Increasing importance of HR for Middle East Businesses

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Middle East Challenge
Human capital is considered to be the most valuable resource for businesses across the world, since people deliver results. People need to be nurtured, developed, motivated and rewarded, to ensure business growth. HR departments ensure that they attract the right competency, develop them continuously, and keep the staff motivated through implementation of various HR processes. Global benchmark for staffing HR departments is 1 HR staff per 50- 75 employees.

The Middle East region faces a unique challenge. Thanks to the oil bonanza, the countries have been able to engage in large infrastructure and other businesses, requiring significant use of expatriate labour (estimated at over 75% of the working population). Hence, most employees were considered transient and investment in their development was not considered to be fruitful. Most local businesses in the Middle East, have not implemented key HR initiatives. At most there is a Personnel Department, looking after the basic requirements of maintaining personnel files/records. This led to underdevelopment of people, de-motivation and high staff turnover.

However, local business groups are beginning to realize the importance of HR and its implications on their business results, due to which increasing focus is now being given to it.

Additionally, with the governments drive to bring Nationals into the work stream, HR is now gaining increasing importance

HR Challenges in the Region
The key challenges that regional organisations face in the HR field include:

  • Lack of organisation & grading structures
  • Clarity of job descriptions & performance measures
  • Lack of clear HR policy
  • Inequality in compensation and reward systems
  • Absence of HR processes

Organisation & Grading Structures:
“Who do I report to? I don’t know.” – a common complaint heard amongst employees. Formal structures with clear designations are missing in most local firms. This leads to non-clarity in reporting structures. Due to this, a person down the line may not know whom to approach for any issues they may have, leading to increasing frustration. They usually get pushed to the ‘next person’, with no one able to address their requirements. Clear organisation structures with clear lines of reporting, can help to sort these issues

Designations need to be defined clearly, so that people with similar designations do not report into each other (eg. a ‘Manager’ should not report into a ‘Manager’). Grading structures help to clarify the hierarchy of a position in the organisation, with different designations. For eg. a ‘Chief Engineer’ may be an equivalent grade to the Sales Manager. Clear designations and grades help during the recruitment stage, so the new recruits can understand at what level they are entering the organisation and what can be expected in future.

Clarity of Job Descriptions and Performance
“I do completely different things that what I am supposed to do. I am doing somebody else’s job”. Common complaints. This happens due to lack of clarity in job descriptions. The job description needs to clearly outline the Principal Accountabilities of a position in the organisation, and hence what are the key activities that position needs to undertake. Coupled with the job descriptions, should be a set of Individual Performance Measures (IPMs), which the position needs to deliver on to be eligible for any reward (bonus/incentive/promotion, etc.). IPMs clarify to the employees that what they will be measured on, irrespective of any other activities they do.

More important is to communicate these to the employees. There are organizations who have developed descriptions, but have not communicated them to the employees, which again is a waste and does not add value to the organizations.

HR Policy
“We get flooded with everyday enquiries from employees, and our time goes in answering them”. A commonly heard remark from personnel departments. Or Managers and supervisors are authorizing individual requests from the employee related to leaves, compensation, travel, etc. This is due to lack of clearly defined HR policies across the organisation

Even if organizations have a policy, it may not be communicated to the employees. Or there have been circulars issued in the past, with no records available.

Development of a HR policy containing all issues related to leaves, travel, expenses, timings, and other related issues can resolve these everyday problems. Once developed it can be communicated in the form of a handbook or put on the intranet for ready reference by all employees. Only ‘exceptions’ can then be referred to the concerned Manager/supervisor for approval. Challenge here is to develop a simple policy, which is readable and can be easily understood by all.

Compensation & Rewards System
Due to the Nationalisation initiative undertaken by the governments, there is a difference in compensation for Nationals and expatriate employees. Even amongst expatriates, there is a difference (eg Western expats and Asian expats may have different salary levels for the same position and grade). Even though this is a known fact amongst employees taking up employment in the region, it does create some heartburn.

To reduce some of this heartburn, organisations need to implement an objective rewards system. Most organisations have a bonus system in place, but it is more or less an equal distribution, with no recognition for better performers. Or it is left to the discretion of Managers or Supervisors. Organisations need to have a rewards system in place, which is linked to performance. “Pay for performance” culture needs to be developed. The difference in performance will differentiate and provide the employees with recognition. The performance parameters are defined in the job descriptions, as outlined earlier.

HR Processes
Implementation of HR processes help to systematically implement the various HR initiatives. There is clarity in roles & responsibilities of HR and the other departments. For example, during recruitment HR needs to source and shortlist the employees, while the final selection is done by the concerned department. However, compensation finalization is again done by HR, to ensure uniform implementation of the HR policy.

Each process that an employee undergoes during his tenure with the organisation needs to be systematically developed and implemented. They not only lead to streamlining the HR department’s activities, but also help to develop and motivate the employees, which in turn can improve their productivity and hence the organisation’s revenue and bottom line.

  • Manpower planning will include budgeting the staffing requirements at various levels in the organisation. This is developed by the business unit and department heads, aligned to the business strategy. However, it is ratified by the HR department, before being approved by the management.
  • Recruitment includes advertising or informing a placement agency of the requirement based on the job description, short-listing candidates, interviews/written tests, making the offer and acceptance by the candidate. Both HR and the concerned department are usually involved in this process.
  • Induction is essential to make the new candidate familiar with the organisation. The HR department usually provides inputs on the organization’s background, HR policies, culture and various administrative details. The concerned department/unit provides detailed inputs on the job content and role that the candidate needs to perform
  • Performance Management allows the candidate to be aware of the organisation’s expectations from that role. Performance measures are clarified with mutually agreed targets, which in turn enable the employees to understand on what parameters they will be awarded their bonus, promotions, etc. This allows the organisation to develop a ‘pay for performance’ culture.
  • Training & development is necessary to ensure that the employees’ skills are continuously developed in order to make them deliver the expected results. The training needs are usually identified during the appraisal jointly by the HR department and the unit that the employee is attached with. The HR department then draws up a training calendar which is circulated amongst the unit heads, so they can nominate their staff, as per the employee’s training requirements.
  • Succession Planning is critical to ensure continuity. Senior management members need to identify and groom the eligible candidates to take upon leadership roles in future. Putting the better performing candidates on a ‘fast track’ ensures that they are motivated to deliver their best and provides them an incentive to continue with the organisation.
  • Employee Satisfaction Surveys are usually conducted annually by the HR department The survey, which needs to be conducted on an anonymous basis, helps the management to identify and take corrective actions, on issues which may prevent employees to perform efficiently. These are usually related to working conditions, compensation, relationship with supervisors, non-clarity of roles, and other factors. The goal is to continuously improve the working environment to enable the employees to remain motivated.
  • Exit Management helps the management identify the reasons as to why the employees are leaving the organization. While in employment the employees may fear speaking their mind. But the exit interview, usually conducted by the HR department after all dues are settled, provides an opportunity for the employees to express all issues and concerns they faced during their tenure. Again the management can take appropriate actions, so that the existing employees can be retained.

The mindset amongst the regional businesses needs to change from ‘HR is a cost’ to ‘HR is an investment’ which will bear fruits. Results may take some time to be visible, but the First Step needs to be taken now!

For a further conversation on this subject of Cedar View or how we may be able to help please email V. Ramkumar, Senior Partner, Cedar at mailto:V. Ramkumar@cedar-consulting.comV. Ramkumar@cedar-consulting.com

 

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