HRM in Saudi Arabia
HRM in Saudi Arabia
This paper explores the development of Human Resource Management in the Kingdom of Saudi Arabia. Because multinationals are increasing in numbers in Saudi Arabia, there has been a development of western ways of managing human resources. However, there are still many factors that must be considered in managing human resources in Saudi Arabia. These factors include religion and culture. Saudi Arabia has an entirely different religion and culture compared to the west. This paper focuses on the HRM processes that are evident in the organizations found in Saudi Arabia. The factors that led to the development of the present HRM processes in Saudi Arabia are also discussed.
Factors that Shape HRM Practices in Saudi Arabia
Socio-economic factors shape HRM practices in Saudi Arabia. Five different key factors shape HRM policies and practices. These factors include economic structure, political environment, labor market structure, human resource strategy and national culture.
Oil production is the focus of the Saudi economy. Oil and oil products make up around 90 to 95 per cent of total Saudi export earnings, providing over 75 per cent of the country’s budgetary revenues (Mellahi and Wood 2001, p. 135). Saudi Arabia was greatly affected by the drop in oil prices since the mid-1980s. The Gulf War also had a severe impact on the economy. Job creation also dropped because of the stagnant economy.
Although the Saudi government advocates a free market economy, and since the 1990s has encouraged the private sector to take up the responsibility of economic development, the fact remains that the government still holds tight control over economic and social development policies and activities. The regulation of the economy remains state-centered. Large state corporations, generally monopolies, dominate the Saudi economy. These firms include the oil firm Saudi ARAMCO, the Saudi Basic Industries Corporation (SABIC), The Saudi Telephone Company (STC) and several other large firms.
Saudi Arabia is a theocratic, Islamic traditional monarchy, based on tribal system with a large royal family. Within this traditional form of government, the central figure of government is the King, who is head of the House of Saud, the Chief of State and Head of Government. In this form of political system which lacks a written constitution in the political sense, the Koran is considered the constitution and the principles of the Sharia law. The King is the highest authority in the land and challenge to political power in any shape or form is not tolerated. Consequently, employees, both Saudis and foreigners are not allowed to establish trade unions and/or form similar associations.
About 95 per cent of new jobs that were created between 1995 to 2000 were in the private sector. Most of these are manual skilled jobs requiring specific vocational skills. The government has introduced a legislation requiring private organizations to employ Saudi nationals wherever possible. Firms are also forced to increase the number of Saudis employed by 5 per cent annually. Despite the regulations and policies toward the Saudisation of the workforce, many private organizations still insist on employing foreigners. Some of the reasons why firms continue to employ foreigners are:
1. Labor cost – Foreign workers are utilized in labor-intensive private sector. Compared to Saudi nationals, foreign workers are paid less. Local workers are more expensive to hire. Locals demand six times the salary of a skilled foreign worker.
2. Socio-cultural perceptions – Social and cultural perceptions toward work in the private sector greatly influence companies’ ability to recruit and retain qualified local workers. In Saudi Arabia, the type of work, sector of employment and social interactions at work determine the social status of the worker and his family (Mellahi 2000). Workers place a great deal of importance on the effect of their work on their social recognition. Most of the jobs in the private sector are manual jobs which Saudi society holds on low esteem.
3. Discipline and control – some research papers indicate that local workers ad more difficult to control than foreign workers.
4. Integration to Multi-cultural environment – Studies point that locals find it hard to integrate in the multicultural work environment (Mellahi and Al-Hinai 2000; Atiyyah 1996).
Government’s HRD Strategy
Saudi Arabia is rich in capital and natural resources but its human resources remain unskilled and unqualified. In order to solve the problem of inefficiency in human resources, the government has invested large sum of money in general and vocational education.
Culture exerts a profound influence on HRM practices. The cultural values and social attitudes to management and work in Saudi Arabia are very different from those found in the rest of the world (Badawy 1980, Yavas and Yasin 1999). The major contemporary cultural and social features of Saudi Arabia that have influenced the practices of HRM can be attributed to two inter-related main factors; the influence of religion, and the influence of tribal and family traditions.
Islamic laws and values influence management practices in Saudi Arabia. The principles and prophetic prescriptions derived from the Koran serve as guides for managers in conducting their business affairs. The influence of Islam can be observed in there areas. These are:
§ Employment of Women – Despite the high investment in the education and training of women which resulted in increase of women in schools and universities in Saudi Arabia, the participation of women in the formal economic and social sectors is still modest. Saudi Arabian women’s share of the labor force is one of the lowest in the world. This is due to the moral and religious belief among the vast majority of people on Saudi Arabia that marriage and child-bearing remain the principal objectives for women (Doumato 1999).
