started appreciating this type of employment from several different points of view and we are also noticing a more positive response on the part of candidates. It is a turning point in which we can see progress in the awareness of both the employer and employee. However, other services provided by personnel agencies will not fall behind. Even if there are a higher number of candidates on the market when compared to previous years, companies still face the same problems. One of the reasons is the need to use time more effectively and to not lose it in the selection of the suitable candidates for the positions offered. The other reason is that there are not many professionals added to certain areas of the job market, thus the search itself is left up to the professionals who have richer resources and who are able to offer either temporary or permanent solutions in the case of the absence of key people in a company. Consultancy companies are able to diagnose the problems of a firm while focusing on its strong and weak aspects. They also compare the Slovak market with surrounding countries and bring in what is missing here while preventing those developments which would not make positive contributions to the market.

TSS: About a year ago, experts said that the crisis will give employers the benefit of having a larger pool of experts from which to select their future employees. Has this scenario materialised? What are the most significant changes that emerged on the labour market?
IŠ:
This has become only partially true. It takes a visionary and strong leader to go for the strategy of recruiting people in difficult times and trying to attract the best on the market. Not many companies invested in such an approach. It can be expected that the next couple of years will still be favourable to those who try to get the best people onboard. It will take time and, of course, resources need to be invested in this, but I strongly believe it is a worthwhile investment.

The labour market in 2009 shifted from one shaped by a short supply of qualified labour to a market where the demand for labour has decreased. This has affected all HR functions. Despite this, the high performers and best specialist in their fields are still in high demand. Due to the overall uncertainty, people in the past year were rather hesitant to make a career change. According to AESC, it is expected that in 2010 people will be twice as open to considering a change as in the previous year.

GK: Yes, that has occurred. Blue and white collar labour in particular is now plentifully available for operative jobs and lower management positions. But the availability of IT personnel has not changed. There was also an opposite trend. For mid-level and high-level management positions the pool of available candidates for newly-created positions became smaller as many managers were reluctant to leave their present employer for a new employer due to the perceived risk because of the crisis.

VK: When we asked this question of several clients who had nourished such a hope, we were getting answers that when they publish an ad they receive hundreds of responses and it can be seen that there are more people on the market than in the past. However, they are still experiencing a lack of high-quality candidates and excellent managers who are usually not free and on the labour market. Firms are trying to keep and motivate these kinds of employees so that they stay. Head hunters have a much harder time to snatch them up for their clients than ever before.

DK: The situation has greatly changed and there are many people who are seeking their place on the job market. The layoffs are one part but there is also the fact that people who worked abroad have returned and are trying to find jobs in the Slovak market or are simply waiting for the situation to calm down so they can return to a foreign country. In general I would say that there is no huge influx of experts on the market. Many of those who are most sought are not searching for new job opportunities since they are not unemployed. And those experts who were forced to seek jobs had no problem finding one within a couple of weeks. The largest change that the market has experienced is the high jobless rate of qualified people and, of course, graduates for whom the situation is critical.

TSS: An academic title no longer necessarily means quality or professional readiness for a profession, observers and HR experts suggest. Has the value of academic titles deteriorated in Slovakia? If so, what are the reasons behind this trend and what are the options for the schools to change this?

IŠ: The quality of university education in Slovakia is a long-standing and complex problem. Just have a look at the recent findings about a university handing out degrees without students even studying. Knowing this, how can anybody then rely on what a person has learned at university?

The lack of quality in teaching staff, the low demand from students for a higher quality of education along with no high demands on students by teachers leads to a rather mediocre quality of education for graduates. Universities have almost renounced their role as centres of research, so they are not attracting researchers and scientists who could upgrade their ranks. They are just not being scholarly centres of excellence.

A systematic change is needed; it starts with resources, making students co-responsible for financing their studies – that can bring resources to the system. More autonomy in governing universities – introducing a governance model to the management of these institutions could be another means for helping them to be better managed and to reflect what labour market needs. And I think that both sides – teachers as well as students – need to get tough with each other. Students need to demand that teachers are better prepared and work on themselves, and teachers need to demand that students are working to earn the degree, and if they are not, then they should not graduate. I would be very happy if Slovak universities would attract the best students from various countries and would not face the situation that the best students are studying abroad because they cannot get the education they should here.

GK: I agree. An academic title hardly indicates that the person will be successful in a profession. On the other hand, an academic title is important as it gives a strong indication about the person’s intellectual capacity. I have no factual information whether the value of the academic titles has deteriorated. Such a conclusion, I guess, can only be made based on research. What certain schools could do is to focus on and adjust their programmes much more on practice instead of theory.

VK: There is a vicious circle emerging here. Yes, these claims stand true; not only HR experts and representatives of personnel agencies, but also firms where university graduates take up jobs, see this trend, which does not pertain only to the professional level but also to the personal value system. I think there are several factors impacting this trend: first, it is linked to poor training by the family and the crisis currently in some families; then with the quality of the education system at elementary and secondary schools. As far as colleges are concerned the whole system of financing should be rethought along with the remuneration of teachers and their motivation.

If the budget and financing of a school depends on the number of students which it accepts, then many schools cancel entry exams and reduce entry criteria. This inevitably impacts the quality and the level of students. As far as the educators are concerned, they often leave the country or work in the private sector. Many have additional jobs and have obligations at several universities. The solution is not easy. Nevertheless, as long as we do not view education as an investment, but rather as an unavoidable expense – and in this case Slovakia sits at the bottom of the charts not only in Europe but also worldwide – only very little will change. I think the situation would partially change if effective links are created between the universities and the private sector such as strategic alliances based on partnership. Colleges need resources which some businesses could provide under certain circumstances. Many firms are strongly motivated to get talents from the schools and thus the possibility to tune a mutually advantageous system emerges.

DK: I also lean towards the opinion that an academic title does not necessarily mean high professionalism. One of the reasons is that people often gain an academic title in a programme that they do not practice in their professional lives. Then it is not surprising if we hire a candidate with an academic title but from another field. Then, if a candidate works in the field he or she studied, then of course a candidate who has never gained such academic title cannot be compared to the first candidate, who is of greater benefit to the company. However, the system of university education at most schools is exclusively focused on theoretical knowledge. Schools often fail to offer practical experience for the students while we all know that theory does not always correspond to work practice.

For more information about the Slovak labour market, HR sector and career issues in Slovakia please see our Career & Employment Guide

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