What's the challenge? Consultancy roundtable with Mercer, Hay Group, Aon Hewitt Middle East, Towers

Written by
Changeboard Team

23 Dec 2014

23 Dec 2014 • by Changeboard Team

HR directors in the Middle East

What are the main challenges faced by HR directors?

Larisa Muravska, talent business leader – Middle East, Mercer (LM): As the region continues to divide into clusters, politically and economically, its labour markets start to show the same lack of homogeneity. The Gulf is a relatively stable geopolitical area, with economies that are driving activity across the region. So, as an HR director, you must focus on how to support business growth. Unemployment figures suggest that the supply side is in good shape, although the pipeline of employees in demand – those with the requisite skills, knowledge, and competencies – is far more restricted. To deal with this, employers are investing more in training and skill development to grow talent from within.

Peter Christie, managing director – Middle East, Hay Group: The biggest challenges lie in attracting, retaining and engaging talent. There are more issues around managing the performance and productivity of your organisation and holding people to account for their contribution to that. Increasingly, there is pressure to remain competitive in terms of pay, benefits and your business model.

Markus Wiesner, CEO, Aon Hewitt Middle East: The challenges of nationalisation are well known, not only to HR directors, but to organisations and governments alike. The region’s employable population is expected to almost double from 145 million to 278 million by 2050. It is one of the fastest growing populations in the world and there is a demographic youth bulge. Youth unemployment already stands at 27% and this is expected to rise in coming years.

In the GCC, there is a dependence on overseas labour to fill the roles that the local population feels are undesirable or for which it is hard to find appropriately skilled local talent. The region produces more graduates in humanities and social sciences than in science and technology. In some countries a dual job market has evolved, with nationals preferring to work in the public sector where wages are, on average, 30% higher than in the private sector. Yet the public sector’s capacity to assimilate more national talent is decreasing as both the wage bill and the number of young people looking for work grow. With one in every five nationals at high risk of attrition and an overall decline in engagement levels across the region, the overarching challenge is, as always, to attract, engage and retain national talent.

The bigger questions are: ‘What should HR managers do to address these challenges and how can they turn this abundance of working-age talent to their advantage?’

Elie Georgiou-Botaris, practice leader – talent management & organisation alignment, Towers Watson (EGB): Our research suggests that attraction and retention are ongoing challenges for HR, and are regarded as the greatest risks to organisations. Of the companies we surveyed, 65% are more concerned about the retention of
their critical-skill and top performing talent than ever before.

Risk and growth are high on the HR agenda in many organisations, and although our study participants are generally confident about the region’s prospects, there are appreciable risks and challenges surrounding HR and economic issues. The results of our 2012 Global Workforce Study, based on the opinions of more than 32,000 workers around the world (around 1,000 full-time employees in the UAE and around 500 full-time employees in KSA), suggested there is a struggle against the impact of financial pressure and constant change, with anxiety about the future. This represents a heightened performance risk for organisations – from lower productivity to higher inefficiency.

James Arnott, managing director, Accenture Capital Projects Services (JA): The MENA region has one of the most diverse workforces in the world, with professionals coming from more than 120 different countries. HR directors must provide practical organisational work strategies and policies for a diverse workforce that come from a variety of cultural, social, economic and religious backgrounds.

Just as globalisation has impacted other regional employment sectors, the MENA region is also continuing to evolve to meet new challenges. These include the rise of the
extended workforce, mobile workers, social media, mobile technology in the workplace, risk and privacy issues in a digital world and managing global operations. The ability
to identify, attract and retain talent continues to be a key differentiator in the market for employers.

What variations do you notice across the region?

LM: The market tends to split along economic growth fault lines. In the GCC, the focus is on employee retention and balancing rising labour costs with the need to retain, develop and promote. In the wider Middle East, where the issues of expat labour are less pronounced, HR is concerned with labour and benefit costs and ensuring alignment with local laws and regulations. The key questions that concern HR and business leaders in the Gulf tend to be around productivity, efficiency and business growth, with an emphasis on ‘localising’ workforces where possible.

PC: On a geographic basis, the UAE remains the most sophisticated market as it has the greatest degree of foreign direct investment, but Saudi Arabia is racing to catch up and is a very vibrant market, with a 5% growth in GDP expected during 2014.

There is a lot of interest in public sector reform to drive better service and efficiency, and there is a desire for greater competitiveness in the sectors that are most open to international competition – for example, transformation of the banking industry to enhance returns.

