We survived the shocking crisis of 1998: many companies went bankrupt, thousands of people lost their jobs, and those who didn’t, remained unpaid for months. Having analyzed the lessons of the past and drawn conclusions we can easily find a way out of the current crisis as well.  However both these crises are so different – in their background and their nature – that we are to make quick intuitive managerial decisions and come to new conclusions when these difficult times are already over.

The 1998 crisis came all of a sudden.  Everything collapsed, there was no hope for any recovery in the short-term, management had to act aggressively and as quickly as possible.  Today the situation is different. Some companies have already started to cut jobs fearful of further deterioration, others prefer not to hurry as their business has not suffered much yet. The question is whether the economic climate will change, when, where and how, but it seems nobody knows the answer. The range of forecasts is wide, the smartest ones and cynics make bets.   

The results of the 1998 crisis were rather constructive. On the one hand, it has a local character; on the other hand, it was the Russian business that mostly benefited from its consequences. The foreign companies in Russia immediately cut the bigger part of their staff, and many valuable employees of the foreign companies joined the Russian companies, bringing new knowledge and expertise there. 

As the foreign company managers were cutting their staff they realized that sooner or later Russia would recover from the 1998 crisis and become an active and attractive market again.  Even making people redundant, large international market participants cared much to sustain their image and reputation. That’s why in that very period the foreign companies management ordered the outplacement service.

 

For example, thanks to the interest to outplacement in those times Ancor recruitment agency not only managed to stay on the surface, but became one of the leaders in the HR market.  At that time Ankor was awash with lists of dismissed employees from the foreign companies.  While the foreign clients paid enough money for the assistance to their employees during and after the dismissal, the Russian companies were happy to hire western specialists who had worked some time in a well-structured and developed European business.     

The HR specialists organized trainings and seminars for the dismissed employees, helped to write CVs, prepare for job interviews, and, certainly, searched for potential vacancies.

 

Another popular service at that time was outstaffing.  The companies transferred their staff to external providers and then got their work done under the onerous service agreements. Nothing changed for the employees themselves as they virtually continued to work at the previous organizations, but became registered at the others. That’s why the companies that thought about their future cut the jobs de jure, but retained the staff de facto.  A lot of foreign companies chose that way and passed the control over its staff to outsourcing companies.  In the end, when the crisis was over the majority of the employees were re-hired.

The third popular service was salary assessment according to sector.   The companies wanted to save more, so they tried to monitor on-line the changes in compensation system, made by their counterparts.

 

As a result of the 1998 crisis the labour market became more pro-European and more transparent.  This crisis opened new doors for the HR market. Namely, many managers from foreign companies switched to Russian business at hard times made their way to the top.  In turn, they started using recruitment services in their business. By doing this they implemented European style of management, taught Russian businesses to make use of recruitment services.

 

Now let’s turn to the current crisis and the trends that have already been developed. Some of them look quite positive.

 

The first is reconciliation of the specialists’ salary expectations to the appropriate level.   I have to admit that before the crisis the expectations of the most candidates were too high. One could expect 5-10 mln a year, while the level of professional skills was not very high. Today the same candidate is ready to take offers (if any!) of 1-3 mln rubles a year, and even less!

The second is the potential for the increase in employee’s performance.  In the past years several employees were hired for one job with different employment functions.  Such functions “spread” among the employees, thus leading to the decrease in performance of each employee.  

Let us consider the functions of the HR management in a large company. What was it like before?  4 employees were responsible for recruitment, 2 – for internal communications, 1-2 –for training, and 3-4 did paperwork. Indeed, one strong “general” and an assistant would be enough to perform all these functions, and most of the functions could be and had to be laid on external providers and outsourcing. Luckily, external providers do specialize in and perform most of these functions skillfully. 

However the general low level of confidence in external providers, the desire to save money and some other reasons resulted in management hiring numerous staff and hoping to offset the lack of competence quantitatively.  Such crowd of people often led to confusion and low performance because of communication losses. Today those who still keep their jobs and those who are “ordered” through recruitment agencies have to be “universal soldiers”.

 

Perhaps, there are other positive trends, but they are fairly outnumbered by the negative ones so far. The key trend is that if in 1998 the companies cutting their jobs were thinking about their future and their reputation, now they have much more important tasks as the future is uncertain. The companies often dismiss people in a chaotic manner with the labour code infringed, and it refers not only to small and middle businesses, but also to international companies and state-owned Russian corporations. I hope it is just an immediate panic reaction, and I can see the first signs of reasonable demand for outplacement services.

As for the recruitment services, the headhunting service is becoming more and more popular nowadays.   The “universal soldiers” are now in great demand, and what’s more such demand will stay as high even after the crisis. The companies are looking for them and ready to pay good compensation. Those recruitment agents that are able to find, attract and provide a competent assessment of such specialists can well get prosperous.

The recruitment agents can help companies in assessing those people who still work as well as those who got into “black lists”. Sometimes in attempt to cut expenses the companies dismiss genius people with high potential, and then they end up with even more losses. The recruitment agents can help their clients to assess their employees and eventually make decision regarding who may be dismissed and how many jobs may be cut, as they can not only get insight of the client’s business and understand its tasks, but also know well the conditions in the labour market. They can compare the company’s specialists with the similar specialists from other companies, other industries and the broader range of Russian and international companies.

Nevertheless, it is very difficult to make any forecasts in the current conditions. It is almost impossible. Everyone is waiting for changes. How long the crisis will last is unclear. We should not get panicked. It is necessary to monitor the market developments, spot «live» segments and immediately transfer the resources there.  Managers have to be flexible and quickly respond to any changes. Companies should boost sales.  Mind, that it should concern each employee of the company. There is no doubt that companies should think about the reduction of expenses. It is clear enough that some components of business that were welcome but not essential in the pre-crisis times have to be removed. The jobs may be cut, and not a total cut is recommended , but a partial outstaffing of staff.  Some employees can go on a leave and return to work only when it is required. In such case, the employees will be grateful, and the company will be able to reduce its expenses.