Searching for a place in a tightening market

It was not so long ago that businesses across Slovakia experienced a sudden drop-off in orders and were forced to lay off employees to survive – and the memory of that crisis is still fresh in the minds of employers. Now, despite forecasts last year that the economy would recover and the labour market would revive, the spectre of recession has returned. The economy might still be experiencing nothing more than a slowdown for now, but employers once again have reason to be cautious. Professionals in the human resources sector, whose job is to keep a finger on the pulse of the labour market, are similarly careful when it comes to making bold predictions for 2012. The Slovak Spectator spoke to them about the prospects for the labour market, the changing conditions for human resources firms and problems in the education system, as well as the shifting expectations of job applicants.

There is no demand within the public or private sectors for such a high number of people 
educated in the humanities, say HR experts. 
There is no demand within the public or private sectors for such a high number of people educated in the humanities, say HR experts. (Source: SME)

It was not so long ago that businesses across Slovakia experienced a sudden drop-off in orders and were forced to lay off employees to survive – and the memory of that crisis is still fresh in the minds of employers. Now, despite forecasts last year that the economy would recover and the labour market would revive, the spectre of recession has returned. The economy might still be experiencing nothing more than a slowdown for now, but employers once again have reason to be cautious. Professionals in the human resources sector, whose job is to keep a finger on the pulse of the labour market, are similarly careful when it comes to making bold predictions for 2012. The Slovak Spectator spoke to them about the prospects for the labour market, the changing conditions for human resources firms and problems in the education system, as well as the shifting expectations of job applicants.

The Slovak Spectator (TSS): How do you think fears of yet another economic slowdown and tensions within the eurozone will affect the labour market and the human resources policies of organisations, firms and businesses?
Luboš Sirota (LS),
CEO of Trenkwalder: Fears of the return of recession have further strengthened the caution of employers when hiring people as their core staff, since between 2008 and 2009 they saw how orders could in fact drop from one day to another. Now they worry that the situation might come back and they have stopped hiring new people completely. Firms which are hiring do so with much more caution. For example, they prefer alternative forms of work contracts like agreements or personnel leasing.

Igor Šulík (IŠ), managing partner at Amrop Slovakia: Companies will most likely remain cautious about their expansion plans, so I would not expect an improvement in the labour market. I think even maintaining the status quo will be an achievement in 2012. In this so-called VUCA (volatile, uncertain, complex, ambiguous) world it is extremely difficult to predict anything and in such circumstances companies usually play it safe and are not pursuing new growth strategies. I think in most companies the task for management will be to at least maintain the status quo.
Mariana Turanová (MT), managing partner at Target: Experience shows that any decision concerning headcount will be influenced by the Q1-2 2012 results. So far we have not felt any market slowdown when talking about recruitment: on the contrary, companies, especially those in the automotive sector, need more staff, mainly technical experts such as assembly technologists, industrial engineers, process engineers and quality managers.

Gerard Koolen (GK), group managing partner at Lugera & Maklér: Demand for excellent staff will increase. Due to the recent economic developments companies have to stay, or become even more, ‘lean & mean’ so the people left in companies have to do more, do it better and do it faster on smaller bonuses. For this you need the best of the best. Many companies will hire their staff through flexible employment solutions like temporary staffing, contracting and a new service: payrolling, which is outsourcing your staff to a temporary staffing company.

Bruna Beata Jakub (BBJ), country manager with Adecco: Currently we see an increase in demand for talent in the market. Even in production the trend is increasing slightly. However, after Q1 the market is a big question mark and the prognosis is not favourable. Fortunately in Slovakia we still offer considerable advantages to FDI companies operating here, hence the negative trends in the West are much more moderate locally.

Eva Sklenárová (ES), CEO of Person: Firms will not increase their number of employees, while good employees willing to extend their work focus will be stabilised. HR companies will be used mostly for picking good managers or specialists. Agencies will perhaps also have some work for personnel leasing. Forward-looking firms might focus on the development of their stable employees and seek ways to train them further.

Ján Menkyna (JM), partner at Menkyna & Partners: On Slovakia’s labour market during the first wave of the crisis firms responded differently, some too early and some, driven by fear, even took steps that they did not necessarily need to take. Now, even if the second wave of crisis comes, firms have some experience and have learned, meaning that they will perhaps avoid those wrong moves. The possible crisis will of course have an impact on the most vulnerable groups, which means part-time employees, limited-contract workers and graduates.

TSS: How will the economic slowdown and consequent concerns of firms change the structure of services provided by human resources businesses and what are the prospects for your sector over the next year?
We assume further growth for agency employment and lower demand for employment recruiting of employees to core staff. We expect an increase in personnel leasing of about 30 percent for last year and in 2012 and the following year this trend should continue, even if the increase is more moderate. Thus the situation should be different from the first wave of the crisis between 2008 and 2009, when employers in Slovakia, aside from those abroad, were getting rid of their employees en masse.

