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Managing recovery

Deals

Crisis managers ruled in 2010, too, as many companies tried to align their corporate culture to changing circumstances by changing their leaders.

The past year saw significant changes on the labor market of Hungarian managers. One of the main reasons behind the dynamic rearrangement is the new government taking power in the spring of 2010. This mainly affected the management of companies that operate in public administration or had other ties to the former political elite, and companies of all sizes in the private sector have also undergone massive management changes.

The changes in the economic environment caused by the global crisis have forced companies to rethink their strategies, and in many cases, to turn to a more cost-efficient mode of operation. Increasing efficiency and exploiting reserves have become the most important tasks of managers. And since such activities usually required a different management culture, these companies had no other choice but to implement big changes in who does their management. This, naturally, could not be executed without conflicts: in many cases, executives chose to leave their chairs voluntarily, while others were made redundant and replaced with others.

The crisis caused significant losses in turnover for many companies – and a top executive who is trained for success might not be the right leader in such difficult times. Different phases of a company’s life cycle call for different leadership abilities: in times of boom and consolidation, leaders focus on profitability and development, while in a more hectic economic environment, staying in operation might become the most important issue.

Thus the role of “crisis managers” has become increasingly appreciated over the last few years. A crisis leader must be confident, decisive, a strategic thinker, able to communicate effectively, and recognize what is important when potentially surrounded by confusion and chaos.

Not surprisingly, companies active in sectors that were hit hardest by the crisis produced the most visible labor market movements: suppliers for the automotive industry, banks and other financial institutions, and real estate companies.

Vanishing bonuses

As for wages, the crisis has put an end to the increase of salaries and bonuses. These days, an executive can expect less money for a position than before the recession. In line with less appealing offers, executives’ expectations have also been lowered. They quickly adapted to the changed circumstances and settle for less in wage negotiations.

Bonus payments are based on a company’s financial performance. Therefore, even if basic salaries were not reduced, bonuses in many cases were withdrawn, decreasing the overall income of executives.

The range of fringe benefits has also been redefined at many companies. For example, it is not unusual today – something that was practically unimaginable before the crisis – that a top management position does not automatically come with a company car.

According to data from wage-watcher site fizetések.hu, the average monthly salary at the top management level is gross HUF 745,177. Country managers top the list with gross HUF 1,357,500 per month, followed by chief executive officers making gross HUF 1,262,200. A chief financial officer earns an average of HUF 763,800, while an IT director takes home a little less, HUF 757,400 per month. The worst-paid top management position is that of a quality assurance director, with gross monthly salary of HUF 429,400.

Locals vs expats

While still more than half of the top 200 companies in Hungary are headed by ex-pat CEOs, and replacements during the first half of the year mostly involved another expats instead of Hungarian professionals, delegating foreign company leaders to Hungarian subsidiaries has become somewhat less common practice for multinational companies by mid-year. This can also be attributed to the crisis: in a small market, global companies cannot afford to pay expats with exceptionally high salaries, not to mention all the extra costs that need to be covered for expats (such as education expenses for their children, accommodation, travel expenses, etc.).

But in spite of the fact that companies send fewer expats to Hungary, Hungarian managers are not likely to take over expat positions in large numbers for at least another four or five years. Many Hungarian managers go abroad to gain knowledge in their areas, and once they return, they will have a better chance of taking over leadership positions from foreigners. However, it still remains a question whether these managers will actually want to return to Hungary, considering the rising labor mobility within the European Union and beyond.

Interim gathers pace

As a result of massive management changes, a large number of highly qualified and experienced executives have been on the job market, in some cases for more than a year. For them, interim management might offer new opportunities. Those who favored stability before are now more likely to accept a less predictable working environment and start to realize the benefits this form of employment might offer.

The profession, however, is still in its infancy in Hungary, and besides supply just picking up at present, demand has also only started to rise for interim managers.

This has been a proven method of reducing costs and gaining a competitive edge at Western European and American companies for more than a decade, but companies in Hungary have just started to realize its benefits in the last few years. Experts say that both demand and supply will see slow but steady growth in the next few years.

As for the growing popularity and acceptance of this profession, a study conducted jointly by Interim Management Resourcing and the Budapest Business Journal at the beginning of the year reveals that while a few years ago there were only about 100 registered interim managers in the country, today there are more than 1,000. However, out of the 1,000 registered experts, only about 250–300 are ready to jump into a certain position – approximately 30–40 in each area. The rest of them probably considered this only as an alternative option during their job-seeking process.

This job, however, is not for everyone. It requires special abilities and skills, and can be perfect for those seeking constant challenges. But it also demands the adoption of a new way of life. An assignment is only for a certain period of time, during which the person needs to work at full speed without any vacations – but these periods might be followed by months without a job.

According to the IMR-BBJ research, the average length of assignments in Hungary varies between three months and 12 or more months. Most commonly, a job is for three to nine months (in 28% of cases, according to the study), but assignments of more than a year are also common. The latter indicates that gap management is also a popular way of weathering a crisis in a company’s life – for example, when someone goes on maternity leave or extended sick leave.

CEOs in better mood

While Hungary is still among the less optimistic countries in the region, the optimism level of Hungarian executives has slowly increased from last year, a Deloitte survey published in June found. More than half of the respondents said that Hungary’s economic situation was likely to improve in the next six months. This represents 40% growth from a year ago in the number of executives with a positive outlook.

Nearly two-thirds of Hungarian companies expect revenue growth in the next 12 months, and the number of companies considering the introduction of new services or products has also increased from last year. The only area Hungarians kept their pessimistic approach is employment: the share of executives considering massive layoffs has grown to 30% from 16% in April 2010.

(This article will be published int he 2011 edition of the BBJ’s Business Who is Who.)

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