Do you know what is in store for HR in the future? How do global trends impact on HR professionals in Russia and the CIS? What areas of HR will be of top priority in the future? How will HR change in the near future?

1. Future of HR:
implications for Russia
www.pwc.ru/en/hr-consulting
How are global trends changing HR in
Russia and CIS countries?
January 2014

2. PwC

3. PwC
Future of HR
3
Document
Overview
Change drivers for Russian HR
6
12
17
22
30
Three major HR challenges
Future HR skills and knowledge
Appendix. Five global trends:
implications for Russia
Contacts
Introduction
Methodology and survey participants
4
5
Key survey findings
7

4. PwC
Introduction
In 2013, PwC published the research findings from several
global scale surveys (the 16th Annual Global CEO Survey,
Talent Mobility 2020 and Beyond, etc.) that highlighted HR
challenges on the agendas of top CEOs. The Russian economy is
also strongly affected by these challenges. With megatrends
affecting our business, new conditions have emerged in areas
such as demographics, information technologies, population
concentration in megalopolises and climate change, which all
have started to reshape HR in Russia.
The purpose of this study is to understand the local impact of
environmental pressures on HR. Guided by the belief that
major changes will appear following the theory of “five
megatrends”, we have defined the six change drivers that
are already forming specific conditions for Russian HR
professionals and are dramatically affecting their
work.
4
Thus, we were eager to uncover the
reasons behind two research
questions:
To what extent global
trends will impact HR
management in Russia?
How will Russian HR
change in the near
future?

5. PwC
Target group: HR professionals, firmly established companies operating in Russia
5
Methodology and survey participants
150
HR directors and
professionals, providing a view
of both local and foreign
companies
52% 48%
21% 11% 10% 10%
68%
65%
Other
industries
Survey timeframe: September
through November 2013
Local
companies
Multinational
companies
Industrial
production
Oil&Gas,
Utility&Mining
Financial services FMCG&Retail
By origin:
By industry:
By size:
54%
24%
9%
13%
Less then 2,500 employees
2,500 – 10,000 employees
More than 10,000 employees
10,000 – 50 ,000 employees
Companies operating in most
Russian regions
Companies that are growing in
terms of total turnover by more
than 5% (in comparison to last
year)
Specifically:
Method: quantitative

6. PwC
Key survey findings
6
Our approach
This study is based on the concept of the five
megatrends (see Appendix) that companies
face globally. These trends have shaped the
drivers that are expected to have crucial
impact on HR’s role and functions in the
future. We applied this theory to the specifics
of Russia and surveyed 150 HR professionals
working in Russian and multinational
companies in order to verify the validly of this
theory and understand how HR will generally
change in Russia in the future.
Key drivers
• Demographic shifts
• Social media
• Digital technology
• Global mobility
• Social responsibility
• The generation gap
Impact of change drivers on HR
All respondents believe that change drivers
will have a greater impact on HR processes,
while having less of an influence on the
knowledge and skills essential for HR
professionals or the organisation of the HR
service's operations or the general role of HR.
Interestingly, multinational and domestic
companies in Russia differ in their estimates
of the drivers' impact on HR functions and
concur only when evaluating demographical
challenges and social responsibility. For
instance, 58% of multinationals noted the
impact of social media on the HR service's
operations material compared to 35% of the
Russian respondents.
Top HR challenges
HR professionals cited leadership development, employee
engagement and productivity as top challenges.
The most crucial set of skills for HR
Change management will be a priority HR skill.
Organisational learning, transfer of knowledge and
employee development will be also important.
Employee involvement in implementing change
Most of the respondents admit that they are now attentively
studying the societal and environmental impacts on HR and
are tying to help their companies implement changes for the
future.

