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Transcript of Neumann Talent Gap Bridging the talent gap in Russia is an Economist Intelligence Unit executive...

  • Economist Intelligence Unit 2008

    Introduction

    The rapid growth of Russia’s economy, coupled with the influx of investment from Western organisations, has renewed pressure on companies to improve their recruitment and retention policies and boost managerial skills. The demand for experienced managers, for example, is increasing, often outstripping supply.

    Problems such as rapid salary inflation are widespread as companies battle with competitors for the best candidates. Faced with an increasingly competitive landscape for local talent, many organisations are being forced to become more creative in terms of how they source and retain talented staff. The situation is likely to be exacerbated by Russia’s decreasing population, which is the result of low birth rates.

    This survey of senior executives in European companies examines their attitudes towards talent management in Russia.

    Key findings This survey explores the issue of talent management in Russian companies and foreign businesses operating in Russia. The most important findings are listed below.

    lRetention is getting tougher and finding and keeping talented employees is now a board-level issue. Some 66% of all executives surveyed say that their board will spend more time on talent management now than it had done in the previous three years. lThe cost of acquiring and retaining talent in Russia is increasing. Of those surveyed, 44% said such costs in Russia had grown greatly over the past three years, and 49% expect costs to increase greatly over the next three years.

    Bridging the talent gap in Russia

    Executive Summary

    Sponsored by

  • Economist Intelligence Unit 2008

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    lHuman resources (HR) departments in Russia are likely to struggle when it comes to finding appropriately skilled employees, as 37% of respondents say that the shortage of skilled employees is a “significant challenge”, while only 4% see this as an “insignificant challenge”. lSome 26% of respondents say that they will increase the proportion of senior executives that they recruit from outside Russia. lLanguage and cultural issues are the main barrier when recruiting employees from abroad to work in Russian organisations.

    Boards will devote an increasing amount of time to talent management issues Two-thirds of respondents (66%) believe that they will spend more time addressing talent management issues in the next three years compared with the last three, while only 4% say that they will devote less time. Managing talent was also cited as the fifth-biggest challenge facing HR departments in Russia, with 22% of respondents seeing this as a significant challenge.

    As a result, the role of Russian HR departments is changing rapidly to meet the demands of the market—they are playing a more strategic role when it comes to talent management, rather than simply providing administrative functions, according to nearly two-thirds of those surveyed (61%).

    This reflects the increasing pressure that businesses—and not only those based in Russia—are under to address talent gaps in the workplace. In our survey, a shortage of skilled employees was the top- placed challenge facing HR departments, with more than one-third of respondents (37%) citing this, rising to 53% for those respondents based in Russia only. Wage inflation was seen as the second-biggest challenge, chosen by 31% of respondents.

    The costs associated with acquiring and retaining talent in Russia are expected to rise Such pressures are likely to require companies in Russia to invest further in acquiring and retaining talent, in terms of both time and cost. They will also need to be more creative with the benefits that they offer in order to boost retention and grow talent. Among survey respondents, just under one-half (49%) said that they expect to see such costs increase greatly in Russia in the next three years, while only 7% believe that they will stay the same.

    Of those surveyed, 27% see the introduction of incentives as one of the most important factors in the battle for recruiting talent, second only to improvement of leadership (29%). While such schemes may be costly to implement, replacing a skilled employee can come at a far greater cost. Enticements that are most likely to make an impact on job candidates are financial incentives, such as regular salary reviews and bonus schemes.

    Most important of all though, for nurturing talent, is a competitive salary scheme, chosen by just over half (51%) of respondents. Companies will need to stay informed on wage trends and tie increased pay to meeting specific goals in line with business objectives.

    The shortage of skilled employees is the biggest challenge that HR departments will face in Russia, regardless of company size Companies agree that the biggest hurdle facing HR departments is the search for skilled employees. When asked what factors are contributing to a shortage of managerial talent in Russia, nearly two-thirds of respondents (61%) said a lack of exposure to customer-focused culture is a challenge, while 55% said that competition for talent in Russia is increasing. Just under half of respondents (49%) believe that a lack of exposure to international business is a contributing factor.

    Education scored fairly low—only 19% of those surveyed say that levels of secondary and tertiary

  • Economist Intelligence Unit 2008

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    education and the lack of postgraduate qualifications such as MBAs were important. This suggests that experience is more important than education, and indeed, workplace training is seen as crucial—the shortage of experienced people with executive-level training came fourth on the list of factors contributing to a shortage of managerial domestic talent in Russia.

    Some companies are looking to recruit from overseas to combat the shortage of skilled employees in Russia In our survey, 26% say that they expect the proportion of senior executives that they recruit from outside Russia to increase, while 49% expect this number to stay the same and 16% say that this will decrease. Some interesting survey findings are revealed when looked at by company sector. Firms in the energy and natural resources sector are most likely to increase recruitment from abroad (75%), while 23% of those in financial services and 24% of those in IT say that they will. Recruiting from abroad can give Russian companies access to staff with specialist education and experience of international working standards. For foreign nationals, the Russian market’s rapid growth offers opportunities for swift career progression.

    Language barriers, however, may be deterring some companies from recruiting abroad as respondents cited this as the major obstacle when placing foreign employees into Russian companies.

    General management, sales and marketing and strategy and business development are some of the hardest positions to fill In recent years some developing countries have shifted from an industrial to a services-based economy, prompting a demand for employees in sales and marketing and business development positions. This trend is reflected in our survey, where just under half (44%) of respondents cited general management, and 39% sales and marketing, as areas where it is hard to attract talent. The ability to think strategically is also important, with strategy and business development placed third, chosen by 38% of those surveyed. For those companies based in Russia only, general management and strategy and business development came first and second, respectively, in terms of positions that are hard to fill, with operations and production third (37%); 32% of respondents chose sales and marketing.

  • Economist Intelligence Unit 2008

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    The growth of the economy and a decreasing population are making it harder for companies in Russia to fill vacancies. Talent shortages in the Russian workplace are now a reality and are likely to increase in coming years, prompting local companies and those firms with operations in Russia to invest further in recruitment and retention policies. Employees are demanding long-term benefits and career opportunities, and companies will need to respond accordingly.

    Sales and marketing experience, the ability to manage change and strategic thinking are becoming increasingly sought after skills, particularly as companies are expanding through acquisitions and joint ventures—both at home and abroad. This is prompting companies to invest further in workplace training and personal development. Financial rewards such as bonus schemes remain attractive and many companies are recognising the need to introduce competitive salary schemes—a failure to address this could lead to many firms losing out in the battle for the best candidates.

    Conclusion

    About the survey

    Bridging the talent gap in Russia is an Economist Intelligence Unit executive summary, sponsored by Neumann International.

    The Economist Intelligence Unit surveyed 193 senior executives of companies based in western, central and eastern Europe in July 2008 about their views on talent management in Russia, looking at the challenges that businesses face and the strategies that they are pursuing. All of the companies surveyed have operations in Russia or knowledge of t