IŠ: The HR services providers have already adjusted to the changed situation. Clients have learned the lesson that choosing a consultant based only on price and not taking into account the experience and quality of the service that professionals provide can be really costly for their companies. I expect that consulting companies that are continuously investing in the quality of their services will prevail and grow, even in the far-from-easy year ahead. I would therefore expect higher demand for quality consulting services.

MT: During the economic slowdown in 2009 clients made their recruitment decisions, if any, due to the hiring freeze, on economic grounds. Money was the main factor and the classical passive recruiters, using advertisements to attract candidates, profited from that. The high number of unemployed and consequent interest in any vacancy advertised supported this method of acquiring candidates. The slowdown may negatively impact employment agencies while executive search should keep its work ratio as replacements in top positions will not stop. Still, there will be less new business.

GK: Training companies will face another difficult time. The demand for external assessment and development centres might decrease. I think the temporary staffing sector will not be affected as more companies will start using temporary staffing. Payroll outsourcing will also grow due to companies seeking additional flexibility and cost-savings. For permanent staffing companies I do not foresee many big changes for 2012.

BBJ: I foresee an increase in flexible workforce alternatives in Slovakia and an increase in outsourced services since these products offer a much more manageable labour alternative in turbulent times.

ES: The outlook is uncertain and the need for services in our segment will be modest but will not disappear. More emphasis will be put on the professional level of services provided by players in our sector; there will be higher demand for analysis of human resources, audits and effective use of the workforce. Classical training of employees will decline since firms will be able to get ‘ready-to-work’ staff.

JM: The possible crisis, unless it assumes catastrophic dimensions, will not bring any significant decline to our sector. The first crisis wave reduced hiring of employees and since the initial recovery companies have not returned to pre-crisis levels and have remained cautious. Firms are aware of the need to get top professionals into key managerial positions and will use the services provided by the leaders in our sector. The eventual second wave of the crisis will, however, affect the structure of services we provide.

TSS: Some observers warn that the growing number of unemployed graduates is a very serious problem in Slovakia. Do you agree with this observation?
The structure of Slovakia’s education system does not correspond with the structure of the domestic economy and demand from employers for concrete positions. Almost 60 percent out of a total of 220,000 students are studying social sciences, for which there is limited demand in society. Only 20 percent are studying in technical fields. There is no demand within the public and private sectors for such a high number of people educated in the humanities. Many university graduates thus end up in positions which are suitable for people with a high school or secondary school education. But we do lack IT specialists and technicians. Also in Slovakia there are too many high schools or business academies and very few institutions to train machine operators, welders or electricians.
The Ministry of Labour in its annual report claims that economic activity among people aged 15 to 65 years with a vocational education is 87.8 percent, the highest of all groups. Yet vocational education is experiencing a recession in Slovakia. The solution is more information and also financial motivation for students as well as better financing for selected universities.

Martin Krekáč (MK), senior partner at Amrop Slovakia and chairman of Jenewein Group: It is a longstanding problem that the education system, besides being of dubious quality, produces graduates in fields that are not in line with what the market expects and accommodates. Unless we align these two we will continue to face this problem. It will eventually create a social problem, so I believe it should be in the deep interest of the state to tackle the problem seriously. Every government we have had has claimed that education was their priority, yet over the past twenty or so years it has not really been addressed. The state should finally stop pretending that it can solve the problem and should step out of the way and let private business and co-financing models drive change in this field.

MT: Schools, especially technical schools, need to do more promotion to attract students and offer a high level of education, including solid language education. The market is ready to absorb more middle technical management, experts such as process engineers, quality engineers and managers, technologists and industrial sales engineers who speak one or two foreign languages. However the market offers lots of marketing specialists, experts on international politics or environmental strategists who are facing difficulty getting employed.

GK: Educational institutions could be more proactive by having active careers offices for their students and including traineeships for students during their studies in order for them to gain relevant work experience. Many companies will like this approach, as they can come into contact, at very low cost, with new, young, potential talent. The state could make employment legislation more flexible. Also, many graduates are unemployed because they are very picky and are unwilling to accept a job they do not completely like.

BBJ: I do not place the problem at the university level, which is only a secondary effect, but rather at the primary and secondary school level. Legislation from 2006 moved the ‘management’ of primary and secondary schools under regional governments. Strong local support is given to ‘cheap’ schools, which do not need technology, laboratories and equipment. Today the number of ‘soft skill’ educational institutions has tripled and vocational graduates have fallen by two thirds, which is in direct contrast to the needs of industry.

