HUMAN RESOURCETRENDS IN

SAUDI ARABIA2015

CAN EMPLOYEE ENGAGEMENT SOLVE THE SAUDISATION CHALLENGE?

www.hrleaderssaudi.com/report

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Human Resource Trends in Saudi ArabiaCan employee engagement solve the Saudisation challenge?

What has been happening in the past 12 months? How are companies adjusting, and what do they see as their major challenges?

A recent study of 215 Saudi-based HR professionals conducted by Informa Middle East, highlights the Human Resource (HR) function’s response to challenges faced by organisations as they strive to meet the Saudi Government’s Saudisation quotas, while still remaining competitive.

As we move into the second half of the decade, Saudisation remains top of the agenda for most Saudi companies. With the introduction of enforceable quotas for Saudisation and severe restrictions imposed on firms who do not meet targets, firms have been forced to increase their efforts to recruit and retain Saudi Nationals.

It is clear that for companies to survive, and thrive, in the face of the Nitaqat programme, they have to look carefully at how they attract, engage and retain their workforce, both Saudi National and expatriate; and this means they need to examine their HR strategies to ensure they can respond to the challenges.

Whilst companies are relatively optimistic about the economic outlook and the growth potential of organisations, there are a number of important issues which the HR function needs to address if firms are to continue to grow.

Quality of Candidates

In the past, companies have expressed concern about the quality of available candidates, and their readiness to enter the workforce. The 2014 MENA Labour Market Confidence Index highlighted that much remains to be done to ensure that young Nationals have the critical employability skills demanded by organisations.

The Saudi Government has responded to the employability challenge by revamping its national school curriculum, moving away from rote learning to an education system which is designed to help students develop the skills they need to acquire knowledge and search for information. Of course, it will be a few years before the full impact of these changes is felt in the labour force, but it is widely regarded as a step in the right direction.

About 43 percent of HR professionals who responded to the survey believe that the overall quality of entry level candidates has remained the same, but there is room for optimism with 34 percent indicating that they felt that the quality has improved. Meanwhile HR professionals need to develop strategies to train staff effectively, not just in the technical job skills, but also in developing the work readiness of new employees.

HR professionals

need to develop

strategies to train

staff effectively, not

just in the technical

job skills, but also in

developing the work

readiness of new

employees.

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The critical skills

Not surprisingly, when asked about skills, “educational and job-relevant technical skills” are regarded as critical by 27.4 percent of the survey respondents. Other vital skills identified include effective communication skills, work ethics, creative thinking and problem solving (see table 1).

The critical skills identified for expatriate employees are similar, but teamwork and collaboration rate more highly for this group of employees. With over forty of the survey respondents listing teamwork and collaboration in their top five, it seems clear that HR professionals in Saudi Arabia recognise the need to address the challenges of working with a diverse workforce.

The outlook for remuneration

As organisations strive to reach their Saudisation quotas, they are employing and training entry-level employees. Anecdotal evidence suggests that this is putting pressure on salaries as firms offer more pay to encourage the employees that they have trained to stay with them. As a senior HR professional with a trading company commented, “Once [Saudi Nationals] have a couple of years of experience, they know they are in a very strong bargaining position and immediately ask for more money or management positions.”

The majority of the survey respondents feel that the overall total rewards and pay outlook has remained the same. That said, there is likely to be increased pressure on reward systems as companies face up to employee retention issues. This pressure could be exacerbated, at least in the short term, when the government introduces a minimum wage for private sector employees.

*Source: The MENA Labour Market Confidence Index 2014

Note: A total of 215 responses were received. Totals add up to more than this number, and the percentage is more than 100, reflecting that respondents were asked to identify up to five critical areas.

Table 1: Top areas of critical development for National entry-level candidates

“Once [Saudi

Nationals] have a

couple of years of

experience, they

know they are

in a very strong

bargaining position

and immediately

ask for more money

or management

positions.”

Educational and job-relevant technical skills

Eff ective communication skills

Work ethics

Creative thinking and problem solving

Teamwork and collaboration

Self and other leadership Skills

Language skills

Technology skills (such as working with PowerPoint, Excel, etc.)

Time management

Life skills (dealing with stress, building confi dence, staying positive, etc.)

Data interpretation and analysis

Preparation for job interviews, resume building etc

Entrepreneurial skills

27.4%

12.1%

2.8%

14.9%

9.3%

2.3%

21.9%

11.6%

2.8%

14.4%

7.4%

1.9%

1.4%

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Engaged employees?

A 2013 article in HBR (Kolac, 2013) quotes research suggesting that “engaged employees are 50% more productive and 33% more profitable. They are also responsible for 56% higher customer loyalty scores and correlated with 44% higher retention rates, leading to great gains in productivity over the long run.” Clearly companies that wish to be competitive need to consider employee engagement seriously.

In Saudi Arabia, many HR professionals consider that Saudi Nationals frequently move from company to company in search of increased remuneration, indicating that they are not ‘engaged’ with the organisations they are working in but are, rather, engaged with the idea of the financial rewards. This perception is reflected in the study with over 43 percent of respondents listing “rewards and benefits” as one of the key drivers of employee engagement. Encouragingly 32 respondents feel that the work culture and values are a factor in engagement.

