The global economic downturn has affected the profitability and challenged the human capital strategies of organisations everywhere, from the most populous nations of the East and the West to the booming oases of the Gulf.
Now, with signs of broad recovery on the horizon, it is evident that the Middle East has weathered the recessionary storm better than many regions, with continuing positive economic output driven by oil exports and the prospect of greater economic growth in the coming year. Yet employers continue to have to put more effort and investment into attracting the best international talent to the region. While high levels of layoffs and reduced job markets in the US and Europe provide a temporary opportunity, this may not last long as they are already on the path to economic recovery and their demand for skilled labour will increase again.
Positive economic growth in India and China has elevated their own demand for talent, while Brazil, with its recent head-spinning discoveries of oil, will drive the demand for labour in South America. It is therefore not surprising that GCC companies are putting a significant emphasis on talent retention. The typical tenure of three to five years is now viewed as rather short and companies are looking for longer-term partnerships with their best employees.
This is not an easy task and it will test corporate capabilities in developing robust and attractive career development systems and effective training programmes, as well as in introducing long-term elements to compensation and benefits structures. For those companies that have operations in more than one country in the region, the challenge is facilitating the transfers from such popular destinations as Dubai and Abu Dhabi to other locations.
Another issue is repatriating employees that have been transferred from less developed countries back to their home nations at the end of the assignment. Organisations dealing with these challenges are looking for creative solutions and several have started to develop a more structured way of managing employee mobility within the region. For instance, some companies are adding a requirement for business experience in more than one Middle East country into their career development plans, while others are providing an additional allowance as an incentive for regional mobility. In an area with youthful demographics such as the Middle East, one of the most important issues related to talent management is the need to develop an effective local labour force that will stay in the region. GCC governments have recognised this need and have launched special programmes directed at labour force development and localisation.
The intention is not to eliminate the expatriate workforce, as international skills will still be needed and in some countries the size of local population is simply not able to satisfy the demand for labour. But facilitating their citizens' labour skills development and employment in both public and private sectors are the key priorities of such programmes. Noteworthy is the fact that different quotas are required by the different GCC governments for different countries and, in some cases, for different industries.
Recruitment and retention of GCC nationals represent a challenge, especially in Abu Dhabi, Qatar, Dubai and Saudi Arabia. For instance, though educated people coming from wealthy families may have developed high-level skills, they may not need to work to support themselves. Therefore, a recognised employer brand, values aligned with their own, interesting jobs, training programmes and career development opportunities would be essential to draw in and keep this segment of the workforce.
That does not mean compensation does not play an important role in the rewards package and employment deal. As local employees become very well aware of competitive remuneration levels and structure, some firms are providing local employees with the same or even higher levels of base pay and allowances as those provided to their expatriate colleagues. Private organisations, be they domestic or multinational, have to compete for national talent with numerous governmental institutions as the public sector provides very generous remuneration and benefits, as well as shorter working hours. Many international companies operating in the Gulf region have a significant advantage in attracting and retaining local talent due to their brand names, learning and development programmes, career plans and dynamic work environments. A strong employer brand is valued more than a prestigious international brand. Becoming an employer of choice will also require recognising local cultural attributes. It is important that international employers are receptive to religious and social needs of their local employees and provide them with a work environment that is conducive to their integration and performance.
Employee salaries in the GCC appear to have weathered the economic crisis far better than in many other parts of the world, the recent Mercer Total Remuneration Surveys, conducted in the organisation's six member countries, shows. Companies in the GCC have increased their staff salaries this year by as much as 6 per cent, the surveys show. They also reveal that companies are planning to increase salaries by as much as 7 per cent next year. It seems that the salary increases in the region are higher than the forecast inflation rates for this year and next. The IMF has forecast a consumer price index inflation rate across the GCC of 3.7 per cent and 3.8 per cent for this year and the coming year respectively.
Clearly, GCC employers want to link reward to performance more closely than they did in the past, which means changing the way bonuses are determined. This is reflected in the percentage increase in the target and maximum bonuses being allocated by companies in which a higher proportion of the total package is linked to performance. Numerous cash allowances have become an integral part of remuneration packages in GCC countries. It is typical to provide housing, transport and home travel allowances. There are also many companies with very diverse allowance structures.
We have observed, though, that there is a growing interest in simplifying the allowance structures and introducing a flex element to cover a number of cash payments and benefits. Though there is a growing emphasis across the region on using retirement programmes and flexible benefits as tools for retention and competitive recruiting, compensation levels tend to vary. The UAE and Qatar, for example, lead the GCC in all elements of compensation, with higher allowances and short-term incentives. Regarding executive remuneration, companies in GCC countries have been following the global trend towards variable and performance-related components and some are starting to revisit their governance practices.
Our experience of advising companies in the GCC on their executive remuneration structures and short- and long-term incentive plans has shown how important it is that boards practise good governance. There should be a formal, transparent procedure for developing policies and fixing remuneration packages for executives. To move in the right direction, companies should revise their current approaches and embrace good executive remuneration governance, which will secure the right executive talents for better company performance and enhance market visibility and credibility.
If anything, the varied and complex mix of factors and rapid change in the Middle East continues to pose a broad challenge for human resources (HR) leaders. Acquiring the right talent is a priority and a problem complicated by regional, cultural and legislative differences. HR must therefore focus on attracting talent and developing leadership as well as training and coaching line managers, while refining the way they deal with cultural aspects and communication. It should also focus on enhancing the effectiveness of HR teams.
These are not easy tasks in such a dynamic and multifaceted region. But as the global recession gives way to renewed economic growth, the organisations that take action to master their human capital challenges will outperform those that do not. Bassam Gazal is the head of information product solutions, and Larisa Muravska the mergers and acquisitions lead for the Middle East and Eastern Europe at the human resources firm Mercer