Testing Estonia's Labor Market: The IGT Perspective (1)

Patti S. Hart, CEO of International Game Technology Photo: Courtesy of IGT
1/26/2012 3:00 PM
Category: Economy

International Game Technology (IGT), one of the world's largest gaming technology and casino equipment manufacturers, is planning to expand its Estonian staff this year, doubling its Interactive (software) division from 60 to 120 workers. 

Depending on how well the local labor market fares in this test, the company could soon up the expansion ante, bringing in hundreds more jobs.

ERR News recently spoke to the company's global CEO, Patti S. Hart, and the director of its Estonian operations at IGT Interactive, Leonid Nezgoda, about their development plans and their experiences with the labor the market thus far. What they find will have significant implications for the country's prospects in becoming a home for global business and a true player in the IT world.

What attracted IGT to Estonia? Last summer you acquired the Swedish gaming software company Entraction, which has an operation here. But did you specifically plan to get into the Estonian market through that move or are you here because Entraction happened to be in Estonia?

Hart: I would like to be able to say that we were smart enough to have planned to acquire Entraction to enter Estonia [but] we were after the capabilities that were resident within Entraction. One of the great surprises that came with it was the workforce here in Estonia. It was not something we were as familiar with but became familiar with very quickly and saw as a great positive to the aquisition - not only for the employees who are currently on the payroll but for the opportunity to take that workforce and expand it.

We see it as an opportunity to create a center of gravity for the company where we can have a multifunctional workforce [...] Our CIO is here and he's looking at some back-office opportunities for people outside of just being supportive of the Interactive group, which is a small part of the company, broadening it to support the entire company on a global basis here.

Have you already made a decision on moving some of your company's back-office components here or is it just an idea at this point? What would make that an attractive option?

Hart: We have decided that we'll significantly increase our workforce here. We're busting at the seams in our facility, so we've got to go through all the normal things that you go through when you make a decision to expand, including finding real estate and finding workers.

The spirit of the workforce here is something that we find very attractive. There's a great work ethic that I think exists in the population here. There's a great youth in the workforce here which we also find very attractive. There's a very interesting level of education here in the available workforce that is unusual for a community of this size.

And there's a real adventuresome spirit in the folks here. While they love their country and they're very loyal, they think about their opportunities to grow broadly in the world. Because we are a global company, we want every employee on our payroll, whether they're in Estonia or Stockholm or Las Vegas, to have an interest in being part of the company on a global basis.

The English-language skills here have suprised us very postively, which is an important part of being part of IGT and building a career here.

Apart from the attributes of the personnel, are there other reasons to do all of this in Estonia specifically rather than setting it up in one of your other offices?

Hart: The workforce is the most attractive. Next is the community. It's a community that we feel encourages foreign businesses to establish their presence here and grow and contribute to the local economy. It's always a two-way street when you choose a place to expand. You don't want to feel like you're forcing your way into an environment where you're not welcome, and we have felt incredibly welcome here.

Leonid [Nezgoda] mentioned that you've got about 60 employees now and that you're planning to double that this year. Can you talk about the issues that you're facing with growing the workforce? What have you found so far and what are you doing to get around some of the roadblocks?

Hart: I think the biggest restriction for us is that it's just not enough - there aren't enough people in the workforce for us. We would love for it to be twice the size or three times the size, that would be great for us. As you get larger, you get to a point of diminishing returns where adding more and more people becomes more difficult. We're a long way from that now, but it's something you have to think about if you put your center of gravity down here.

Nezgoda: IGT is a big, US company and generally for the labor force here, being able to work for a big, American company is very attractive. But at the same time, IGT is not on the radar right now, so we have to do a lot of work to create brand awareness in the country.

The other issue is of course is the labor pool. When we're coming into the country right now we will be cannibalizing staff from other companies. One of the challenges is that, if we are here to stay, we need to work together with universities and other education institutions to make sure that the labor pool in the field that we are acquiring is actually constantly growing. It's not just a challenge for us, it's a challenge for any big company here like Playtech and Skype.

IGT is a very international company that has 65 offices in 50 countries. The thing is that when you're bringing in international staff, the lack of international education, especially secondary education, is a challenge. We have only one international school in Tallinn and the tuition fee is very high for a country the size of Estonia.

