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‘Loss of direction’ contributing to labor shortage

Industry and academia have come together for a major survey into Hungary’s labor shortage and staff retention patterns.

The study was undertaken by Pivot Human Capital, a Budaörs-based company providing management services such as executive recruitment, consultancy, and communication and the Management and Human Resources Research Center of Gödöllő’s Szent István University, and based on an online questionnaire called “The shortage of skilled professionals and retention of manpower in key positions 2016”. The research was conducted in the second quarter of 2016 an was professionally supported by the American Chamber of Commerce in Hungary (AmCham), the Budapest Chamber of Commerce and Industry, and the National Association of Human Experts. The online questionnaire was completed by 328 HR experts and CEOs. 

In October 2016, AmCham organized a professional workshop to discuss the study results with the chamber’s HR Committee and Talent Policy Task Force members, and members of the research team. Participants of the workshop agreed, beyond well-known reasons, a new social phenomenon was also contributing to the acute labor shortage. This is described as part of a general loss of direction: “We are looking for each other, but we do not actually meet”. Participants of the workshop all agreed improvements to the education and vocational system are crucial to solveing the problems of the labor market.

Depending on the scope of their activities between half and one-third of the companies answering the questionnaire said they are struggling with fluctuation exceeding 5%, though this is not uniform across all job titles. Executive and mid-level workforce fluctuation is not considerable, at 5% or less. In the case of sales jobs, 77% of data providers reported fluctuation under 5%. Among jobs requiring higher education, 57% of enterprises said they have less than 5% fluctuation. The highest turnover is observed among blue-collar workers. Some 9% of the organizations studied reported turnover exceeding 40%, while another 13% put it at between 20-40%.

According to the research, the following 12 positions are the most difficult to fill: IT specialist, engineer, operator, salesman, quality assurance engineer, consultant, administrator, mechanical engineer, HR specialist, mid-level engineer manager, waiter/waitress and project manager. Filling a vacant position takes an average of 11 weeks. Operators and the project manager positions are filled the fastest (around 4-5 weeks), but it can take 18-21 to find an engineer.

Where the labor shortage is the most critical, most of the respondents indicated “low payment”, “lack of skilled labor” and “competition” as primary causes of lack of manpower. However, when describing general reasons behind labor shortages, many respondents revealed that internal organizational problems could also be blamed, such as internal conflicts, bureaucracy, weak employer brand, poor motivational environment, unattractive organizational culture, and leadership errors. Another problem can be detected in the widening gap between the expectations and beliefs about the workplace of senior level executives and of other labor market participants.

The most commonly used company programs are not considered to be the most effective solutions in attracting and retaining talented employees. While 87% of respondents said they use an employee satisfaction and engagement survey, only 39% considered it “especially effective”. Similarly, a performance evaluation and bonus system was used in 93% of cases, but thought “especially effective” only in 62% of cases. The highest score (64%) was given to individual training and personal development plans, used by 84%.

Government solutions 

The research also looked at what value company representatives put on government programs that are targeted to help ease the labor shortage. A revised tax and social security contribution systems is considered an efficient tool by the majority of the responders (85%) in attracting and retaining talented employees. And 74% of respondents felt that supporting non-standard forms of employment (i.e. telecommuting, part-time work, shared work, etc.) would be especially effective. More than half of the participants found the following seven solutions very efficient: encouraging and supporting training programs (dual training, and special vocational training programs), a more sophisticated income support system, supporting housing costs (construction, workers’ hostels, renting costs), supporting day-care centers and kindergartens within an enterprise, introducing special labor market services, increasing the role of student work (involving secondary and higher education students), and the development of transportation, commuting contributions (i.e. supporting company buses). According to the respondents, the employment (or “renting”) of public workers by non-public administration organizations is the least effective solution. Similarly, respondents view the support and promotion of attracting foreign employees a solution that would have limited results in easing the labor shortage in Hungary.

“AmCham Hungary supported the survey as we see an overwhelming interest from our members – the largest investors in Hungary – to have a better understanding of labor market trends in general, and specifically of securing and retaining talent,” explained Írisz Lippai-Nagy, CEO of AmCham. “We understand that in order to improve Hungary’s long-term competitiveness, we must embrace a strategic view of talent, as only with highly motivated and skilled employees can we attract more jobs.”

The highest turnover is observed among blue-collar workers. Some 9% of the organizations studied reported turnover exceeding 40%, while another 13% put it at between 20-40%.