While 2021 saw companies in Hong Kong and Singapore pressured to re-adjust hiring strategies to meet candidate-driven market challenges, here in Tokyo, this has always been the norm, and last year was no different. While hiring levels increased from 2020, we didn’t experience the great resignation as witnessed elsewhere.
Japanese market conditions at the beginning of 2021 were uncertain due to the slow vaccination rollout. However, confidence slowly returned, and by the end of the year, almost 78% of the population had been fully vaccinated. The economic recovery was relatively weak and suffered from subdued private consumption, a Delta variant spike in the summer and supply chain and procurement challenges for semiconductors for digital goods and the automotive industry.
Japan’s unemployment rate remained stable, dropping slightly from 3% in January 2021 to 2.7% by the end of the year. Currently, the job to application ratio is 1.15, meaning there are 115 job openings for every 100 job seekers.
Through 2021 the highest levels of hiring activity were seen across the IT, e-commerce, pharmaceutical and medical device industries, while the retail, hospitality and automotive sectors continued to struggle. There was renewed appetite for senior sales & marketing, HR and finance professionals which was driven by companies looking to upgrade key positions within their leadership teams as well as senior candidates leveraging the market by moving onto new opportunities.
There was also an unprecedented need for talent acquisition professionals in Tokyo as many firms realized they were behind the competition in recruitment expertise and attempted to strengthen their capabilities. Traditionally, recruiting functions here have been overly administrative with little emphasis on strategy, however, those who attempted to make the transition to a more strategic function struggled to find qualified candidates with the necessary experience and knowledge.
Although Japan has always been a candidate-driven market, increased client demand last year further squeezed talent availability. At the mid and senior ends of the market, candidates received multiple job offers, making it difficult for companies to hire their preferred candidate. The firms that were the most successful in hiring understood the market conditions surrounding the available talent pool and put in place strategies to ensure they got ahead of the competition. Other firms who failed to do this in their recruiting strategies had positions open six months or longer.
Positive business outlook for 2022
Despite the new Omicron variant spreading, overall business sentiment remains positive for 2022, with the government forecasting the economy to grow by 3.2%. As supply chain issues lessen, we will see increased levels of production and a rise in exports which will contribute to greater corporate investment. Client sentiment is also positive for the year ahead and we foresee an increase in demand for qualified bilingual professionals. To ensure businesses thrive, retention and attraction strategies will be more vital than ever, and as we move through the year, it will become apparent which companies have invested in such strategies and those who have not. Although the discussion on this topic has been held again and again, there has never been a more critical time to get it right.
Support flexible working arrangements
With most foreign-affiliated companies in Japan having had an almost fully remote or hybrid working arrangement since the pandemic started, the year ahead will raise new retention and attraction challenges as companies look to return to offices. A lot of firms are already facing resistance from employees who do not wish to return to pre-covid conditions and maintain at the very least a hybrid working arrangement. These employees do not want to give up the well-being and quality of life they have gained through the time saved on long daily commuting times. Firms that lack a clear and flexible policy around WFH will not only lose key talent but also find they are positioning themselves out of the market to hire new employees and will be left with a weakened employment brand. When discussing new opportunities with candidates at all levels, flexible working arrangements are now as important as salary and career progression.
Broaden the ideal candidate profile
In an increasingly competitive market, more flexibility should be shown around age and experience levels. Too often we see clients who are overly rigid around their preferred profile and miss out on an untapped potential pool of qualified and talented candidates. With Japan’s ageing population, such flexibility will eventually become a necessity.
Robust and speedy interview processes
Interview processes that focus on both candidate assessment and candidate experience are essential to retention and attraction. We’ve seen clients repeatedly lose out to other companies because of prolonged and drawn-out interview processes. That, or candidates drop out due to a poor interview experience. Companies who focus on quality and can expedite processes when needed will always come out on top.
Invest in learning and development
Employees feel appreciated when given opportunities to improve their skills, and companies who invest in development will see lowered attrition rates. One area many firms struggle with is training managers in leadership and best practice performance management. Often, managers in Japan do not want to show perceived favouritism, a practice which backfires when employees feel they have been undervalued and leave to go somewhere they feel they will be recognized and rewarded for their efforts.
Prioritize compensation and benefits
Along with benefits such as flexible working, compensation levels remain one of the most important motivating factors for employee engagement and retention. As candidate demand increases, up-to-date benchmarking will be a necessity to stay competitive. Additionally, companies needing to make crucial hires must exercise flexibility around salary ranges, otherwise, they will lose out to competitors who are willing to exceed market levels.
We've got a wealth of experience hiring on the ground and can help. If you would like to discuss hiring in the Japanese market, please contact Jonathan Hughes.