High-tech companies are pouring into the Czech Republic, but there aren't enough skilled workers to fill the positions
A war has broken out in the world for smart people, or, in other words, for brains, talents, a highly qualified work force. Some countries are able to develop more of them, others less, but they all need them for their own future prosperity. The Czech Republic already lacks a couple of thousand.
A man in his 30s, wearing a print T-shirt and a black corduroy blazer, is sipping a mineral water in the Jet Set café in Prague's Smichov neighborhood. On his nose are perched elegant rimless glasses, and from time to time he self-consciously apologizes for his not-so-perfect Czech. Just around the corner, his office is being built, one that, like its sister office in the Estonian capital of Tallinn, will be equipped with pool tables, maybe a sauna, eye-catching multicolored couches, and top computer technology. Employees' dogs will be permitted to roam there.
The man in the café is Philippe Bernard, son of a Czech mother and a French father, and since spring, the chief of software giant Skype's development center in Prague. These days he faces a difficult task: finding 30 developers who will think up ways to improve software that nearly 200 million people worldwide use to phone over the Internet for free or a pittance. What exactly is going to be developed in Prague, the business is reluctant to say -- some kind of new communications software.
This company, regarded as "cool" around Prague, has put up billboards with the appeal to "Write the code of your life. Work for Skype," and is now faced with queues of applicants. Still, Bernard has concerns. His business is not searching for just anybody. "We're looking for unconventional geniuses," he says with a smile. For instance, the list of requirements for the post referred to as senior tester fills a page, and even experienced computer experts will gasp about how demanding they are at Skype. A tester must master web management, databases, programming, and operating systems in order to analyze a program, find flaws in it, and make sure they are corrected.
"'We do not tolerate mistakes and slips, in the pedantic positive sense. They have a real desire to improve the ways people communicate. They don't know the words "it doesn't work." They are able to organize their work and complete their work on time.' " Bernard is going down the list of requirements. To this, add the necessity of outstanding English, through which they must be able to clearly delegate tasks. Estonian, too, is an asset. "No one is saying that it's easy for us to find these people," Bernard smiles at the journalist's astonishment. "But we don't lower our standards; we want the best people." So far, they have found the first 10 people for their dream team and are continuing their search.
On the other bank of the Vltava River, a short way downstream, is a place visibly more conservative -- they don't even have pool tables -- and Martin Jahn, seated in the chief executive's armchair in Skoda Auto's Prague offices, is wearing a classic blue shirt and brown-and-yellow striped tie. Nonetheless, he shares one thing with Bernard: the wrinkles on his forehead that come from worries about finding enough talent for his business.
Skoda needs not only engineers, but also, for instance, designers. "Developers will be devising ways to make the cars lighter, to get better gas mileage and lower CO2 emissions, to make manufacturing easier, to create more appealing car designs," Jahn says. Finding such people is "hard and getting harder."
On the wall behind Jahn hangs a painting of ultramodern glass buildings juxtaposed against the wild curves of an adjacent Baroque church. The church is consecrated to St. Bonaventura and stands in the historical center of Mladá Boleslav, the Czech city where Skoda is headquartered. Soon, the country's largest nongovernmental "brain incubator" will open next door. "This is what one of the buildings of our university will look like, when we open it in the autumn," Jahn points toward the painting. "Here, we will be nurturing talent." According to the firm's plans, mathematicians or engineers would transfer from a training center a few kilometers away, close to the huge Skoda factory, where the company is expanding its product testing and development team. The 1,400-strong team will soon get another 300 members and will continue to grow.