7. PwC
Change drivers for Russian HR
7

8. PwC 8
Demographic
challenges
22%
Social media
16%
Corporate
responsibility
18%
Digital
technology
19%
The
generation
gap
16%
Demographic
shifts
Shift in global
economic power
Accelerated
urbanisation
Climate
change and
resource
scarcity
Technological
breakthroughs
Global
mobility
9%
Drivers shaped by global
trends have an impact on HR
in Russia
Based on the Global Annual Survey*, we asked respondents to assess
the impact of these drivers on both our future and the future of our
clients over the next ten years. The respondents assessed the impact of
these drivers on HR services as follows:
The drivers are
closely
interwoven and
whenever one of
them changes, it
prompts changes
in all the others.
(*) Global Annual Review 2013:
Building trust in a time of
change

9. PwC 9
Theses drivers impact HR in all the
companies, no matter what their size or
industry or turnover may be.
The respondents believe that the change
drivers identified will have a greater
impact on HR processes, while having
less of an impact on the knowledge and
skills essential for HR professionals, HR
service structure or HR’s general role.
36%
Impact on
HR processes
Impact on
HR knowledge
and skills
Impact on
the functional
organisation of
HR
Impact on
HR’s role
23% 22% 19%
Impact of change drivers on certain HR issues

10. PwC
Russian and multinational
companies have varying
assessments of the drivers
impacting of HR services
10
69% 58% 56%
60% 58% 44% 44%
Multinational
companies
Russian
companies
Demographic shifts
Social media Corporate
responsibility
Demographic shifts
Corporate
responsibility
The
generation
gap
Digital technology
Demographic shifts. Although there are
differences between multinational and local
companies, all companies admit that the decline
in the share of working population in their prime
years between 18-60 will have a crucial impact on
the work of HR professionals.
52%
Digital technology The
generation gap
46%
Social media
35%
ImpactImpact

11. PwC 11
Digital technology
Digital technology transforms the
key HR processes. Such
processes encompass HR
administration, recruitment,
performance management,
learning and development, bonus
and benefit management, etc.
Impact of generational
differences on competencies
Managing workforce diversity,
particularly generational
differences, will be a new key
area where additional knowledge
and skills will be required.
HR departments will manage
certain categories of the
personnel with various working
methods, preferences and even
36%
The generation gap is the
key driver that will change
competences.
Furthermore, societal
expectations will also have a
strong impact on the methods
multinationals employ for
organising their HR functions.
These recent changes demand
that HR professionals not only
understand their customers and
their values but also treat
employees as clients by building
policies and practices that will
support the delivery of brand
promises, both internally and
externally.
values. Here, HR’s objective is to
ensure effective work cooperation
among various groups of
employees, which may call for
adjustments in HR systems
themselves.
Rising expectations for
corporate social
responsibility
Social responsibility as an
integral part of business will drive
44%
Social responsibility is
changing HR’s role.
56%
Digital technology
will materially
change HR
approaches.
68%
Extensive use of digital
technology will
transform key HR
processes.
the changes in HR’s role and the
way it is organised. This is
particularly the view held by
multinational companies
operating in Russia.
Most of the respondents
indicated that the society’s
expectations about how products
are manufactured,
what they stand for, the way they
serve to customers and labour
standards that they follow are
more and more changing the role
of HR professionals in the CIS.

12. PwC
Three major HR challenges
December 2013Future of HR
12
(*) The data reflects the opinions of study participants

13. PwC
Future of HR
13
Productivity
Employee
engagement
Leadership
development

14. PwC
Leadership development
14
Table 1. Leadership development challenges by industries
100%
69%
67%
57%
47%
45%
33%
Pharma and Healthcare
Technology and Telecom
FMCG & retail
Oil and gass
Industrial Production
Financial services
Professional services
Not at all% Partly challenging % Highly challenging %
Professional services
Financial services
Industrial production
Oil and gas
FMCG and retail
Technology and telecom
Pharmaceuticals and healthcare
Not at all % Partly challenging % Highly challenging %
Building leadership capabilities is a major challenge for 55%
of companies operating in the CIS.
Although management is gradually gaining a better understanding of
the importance of leadership development and effective HR
investments, these are still challenges for both Russian and
multinational companies. Compared to 51% of local companies
admitting such challenges, 58% of multinationals operating in Russia
and CIS countries acknowledged the same.

15. PwC
Employee engagement
15
Table 2. Employee engagement challenges by industries
29%
33%
45%
53%
57%
71%
77%
Oil and gass
Professional Services
Financial services
FMCG & retail
Pharma and Healthcare
Industrial Production
Technology and Telecom
Not at all% Partly challenging % Highly challenging %
Professional services
Financial services
Industrial production
Oil and gas
FMCG and retail
Technology and telecom
Pharma and healthcare
Not at all % Partly challenging % Highly challenging %
50% of HR professionals consider achieving a high rate of
employee retainment to be extremely difficult.
In this regard, multinational companies experience slightly less
challenges than domestic companies. This can be explained by their
long-standing HR practices with respect to employee involvement
and engagement. Furthermore, western multinationals usually enter
a market with a relatively high brand awareness and good image as an
attractive employer, which may positively influence employee
engagement at its early stage.

