Lima, Peru – The economic slowdown is having a significant effect on corporate hiring decisions. Staff selection is inextricably linked to the economic situation across all sectors.
Throughout 2012, non-public formal employment in Peru rose by over 4%, but this rate has levelled off since mid-2013. During the first half of 2015, employment rose by only 0.9%.
Companies are seeking to “do more with less” as far as their talent is concerned. In many cases, and as a precaution, hiring protocols are implemented before new vacancies can be authorized, with headcount decisions subject to the approval of general management.
“Some companies are implementing incentive programs to reduce headcount. However, in some cases, they later need to reinstate key and strategic positions,” says Cecilia Ibarra, Country Manager for Peru at Pedersen & Partners.
As a result, the aggregate growth in employment in Peru has begun to decline. This is most noticeable in mining, oil, industry and commerce, and to a lesser extent, in the retail sector.
The mining sector is under pressure due to lower metal prices and social unrest; these factors have led to significant reductions in demand for personnel, with the exception of mining operations that are completing construction and about to come into operation. Moreover, the fall in oil prices has hit the petrochemicals sector hard.
Many professionals in these sectors are currently trying to relocate from Peru, says Cecilia Ibarra.
It is precisely these economic activities – the ones where jobs are most vulnerable, and where raw materials are being exported – which are being directly hit by the international crisis. Within organisations across all sectors, positions that are not considered strategic are also becoming more insecure.
It can also be expected that employee workloads will increase as employers try to “do more with less”. This will in turn have a detrimental effect on working conditions, for example by increasing reliance on casual labour and part-time employment.
Workers with a variable component to their pay (e.g. commission or bonuses) are likely to suffer as well. Conversely, when there is pressure to reduce costs, the safest positions are those that guarantee the operation of the business. “The same is true for strategic positions such as Finance Directors, for example. For most other people, the amount of direct impact that they have on the business and its results will determine how vulnerable they are to the situation,” says Cecilia Ibarra.
However, once the economy does recover, several aspects must be considered when making hiring decisions.
The first thing is to avoid “short-termism”, an error, which companies very frequently make due to the pressure to achieve fast and demonstrable results. For a company to avoid this mistake, it must have thorough knowledge within two areas: firstly, its own business vision, in order to create the map of talent that it needs, and secondly, a systematic and accurate inventory of the talent that it already has.
Cecilia Ibarra recommends two common strategic moves for crisis situations: focusing on the core business and restructuring non-strategic (or non-profitable) business units. “It is important to primarily promote, attract, build loyalty and retain professionals that add value to the core business in key positions, and on the other side, relocate talent from other areas to make them more efficient,” she continues.
Ideally, the focus of hiring should be in positions that generate higher incomes, or as the next best option, have a positive impact on margins (by either increasing efficiency or reducing costs).
However, under the current circumstances, reducing the sales force is a bad decision; the economy is still growing, but more slowly. It is better to improve the efficiency of the sales force, and control costs rather than dramatically reduce structures.
A lot will inevitably depend on the sector in which the organization operates, and its individual financial situation.
Even when companies are reluctant to hire new employees, talent shortage is a global reality, and the issue is particularly intense in Peru. Therefore, even if the growth prospects for companies are smaller, they cannot neglect their talent retention strategies, and should implementing internal retention programs and reinforce their brand as an employer of choice.
Cecilia Ibarra Posada is the Country Manager for Peru at Pedersen & Partners. Ms. Ibarra brings more than a two decade career of experience in multinational companies from the Education and Technology sectors. Ms. Ibarra held positions with AT&T Latin America, Microsoft Peru and Nextel in commercial, marketing & communications and sales roles. Prior to joining Pedersen & Partners, Ms. Ibarra was the Business Relations Manager at Grupo Santillana.
Pedersen & Partners is a leading international Executive Search firm. We operate 55 wholly owned offices in 51 countries across Europe, the Middle East, Africa, Asia & the Americas. Our values Trust, Relationship and Professionalism apply to our interaction with clients as well as executives. More information about Pedersen & Partners is available at www.pedersenandpartners.com
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