FROM FACTORY TO DEVELOPMENT
The examples of Skype and Skoda illustrate two main trends bubbling in the Czech economy these days. One is great news, and the other somewhat less great. First the good news. The Czech factory is slowly but surely changing into a development center. Firms are coming in, and these firms want more than a couple of unskilled arms for the assembly line. According to the business daily Hospodarske noviny, 31 international companies have set up development and distribution centers here just in the past year. They include Siemens, Honeywell, and Skoda Auto, an old Czech concern bought by Volkswagen in the early 1990s. Valeo Compressor (a manufacturer of condensing units for car air conditioners) is also building one, and Hyundai promises one in the future. Among computer firms, another software giant, Red Hat, is establishing its development branch next to Skype's. And Czech firms aren't falling behind. Elmarco, which manufactures nano fibers -- microscopic fibers, often of steel or polymers, used to reinforce other materials -- is building a research bureau in Liberec; ZAT, a specialist in nuclear reactor operating systems, is hiring near Plzen.
This trend, particularly in information technology, has affected all of Central and Eastern Europe. Czech, as well as Romanian or Estonian programmers, are capable and still cheaper (despite rising wages) than their Western counterparts. "We did a study where we compared 12 European countries," says Skype's Bernard, explaining the reasons behind the creation of the Prague office. "And the Czech Republic has emerged as the best. It's not by chance that other firms such as Sun Microsystems came here before us. Besides renowned local programmers and quality schools, the location also played a role -- there's a direct flight between here and London, and here and Tallinn." With car industries, on the other hand, it's practical to have development facilities near the factory.
In the past four years, companies have invested 17 billion crowns (590 million euros) into the construction and development of these centers. According to the Czech Statistical Office, firms spent nearly 23 billion crowns (800 million euros) in research and development in 2005, the latest year for which data are available. That's about a quarter more than state R&D spending for that year. The speed at which businesses are increasing their expenditures for research and development is above the EU average, according to a study by the Czech Academy of Sciences Technology Center. Similar results came out of work by Jana Vavreckova of the Research Institute for Labor and Social Affairs, in which she studied whether the Czech Republic is experiencing a brain drain. "The establishment of development centers creates a realistic presumption that manufacturing will remain in the Czech Republic," Vavreckova writes. According to estimates by the state foreign investment agency CzechInvest, more than 20,000 Czechs work in development centers, with thousands to be added this year. Regionally, the city on the rise, apart from Prague, is Brno. Here, the number of firms is growing so fast that its title as the "Czech Silicon Valley" has already become a journalistic cliché. Besides the good location, firms are primarily lured to the southern Moravian city by the constant supply of graduates from local colleges.
And now the not-so-good news: with the described influx of "smart" firms comes a phenomenon that, new to the Czech Republic, has been an issue in countries of the West for some time. This phenomenon is described as a "brain deficit." For example, Germany, according to the estimates, lacks 15,000 engineers. The Czech Republic does not yet have such exact figures, but it is certain that in addition to domestic businesses, dozens of incoming international firms now are competing for skilled people in technical fields.
On the outskirts of the southern Bohemian town of Ceske Budejovice, down Robert Bosch Street, you come to gray boxes, attached to each other as if by glue. Every day, two thousand employees pass through the gate of the German automotive and industrial technology firm's extensive complex. The annual turnover borders on 10 billion crowns (350 million euros), and the director's Best Employer of the Southern Czech Republic awards are accumulating on a shelf in his office. It all seems perfect, but it isn't. Deep inside the complex, 200 mechanical and design engineers are brainstorming new models of electric gas pumps or gas pedals. The firm has invested 130 million crowns (4.5 million euros) into the development center, equipped with a laboratory and a testing room. Still, it is 50 engineers short. "It's a serious problem for us," says the firm's human resources director, Barbora Schelova. "On the one hand, we have projects and commissions to work on, but, on the other hand, we don't have the specialists to execute them."
The problem of dwindling numbers of highly qualified workers in the Czech Republic has been confirmed by many studies. The Czech Technical University, which began tracking its graduates in the mid-1990s, further confirms the growing demand for its people. "I'm not aware of one employment bureau where a graduate of ours would be registered [as seeking work]," says the dean of the university's mechanical engineering department, Frantisek Hrdlicka.