Apart from that, we would like to see the quota for immigration in Estonia grow in the future, especially for white-collar jobs - highly educated people. That's also good for the country because it brings in a knowledge spillover. With some exceptions like Playtech and Skype and a few banks, Estonia has been a center for peripheral services. Typically the headquarters of many companies are located somewhere else, like Scandinavia or the western side of the US, and there are a lot of core functions that are not well established in Estonia. The increased quotas and more immigration to Estonia will turn this situation around.

You mentioned working with universities to make sure that people with the right skill sets are going into the system. Are you looking at cooperating with Skype and Playtech in this effort?  

That's kind of a sensitive area, because we're competing with them for labor force. I think that we'll see some level of cooperation in the future, especially when it comes to discussions with governmental agencies.

When it comes to universities, we are at the exploratory stage right now. We are trying to go to universities to see what they can supply us with. Tomorrow we are meeting with the Tallinn Technical University and we'll [see] what we can do for each other – what the university can produce for us and how we can help the university in terms of additional scholarships or [supplying] experienced lecturers from time to time. And I hope that we will be able to do the same with the University of Tartu in the future.

Have you dealt with anyone on the government side, either in the education arena or in the expansion of immigration quotas?

Nezgoda:  We haven't addressed those issues with anyone on the government side yet, but we are looking for forums to do so. A few months ago we met with Sten Tamkivi at Skype and discussed what they are doing to address these issues. And I think that as time goes by and we expand here [...] the next thing will be for us to ask what the long-term perspective is for us in terms of labor.

Hart: It's really important, when we have facilities of this size in our company, that we can create a free flow of employees into and out of that facility. This is one of the things not only here, but around the world that we're struggling with.

As globalization becomes a reality, your workforce has to be fungible from a geography perspective. It cannot be wed to a particular geography. We have people in 65 offices around the globe and all of those employees want to be able to move around [to different offices] whether it's on a project basis or on a permanent basis. [It's] not that we're trying to replace Estonian's jobs, we're trying to create a global economy that will help our workforce here in Estonia grow.

In every place we have people around the globe we have these kinds of issues. And we think that there's less barriers here in Estonia than in other places where we have employees. There's at least more willingness to sit down and talk about it at least, and that's where you have to start.

Your plans to add another 60 people this year are, as I understand, a kind of test to see if it will go farther. How far will it go and what will you look at to make that determination?

Hart: We'll look at the same things we look at in every facility: turnover rates, production rates, promotion rates and the quality of work output from the group. There's not a date when we're all going to gather in a room and decide, but you kind of get a feel for it as you go when you get to the point when the next person you bring in isn't pulling up the pack.

We don't really know what that number is, but we know we have a workload that will keep another 60 people busy.

If you decide you can't push it farther than that, what will the picture here look like in, say, five years?

Hart: Our plan will be to freeze it at that size - 120 to 150 people. A lot of it has to do with the quality of the workforce and how easy it is to move people around. But it also has to do with our business - is our business really meeting its objectives and growing so can we continue to add people, or are there fuctions in other parts of the world that we can relocate here easily?

Nezgoda:  Of course there are ambitions from the local management team because the local management team wants to add value for IGT. And since we're relatively young here, there are no limits. We will be working with all the communities, with all the forums and all the agencies to make sure that this country will create a lot of additional benefit for IGT and that hopefully we won't hit that point where we need to stop.

Are there any other labor or relocation issues that are emerging as roadblocks to your expansion?

Nezgoda:  One very practical issue is the airport - being able to connect to the rest of the world. Even though Estonia is at the center of Europe, getting to the US is sometimes a nightmare. It's 24 hours to get to San Francisco, more or less.

Hart: We have a fairly large workforce dispersed around Europe. Even getting to some of the European offices quickly is difficult. From all of our other European offices, most of our emplyees can make a day trip to get to a meeting. It's not possible from here for the most part. It makes us more reliant on technology to keep our workforce connected, but there's only so much you can do through technology. We don't want that to be a limiting factor for our local folks in Estonia, keeping them from being involved in the kinds of projects that I think they can contribute to.

Nezgoda: I really hope that the government addresses this issue, but we don't really see anything moving in that direction, unfortunately.


Interview by Steve Roman

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