Finding the right HR strategy for the GCC

19 May 2008
Edmund O'Sullivan suggests a three-step plan to reduce staff turnover in a Gulf business.

In an interview with MEED, Qatar’s Finance Minister Yousef Kamal candidly confessed that inflation in Qatar, though down a bit, had recently hit an annual rate of 15 per cent.

A separate report published by MEED at the same time reported that Saudi Arabian investment banks are losing key people and having difficult finding qualified replacements.

The two stories are connected. Those being paid in currencies pegged to the dollar are suffering from the higher cost of living in GCC states and the slump in the international purchasing power of what they earn.

Unsurprisingly, employers that fail to compensate their people are inviting them to find an alternative. Those that remain are often disgruntled. Nothing is more likely to guarantee underperformance.

Most companies have failed to develop effective human resources (HR) strategies to deal with the extraordinary circumstances in GCC labour markets.

King Canute

They continue to rely on systems shaped by conditions in Europe where growth is low, there is a ready supply of young people entering the workforce from universities and willing to accept low pay, and inflation is low.

But in the GCC, the opposite applies in all three cases. Growth is high and will continue to be so. The universities have practically no capacity to meet the needs of companies seeking to employ people capable of working in English. And the inflation rate, as Kamal has admitted, is high. The consensus is that it will remain high.

Rather like England’s King Canute, who couldn’t believe that he would be overcome if he put his throne on the beach at low tide, some companies are refusing to recognise the facts of the Gulf economy.

This is particularly the case in acknowledging the extent to which inflation and the decline in the dollar has negatively affected its employees.

Most employers continue to believe that key staff will accept a fall in their real living standards. If they are any good, they won’t. Nor should they be expected to.

The starting point for any GCC HR strategy is dealing with the world as it is, not as a company would like it to be. That means coming to terms with three basic facts.

  • First, the GCC is a high growth economy; everyone will need more employees in one year’s time than they do today. So they should have a system in place explicitly designed to deal with that initial challenge.

  • Secondly, they are not going to be bailed out by fresh graduates from a local college willing to accept low pay - at least initially. These institutions don’t exist in the GCC. There is, effectively, a fixed supply of skilled labour. If you want more, you either have to attract them from someone else, import them - which can be expensive and risky - or develop them yourself, which is probably be best way, although it takes time.

  • The third, and most challenging, fact is that companies will have to compensate key employees in full for inflation and, possibly, exchange rate movements. That means being honest about what the inflation rate is.

Good employers in Qatar will thank Kamal for telling the truth. Bad ones will grumble and bury their heads in the sand.

The principal HR requirement is to reduce staff turnover and maintain employee continuity in a Gulf business. The best way to do this is:

  1. Ensure salaries at least keep pace with inflation.

  2. Establish a generous annual bonus that applies to a wider range of people than most schemes do. This will provide an incentive for people to stay for a year, which would be progress in many cases.

  3. Establish a way in which key employees - and not just the chief executive - have a chance to benefit from an increase in the value of the business which their efforts are making possible. Some farsighted employers are already doing this.

It’s a simple three-step plan to higher productivity and profits. But do you have the guts to follow it?

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