Friday, March 07

This recession hits management the hardest


At the InternetInfo conference last autumn, Petr Bazant of OMG stated that companies in the media sector had seen 50% of their revenue disappear since the financial crisis. Afterwards people commented that he had exaggerated, but they missed the point that he did not describe a 50% drop in one year but a slow erosion of business continuously over five years as the miserable Czech recession dragged on and on.

A couple of weeks ago, speaking to Hospodarske noviny, Barbora Tomšovská of Touchdown search agency estimated that 10-15% of top managers in the CR are without work. She went on to say that those earning Kč 400,000/month before the crisis can now expect less than half this. This was perhaps an even more startling claim than Petr's.

Our own experience broadly supports these remarks. Look at the headcount of major agencies. BBDO is the most striking example; its headcount is around 25% of what it was when it led the agency world. A similar story can be told at the other fallen giant, Leo Burnett. On the corporate side, the three telcos have been continuously "re-organising" for the last three years, as have many of the big banks. These re-organisations always involve reductions in headcount, and in new managers taking on roles for far less money than those who have lost their jobs, thus depressing salary benchmarks.

Now, Czech politicians will be quick to point to the global crisis as the cause, and particularly the crisis in other European countries. But that is where things start to become interesting. In countries such as Spain, Greece, and Ireland, unemployment, especially youth unemployment, has risen to horrendous levels; and people have lost their homes due to debt default. None of this has happened in the Czech Republic. In particular one sector has remained "bouyant": The State bureaucracy. In the last five years, which ministries or public authorities have seen their headcounts reduced by half or the salaries of top bureaucrats cut in half? And which political party in the last election came with concrete plans to cut down waste in this sector, which of course would mean reducing employment? Has the use of IT reduced your need for pointless personal contact with State officials, or the collection of various razitka? (Notaries; now there is a bouyant employment sector. Did you know that in the UK, we do not have them at all?).

In practical terms this is of course bad news for all of you who read this, as we are in the business of finding and placing people in management roles. And by the way, our own sector is far from immune. Executive search companies too have headcounts 25% of what they were before the crisis. Of course. Fees are related to the starting salaries of candidates placed. There are less placements, and the starting salaries are lower. We are in much the same business situation as most of our clients.

What does it mean for you, and is there any good news on the horizon?

If you have lost your job, you need to be prepared to accept a drop in salary. How much though, varies from case to case. Some companies will also behave unwisely by offering the lowest figure they think they can get away with. (This is unlikely in international corporate companies). If you suspect this is happening you can try to detect it by asking about the salaries for similar positions in the same company or agency. If you are offered a salary which the employer knows is well below your previous salary, you could ask about a performance related ‘path' to return you to that level - an increase after the trial period, and again based on KPI achievement after one year, for example.

Flexibility is also important in the race for the few good positions which are available. Employers may take advantage of the more flexible trial periods. Why not accept them for now? Once you start to become an asset to the new company, you can gently remind them that you too are free to leave within a trial period. You can also work on a consultancy basis as a way of making it more cost -effective for a company, especially a smaller one, to ‘take a chance' on you. Never forget that an employer has to pay 36% to the State on top of your brutto salary, and for management positions that is a lot of money. If you are an account director on 100,000CZK/month the 36% could instead be used to pay for an account executive to work in your team. (It is of course one of the biggest problems of this economy, but again do you hear any politicians promising to reform it? Of course not. It pays for the bureaucrats. And bureaucrats too, have a vote).

What about working abroad, we are asked? Well for a start, wherever you might wish to go, fluent English is the visa you will need. Actually the liveliest recruitment market in our sector right now is the UK, and we are actively investigating ways in which we could explore opportunities for Czechs there, especially those with digital experience. Having said that, the work being done in the UK is far more sophisticated than anything we see here, and London remains a horribly expensive place to live. Other possibilities to consider are the Middle East, and possibly Russia; Germany too, although standards are high.

No major companies or agencies are reporting an uplift in demand from consumer sectors yet, so marketing budgets (and the salaries that go with them) will remain depressed for at least the first half of the year. However there was sudden return to GDP growth in the last quarter of 2013. Nobody quite seems to know where it came from. There is talk to of an uplift in capital investment. It takes time for such developments to restore confidence to Czech consumers. Rather than just sit and hope for the best, it would be good to take every opportunity to ask Czech politicians: "What is your plan for growth? And how will you reduce waste and corruption, so that the money we have is used more productively?"

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