Off shoring Jobs and Executive Recruiters

Hiring workers abroad to do the jobs of those who would otherwise work in the United States may not be the first thing managers think of when “recruitment” comes to mind. However, outsourcing jobs in this way is an increasingly important employment option. Current projections are that about three million white-collar jobs in occupations ranging from computer scientist to call center employee to radiologist will be moving abroad in the next five or six years.

The issue of sending jobs abroad is a contentious one; there are staunch advocates of both the employers’ points of view. However, regardless of the pros and cons, there seems little doubt that outsourcing is an option that most HR managers will have to deal with. To take just a few recent examples, GE’s Transportation division announced in 2004 that it was shifting 17 mid-level drafting jobs from Pennsylvania to India. Surveys conducted in California suggest that almost 7% of employers there would consider off shoring IT jobs (as well as many others).

The question therefore is what sorts of specific issues should the HR manager keep in mind when formulating plans to outsource jobs abroad? Here, the experiences of other employers suggest several things to watch out for. One is the very real potential of instability or military tension in countries such as India, the Philippines and Russia. Other issues include: the likelihood of cultural misunderstandings (between your customers and the employees abroad, or between your employees here and employees there); security and privacy concerns (some US customers may object to giving credit card information to strangers abroad, for instance); and the need to deal with foreign contract liability and legal system issues.

Instituting programs such as these (for instance, a call-center in India) requires careful attention to various other potential obstacles as well. For example, there is the need for special training of the foreign employees (for instance, in learning to speak with American accents and idioms and to use pseudonyms like “Jim” without discomfort). Also understand that all the expected cost savings probably won’t materialize. For example, the employee abroad may earn only 10% of what someone doing comparable work in the United States would earn, but the companies supplying and managing the foreign labor will retain a portion of the savings to cover their own profits and the cost of their own infrastructure. And, of course the HR manager’s plans should include how he or she will deal with the anxiety of its US based employees and unions.

Executive Recruiters: Executives recruiters (also called headhunters) are special employment agencies retained by employers to seek out top management talent for their clients. The percentage of your firm’s positions filled by these services might be small. However, these jobs include crucial executive and technical positions. For executive positions, head hunters may be your only source of candidates. The employer always pays the fees.

There are two types of executive recruiters – contingent and retained. Members of the Association of Executive Search Consultants usually focus on executive positions paying $150,000 or more, and on “retained executive search”. This means they are paid regardless of whether or not the employer eventually hires the executive through the efforts of the research firm. Contingency based recruiters tend to handle junior to middle level management job searches in the $50,000 to$150,000 range. Whether retained or contingent, fees are beginning to drop from the usual 30% or more of the executive’s first year’s pay. For example, in one survey about 96% of clients paying executive search fees paid the full 30% in 2000. This dropped to 77% in 2001 and to 70% in 2002.

Two trends – technology and specialization are changing the executive search business. Most recruiting firms are establishing Internet linked computerized databases, the aim of which is to create a long list [for potential candidates.

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