Expats aren't going anywhere

The economic crisis and Russian tradition

Ten years ago, after the 1998 default in Russia, local employers, unable to pay foreign specialists competitive salaries, replaced expatriates with Russian employees in droves. With today's economic crisis, however, the situation is completely different. The number of expatriates working in Russia has shrunk no more than the overall number of job layoffs in the country. The fact that changes have taken place in job requirements in the international-specialist environment, a sort of changing of the guard if you will, is something completely different. Employers, willing to pay but not overpay for talent, prefer all-round experts to specialists with a narrow focus and are replacing well-known managers with younger but promising ones. And the latter, do not forget, are more than happy to come to Russia – the experience obtained here can serve as a spring-board for one's future career in the West.

History shows that foreign specialists have more or less always been heavily sought to come and work in Russia, all for the commonplace reason of developing the majority of industries in which we have historically lagged the West. Therefore, the economic crisis has not caused any significant changes: as long as business exists and grows, there will be demand for experts that know technology the best. “One of our clients is competing seriously to be Russia’s leader in meat-processing,” said Mikhail Bogdanov, chairman of the Board at the Consort Group. “So then you ask yourself the question, where are the best sausages and bratwursts made: Germany, Austria, Switzerland, and Italy. Therefore, the client is willing to offer an extremely attractive compensation package to a specialist from any one of these countries who would be able get a company’s production units up and running.” In short, the overall demand for expatriates has gone absolutely nowhere during the economic crisis. HeadHunter, a job-search company, conducted a survey in June 2009 on its web site, www.hh.ru, among 137 large and medium-sized businesses. The survey found that 22% of the companies have expatriates in their work force and 6% have plans to hire some in the near future, while a mere 7% of Russian employers have decided to refrain from foreigners on their staff. As for foreign companies operating in Russia, opting for locals instead of expatriates is economically desirable, but not always possible, because upper management, and all too often middle management, positions require people who know the corporate rules and management principles inside and out. Moreover, one also comes across some fairly exotic cases as well. “You have Asian companies with a corporate culture that many Russians are unable to fit in to, so these companies really stick to hiring people from their home country,” says ANCOR Management Company President and CEO Sergei Salikov. “Take, for example, the different kind of business model used by the Japanese and Koreans. They don’t have the practice of removing administrators from posts. Before one can attain an administrative position, he or she needs to work for many years in one company and show their loyalty to it. Therefore, they are unlikely to replace these people with Russians.”

No more paying for the accent

Andrei Sado, Director of the Apartment Rentals Division at Penny Lane Realty, a company specialising in services for foreigners, believes that 2009 saw a change in the number of tenants in luxury-apartments ($12,000 a month and up). Before the economic crisis, the correlation of foreign specialists working in Russian and international companies to Russians was even, whereas today things have changed, with expatriates making up one third of all tenants. Having said that, the intermediate segment ($3,000 to $6,000 a month) has had its proportion of tenants remain intact. This does not mean, however, that upper level management has been disposed of while mid-level management has been spared. This above-mentioned information indirectly shows a completely different trend: employers have stopped designating astronomical salaries for “a foreign accent”. It is not that many companies have completely turned away from expatriates, rather they are adjusting their salaries from unjustifiably enormous to appropriate. “The first to jump ship have been the “ceremonial bystanders” who were invited to take positions on a company’s board of directors just for the image,” says Natalya Kurkchi, a partner at Antal Russia Executive Recruitment. Moreover, she believes that many very talented specialists in Europe who have lost their jobs are willing to come work in Russia on terms somewhat different than before.

“2009 started off with a trend towards replacing “expensive” expatriates with people just as qualified but not as highly paid,” said Mr Bogdanov. “Not too long ago we replaced the logistics director in one of our client companies. Salary expenditures have now been cut by roughly 50%.” All surveyed experts believe, however, that nothing resembling a tailored switch of expatriates in favour of Russians has gone on at all. Foreign specialists have suffered just as much as Russians, depending on the industry, profession and personal qualifications. Foreigners’ salaries may be much higher than what Russians receive, to the tune of 30-50%, but this is all determined by the expatriate having better qualifications. We should point out that upper-management salaries for Russians and foreigners have become almost identical in recent years, while in other cases Russians are paid more! Mr Bogdanov added: “not too long before the economic crisis hit, an executive director from England told me the following: ‘your candidates, especially ones for high-level marketing positions, rate themselves very highly, but so unjustifiably so, that I am being forced to think about bringing in a younger and less fastidious Englishman. He will be more honest, do his work better and all for a lower salary’”.

It goes without saying that the economic crisis has led to a change in demand for specialists in various industries. For example, the demand for specialists in the banking and financial sphere has, for reasons everyone can understand, taken a hit. At the same time, demand for foreign managers has remained as it was before the crisis or even grown in the retail, and curiously enough, development sectors.

The Closest of the BRIC Countries

The expatriate contingent in Russia has gone through some significant changes. Foreigners used to come to Russia with the main goal of quickly making a load of easy money, but now they have different things in mind. Alongside beautiful Russian women and low taxes, Russia is also an attractive place to work because of the opportunities it offers for making a career breakthrough. “A top-level executive coming to work for us received not only a higher compensation package than he would in the West, but also had access to completely different business practices,” says Anton Derlyatka, managing partner at Ward Howell, “in Russia a person can get their hands on managing a business with billions in turnover a whole lot earlier than, for example, in Great Britain.

Here is an intriguing look at the situation from Mikhael Germershausen, managing director at Antal Russia Recruiting. He says, “compared to Germany, Russia offers me many more opportunities to realise my potential. Back in Germany, I would be just one of the many thousands of recruiters around, while here I am probably the only German that speaks fluent Russian, has worked in recruiting for seven years in the country and understands both countries’ mentalities. Thanks to all this I have been able to create an extremely profitable recruiting business serving German companies in Russia.

Moreover, the economic crisis may have caused some corrections, but it did not put a stop to international businesses' global course from moving forward in the BRIC countries and other developing markets. Therefore, a career in a large international company all too often requires some work experience in developing markets. In this sense, Russia is preferable to countries like China and Brazil in terms of proximity to Europe. Experience in a developing market is what experts believe to often be a ticket to the best global employers, since far from everyone is willing to transfer employees to management positions in developing branches of European companies. Having said that, you don't have to spend your entire life working in third world countries. Russian business is continuing to expand and integrate abroad, be it quickly or slowly. Demand across the world is growing for Russian specialists who not only know the language, but their partners' mentality as well. For example, Natalya Kurkchi pointed out not too long ago that her company's Singapore office received a request from an extremely large bank for clerks with knowledge of Russian to serve VIP clients from Russia. No need to mention Europe here. “Curiously enough, the United States had many more Russian specialists during the Cold War than they do today when our countries are not at a stand off with each other,” says William Branch, a Russia-branch employee at an international consulting company. “Demand is now starting to go up again. When my contract here expires, I plan on returning to the United States to find a job in either the State Department or a large corporation as a Russia expert.”

hh.ru survey

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