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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competition for qualified employees is complicated by an outdated 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. 
 
------------------------- 
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. 
 
------------------------------ 
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