Cablegate: Russian Labor Market: Good Talent Is Hard to Find (And

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ZNR UUUUU ZZH
R 191238Z JUN 08
FM AMEMBASSY MOSCOW
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RUEHKV/AMEMBASSY KYIV 0254

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competition for qualified employees is complicated by an outdated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.

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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.

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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

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