16. PwC
Productivity
16
Table 3. Employee productivity challenges by industries
14%
14%
42%
46%
47%
50%
60%
Oil and gass
Pharma and Healthcare
Professional Services
Technology and Telecom
Industrial Production
Financial services
FMCG & retail
Not at all% Partly challenging % Highly challenging %
Technology and telecoms
Pharma and healthcare
Professional services
Financial services
Industrial production
Oil and gas
FMCG and retail
Not at all % Partly challenging % Highly challenging %
For 47% of HR professionals, supporting line managers in
order to improve employee productivity is still a top HR
challenge.
The growth of competition, on one hand, and slowdown in economic
growth, on the other, has highlighted the importance of costs and business
restructuring.

17. PwC
Future HR skills and knowledge
17

18. PwC
The importance of developing
certain HR skills
18
69%
89%
Managing change
Organisational learning/
knowledge transfer
Employee development
Performance
management and reward
Restructuring business/
Organisational design
Prior importance
Needs improvements
Planning staff headcounts
Recruitment
We asked all respondents to name the future skills most important for
the future of HR, as well as areas for improvement.
The opinions were split as follows:
59%
59%
56%
55%
84%
84%
85%
76%
36%
77%
30%
67%

19. PwC 19
Managing change1
HR professionals indicated that the current turbulent
environment demands quick and wide-ranging
managerial changes from them every day. This is even
more important for local companies and this
illuminates a growing trend for greater business
restructuring. The need to improve the skills is just as
high for local companies as it is for multinationals.
Drawing on the above responses, we can
name the skills that will undoubtedly be in
high demand for future HR functions:

20. PwC 20
Organisational learning and knowledge
transfer/ Employee development
2
There is a greater demand on HR to help organisations create systems that can ensure the
transformation of tacit knowledge into explicit understanding. This will help organisations to
retain knowledge regardless of employee turnover. In order to share and transfer knowledge
throughout operations and between employees, Russian HR should not only use IT systems,
it will also need to built supportive organisational cultures, as well as encourage
organisations to cultivate their own capabilities.
Managing employee development will become equally important for HR as it is significant
for line managers. HR will also need to support managers in improving these skills.

21. PwC 21
20%
Not Involved
34.5%
Building
awareness
30%
Participate in actions
driven by others
15.5%
Initiate and drive
actions
One fifth of the HR professionals are not involved in initiatives
that address changes.
HR professionals' engagement in
implementing change
18% 22% 34% 36%
31% 28% 17% 14%
Multinational
companies
Russian companies
Multinational
companies
Russian companies
Multinational
companies
Russian companies Multinational
companies
Russian companies
HR professionals in Russia are developing cases for change while also
raising awareness about the current environmental and the social impact
on HR.

22. PwC
Appendix.
Five global trends: implications
for Russia
22

23. PwC
Future of HR
23
Demographic
shifts
1
Shifts in global
economic power
2
Accelerated
urbanisation
3
Climate change
and resource
scarcity
4
Technological
breakthroughs
5

24. PwC
Demographic shifts
24
Annual growth rate 2010-2050*
1
Explosive population growth in some areas of the globe against
declines in others parts has been contributing to everything from
shifts in economic power to resource scarcity to the changes in
societal norms. This trend is not only global, it is also visible in
Russia. Over the last 13 years, the Russian population
declined by 2%. The country’s population is expected to fall
from 143mn in 2010 to 132mn in 2030, which would mean a
population decline of 8%.
Growth rate
2000-2050.
2013 2020 2030
143mn
-3mn
140mn 132mn
-11mn
Even factoring in the rise of the immigrant population,
Russia’s population will still fall by 21mn.
The population will decline below the 1975 level by 2030. This
will create a huge talent gap in the country’s future economy.
18% of the
population of the
Russian Federation
in 2030 who will be
older than 65 years
An ageing population restricts
Russia’s ability to increase its
share of world GDP over the
long-term as is the case with
other large emerging
economies.
Population growth
for average working
age until 2030 (% per
annum)
1%
18%
* Russian Federal State Statistics Service (Rosstat). The estimated Russian population size by
2030.

