Services of executive search firms are in demand

THE SLOVAK economy is showing clear signals of recovery and this has been reflected in the labour market, bringing more work to executive search companies. Companies in Slovakia have started looking for managers and experts either to replace individuals with unsatisfactory past performance or to hire individuals for newly-created positions and they are often doing so with the help of executive search companies, which say they are also asked more and more to perform personnel audits and outplacement services.

THE SLOVAK economy is showing clear signals of recovery and this has been reflected in the labour market, bringing more work to executive search companies. Companies in Slovakia have started looking for managers and experts either to replace individuals with unsatisfactory past performance or to hire individuals for newly-created positions and they are often doing so with the help of executive search companies, which say they are also asked more and more to perform personnel audits and outplacement services.

The Slovak Spectator spoke with: Igor Šulík, managing partner of the Amrop Slovakia consultancy company; Martin Krekáč, chairman of Jenewein Group and senior partner of Amrop Slovakia; Mario Fondati, partner of Amrop Slovakia; Ján Menkyna, founding partner of Menkyna & Partners Management Consulting; Mariana Turanová, managing partner of Target Executive Search in Slovakia; and Dana Blechová, country manager of Iventa Slovakia Management Consulting.

The Slovak Spectator (TSS): How do you perceive developments in the current labour market and particularly in the executive search segment? How has the situation changed in comparison with the period of the economic crisis? What do you expect next in regard to recovery in Slovakia’s economy?

Igor Šulík (IŠ): Consultancy companies are reporting a more significant demand for their services now than during the crisis. Companies have gradually restarted their investments while they have simultaneously begun to look for enhancement of their teams, even though it is still not possible to talk about the dynamic movements in the labour market that we witnessed before mid 2009.

Simultaneously, it is necessary to point out that what is expected from job applicants has changed. The ability to act in a changing environment, to face unexpected events, to anticipate and eliminate potential risks – these are some of the evaluation criteria which employers are using to analyse potential candidates for managerial and leadership positions.

In my opinion the human resources and recruiting industry faces two fundamental challenges. The first is the swift arrival of social media and social networks, where information about job applicants is relatively easily available. Thus, the ability to work with these networks in a correct and ethical way as well as the ability to find also those people who protect their privacy and avoid such media will be of key importance in the success of consultancy companies in finding leaders. The second trend, which I believe will determine the near-term development of personnel consultancy, will be the increasing interest [of clients] in services with a higher added value.

Organisations should realise that short-term solutions cause harm which would need to be fixed after awhile. I would like to see the upcoming period to be one of increasing professionalism in the market.

Ján Menkyna: The situation in executive search is different from business sector to business sector. For example, the manufacturing sector was hit hardest by the crisis but here we have registered a spontaneous restart. On the other hand, there are sectors which were less affected by the crisis and changes are happening only now. Here I would put, for example, the pharmaceutical industry which was actually not hit by the crisis in any significant way but is now reflecting some systemic changes which the healthcare sector is facing, as well as development and research. Consequently, we perceive a bigger crisis in the pharmaceutical industry now than during the global crisis.

Mariana Turanová (MT): Developments are favourable for firms active in executive search. Companies are again searching for managers and experts. They are creating new positions which they need to fill with people with specific experience and managerial potential. They are unable to find such people via classical, passive recruitment, such as ads and database search and that is why they need our services. Reports about the planned economic growth as well as concrete investments, for example those announced by Volkswagen and Honeywell, are creating a positive atmosphere and are drawing other investors to Slovakia.

Dana Blechová (DB): Movement is already visible in the labour market when previously vacant positions are now being filled and some companies are taking up new staff. The latter trend we see especially in manufacturing companies as well as in so-called shared service centres. Firms that have orders and sound results are more courageous when making decisions, as well as in making changes.

Executive search has been used especially when changing top managers but as well for managers in various divisions. Thus far, companies had been filling managerial positions internally but this was not always the best solution. Companies are gradually ending policies of saving and optimising. They really need the appropriate people and must find replacements at certain positions, something they did not do even before the crisis. They all have learned that economic growth is not a permanent phenomenon and that managers who have occupied their posts for many years without any tangible results must be evaluated more realistically and in some cases must even be replaced. After the crisis companies are looking for optimal solutions. This is why companies are strengthening their local management and replacing expats. We expect that a lot of companies will be looking for the most appropriate people and that will increase demand for the services of executive search companies.

TSS: What new trends in executive search have emerged as the economic crisis has winded down?

Martin Krekáč (MK): The crisis hit the HR consultancy sector relatively hard. The drop in turnover, for example only in executive search consultancy, reached in some cases as much as 70 percent, based on an international study that Amrop carried out in countries of central and eastern Europe. And in spite of signals of a gradual revival as well in the market for personnel consultancy, including executive searches, the question of keeping this upward trend afloat is the basis of new challenges. There is also a reality that traditional thinking, even partially conservative thinking, to the profession of consultancy will no longer work. Captains of individual companies must think beyond well-used practices and look for new driving forces for new success.

During the last few years a number of new firms arrived in the market, which originated by market leaders separating individuals or consultants, who now declare that they are personnel or executive search companies. I also perceive it to be a negative feature that there are no limitations and barriers for entry into this business sector.

JM: The crisis had a fundamental influence over our industry. In Slovakia the biggest players in executive search are typically absent and thus the international competition in Slovakia is limited. Moreover, players present in the Slovak market rather followed the trend of adapting, I would say, to a maturing behaviour in the local market. The crisis also differentiated clients into those who were and were not able to distinguish the added value and companies which identified the crisis as an opportunity to get the best people and used the most professional way to do this.

