Russian Labor Market: Good Talent is Hard to Find (and

UNCLAS SECTION 01 OF 02 MOSCOW 001748 FOR CA/FO, CA/VO, CA/FPP, EUR/RUS SENSITIVE SIPDIS E.O. 12956: N/A TAGS: ECON EINV PGOV SOCI CASC RS SUBJECT: Russian Labor Market: Good Talent is Hard to Find (and Keep) ¶1. (SBU) Summary: In recent meetings with U.S. companies operating in Russia, executives highlighted the increasing difficulty they face in attracting talented Russian employees. Competition has been largely among foreign companies operating in Russia. Recently, however, Russian companies have begun to successfully compete with their foreign counterparts. Executives also stressed that the competition for qualified employees is complicated by an outdated and at times corrupt university system that has not adapted to the current demands of the labor market. These obstacles have forced U.S. companies to devise innovative methods of identifying, attracting and retaining Russia's best talent. End summary. -------------- Competition and Retention -------------- ¶2. (SBU) As U.S. companies continue to expand their presence in Russia, they are increasingly faced with competition for the recruitment and retention of talented Russian employees. A recent U.S.-based entrant to the Russian market admitted that it blatantly poached employees from its rival. An oil industry executive confirmed that his company also engages in the same practice - he said he used to work for TNK-BP until he was approached with a better offer from ConocoPhillips. ¶3. (SBU) Until recently, U.S. companies competed with other Western businesses operating in Russia for the country's best talent. As Russian businesses have become more successful, they are now on more equal footing with their foreign rivals to offer comparable salaries and benefits. Philip Read, General Manager of American Airlines, and Edward Verona, former Vice President of Exxon-Mobil Russia, both said their companies were finding it more difficult to match the offers of Russian companies and thus attract and retain the best employees. ¶4. (SBU) U.S. companies in Russia are dealing with increased competition by finding creative ways to attract and retain new employees. Apart from the obvious solution to increase salary offers and other financial incentives, Stephen Schueler, Managing Director for Procter & Gamble (P&G),said it differentiates itself from Russian companies by promising training and guaranteeing only in-house promotions. Mr. Schueler added that other companies are also following suit. -------------- Obstacles to Evaluating Talent -------------- ¶5. (U) In addition to competition for talent, U.S. companies also face the challenge of evaluating qualified employees in light of an outdated and corrupt university education system in Russia. The inability of the system to develop in pace with the Russian and global economy has resulted in a severe mismatch between the skills that are taught and the rapidly changing demands of the labor market. According to Minister of Education and Science Andrei Fursenko, only 15 percent of all Russian universities are of "high standard" and provide the necessary training which meets today's demands. This means that even if a prospective employee has an advanced degree from a Russian university, he/she may not have the necessary knowledge or skills that the degree usually exemplifies nor that are required for a job in the same field. ¶6. (U) The Russian university education system also suffers from endemic corruption. In March, the Russian Interior Ministry reported that corruption is worsening in the higher education system. UNESCO found that university bribes in Russia surpassed $520 million in 2007. Bribery in Russian universities can take on a number of forms, including but not limited to: -- grade buying; -- paying a teacher for tutoring who is the same teacher to later officiate exams; -- promising special services in line with a parent's job, such as medical treatment from a parent who is a doctor; and -- buying a trip abroad for a teacher. ¶7. (SBU) These obstacles to identifying the truly qualified and skilled student have forced U.S. companies to devise innovative solutions in their hiring process. Companies we spoke with MOSCOW 00001748 002 OF 002 (mentioned above) told us that, by and large, the trend has been to rely less on grades and transcripts and instead to introduce tougher screening for applicants. As a result, U.S. companies are coming up with their own programs to identify and train up-and-coming talent. For example, Topcon, a U.S. subsidiary of a Japanese company which specializes in high-tech products such as global positioning systems and semiconductor inspection products, relies on a combination of recommendations and internships. It has developed informal relationships with several Russian universities and regularly seeks recommendations from faculty members. Promising students are offered an internship. ¶8. (SBU) Other companies prefer more formal relationships with universities. ConocoPhillips, for example, offers scholarships to students with the understanding that the student must maintain his or her academic standing or lose the scholarship. After graduation, students receiving an offer are placed on a three month probationary period. Most new employees survive the probation, which is a tribute to ConocoPhillips' relationship with the universities. ConocoPhillips said that if a significant number of students did not pass the probation, it would rescind or reduce scholarships to that university. ¶9. (U) Rather than rely on relationships with universities, other U.S. companies perform their own employee screening. P&G said that although it relies to some extent on grades, it requires every prospective employee or intern to (i) speak English fluently, and (ii) pass an IQ test. According to a P&G executive, 80 percent of those who take the test fail to meet P&G's requirements. While measuring English proficiency and administering the exam are expensive, P&G believes the benefits of a fair and transparent process outweigh the costs. RUSSELL