ES: The number of unemployed graduates is a serious problem because firms are reluctant to employ graduates who do not have real practical experience, since graduates leave school with insufficient preparation. It would be good to support more effectively internships for graduates during which firms could better identify suitable future employees.

JM: It is a very serious problem since not only the universities but all levels of the education system fail to reflect the needs of the market, for example in attracting students to fields which are no longer popular. Today it is problematic to get qualified people with proper vocational training. Moreover, the universities are not adjusting their curricula to the real needs of the market and thus the preparedness of graduates is lower compared to what businesses need.

TSS: What impact could the revised Labour Code have on the flexibility of the labour market?
The Labour Code has undoubtedly increased the flexibility of labour-legal relations in Slovakia but several measures which could help have not been included. For example, making works councils equal with trade unions, or a significant simplification of the text or shortening of the whole code. It is still more of a measure for lawyers than for regular employees. Despite many positive changes, the code has not brought a significant revival to the market. Moreover, we are worried that the new government which will emerge from the March elections will again open the code and reduce its flexibility.

MK: The changes to the Labour Code improved the flexibility of the labour market although the government could have been more ambitious and gone even further. It is difficult to prove it, but my feeling is that without those changes we would now have even higher unemployment. It is worrying to hear that the next government will probably reverse the changes. Stability of legislation over the long term is a problem in Slovakia that makes this already hard-to-predict world even more unpredictable.

GK: Every article of the Labour Code that decreases flexibility and increases cost will have negative effects on the labour market. Slovakia is now ranked 10th among the 34 OECD countries in terms of the flexibility of its Labour Code. If the Labour Code is revised again of course Slovakia will fall.

ES: The Labour Code should give greater support to the quick change of jobs and also support the process of agreement between employee and organisation, as well as supporting shorter working hours, which are rarely used in Slovakia.

JM: It has significantly increased the flexibility of the labour market, which primarily concerns regular employees rather than management. Yet it is a double-edged sword in that while it is now much cheaper and easier to lay off people at the level of regular employees, at managerial levels, where there are different agreements and severance payments involved, it is still more difficult. However, it also means that firms are less worried about creating working positions and are more willing to hire people.

TSS: Have the expectations of job applicants changed compared to the period from two years ago? Is there a difference between the approach of the older and the younger generations when it comes to hiring for managerial positions?
Changes are probably the sharpest when compared with the first half of 2008: back then the market suffered from a lack of qualified labour which was reflected in the growing demands of job applicants. These frequently did not correspond with the economic reality of the country. Currently the situation is more balanced and the crisis has taught people to appreciate work both at managerial but also at manual job levels. Yet in managerial positions experience is currently a decisive factor, which puts graduates at a disadvantage.

MT: Candidates have become very sober when evaluating their own market value and actually we more often meet good candidates who simply underestimate this when it comes to their financial expectations. Also, candidates’ expectations are defined by the companies they have been working for. Local companies pay less than international companies.

GK: Before the crisis job applicants could be picky and demanding in terms of job, salary, bonuses and, if relevant, a company car. Today this is different. The new jobseeker has grown more modest and is grateful for a job. The younger generation of middle management has faced many job cuts during the crisis. Many companies restructured their organisations while cutting out middle layers in their corporate structure, which means young managers will have to display flexibility.

Mario Fondati (MF), partner at Amrop Slovakia: Managers adjusted to the new situation throughout 2009. They know that there are not as many opportunities as there used to be and that to get a position they need to outperform larger and better prepared competitors. The younger generation is more impatient to get positions, but that is not a result of the current market condition; rather I would say it comes down to the characteristics of those of a younger age.

JM: The older generation has a more realistic view of their value in the labour market, while younger people frequently do not have a realistic assessment of their own position and need experience to gain this. Nevertheless, younger applicants are often better equipped in terms of foreign languages and are more willing to relocate.

TSS: What are the most important characteristics that firms currently seek in candidates when hiring people for managerial positions?
Emphasis is put on work experience, recommendations and participation in projects and the ability of the candidate to respond flexibly. A manager should be able to come up with their own solutions, to think critically and have a good estimate of the needs of clients. Seeking universal solutions is no longer the key.

MT: Decisive, motivated, able to bring new effective solutions, persuade others to accept them and oversee implementation. Mature, positive, honest.

GK: The key words are leadership, change and innovation. Companies are no longer searching for traditional managers. They need leaders who can be practical and active; people who are working and on-the-job with their team members.

BBJ: Competency, leadership, experience, creativity, the ability to motivate oneself and others. Obviously social networks have significantly changed the way searches are handled today compared with, say, five years ago.

MF: Are they going to succeed in the difficult market conditions? Are they flexible and innovative enough to lead our business further? Do they build on strong and respectable beliefs? These are some of the key questions clients ask when making decision about hiring someone for a leadership role.

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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