Middle East companies set to enhance human resources capabilities in the region

Middle East companies face a unique opportunity to enhance the human resources (HR)landscape in the region in the coming years, according to The Boston Consulting Group (BCG).

The firm made these comments in the wake of the recent World Economic Forum held in Jordan, which put the region’s need for job creation firmly in the spotlight.

Dr. Klaus Kessler, Senior Partner and Managing Director, BCG Middle East, said, “For quite some years now, economic development in the region has been driven by two objectives: diversifying local economies away from a strong dependence on oil and gas and the creation of additional workplaces, which can facilitate job opportunities for the growing number of youth across the region. We believe that this ‘new’ generation of local talent will reach critical mass soon with significant implications for the labor market in the Middle East.”

According to BCG, Middle East companies need to focus on a couple of key areas, in anticipation of this development:

Recruitment shift towards nationals

The current drive towards the recruitment of nationals, especially in Gulf countries, raises the question of how these new employees will replace the accumulated working experience of the former generation. In other words, can intellectual property be easily transferred and saved?

“The academic education of the older generation is one factor here, but beyond this the transition has to be managed smoothly. Handing over the baton will require careful function-by-function and even individual-by- individual planned transition programs. In many cases training-on-the-job will play the most essential role in this process”, said Kessler.

Another question that is raised with the shift towards the recruitment of national talent is how to balance this with the need for businesses to manage costs efficiently?

This question is especially relevant in today’s increasingly competitive environment. Since government salaries are typically significantly better than those in the private sector, this createsan upward cost pressure on private companies trying to compete for local talent. Furthermore, often the best local talent is attracted to government jobswhich tend to have a better work-life balance. “The Middle East is one of the few regions in the world where young talent is drawn into public sector jobs with low productivity", explains Dr. Sven-Olaf Vathje, Partner and Managing Director, BCG Middle East. "If the region does not manage to increase the attractiveness of the private sector for young local talent, it will depend on expatriate labor for a long time."

Under these circumstances, the active limitation of public sector compensation packages and an alignment of salaries to productivity will be a key prerequisite for developing the regional economies while employing an increasing number of local talent.

Role of the CHRO

Only very few companies in the Middle East have institutionalized powerful Chief Human Resources Officers (CHRO).

In most cases, the HR department has been seen as an administrative function, very much involved in day-to-day activities such as payroll management,recruiting, and training. This set-up will not be sufficient in the coming years. Instead, human resources will need to be dealt with strategically and proactively, to replace the primarily reactive approach of the past.

This may entailnegotiations between business line managers and HR managers, with the former likely to be more concerned with delivery by employees in the short term, and the latter with delivery in the long term. This may require companies to strengthen the role of the CHRO. 

Middle East companies are in a unique position to initiate this trend. Since many organizations are still relatively young and evolving, the amount of transformation required is still manageable. There is a significant opportunity for Middle East companies to avoid the mistakes of Western companies that have neglected the challenge of generational handover for many years. By leap-frogging these problems, Middle Eastern companies can even achieve global best practice.

Social Media is Changing the Rules in Personnel Management

The rapid growth of online social networks is also expected to have a lasting impact on personnel management in the coming years, both globally as well as in the Middle East.

In a recent global survey by BCG,Creating People Advantage 2011—Time to Act: HR Certainties in Uncertain Times, more than 2,000 executives from business and administration in 35 European countries, provided their feedback on the potential of social media:

Three-quarters of the managers surveyed cited the chance to present their companies as attractive employers (employer branding) as the greatest opportunity offered by social networks.

Half of those surveyed cite the recruiting of new employees as most important

One-third most value the transfer of knowledge that the networks enable.

Web-based professional career networks are expected to be considerably more importantin the future than standard social networks.

By contrast, the greatest risks identified by the surveyed managers are:

Disclosure of a company’s internal information

Limited corporate influence on published entries about companies

The possibility that the new technologies will make it easier for competitors to poach employees.

“Social media are here to stay, and given the recent prominence of social media in the Middle East, this is also true for the region. Against this backdrop, it is critical that companies embrace the Web 2.0 as an opportunity and not see it as a threat. Companies that can be early movers in this field will no doubt gain a competitive edge over their competitors in the years to come”, concludesVathje.