Experts from the IT and statistics department of the University of Economics in Prague found that last year firms in the Czech Republic lacked 5,000 computer specialists and had to hire people from other fields due to the scarcity. Moreover, researchers have detected a "disconnect" between the firms' requirements and the applicants' actual knowledge. Only a fifth of bachelor's and less than half of master's program graduates meet the firms' high demands. And the investors' appetite, according to their findings, will only grow. "To maintain the present state of affairs (not considering new investments and development projects of multinational firms), more than 4,400 new IT experts a year will be needed starting in 2010, more than half with a university education," the authors of the study predict.
So we come to yet another feature of the search for brains. Although there are applicants, perhaps even with the appropriate education, some of them are of no interest to firms, because, for example, they have not mastered a foreign language. "Technical English causes difficulties for students and needlessly hinders their asserting themselves in our company. It used to be that during the selection process we had to favor an applicant who was average in his field but outstanding in a language. We would like to change that," the chief executive of the Vitkovice Holding engineering concern, Marian Dobias, recently sounded off in Profit magazine.
OBSESSION WITH TALENT
With this shortage of staff, firms are breaking their backs (dubbed an "obsession with talent" by The Economist) to find and subsequently keep competent people. To these ends, they use two main strategies.
Strategy No. 1: massive recruitment in schools. This year's survey by the employment agency LMC of 2,000 graduates and 30 major firms showed that students and recent graduates are an increasingly sought-after commodity on the job market. "Big multinational companies, in particular, have targeted them," the agency's report states. "With [big companies], it's not only a matter of solving scarcity problems, but rather a thought-through recruitment strategy that aims to address prospective employees before the competition gets their hands on them."
Korean car manufacturer Hyundai, has, for instance, had a detailed recruitment strategy worked out by PriceWaterhouseCoopers for its plant in Nosovice. Although the strategy remains classified, the basic principles are evident from the firm's course of action: it searches for new staff, mid-level managers and qualified specialists, primarily among recent graduates of the Technical University of Ostrava. From around 500 university applicants, the firm selected 130 for the next round. These were invited for an interview at Ostrava's Imperial Hotel, where Korean recruiters interviewed exclusively in English. From 130, 60 were selected; more recruitments of this kind will follow. Successful applicants can look forward to top internships, professional growth, a very good paycheck, and job security, which isn't always guaranteed in the Ostrava region. "We want to promote them so that in couple of years, they'll take over the Korean specialists' positions," says the plant's human resources director, Jaromir Radkovsky. Hyundai wants to go even further (or "lower"). "We're planning to target elementary schools, so they all realize that there's a large investor, and that it's worth going to study at a technical college," Radkovsky says.
Businesses are approaching the issue from many angles, including helping to fund some educational programs. "If Siemens had not supported us, we wouldn't have even opened the railway and wheeled vehicles programs," says Hrdlicka of the Czech Technical University. Half of the budget of the university's mechanical engineering department comes from private companies. This year, Bosch began a Technician of the Year contest in six categories (for example, "a new concept for an ultra-high-pressure pump for diesel cars"). Students who come up with the best ideas will receive a financial reward, and Bosch will send them to intern at its branches worldwide.
Skoda Auto has contracts with all major technology manufacturers in the country. The auto-parts maker Brano Group collaborates with technology manufacturers in Liberec and Ostrava, with an industrial high school and training school in Opava, and another training school in Koprivnice. Bosch regularly invites students from technical high schools to "show them that a modern plant today is no longer a dirty job in a loud environment, but work on highly modern machinery and interesting projects." Firms are also setting up their own "company universities." The chief of sanitation technology firm Linet, Zbynek Frolik, has established his own Academy of Productivity and Innovation next to the firm's headquarters not far from Prague. And, of course, there's Skoda's planned college.
The second strategy requires that businesses take care of their own. "We will send you off for training to America, Turkey, India, or South Korea," Hyundai's Radkovsky tells applicants.
We will make your life easier, other firms promise. Bosch offers a kindergarten, open days, after-work parties, and a reduced work load for employees on maternity leave, and hosts company balls. And, of course, an old-fashioned tactic is put to use -- high wages. "Assemblers are leaving us because competitors offer them, for instance, 60,000 to 80,000 crowns (2,000