Bolster Your Bottom Line Through Recruiting

Back to Contents of Issue: May 2004

An improving economy means intense recruitment pressure.

by John Dodd

Although the Japanese economy is in an upturn and both foreign and Japanese firms have started hiring again, the old rule that employment follows the stock market by six to nine months is still very much alive.

The recruiting market began its latest recovery literally in the last three months, and now wary managers are just starting to rebuild their atrophied teams. But the hiring is not happening across the board. Just about every company we spoke to in this survey told us that the demand was for skills and experience, and that administration and back office teams are still under pressure to shrink.

Ingenium's life science practice consultant, Adam Kennedy, sums up the improved outlook for recruiters in today's economy: "The general feeling is that following a long period of market stagnation, the prospects are improving. There is renewed confidence. This is leading potential candidates to become more receptive to new opportunities."

David Scott, a finance practice senior consultant, also from Ingenium, adds, "Compared to the last two years, the indication from the first quarter of 2004 is that confidence is returning to the market. Financial recruiting was slow during 2002 to 2003. Business lines were continually being assessed and restructured and hiring freezes were common. Firms still wanted to meet talent in the market but few had the mandate or budget to actually increase their headcount. We are now seeing a complete reversal and more frenetic activity by managers trying to restore their teams. There is definitely a note of urgency in the recruiting process, with the business manager pushing HR to get resources on board."

Speed&Pride Corp.'s representative director, Akio Sashima, gives a concrete example of the improvement over the first quarter of 2004: "We are very confident that things are improving. Most of my partners say that the number of recruiting requests they are receiving now are running at about double the same time last year."

Growth Sectors
Of course, in some industries, there are specific opportunities starting to arise, which foreign firms are very quick to capitalize on. As Ingenium's Kennedy notes: "The business environment is perceived as becoming more open thanks to Japan's harmonizing its regulations with the rest of the world. This is allowing foreign players to look further forward and hire for future market growth."

Speed&Pride's Sashima agrees. "Medical placements are definitely on the increase. Thanks to the market opening efforts of the US government in the sectors of education, medicine, and M&A, we're seeing a lot of optimism by foreign firms positioning themselves for regulatory changes."

Ingenium's finance practice consultant Martin Eastgate also points to real estate as a solid performer with a steady demand for talented individuals. "Since the real estate Big Three -- Morgan Stanley, Goldman Sachs, and LoneStar -- are so dominant, we're receiving a steady flow of requests for specialists to work in companies seeking to create specialized portfolios focusing on one particular niche, such as retail, residential, office space, hotels, golf clubs, et cetera."

Memory devices for digital cameras and other consumer electronics devices are also booming. SanDisk is the leader in producing the Flash memory card standard used in many export models of digital cameras, cell phones and other electronic devices. The company is now in the midst of a substantial ramp up of its hiring efforts. It had just 40 people at the start of 2003, but thanks to booming business had increased its ranks to 70 by March 2004, and expects to almost double that again to 140 people by the beginning of 2005.

The company's HR recruiting specialist Toru Ishii says, "Globally the firm had an increase of 99 percent in revenues and almost 500 percent in profits last year. A strong share came from Japan. The world has rediscovered the joys of consumer electronics: digital cameras, cellular phones, portable music and other devices, and we're riding that wave."

Mobility of Skilled People is Improving
Traditionally Japan has been a tough market for finding talented bilingual CxO (senior positions such as CEO, COO, CIO and CFO) managers and thus most foreign firms have been loathe to replace such people as a strategic measure. However, there has been an increased supply of new candidates into the market, fueled by the doubts that many younger internationally-minded Japanese are having about the security of their jobs in conservative major Japanese companies.

This uncertainty has been accelerated by the recent news that a Labor of Ministry survey revealed that older salarymen (in their 50s) have been victims of the greatest restructuring efforts and have seen their real salaries drop by 1.7 percent in fiscal year 2003 alone, putting them on the same levels as colleagues a decade younger. Clearly the system is betraying its staunchest supporters, and the young, smart and mobile are taking heed.

The attraction of going to a foreign firm lies largely in the ability to be independent and make a higher salary. Thus the flow of good quality candidates is rapidly improving. As Speed&Pride's Sashima says: "Qualified candidates are those who have survived the many restructurings going on in major firms over the last three to five years. They are feeling more confident in their abilities and less loyal to their employers, thus are looking for ways to improve their career prospects."

Ingenium's industrial practice consultant, John Shippen, agrees. "There is definitely an increase in qualified candidates. Young people who worked through the poor economy are now in senior positions and are proven performers. It is these people who are most likely to want to proactively manage their careers."

Active Recruiting: The Flight to Quality
A review of online job listings from recruiters at several major bilingual job sites in Tokyo during the January-March quarter of 2004 shows hundreds of job openings for senior business managers, sales managers and engineers. We approached a number of foreign company CEOs to confirm the trend. Although no one was willing to go on record, what we did find is that companies are giving their managers six to nine months to pull particular teams into profit, and if unsuccessful, the managers are being replaced by selective ("active") recruitment. While this may be somewhat unfair given the slow business environment of last year, it appears to have become a market reality and candidates are aware of it. This explains the typically higher salaries for such key positions, despite overall downwards pressure on personnel costs.

Several executives even told us that they are leaving some key positions open until they find the right person, rather than simply filling the position and/or promoting from within. This requirement to find the ideal person has put a lot of pressure on HR managers and recruiters alike, and is causing the market to open up as hiring companies contact a wider range of recruiters rather than staying with a traditional exclusive retainer-based relationship with one of the branded recruiting firms.

This has been good news for the contingency-based recruiters and has lead to them placing record numbers of CxOs. DaiJob's Doherty confirms: "We've never had so many requests for CEOs, CFOs, and COOs as we do now. New customers, companies with leading brands worldwide as well as here in Japan, are becoming impatient to find the 'right person,' and they can't wait for the retainer search firms to go through their paces. Instead they're opening up to contingency firms such as ourselves."

But DaiJob's Doherty goes on to say: "Training of staff to accept a culture of change, even if those changes are of senior management, is important if you want to engage in active recruiting. You can't just go lop off a couple of heads and expect people to feel good about it -- especially if the team has been together for a while."

Signs of Real Reform
While the media have been critical of the slowness of Japanese government reforms, there can be no doubt that Japanese companies are on a reform crusade of major proportions.

We end this survey with closing comments from Ingenium's Joe Mindell, professional services consultant, and representative director Mark Saft, about the reality of restructuring and the labor shifts/demands it is creating. Mindell: "There is currently a large demand for strategy consultants in the management consulting Industry. This is due to a large increase in corporate strategy projects focusing on ERP implementation, BPR, brand strategy, and human performance -- caused by restructuring and a resulting labor force reduction, especially at consumer electronics firms."

Saft: "Many of the top management consulting firms are maxed out and are having to turn down projects due to their inability to provide adequate resources for such projects. We are seeing huge demand from these consulting firms for IT consultants, management consultants, and of course, highly-skilled SAP engineers."      @

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