It’s been a year to the day since I posted the “Japan Recruitment: show me the numbers!” post and it’s about time we provided an update.
In citing the annual ManpowerGroup “Global Talent Shortage” survey of 2015, a year ago I cited the result that in 2015 a staggering 83% of hiring managers and HR professionals find hiring in Japan “difficult”, compared to a global average of 38%.
Now one year later that figure has crept up to 86%, with the global average to 40%. The talent shortage is a global phenomenon but worsening (+2%), and worsening faster on average in Japan (+1%) than elsewhere.
I came across the “Survey of Trends in Business Activities of Foreign Affiliates” (Ministry of Economy, Trade and Industry) that helps pinpoint some of the challenges that stand behind this 86% “difficulty” and want to share some of the key take-aways here.
Interestingly, according to the METI survey the challenge is not about the quality of personnel but the availability. “Quality of personnel” is actually cited as one of the key factors for the Japan market being attractive for business expansion, as according to survey respondents.
I’d like to outline some of the main factors cited in causing difficulty with hiring talent along with a few observations that may be relevant to come of our clients. The percentages represent the proportion of respondents (some 3,332 people) citing that particular factor as important to them.
Factor 1: Communication difficulties (54.9%)
This one is not going away in any hurry. Japan is regularly cited as one of the worst English-as-a-Second-Language markets in Asia.
As a rule, do not confuse great English with great Talent. You should focus on the talent first, and to do that you may need patience and “confirmation” strategies in your communications.
Factor 2: High compensation (53.3%)
There is a “risk premium” attached with a move to a non-Japanese company, and especially to a “startup” that is the real cause of inflated salaries. Typically these premiums are 15-20% but they can be higher when other options are scarce.
It is very well known that decisions made in a far away HQ can sometimes lead to a sudden reduction of staff or withdrawal of business from Japan. As confident any company is about their own chances of success, there is no way to escape this history and the risk premium that it creates in a labor market used to “lifelong employment”.
By the way, companies seeking someone who has a proven track record in a startup environment automatically enter “expensive” territory as they seek to lure away people who have already made the jump from more established companies with “normalized” compensation levels. This entire phenomenon is something I want to look at in a future post, as there is a very real 2IC (second in charge) gap in the market, which complicates options here.
Factor 3: Lack of mobility in the labor market (34.2%)
Whenever we do a startup search in a “mature” market sector it is often the same candidate faces that pop up, and at any given point in time only a few of those people will be open to entertain a move to a new company.
Getting these “viable candidates” to move from a business they have established as stable to another that still has a lot to prove in Japan is often a challenge and a matter of “timing”. You may need to throw money at the problem, taking us back to point #2 above.
If a particular market is going through a wave of innovation then it is likely that any “late mover” start ups coming into the Japan market will be too late to get the top talent.
You can see more details on the rigidity of the labor market in this post.
Factor 4: Recruiting and hiring costs (29.2%)
Given the challenges in finding “ready-to-move” talent, and the fact that Tokyo is an expensive place to operate a business, the time that it takes to find and develop relationships with the talent in any sector is a considerable investment.
The same factors inhibiting business expansion cited in the METI survey are the same factors that recruiting agencies face in running their businesses. That said, there are differences in the type of agents you can use and models of engagement that could mitigate some of these costs.
You can read more about the drivers of cost in this post: “Talking Terms”.
Factor 5: Underdeveloped employment agency services (8.4%)
The fact that 8.4% of survey respondents cited agencies as the problem demonstrates that many talent acquisition professionals and hiring managers responsible for Japan are using the wrong agents. At least this one is easily fixable!
I hope this information is helpful!! If anyone needs pointers, you know where to find us.