§ Managerial Attitudes – Managerial attitudes and practices in Saudi Arabia are shaped by Islamic values. Islamic values and teaching put string emphasis on obedience to leaders. The authority of the leader or manager is thus accepted as right and proper and subordinates are expected to show respect and obedience to superiors. According to Atiyyah (1999) Arab and Islamic values emphasize harmony, cooperation and brotherly relationships. Conflicts are avoided and suppressed.
§ Manager-Employee Interactions – The Islamic teachings and values also affect how superiors and inferiors interact. At least twice a day managers and workers meet and pray together side by side regardless of managerial positions and influence.
The Arab culture is traditional, socio-centric and male dominated (Abdalla 1997). The Arab culture also encourages dependence on relatives and friends. Saudi Arabia could be described as high in power distance, high on uncertainty avoidance and collectivist within the in-group and individualist with the out-group. High power distance could be attributed to Muslim belief about respect of authority in Islamic teaching and Bedouin traditions.
The above discussion has provided us with a bird’s eye view of the factors that affect the HRM practices and policies in the Kingdom of Saudi Arabia. We can say that political, social, and cultural factors affect the way human resources are managed. Religion plays an important role in almost every aspect of business including HRM. One distinct feature of the labor market of Saudi Arabia and almost all Middle Eastern countries is the predominance of the government sector in the economy. The HRM processes and policies in public agencies are somewhat different from those in private sector.
Western Influences on Saudi Arabian HRM
Multinationals and Joint-ventures in Saudi Arabia
Globalization, economic and financial liberalization, and the internationalization of business have all given way to the emergence of multinational enterprises. Firms are employing a global strategy in order to be more competitive in a borderless world. Organizations are establishing operations in different locations around the world. As firms expand into new markets new opportunities and challenges emerge. In order to better cope with the challenges presented by the external environment such as political, social, economic, and technological challenges in a new market, International Human Resource Management (IHRM) was born. According to Keeley (2005), organizations all over the world are developing a renewed interest in human resource management as a major strategic tool that can uphold the competitive position of the global firm. According to Briscoe and Schuler (2004), IHRM is about understanding, researching, applying and revising all human resource activities in their internal and external contexts as they impact the process of managing human resources in enterprises throughout the global environment to enhance the experience of multiple stakeholders, including investors, customers, employees, partners, suppliers, environment and society.
Multinational companies in Saudi Arabia are considered as contributors to the economic affluence of the kingdom. Multinationals in Saudi Arabia positively affect the socio-economic development of the host country. The expertise and technologies of the multinational companies are also transferred to local firms. Multinational firms also provide jobs for the Saudi nationals (Mababaya 2003).
How Do the West view HRM?
Human Resources Management refers to the philosophy, policies, procedures, and practices related to the management of an organization’s employees. Human resources management is particularly related with all the activities that contribute to successfully attracting, developing, motivating, and maintaining a high-performing workforce that results in organizational success (Sims 2002, p. 2-3). Human resources management covers the every aspect of the relationship between the individual and firm including recruitment, contractual obligations, individual training and motivation, corporate planning, performance monitoring, grievance handling and general welfare, dismissal and redundancy (Vernon 2002, p.101). Human resources management involves the establishment and execution of policies, programs, and procedures that influence the performance, capabilities, and loyalty of the employees of an organization. Through these policies and procedures, individuals are attracted, retained, motivated, and developed to perform the work of the organization. It is through these policies and procedures that the organization seeks to mold and shape the actions of its employees to operate successfully, comply with various public policies, provide satisfactory quality of employment, and improve its position in the market place through strengthened ability to compete an serve (Clardy 1996, p.1).
How does HRM add Value to Organizations?
Human Resource Management adds value to the organization because:
1. It provides the right kinds of talent to the organization at the right time. HRM is expected to assure that a supply of qualified labor in a timely fashion (Clardy 1996, p.20).
2. It ensures that the organization is properly staffed. When done effectively, the staffing, recruitment, and selection process provides a flow of qualified individuals for filling open positions within the organization on a timely and efficient basis (Clardy 1996, p. 41).
3. Using appraisals, the employees are assesses and evaluated. Employee appraisals have very profound implications for both the employees and for the future success of the organization (Clardy 1996, p.58).
4. Using effective pay systems, the management can focus employees’ efforts toward desired organizational goals (Clardy 1996, p.79).