25. PwC
Shifts in global economic
power
25
2
The focus of global growth has shifted towards emerging markets and
Russia. By 2050, Russia will rank as the sixth largest
economy by GDP. Emerging markets will host the majority
of corporate headquarters with some of them in Russia,
which will change the business models of many companies.
2009
2050 (USA, Japan, Germany,
UK, France, Italy,
Canada)
(China, India, Brazil,
Russia, Indonesia,
Mexico, Turkey)
USD 29tr GDP USD 20.9tr GDP
USD 138.2tr
GDP
G7 E7
G7 E7
GDP of G7 and E7 countries in USD PPP
Competition will increase and be generated by multinationals coming
from emerging markets, including from those of Russian origin. They
will also become international players, which, in turn, will have many
implications for HR.
Source: PwC Global Annual Review 2013: Building trust in a time of change
USD 69.3tr
GDP

26. PwC
Accelerated urbanisation:
Moscow and other large cities
26
3
The Russian population in urban areas will have risen by
2% by late 2025 (up to 76,3%)2.
Rapid urbanisation and concentration of people in the cities will
increase and, by 2030, the proportion of people living in cities will
have surged from the current 30% towards 60%. The UN estimates
that, by 2025, Moscow will be amongst 37 megacities1, ranking 27th.
80 and over
60-79
40-59
20-39
<20
Not
estimated
Percentage of population in urban areas, 2030
11.9mn
12.2mn
2014
2025
Moscow will see a minor rise in its
population by late 2025, up to
12.2mn people.
The population in the Moscow
Region will also increase. This
population will have grown by
approximately 600,0002 by late
2025.
1 United Nations Organisation. World Urbanization Prospects The 2011 Revision.
2 Russian Federal State Statistics Service (Rosstat).

27. PwC
Climate change and resource
scarcity
27
4
Scarcity of resources and the impact of climate change are of growing
economic concern. Demand for energy is forecast to increase by as much
as 50% by 2030 while water withdrawal will likely go up by 40%. The
need for sustainable solutions may well be at odds with the demand for
resources to fuel growth and feed populations. Time-honoured
traditions will be challenged by changes to the physical environment.
Although Russia will not be amongst these countries, it will still impact
on doing business in the country.
Climate change and resource scarcity trigger change in
business models, as well as the behaviours and values of
both customers and employees. As a result, this will have a
very major impact on corporate social responsibility.
35%
more
food
40%
more
water
With a population of 8.3 bn people by 2030 , we’ll need...
Food
It takes 1,200 l of
water to produce
1 kg of grain
7% of global energy consumption
is used for delivering water
1-2% of cropland
is needed to produce biofuels
Energy
The Food/Water/Energy Nexus
Water
Source: OECD; Dan Hammer, Center for Global Development
50%
more
energy

28. PwC
Technological breakthroughs
28
5
The combination of the Internet, mobile devices, data analysis and
cloud computing will continue to transform Russia. Many companies
in all sectors are grappling with how these developments will affect
consumer expectations, as well as how to interact with their customers
and the underlying business models that support this.
Technological breakthroughs and digitalisation of the world will also
change workplaces and enable new forms of work. For instance, we
already see remote working and virtual teams, more flexpatriates and
changes in working practices.
Access to systems and information should help management models to
flatten out their organisational structures. Furthermore, new
competitors will emerge as technology and innovation create new
competitive advantages and increase productivity across sectors and
geographies.
61.1mn > 52% 49 %
The number of
Internet users in
Russia1
People use the
Internet at least once
a month
People use the
Internet on weekly
basis
@
57%
of Russian on-line shoppers
use social media every day,
which is above the global
average. This is a
significant target group
with higher disposable
income1.
1 PwC Global multichannel survey 2012 • Survey Summary and Business
Implications, April 2013.

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Ruxandra Stoian
Partner
Human Resource
Consulting Services
Tel: +7 (495) 967 6169
E-mail: ruxandra.stoian@ru.pwc.com
Contacts