The HBR article also stated that people “are not picking their next job based on the size of the paycheck. They are instead looking for a worthwhile mission and promising team to join.” Worryingly, the study revealed that only three of the 215 people who responded feel that “meaningful work” is a driver of employee engagement (Table 2).

Over 43 percent

of respondents

listing “rewards

and benefits” as

one of the key

drivers of employee

engagement.

Table 2: Key drivers of employee engagement

Note: A total of 215 responses were received. Totals add up to more than this number, and the total percentage is more than 100, reflecting that respondents were asked to identify multiple drivers.

Saudisation is not the only HR challenge facing firms in the Kingdom. Companies need to find ways to continue to attract senior, experienced, expatriate talent to ensure that they remain successful as a new cadre of Saudi talent is developed and made ready to take control. Given that, for many, Saudi Arabia is not seen as an attractive country in which to work, firms need to ensure that their expatriate employees stay for more than a couple of years.

This means that organisations need to look beyond pay as an engagement strategy and design working environments and cultures where employees want to stay. The overall employment package, including reward management, career development, organisational culture, and meaningful work, needs to be attractive.

Rewards & benefi ts

Self and other leadership skills

Being valued and recognised

Work life balance

Impact of our senior leadership team

Our work culture and values

Their own career growth and development

Their position and title in the organisation

Inspiring and eff ective managers

Eff ective communication

Their belief in our company’s mission and values

Meaningful and engaging work

43.3%

15.3%

12.6%

16.3%

13.5%

8.8%

33.0%

14.9%

9.8%

16.3%

13.5%

1.4%

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What do these challenges mean for HR?

Faced with government pressure to increase Saudisation, HR is in for some challenging times. The trend in HR in Saudi Arabia is to shift the function away from a processing and administrative role, and to create a strategic HR function that supports the organisational goals by ensuring that firms have the right people, in the right place, at the right time, and at the right price. This reflects the trend over some years now in major companies internationally.

With sought after young National talent being in demand, HR needs to step up to the task of ensuring that organisations are doing what they can to recruit and retain the employees they need, not just to fill the quotas, but to ensure that the organisation remains competitive. In the short term it seems likely that HR costs will increase. With an education system that is failing to prepare young Saudi Nationals for work appropriately, firms are faced with the need to invest heavily in employee training. Once a new employee is well-trained, they are then increasingly attractive to competitors and the risk of them moving to another organisation for higher remuneration is very real.

It is imperative that, in this situation, companies look beyond the next few months and consider how their cultures, work practices and working environments combine to provide an attractive employee value proposition. HR professionals need to consider creative ways to reward employees that go beyond the traditional pay and benefits package. Career development, succession planning and meaningful work need to be brought together in such a way that a newly trained employee does not feel the need to rush off to the next opportunity for a higher salary. HR strategies need to support the long term retention of skilled and motivated employees, but this is not easy.

Add to the mix increased female participation in the workforce, and questions of how much and in what ways women can be integrated into organisations, and HR professionals may start to wonder why they entered the profession.

For HR interventions to be successful, they need management support. Too often HR professionals develop excellent ideas, but do so in isolation from the business needs. It is vital that HR professionals build strong relationships with managers at all levels, and that they understand the business imperatives. Regardless of how good a proposed intervention is, it will not succeed if the managers are unwilling to implement it. HR professionals need to ensure that they communicate effectively with the business and clearly demonstrate how the HR initiatives will improve the business.

The road ahead may not be easy or smooth, but there are organisations in Saudi Arabia and other regional countries that have developed ways to overcome the challenges. Top business leaders in Saudi Arabia understand the value of strategic Human Resource Management and the crucial role that HR plays in helping organisations remain effective as they face the ever more competitive business environment. Embracing international and regional best practices in employee engagement, workforce planning, and talent management will ensure that firms are able to recruit and retain the talent they need, and to effectively manage the challenges.

HR professionals

need to consider

creative ways to

reward employees

that go beyond the

traditional pay and

benefits package.

ReferencesInforma and The Talent Enterprise (2014), MENA Labour Market Confidence Index ‘14

Koloc, Nathaniel (2013), “What Job Candidates Really Want: Meaningful Work”, Harvard Business Review, https://hbr.org/2013/04/what-job-candidates-really-wan/ (accessed 12 April 2015)

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The HR Observer is the region’s first of its kind initiative aimed at becoming a platform for HR professionals to exchange insights freely both online and offline in efforts to help develop the profession in the Middle East. Visit www.theHRobserver.com to know more.

HR Leaders focuses on Saudi specific opportunities to create business value through HR. It will also explore the challenges of implementing HR strategies effectively in the Kingdom. Meet and learn from regional HR experts and CEOs, as well as HR leaders from top international companies. Hear their experiences in making the transformation from functional administrative HR to strategic and business driving HR. Visit www.hrleadesrsaudi.com for more information.

10 – 13 May 2015Kempinski Burj Rafal • Riyadh • Saudi Arabia