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All Middle Eastern governments make targeted efforts towards the development of HR with the objectives of maximising local employment and reducing dependence on expatriate labour. Today, most of the Gulf States are implementing a workforce nationalisation policy, whereby organisations (both in the public and private sectors) are encouraged to reserve some positions for nationals, or at least give preference to nationals in the hiring process.
However, this has also resulted in some major challenges for HR.
To begin with, the private sector has not been able to provide jobs for nationals in the oil-rich countries largely because of its inability to compete with the kind of work conditions and salaries offered to nationals by the public sector. There is dearth of qualified nationals for technical/professional jobs, and a need for large scale training and career development targeted towards the Middle East national workforce, points out Dr Sami Ali Al-Amri, managing partner - Business Advisory Solutions Middle East, Ernst & Young.
Interestingly, some of these challenges are specific to the Middle East, Sami notes. "In other parts of the world the reliance on the expatriate workforce is significantly less and, therefore, the related nationalisation challenges don't arise. HR is a more evolved function in other parts of the world and, therefore, the challenges faced in terms of transitioning HR from a personnel administration function to a strategic function are significantly less. The labour market characteristics are different as there's a greater supply of resources as compared to the demand."
Managing talent
Most organisations in the Middle East would agree that retention and hiring 'talent' has become increasingly difficult. The 'war of talent', as Sami says, can be attributed to many factors. "There's significant reliance on the expatriate workforce all over the Middle East and it's becoming more and more difficult to attract professionals to the Middle East (especially non-GCC countries) primarily because of the perceived political situation." Also, the rapid economic growth in the region has resulted in a high demand for talent in all sectors of the economy thus making it a very competitive labour market, he adds. "This economic growth has created inflationary pressures (over 8%) in many parts of the region.
This results in an increase in the cost of living (primarily housing) and resultant increase in manpower costs."
Moreover, the competitive labour market (with organisations offering more and more attractive compensation packages) and limited supply of professionals results in high workforce mobility across the Middle East (especially among the GCC countries). Organisations face high attrition rates (20-30%) despite the government restrictions on workforce movement, he shares.
HR still in the backroom
Sami emphasises that, with talent management as the key challenge and at a time of inorganic growth, it is imperative that HR as a function transits from a 'transactional' to 'transformational' role. "This entails positioning HR as a strategic business partner as opposed to a personnel administration function."
However, Sami is quick to add that this process of transition is a challenge in itself due to several factors. "There's not enough buy-in and support from top management for innovative HR activities due to the 'intangible' effects on the bottom-line. There's lack of empowerment of the HR function in a majority of the organisations across the Middle East. HR is perceived as a function which isn't aligned with the business strategy. It's often considered as a mere support function."
In order to cope with these challenges, organisations must focus on career management and succession planning. This will not only help in attracting and retaining talent but also in coping with the nationalisation challenges by developing the Middle East national workforce, he reports.
"Implement a system of individual development planning, wherein the employer partners with employees to consider and support their career goals in line with the corporate goals and individual aspirations. Improve the effectiveness of the performance management system which would help in the assessment of individual strengths/weaknesses and employee development respectively," he recommends.
Besides, identified high-potential employees should be provided additional exposure through greater responsibility and job rotation. It is also important to have succession planning practices that are developmentally oriented, rather than simply replacement oriented, Sami feels.
With the war of talent that HR managers are currently fighting, the traditional training function should be viewed strategically so that it can transform an organisation into a high-performance organisation (with the introduction of competency-based training, developing indigenous training expertise, evaluating training effectiveness and alignment of learning). In addition, organisations should adopt a total reward strategy in order to attract, retain and motivate employees using both financial and non-financial rewards, thereby maximising the ROI of the employee reward programs. "An optimal mix of fixed and variable pay should be introduced in order to provide employees with a degree of security as well as encouraging risk taking, productivity, retention and commitment," he says.
Time to position HR as a strategic business partner
Furthermore, it is imperative that HR is viewed as a strategic partner and given the due support for implementing various HR processes that are critical to the business, he says. "This can only happen when the HR function aligns HR processes with business needs. HR should work towards creating a high-performance culture and spend time in communicating with the employees about organisational strategies and linking employee performance to organisational outcomes in order to improve their 'line of sight' vis-à-vis strategic business objectives."
Also, organisations should create a performance management system that is flexible enough to adapt to ongoing changes in an organisations' strategy and business environment; and can determine the correlation between non-financial measures and financial results as well as between pay and performance. The HR function should be granted independent budgets and organisations should have competent HR professionals who get involved and provide inputs in business planning. Beyond that, Sami feels, HR should collaborate with other line functions in order to increase customer focus and improve business alignment.
HR performance should be measured periodically and not be limited to traditional metrics such as attrition and headcount. "The performance of the HR function should be assessed through more innovative sources such as customer satisfaction surveys, usage of benchmarking to compare HR effectiveness with global leading practice data, achieving desired levels of regulatory compliance, and compliance to Service Level Agreements (SLAs) with internal customers."
Managing key HR challenges
CASE IN POINT: ERNST & YOUNG
· Hiring right talent - Hiring bilingual (Arabic/ English) resources with the right skills and competencies has always been the biggest HR challenge facing Ernst & Young - Middle East
· Retaining talent - This is mainly due to the fact that experience in Ernst & Young provides our people with numerous attractive opportunities in the market. People who have considerable experience with firms like Ernst & Young are perceived as high value resources in the market, especially in the public sector. Therefore, our people are often offered attractive positions and pay in the market. It has been observed that many Ernst & Young employees immigrate to other countries such as the US, UK, Canada and Australia amongst others.
· Career development - We, as a firm, are committed to the development of our people on a continuous basis. We have a number of programs and plans in place to this effect. These include: (a) graduate development program (b) career counselling program (c) continuous professional education (b) 360 degree feedback (e) Balanced Scorecard (personal scorecards) (f) mentoring programs (g) supervisor assessment and development program (h) senior management development program (i) executive manager development program, etc. The execution of the above programs and plans through our line management has been one of the greatest HR challenges we have undertaken and successfully addressed. We, as a firm, have always created and maintained a strong team of managers with proficiency in behavioral HR functions. This helps us facilitate the implementation of our key HR initiatives aimed at retaining and developing talent within the firm.
BIO BRIEF
Dr Sami began his career with Ernst & Young in the Middle East in 1966. He then moved to Canada where he held a number of senior positions in internal audit, joint venture auditing, management auditing, financial accounting and budgeting, performance management & HR in major oil companies. He rejoined Ernst & Young in London as a manager in the Corporate Advisory Services Department which further augmented his experience. Dr Sami then joined the Middle East practice of Ernst & Young and is now the managing partner of the consulting practice of Ernst & Young - Middle East.