5. Ensures that the employees are properly skilled to perform their tasks and supports the organization’s growth through career development. The goal of training as part of the human resources management processes is to create cost-effective programs that build the skills to perform effectively (Clardy 1996, p.103).
HRM Activities and Processes
1. Strategic Management of Human Resources
Integration of Human resources management with managerial planning and decision making such as international human resources, forecasting, planning, and mergers and acquisitions is essential. A closer integration between top management’s goals and HRM practices helps to elicit and reward the types of behavior necessary for achieving an organization’s strategy.
2. Recruitment and Selection
Employee recruitment includes interview, screening, and selection of most qualified candidates, filling of positions through transfer or promotion, and coordinating temporary employment. The aim of recruitment is to identify a suitable pool of applicants quickly, cost efficiently, and legally. Selection or staffing involves assessing and choosing job candidates.
3. Training and Development
Training and development such as orientation, performance management skills training, and productivity enhancement are planned learning experiences that teach employees how to perform their current and future jobs. Training focuses on present jobs, whereas development prepares employees for possible future jobs.
4. Performance Appraisals
Through the performance appraisal process, organizations measure the adequacy of their employees’ job performance and communicate these evaluations to them. Performance appraisals are a critical link in the HRM process, as they assess how well employees are performing and determine appropriate rewards or remedial actions to motivate employees to continue appropriate behaviors and correct inappropriate ones. The HRM role in performance appraisal is one of working with other managers in the organization to establish the appraisal process, the performance dimensions to be measured, the procedures to ensure accuracy, and requirements for discussion of appraisal results with employees.
5. Career Development
Organizations are becoming more active in developing career development programs. Many organizations are designing career programs in an attempt to increase overall organizational performance and employee productivity, and to attract, develop, and retain the most qualified employees in this increasingly competitive and global environment.
The aim of compensation practices is to help organizations establish and maintain a competent and loyal workforce at an affordable cost.
7. Health and Safety
The human resources department ensures that the employees are working is an environment that is safe and healthful. Organizations try to create a safer and more healthful working environment by instituting accident prevention programs and programs designed to ensure the health and mental wellbeing of their employees. Organizations are taking more responsibility for helping employees deal with problems caused by stress or substance abuse through wellness and employee assistance programs.
The Changing view of HRM in Saudi Arabia
The shortage of skilled workers and the war for talent are gradually shaping the HRM processes and policies in Saudi Arabian organizations. The competition is now becoming more global. The emergence of multinational companies in Saudi Arabia has intensified the war for talents. The shortage of skills and talents have led many organizations in Saudi Arabia to develop strategies that will attract, motivate and retain valuable employees. Large organizations which needs more supply of skills and talents such as ARAMCO are starting to see the value of employees in the achievement of corporate goals. Companies in Saudi Arabia especially those that are involved in high-tech businesses are starting to take nontraditional approaches to recruiting.
Saudi Arabia, as one of the wealthiest countries in the Middle East where world-class and international companies abound, HRM is considered a strategic area which will help local companies to achieve the same level of performance as their international competitors. Competency-based HR systems are also being adopted by organizations in Saudi Arabia. These organizations are beginning to adopt western styles and strategies in areas such as recruitment and selection, training and development, career planning and compensation and benefits.
In general, there is transition in terms of HR activities and processes. Organizations are starting to value employees. However, the development of HRM as a strategic partner of the firm is hindered by different factors. One such factor is the shortage of qualified employees. The war for talent among firms are intensifying and it is becoming harder and harder to attract and maintain qualified employees. Due to the shortage of qualified employees firms are forced to compete with each other in areas such as compensation and benefits. This has given way to a workforce that is highly mobile. Organizations face high attrition rates. Many organizations are beginning to see HRM as a strategic weapon that may increase success. However, there are still many organizations that refuse to acknowledge the importance of HRM. Many organizations in the Middle East still view HRM as a mere support function.
The firms that are aligning the HR functions with strategic planning in the Middle East as a whole are increasing. Let us take for example, how ARAMCO is using HRM to achieve its business goals. ARAMCO invests heavily in attracting qualified employees. The company offers attractive compensation packages in order to attract and retain highly qualified Saudis. Training and development of employees are also given importance. The company has established one of the most effective training and development programme and facilities in Saudi Arabia. To retain its Saudi workers, the company provides quality rental housing and recreational facilities for family communities throughout the Eastern province. Saudi ARAMCO also provides high-quality medical care for its employees and their dependents, as well as many other services.
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