During the crisis, the portfolio of our company had been extended by additional clients who are interested in long-term partnership cooperation, bringing added value.

Paradoxically, our company reached its highest turnover during the crisis. This is because we also do a lot of managerial auditing and outplacement, products whose importance increased during the crisis. During the crisis we received orders for more managerial audits which helped companies to identify their key persons.

DB: Companies which have learned a lesson from the crisis try more to watch costs and cash flow and this leads to higher demands on the financial and comptroller departments. Many companies are looking for or replacing financial managers or comptrollers because the financial performance of a company is of the highest importance. Also good salespeople and employees whose task is to bring new clients and increase turnover are being searched for. We are also asked to search for people whose task is to increase productivity or quality. Everything now is focused on results which can be measured.

We can say that companies now change people more so than they did one or two years ago. They are looking for quality people from whom they also expect a lot. These people cannot be found in a way other than by direct contact.

We also see a growing trend of personnel audits in companies, especially those whose organisational structures change due to the different owners or mergers as well as because of bad economic results. Talents are being searched for as well as candidates with potential for higher positions.

TSS: What is current ratio between demand and supply for your services or in the labour market?

MK: The offer of services in most cases does not match current standards and professional attitude and is rather based on persuading a client that ‘I will deliver the same result to you for half the price because I have the same know-how’. I do not give a long durability to such companies as they do not invest in quality and the highest standards. Paradoxically, the crisis has rather ‘polluted’ the personnel consultancy market rather than ‘cleaning it up’.

Mario Fondati: The number of vacant positions and job offers is certainly higher than one or two years ago. Several industrial segments have revived and firms have not been afraid any more to employ new people or search for replacements for people who are leaving. But firms must remain careful, especially in terms of costs.

The challenge for the upcoming period is especially to continue optimising human capital, indentifying key employees and future leaders. The importance of comprehensive consultancy solutions, which will evolve from strategies and targets of companies in the nearest future, will increase.

JM: In general, there are still only a limited number of top managers or experts for a certain position and companies are fighting for these people. This did not change even during the crisis. And during the crisis it was very difficult to persuade those experts to a change jobs and this tested the competency of head hunters. This was a paradox: you were able to fill a position when you did not have the goal to fill it with the best candidate but when you wanted to get the best, those who pondered the riskiness of such a decision and were in a much stronger, stable position with their current employers, it was much more difficult. Within the whole process of selection, the final phase, in which the chosen candidate decides whether to take the job, was the most difficult. This has changed already and people are now more willing to make a job change.

MT: The supply of candidates keeps exceeding demand for them. In the segment of executive search we see a high interest in managers and experts with a technical background. These include positions such as Process Engineer, Operations Manager, Head of Engineering and Technologist. Our clients are also looking for capable managers in the financial fields (reporting, accounting, taxes and similar). Apart from this, the retail segment is also growing and here regional managers, category managers and supply chain managers are needed.

DB: This is individual depending on the region and specific position. There are regions which have had problems finding quality people for years since there are a limited number of firms or schools and for that reason there is a lack of suitable candidates. In general, the best situation is in western Slovakia where the concentration of companies and schools is the highest.

With regards to positions, we can say that in general the more specialised the position is the more demanding it is to find the right person.

For us it is surprising that there are a lot of available financial experts and top managers who were made redundant for organisational reasons. There are a lot of companies which, with the aim of better financial results, are terminating local management and creating regional positions. This often happens when so-called Czech-Slovak managerial positions are created in which managers are sitting in Prague in most cases and control both markets. We also witnessed various mergers and sales of companies and for that reason there are a lot of really quality people available on the market.

TSS: What impacts has the economic crisis had on executive search companies in Slovakia?

IŠ: The last two years were demanding for personnel consultancy companies – on one hand they had to adapt to changes in the labour market and simultaneously they were often confronted with a return in their clients’ thinking back to the end of the 1990s when the quality of a consultancy company and its professionalism was less important than the ability to arrive with any candidate who approximated the profile of a person that a company needed almost immediately. Services with a higher added value were not less preferred, to the detriment of strategic and long-term sustainable development. The timeframe of thinking within one’s organisation has moved in many cases from a long and mid-term point of view to short-term.

From the point of many HR services, there is visible in-sourcing of recruitment services and creation of internal recruitment teams while cooperation with a renowned professional consultancy company is the preferred option for executive search. Internal performance reviews of people are often conducted by a local team while comprehensive assessments, when it is necessary to also use a benchmark to an external market, usually involve external consultancy companies. Wage structures, training or coaching are more and more often handled in cooperation with consultants.

JM: Many executive search agencies in Slovakia have adapted to the market reality in Slovakia and in that respect that you will find many people for whom work for an executive search and recruitment firm is a starting position within their career. They expect that afterwards they would end at HR positions for a client. On the other hand, we want to build on people who have long-term senior managerial experience and know their sectors and their specific features. This makes a significant difference when we make, for example, a managerial audit. This means that we can offer a deep local knowledge in comparison with global players.

MT: The crisis affected the executive search segment in Slovakia as in neighbouring countries. Orders and turnovers decreased rapidly, in some cases even by as much as 60 percent. There are agencies which closed their branches in Slovakia and they now serve the Slovak market from the Czech Republic or Hungary or Poland. Another impact of the crisis was that clients tended to use rather classical recruitment firms, offering passive search for a success fee, in order to save money. They did not realise that these methods are not adequate for certain positions. Now they are returning to use of active headhunting but saving on the costs of recruitment remains very topical.

DB: Many executive search companies mimicked the situation in the broader economy during the times of the crisis and this curve headed down. International personnel companies had an advantage in overcoming the situation due to their synergic effects and long-term visions. Many smaller local companies disappeared from the market.

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