MW: Engagement figures for nationals are highest in Qatar, at 51%, and lowest in Saudi Arabia at 41%. Although neither of these rates are satisfactory, they presumably reflect the extent to which key engagement criteria – including pay, career progression and learning and development opportunities – are being met. Saudi is a relatively mature market in the Middle East, and also a very big one, while Qatar has experienced huge growth in recent years, from a far smaller base. Overlay that with the relative sizes of the national Saudi and Qatari working populations and we can assume that all the recent investment into Qatar and general optimism goes a long way to meeting the needs of a relatively small number of people. The opportunities per working Qatari may have flourished more recently than for the average working Saudi.

EGB: More than a third (36%) of the local national employees we surveyed in Saudi Arabia and nearly half (44%) in the UAE are likely to leave their employer within the next two years. However, 43% of Saudi national employees and 49% of UAE national employees would prefer to remain with their current organisation, even if a comparable job was available in the marketplace.

JA: The MENA region is constantly evolving as countries are impacted by economic, social, cultural and political changes. Developments and expansion have
produced a migrating workforce and competition for talent. Professionals are shifting locations to work on new projects. Now that Dubai has been awarded the 2020 World Expo, this will produce a new commercial magnet for professionals and workers with the creation of 275,000 new jobs. There will be an increasing demand for professionals from the engineering, construction, transportation, retail, logistics, and financial sectors, resulting in a rise in workforce competition. The ability to understand and navigate the varying employment rules and regulations across the region – and the drive towards local content – will also be an important aspect of the ability to create a flexible and competitive workforce.

How do engagement levels vary across the public and private sectors?

LM: In a recent global study, we asked respondents – mainly people employed in the private sector – what influences how motivated and engaged they are at work. While there was a variance in how employees in different countries and regions ranked their answers, the unanimous top choice was ‘being treated with respect’. We believe that this would score highly in a poll taken in the public sector, since it is a universal human desire.

PC: There is a major challenge in markets where jobs that have been created are so attractive that they make private sector careers unappealing to nationals. This inequality in
the labour market needs to be addressed before it becomes a major structural issue.

MW: Interestingly, despite the perceived attractiveness of working in the public sector – with its favourable conditions including considerably higher wages and regulated working hours – GCC nationals in the private sector report higher levels of engagement (45%) compared with their public sector counterparts (37%). Risk of attrition also rises from 20% for GCC nationals in the private sector to 24% in the public sector (and from 14% to 30% in the UAE).

This tells us that, while the public sector may be more attractive to nationals, the private sector is providing greater job satisfaction and is more likely to retain that talent pool.

EGB: Employee engagement is fundamental, yet fragile, especially since the economy is putting pressure on both employers and employees. Employers are at a critical point in their ability to sustain their employees’ engagement, mainly because they are running 21st-century businesses with 20th-century people programmes and approaches.

Globally, more than a third of the population we surveyed is highly engaged, a quarter of it disengaged, and the remainder feel some level of lack of support or detachment. We generally find that the public sector scores below the private sector in terms of engagement.

JA: In order to attract and retain top professionals, both sectors have been involved in developing high levels of employee engagement. Efforts have been spent on better articulating employee value propositions as a means to attract employee engagement initiatives to retain their talent. Regional nationalisation policies place additional pressure on the system. In many geographies there is limited talent, so efforts associated with ensuring high levels of engagement – to retain critical and scarce resources – are even more focused.

Public and private sector

Why is there such a disparity between the public and the private sectors?

LM: In general, the public sector provides better job security and work-life balance opportunities: no mandatory overtime, no unsociable hours, no shift work, and long holidays. Last year in the UAE, for example, public sector employees benefited from double the number of public holidays those in the private sector enjoyed. Public sector employees also receive very good benefits and their remuneration is as attractive as that in the private sector. In the UAE, about 90% of workers in the private sector are expats, while public sector jobs are dominated by UAE nationals.

PC: Many GCC governments have created employment opportunities in the public sector to mitigate youth unemployment, since this is more feasible than influencing the private sector.

To compete with the public sector, private companies must emphasise everything they have to offer, including career growth, exciting and rewarding work and the opportunity to effect real change. A clear career ladder must be shown to allow nationals who are here for the long-term to create a connection with the future.

