Economic Crisis: Is it past ?

Economic Crisis: Is it past ?

Immediately following the May holidays, a tentative theory was heard amongst international and Russian media suggesting that the world economic crisis had reached its bottom, and that the first signs of recovery had appeared. This means that hope of improvement in the labor market has also appeared. Is it possible that the lean times have already passed, and that the end of the extremely complicated situation in world markets will be as sudden as its beginning? What lessons can Russian executives draw from the preceding crisis? Maxim Stepanov, president of the consulting firm AVENIR (AVENIR GROUP) 5 comments.

Without a doubt, emotional reactions to recent economic proceedings can have a real effect on market behavior, accelerating loss or enabling gain, but market confidence alone is not enough for a quick recovery in collapsed economies. It is impossible to deny that the recent economic crisis has been not only felt, but very painful to all strata of the population. However, as exposure to disease is necessary for the human immune system to improve itself, this crisis will have a most favorable effect on the Russian economy, by providing all members of the market, be they country, company or individual, a good lesson in crisis management. The only complaint is that the majority has and will pay a very high price for their education.

Never before in the era of the Russian free market, has it been necessary for top managers of so many different enterprises to enact such large scale reductions of expenses, due to decreased production, examining each expense "with a fine-toothed comb". Never before has the "human factor", a fundamental component of any production process, been as poignant and painful as this time. Seven out of ten businesses were forced to reduce personal, on a limited or extensive scale, to ensure the survival of their company and protect as many jobs as possible under prevailing conditions. The tragedy of reductions served as a good motivator for the analysis and revision of earlier common models, concerning traditional labor mobilization. Many looked at what had once seemed a natural and beneficial resource, i.e. their own personnel, with a new perspective, and began to asses the real costs, risks and social benefits. More and more executives, who are responsible for a companies profitability, began to look at modern methods of safeguarding their business and alternatives to hiring their own personnel.

The plethora of business process outsourcing services available in Russia today is already great enough that any company can take advantage of them to fulfill any number of functions, which had earlier been handled by internal departments, saving both time and money on the hiring, training and management of personnel. Accounting, payroll, clerical services, tech-support, call-centers and office management are some classic examples of formerly internal services transferred onto the market in order to optimize business.

Accounting services in Russia, especially in Moscow and St. Petersburg, had already begun to be replaced by outsourcing companies in the early nineties, and AVENIR GROUP was one of the first companies to push outsourcing as a modern means of optimizing and increasing the effectiveness of business processes. Analogously to accounting services, payroll services in Russia almost immediately won great popularity first in Moscow and St. Petersburg, and then in other Russian cities. These services were in such high demand due to the complicated systems connected with employee salaries, the calculation of bonuses and benefits, and with the payment of payroll taxes in Russia.

Modern technology and goal-oriented investment in the optimization of specific business services makes it possible for today's outsourcing companies to greatly reduce their, and thus their clients, expenditures, by strictly expending only the necessary amount of labor to get the results required. In essence, fixed personnel costs become variable.

Today it can confidently be said that, due to crisis conditions, outsourcing will obtain a second and prolonged life. It will become one of the most popular business tools, not only in all areas of recovering economies, but also as long term method of maintaining the stability and effectiveness of business models.