The Journal The Authority on Global Business in Japan

Japan has always been a challenging market for the executive recruitment industry, but the coronavirus pandemic has added another level of complexity to both sides of the equation: the specialist agencies that play matchmaker and the companies looking to secure the most capable talent.

Recruiters, not surprisingly, saw business drop steeply in the early months of what, very quickly, devolved into a global health crisis. But now, they say, companies are adapting their operations to the new normal. This includes hiring accom­plished staff who will help propel an organization on to bigger and better things.

CHALLENGES AND RESILIENCE
“The immediate impact, during the first few months, came as a bit of surprise to everyone,” admits Eric Cole, president of Cole and Company. “Certain sectors that we cover—advertising agencies, travel industry companies, and retail-oriented busi­nesses—felt the full force of impact, with radically reduced budgets, canceled or postponed contracts, and closures of stores, shops, and other retail outlets.”

But while these companies were facing unprecedented chal­lenges, Cole said he has been very impressed by client companies that have shown “a really admirable level of flexibility and resilience in dealing with the coronavirus crisis.”

Not all have struggled. Consumer-oriented sectors, such as technology pro­viders, digital payment, and ad tech, he said, are seeing strong and rapid growth.

“Companies that make general, daily-use consumer products, while facing challenges, have a degree of immunity from Covid-19. People don’t stop brushing their teeth, or replacing worn-out shoes, or drinking alcohol because of the crisis. Companies that provide these, and many other, consumables still need to develop, manufacture, ship, market, and sell them—and that requires people with high capability to do their jobs effectively.”

COMEBACK
Kevin Naylor, vice president of business development at en world Japan, said March turned out to be a “record month” as companies rushed to close critical roles ahead of the hiring freeze that they realized was inevitable.

That freeze, combined with candidates in employment suddenly getting cold feet about a move to a different com­pany—and the new challenges associated with the remote workplace—began to be felt the following month, he said. About 40 percent of foreign capital clients introduced some degree of restrictions on new hires—although the total number of permanent positions available from client companies contracted by less than 10 percent year-on-year. The impact on contract hiring was more significant, however, down by about 26 percent from the previous year.

Yet, by the summer, the market was ticking up again, according to Naylor.

“Since the government lifted the emergency order, the market has improved step by step,” he said. “We saw, like many of our clients, a significant bounce back in July.

“August and September were a bit slower but have still shown a gradual upwards trend in the number of job openings available, and in candidates’ willingness to explore career options,” he noted. “The market is still far away from where it was last year, but companies are coming to terms with the need to hire people to help transform their businesses during this dramatic shift to some kind of new normal, both internally and out in the market.”

One measure of appetite for new hires is clients’ interest in interviewing candidates, said Naylor, which bottomed out in the summer at 15 percent below 2019’s figures. It has since recovered and is currently just five percent lower compared with the same period last year.

HEAD WINDS REMAIN
Ryan Yasunari, president and CEO of Envision Co., Ltd., simi­larly reports a “significant slowdown in the volume of hiring, with a large proportion of our clients freezing headcount almost immediately after the start of the pandemic.”

And while a gradual recovery is already apparent, Yasunari anticipates that business will be slow again next year, as the global economy recovers, which will translate into “job-seekers experiencing difficulty securing new opportunities as com­petition for a limited number of positions remains intense.”

“However,” he cautioned, “there are significant headwinds in the long term—particularly associated with the increased prevalence of recruitment solution services, including recruit­ment process outsourcing and direct sourcing services. Increased job board participation and the introduction of artificial intelligence and recruitment technology also threaten the traditional recruitment agency model.”

Naylor does not feel the pandemic has fundamentally altered the recruitment sector in Japan, but that it has delayed longer-term trends in the global talent market in two ways.

“First, the aging population here in Japan has been shrinking the workforce for a long time already,” he pointed out.

“Second, corporate Japan made a dramatic swing from active global engagement and expansion during the bubble period to a more conservative and internally focused approach in the 20 years that followed. This resulted in fewer Japanese studying and working abroad, sponsored by large Japanese companies, which also gave the appearance of a weakened demand for global skills,” he added. “These two factors combined have resulted in a very small pool of global talent.”

In the past five years, however, an increasing number of Japanese corporates have turned their focus outwards once more, putting extra strain on that small pool of global talent as they go looking for the bilingual and bicultural resources that they have not developed internally.

CHANGING PROCESS
There have been other changes, said Yuko Yogo, vice-chair of the American Chamber of Commerce in Japan Human Resource Management Committee.

“Certainly, the pandemic has changed the way we interview people—we’re learning that online interviews are easier to set up, speed up the interview process, and get us the insight we need, although an eventual face-to-face is still desired for a final decision,” she said. “People hired this year are experiencing a different onboarding process than before Covid-19,” she added. “We suspect that those who have joined this year may feel less attachment to their company, as contact with their colleagues, direct reports, and bosses is only through online tools.

“We also notice that people who are concerned about the personal health ramifications of Covid-19 may be thinking more about what is important to them personally, the type of work they want to do, or the type of company they want to work for.”

Jeremy Sampson, managing director of Robert Walters Japan K.K., agrees that companies have been quick to switch to remote interviews and onboarding. A company survey conducted in May revealed that fully 90 percent of companies are carrying out interviews remotely.

He said that there is still demand in certain sectors. “Covid-19 has opened new opportunities for businesses in technology, e-commerce, and healthcare. We have seen an increased demand for services that support remote working environments and online education as a result of rapid adoption of digital tools.

“The digital and technology sectors have always experienced a shortage of highly skilled professionals, and with increased digitalization it is likely that demand will only grow stronger,” he said, adding that the need for bilingual professionals and highly skilled talent across industries “will continue even in the post-Covid-19 era.”

Online interviews have become the norm, and are proving effective.

SUPPLY AND DEMAND
The bottom line, Sampson said, is that Japan “suffers a chronic talent shortage.” And that can be an opportunity.

“Organizations that understand the pandemic is temporary are shaping their recruitment strategies based on their long-term hiring needs,” he emphasized. “Businesses in industries that are experi­encing particularly acute talent shortages are seizing the opportunity by actively hiring when the competition for talent is not as tight.

“Japan continues to be one of the most challenging markets in which to secure talent,” he said, pointing to a mismatch between supply and demand for talent that is further exacerbated by demographic trends—an aging population combined with a low birthrate that translates into a shrinking workforce.

The jobs-to-applicants ratio in Japan remains among the highest in the world, and for roles that require bilin­gual specialists this ratio is even higher, experts point out. And while the pandemic may have affected recruitment trends in the short term, they say, the demand for highly skilled, bilingual professionals remains unchanged.

“There are still many com­panies who are seeking to hire talented, effective individuals to manage and lead organi­zations,” said Cole. “We expect the demand to remain fairly constant. Overall, I would say that the outlook has gone from a pre-Covid ‘great’ to a mid-Covid ‘good,’ with pockets of great.

“There may be a slightly more conservative approach to the recruitment process, to ensure that the right person is chosen for the role, but the demand is there.”

Julian Ryall is Japan correspondent for The Daily Telegraph.
While the pandemic may have affected recruitment trends in the short term . . . the demand for highly skilled, bilingual professionals remains unchanged.