MW: While the public sector is reputedly more attractive to nationals, those in private organisations are benefiting from an enhanced workplace experience. For example, Emiratis working in the private sector report significantly higher satisfaction levels than those in the public sector when it comes to key employee experiences such as learning and development opportunities (public sector nationals, 36%; private sector nationals, 59%),confidence in leadership (36% and 48%) and recognition within the organisation (49% and 67%).

EGB: Employers in the private sector are often reluctant to employ national workers based on previous bad experiences and their fear of job hopping and lack of loyalty.

JA: There are different focuses and intent. In some regional geographies, roles within government are highly sought after, in others not. The competition for talent is high and consequently the private and public sector are both recruiting from a limited number of high-tech professionals in the region.

What can the private sector do to redress the balance?

LM: A lot of companies have introduced graduate development programmes and special incentives – financial and non-financial – to attract local talent. However, there is still room for improvement. Companies could partner with local universities and high schools to educate graduates about private sector jobs, for example.

PC: Companies need to develop more compelling employee value propositions. For example, the most progressive organisations provide clear and planned career development opportunities with continued learning, and they create a corporate culture where knowledge transfer really works. For the first time, we are talking to leading-edge
organisations in the region about flexible benefits.

MW: Clearly there is an opportunity for the private sector to leverage the advantages it offers over public sector employment rather than trying to compete solely on pay. Interestingly, our nationalisation research shows that the percentage of nationals working in the public sector who are happy with their salaries (32%) was not significantly higher
than the overall average (30%).

The private sector needs to emphasise the meaningful experiences that locals have while working in that sector, to reinforce that the intellectual challenges and opportunities to prove themselves in the private sector might be higher. Given the drive to ensure nationals are taking on more of these roles, many private sector organisations are prepared to invest heavily in providing growth and development opportunities for nationals. So those who choose to follow that path may find it a more enriching experience.

EGB: Private sector organisations need to lose their fears and change their perceptions of national workers. Balance can be restored by employers who identify and attract the
right national talent, keep them engaged and motivated with concrete plans and focus on their career development. Also, sustainable growth will prepare them to assume pivotal and leadership roles in the organisation.

A research study conducted by Towers Watson Middle East in 2012 across the GCC indicated that succession management was widely seen among the majority of respondents (91%) as being a vital process in identifying and developing the next generation of leaders. Preparing nationals for leadership positions was also cited as a significant part of succession planning, with 70% of respondents agreeing on this focus. However, only 35% of them could identify, within their current talent pool, a GCC national with the potential to assume the role of the CEO.

This is one area that private sector employers can tackle in order to build and nurture a pool of capable, willing and highly engaged national talent with strong commitment and loyalty towards their organisations.

JA: Entrepreneurial opportunities offered by the private sector can be a differentiated proposition when organisations are formulating their employee value propositions and recruiting strategies. Due to high competition, this may not be enough and hence the private sector will need to go and challenge their conventional (and perhaps very Western) thinking to develop unique MENA region strategies. In some countries this implies looking to develop a mobile global workforce – a network of partnerships that are made up of contractors, outsourcing partners, vendors, business partnerships and non-traditional workers. In other countries it will be about the ability to develop local talent, be seen as the employer of choice through professional development and drive a differentiated proposition through in-country leadership, nature and type of work and local branding.

The future of HR in the region

What role does HR have to play in this?

LM: The HR function is more mature than it was five or so years ago, with tools, programmes and information now up to the task. The biggest thing HR can do is develop a closer appreciation of the business they operate in, so they can support advancement in this area. The key role for HR is to serve as an outward-facing employment brand for potential hires.

PC: HR has an absolutely crucial role to play. To effect change you must move away from being predominantly administrative and transactional to making a real
commercial contribution: influencing the leadership of the business and effectively implementing policies to create a high performance and high engagement culture. HR teams need the support of their leadership teams to ensure line managers recognise the contribution that HR can make, and give it space to do so. HR needs to work with the leadership team to effectively communicate local and regional concerns to corporate and global leadership, educating them about the region and how to best capitalise on the opportunities here.

MW: HR needs to take ownership of the nationalisation issue and address it more cohesively by adopting a more strategic approach to meeting the company’s
goals. Indeed we are seeing an increasing trend of moving away from isolated instances of intervention to a more managed approach addressing all facets of the employee lifecycle. Those HR departments who act now will provide a competitive advantage to their organisations in the future, as this issue is only set to become increasingly imperative.

