ECONOMY

Demographic problem to mean less business talent in the West

The Western world is suffering from a lack of business talent, according to a top US recruitment company official who predicts an increasing migration of executive staff. Paul C. Reilly, chairman and CEO of Korn/Ferry International, one of the most important companies for headhunting executive and specialized staff, with 90 branches in 37 countries, recently came to Greece and his insight in this domain is too precious to ignore. What is the secret of your success in such a complex activity? Any company’s secret is to operate truly as a global firm. We are active in 40 countries, focusing on seeking executive staff. This corresponded to 83 percent of our work in the last three months. The outsourcing of medium-level staff is also rapidly developing, along with human resource upgrading in staff evaluation and leading groups’ definition. Our branches adapt our knowledge to local peculiarities. Athens is different from London or Milan, but, also within the same country, New York is far different to Chicago or Los Angeles. Athens has access to our company’s world database; it can see, for instance, the people we hire in China, all our activity across the world. This is a global activity, but in those one needs to comprehend local conditions and adapt likewise. This is tough, but also challenging. To succeed, one needs to have a team dispersed around the world; people who can work together to offer customers what others cannot. In a recent interview in the US you argued that success depends 10 percent on theory and 90 percent on execution and application. What is your view of Greek companies? Do they adhere to this rule? Company success universally mainly comes from application and execution. In some places in the world this is easier than in others. One of the reasons for the success of US firms is they are relatively free from too many regulations and can move rapidly, while in Europe companies operate amid a sizable «social legislation.» In Greece, there also are such limitations, with labor or other legislation making things harder. If I had a company in the USA and another in Germany and wanted to restructure them by laying off some of the staff, I could do it in the US within a day, while in Germany I would need an entire year. So is the Americans’ business activity compatible with Europe’s labor environment? My ancestors are from Ireland, Germany and Italy, so I have grown up in a European environment. This, however, is a matter of mentality. The right attitude is to do what you can given the business environment. Well, the Americans do not have the reputation of being able to do that. Some are very successful but others come over with the «American mentality:» «It’s all wrong, we do not work like that.» In the US there are good and bad elements; it is not perfect anywhere. Yet as a manager you need to say that these are the rules and, instead of being critical, you must find how to function best; this means I have no opinion on these issues. For instance, the labor legislation in France and Germany has positive aspects from a social point of view; maybe layoffs are too easy in the US, but also unemployment is very low, even at times of economic recession. In France and Germany, laws are so complex that companies find it tough to be competitive, especially at times of change. Yet these are the rules and I work with them. The question is how I can succeed in that environment. Will there be a lack of talent in the executive staff market in the near future? Definitely. Demographic projections for the next two decades show the 35-50 year old population, from which higher-level staff come, will drop by 10 percent in France, 20 percent in Germany, stay put in the UK and the US and rise by 16 percent in China and 47 percent in India. Where will executive staff come from? One way is migration and another is offshoring; by taking those jobs where people live. Executive staff will be in great demand, with human capital being the most important financial investment in the next decade. Will outsourcing expand further? Yes and there are two reasons for that. The first is cost: A company from Greece or Germany sells its products across the world, so it has to be competitive, have low costs. The second is demographic developments: This is a very controversial issue in the US. Why should there be outsourcing when there is unemployment? If your job has been outsourced, this could be terrible on personal level, but looking at the whole economy, this happens because there are not enough specialized workers to do that job. I do not know what the lowest possible unemployment level could be, maybe 3 percent, from which we are not too far now. There just aren’t enough workers for some jobs and I think this will continue. States could close their borders and say we are a self-sufficient economy. For some time they will transfer the problem, but not forever. The economy is so globalized; who would have thought 20 years ago that Russia and China would open their borders. You can run but you can’t hide. What is your view of unemployment? It is a big challenge. Does each country create jobs as it develops? The same goes for developed countries such as Greece, Germany or the US. There is also structural unemployment. Labor legislation protects workers, but could also have negative effects. For example, let’s exaggerate a little saying that the ease of laying off staff in the US forces workers to retrain themselves and obtain skills to get hired with the same ease. In Europe, though, it is so hard to fire an unneeded employee that entrepreneurs are more reluctant to hire. Excessive protection of employment can lead to structural unemployment. When can a company lay off a worker? When he is still young and can change jobs, or in his 50s when that would be harder? So the European system may be more humane but hampers workers from changing jobs. Yet many jobs in the US are the so-called «McJobs,» or part-time employment with insecurity and unsettled hours. Is this enough to solve the problem? The right balance must be found. Too much protection hurts companies and employment. I do not claim the US has the right system, yet things are tough in France and Germany, the EU’s biggest economies. Germany is losing tax revenues, as high taxation forces companies to other countries.