EGB: HR can play a key role by translating business strategies into talent strategies through the introduction of fully integrated HR programmes and systems. These can create a high performance culture, build and grow a pool of high potential talent to prepare for and support future business growth, and address any emerging issues and challenges that may hinder or slow this down. HR can also support the business by maintaining highly engaged employees through addressing drivers such as leadership, work environment, development and growth, clarity of vision and strategic objectives.

JA: Accountability for workforce planning, HR strategies, recruiting and employee engagement all lie with the HR director. To be successful in the MENA region, HR directors will have to create non-traditional HR policies and strategies to manage a non-traditional workforce made up of more partnerships, contractors, freelancers and consultants. These people can work outside the traditional corporate structure and balance that with the ability to meet local content requirements and expectations.

What are your predictions for the future?

LM: Across the GCC, policy makers’ and business leaders’ agendas will be dominated by the issues of rising labour costs, labour productivity, employment and employability of local nationals. They will also need to juggle the supply and demand pipeline for the right mix of people and skills. Labour market competitiveness is an important building
block in the overall competitiveness of each country. A flexible labour market that is free of discrimination and accompanied by meritocratic incentive structures is one that is best placed to contribute to competitiveness.

PC: For HR, this year will be even busier and more challenging than 2013. There will be tougher battles to attract and keep talented individuals, to build capability through an organisation and create an HR function that is valued and recognised. As the war for talent returns, organisations must be conscious of the many levers that exist other than pay, which can help to build a more sustainable proposition through career development, leadership and by nurturing a positive organisational culture.

MW: Nationalisation has been an issue in the GCC for many years so one year is a very short period of time over which to look ahead. But in the short to medium-term, we can expect to see an acceleration of regulatory amendments to the functioning of GCC labour markets as well as and more government initiatives (such as Absher in the UAE) designed to encourage national workforces to consider the private sector as an employer. There will be an increasing focus on the education sector to provide work readiness, manage expectations and influence career choices. We have already observed – and would expect to see more – organisations taking a more strategic approach to realising their vision for nationalisation.

EGB: In order for HR to position itself for the future and gain credibility in organisations, it will undergo a mindset change and start to think more as a core business function rather than as a support. Accordingly, HR is expected to become more evidence-based to present the business with the required data and analytics to drive and support their human capital decisions and investment.

HR will also better integrate its systems and processes to ensure optimised and cost-effective investments in acquiring, developing, rewarding, engaging and retaining critical talent in pivotal and leadership roles towards sustainable business growth. HR technology will provide the platform for such integration, with ready and easy access to employee and market data for HR and the business. It will also be a tool for performance and reward management, recruitment and succession planning, and other HR systems. To support the upskilling and re-skilling of the workforce – and especially high potential local nationals who need to enter the workforce and play a more active and effective role – L&D strategies and opportunities will become the means for creating a competitive advantage, retaining the right talent and increasing employee engagement.

New competencies, leadership and otherwise, will emerge and become more critical to the success and sustainability of organisations working towards improved performance levels and employee behaviours. Ensuring business continuity through strategic workforce planning, succession planning and building bench strength will help identify critical roles and ensure the ongoing identification and feeding of the right talent into the pipeline.

JA: The MENA region is likely to be characterised by two key themes. ‘In-country value’ is a focus on the attraction and development of local talent – either as employees, potential employees or suppliers. ‘Extended workforce’ means increasing the number of employees, with a focus on cost and enabled by ‘lean human resources’ and ‘just-in-time’ employees. Regardless of all of this, the MENA region will be an exciting place to work in and be a part of.

Dr Markus Wiesner

Marcus WiesnerCEO, Aon Hewitt Middle East

Markus joined Aon Hewitt as CEO MENA in 2011. Previously, he was managing director for the Middle East at Mercer Consulting.

Elie Georgiou-Botaris

Elliesenior consultant, Towers Watson

Elie is practice leader of talent management and organisation alignment in the Middle East. He is a frequent speaker on talent management topics at HR forums in the Gulf.

Larisa Muravska

Larisatalent business leader – Middle East, Mercer

Larisa has a broad consulting experience around rewards, performance management, organisational development and executive remuneration.

Peter Christie

Peter Christiemanaging director – Middle East, Hay Group

Peter’s consulting expertise lies in financial services and he advises clients on executive reward issues.

James Arnott

James Arnottmanaging director – Accenture Capital Projects Services EALA

James leads Accenture Capital Project Services for Europe, Middle East, Africa and Latin America (EALA).