HR Practice in Saudi Arabia

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Human Resource (HR) Management in Saudi Arabia It has now been universally acknowledged that the human capital is the most valuable asset a corporation possesses. It is relatively easier to procure other assets including the highly sophisticated technologies, whereas, it is not always possible to source the right talent. At the same time, unlike other assets, managing human capital is a complex issue and requires special expertise. Furthermore, presence of heterogeneous workforce coming from diverse background and culture makes human resources (HR) management a little more difficult. Mostly, in the Gulf countries, including Saudi Arabia, there has been a different perception altogether as far as HR management is concerned. Barring a few corporations, most of the Saudi companies, including many large sized organizations, often treat HR management akin to a logistic function. Typically, HR Departments in the organizations are assigned the functions of hiring and firing of employees, maintaining their database, handling periodic renewal of personal documents (passports, residence permits, work permits, driving license, medical insurance etc.); preparation of payrolls, calculation and disbursement of allowances; maintenance of personal files; issuing notices to employees, filing of regulatory returns and in some cases, ensuring their safety and security. In short, the HR Department is usually entrusted with the job of handling the headcount and ensuring that the regulatory obligations associated with them are fulfilled in a timely manner. Most of the corporations club the HR management function either with general administration or public relations and in some cases even with the accounts & finance function which reflect nothing but total misunderstanding and misgivings about the importance of human capital. The perception that the role can be handled by any senior executive in the organization further demonstrates this lack of understanding vis--vis human resources. This restrictive role of HR management in Saudi Arabia probably owes its origin to the early boom period when a large number of workers were brought in from different countries as contract employees wherein the HR Department was primarily concerned with the documentation required for their recruitment and handling the consequent logistics. Despite the presence of Saudi employees in different proportions, catering to the needs of the expatriate employees continued to be the primary function of the HR Department. Paradoxically, in the absence of real competition and owing to the scarcity of goods & services guaranteeing higher profit margins, there was hardly any need for the corporations to inspire and motivate their employees. Besides, the regulatory restrictions that disallow free movement of employees from

one sponsor to another made the employers quite complacent. Unfortunately, the HR management practice that evolved under those circumstances continues even today and did not undergo substantial changes. Continuous treatment of HR function as a mundane logistic activity has adversely impacted the development of the skills and talent of local manpower. In fact, in the absence of appropriate career development avenues, there has been a constant stagnation and regression that resulted in accumulation of local workforce that cannot be instantly employed in the changed working environment. This archaic approach to HR management can no longer be sustained in the changed world economic order and present situation where there is a high degree of competition and greater demand for talent. In fact, attracting, managing, nurturing and retaining talent has emerged to be the single most critical element of the HR management of the corporations that are eager to exploit the enormous opportunities thrown open by the free markets. This has led the companies the world over to take a proactive approach towards human capital by creating an organizational ambience where talent can bloom; putting in place systems that help employees unleash their full potential and building a reward mechanism that provides value for the efforts exerted by them. At the same time, cubicles, hierarchies and rigid organization structures of the past, have now given way to open work environment, flat structure with informality being a general rule and empowerment of individuals. There is an enormous potential for numerous Saudi corporations to attain the status of being a real MNC and effectively compete in the international markets as they have all the physical means such as an easy access to raw materials, capital and technology. However, satisfied and motivated work force will be instrumental in turning this prospect into a reality. They will have to align themselves with the changed perception of HR and entrust its management to a leader who has the ability and experience in comprehending the human psyche. The first and foremost; the corporations will have to treat their employees as human capital in the real term and not just as contract workers, even if their legal status happen to be contractual. Secondly, the HR Departments will have to formulate or radically revise their HR policies with the ultimate objective of gaining the loyalty of all of the employees and instilling in them some sense of ownership. With a view to achieve the latter objective, the publicly listed companies could consider granting stock option to their employees. The compensation structure has mostly been determined in a very haphazard and ad hoc manner and ironically, in many instances, a product

of arm twisting by the employees. Besides, many organizations still indulge in a great deal of discriminatory practice and determine salaries and benefits of the employees on the basis of nationality. Development of a fair appraisal mechanism to compensate appropriately the efforts of employees in cash and in kind is a crucial element of any HR policy. The corporations will also have to provide the employees with greater avenues of career development within the organization; encourage and support them to enhance their skills through external means; organize training programs not only related to their respective skills but also aimed at developing personal traits. Abraham Maslow, in his widely acclaimed theory of motivation, stressed that human beings are motivated by their unsatisfied needs and that certain lower needs (physiological, safety, love and esteem) need to be satisfied before the higher needs (self actualization) can be addressed. Similarly, Frederick Herzberg, on the basis of his interviews with 203 American accountants and Engineers, demonstrated in his equally recognized two-factor theory that individuals are not content with the satisfaction of lower-order needs at work, although, absence of which result in dissatisfaction; rather, individuals look for the gratification of higher-level psychological needs having to do with achievement, recognition, responsibility, advancement and the nature of the work itself. It is easy to relate these two conclusions with the problems that companies encounter with some of their Saudi employees, namely, relatively higher turn out rate, absenteeism and irregularity. Seemingly, non-gratification of higher level psychological needs has been one of the major reasons for these predicaments. An effective HR policy could exploit full potential of the Saudi employees by making them realize their importance to the organization, instilling in them a sense of ownership and acknowledging their contributions while letting them understand their responsibilities. Ironically, egos have hindered opening up the channels of communication for the employees to give their opinion and feedback. Employee participation and involvement in developing the HR policy will definitely have a very positive effect, and at the same time, will ensure that they fully understand the goals and the vision of the organization. There are many fringe benefits that do not cost fortune, yet, go a long way in making the employees feel comfortable. For instance, the Saudi Arabian Cooperative Health General Insurance regulations provide for co-payment of 20% of the medical costs by the employees; the corporations could easily reimburse this payment as the maximum amount that is payable per visit is SR.100.00. Although, many corporations provide recreational facilities for their

employees after the office hours, yet, they are usually limited in type and content.


corporations could occasionally organize open house or field trips for the employees and their families giving them an opportunity to have fun and at the same time interact with their colleagues in an amiable environment. A conducive work environment and HR policy that applies human touch and deeply values the efforts of the employees will not only motivate the existing workforce, but, will also attract new talent bearing in mind that the information now go rapidly into public domain through different social networks. More importantly, motivated work force also provide comfort to different stakeholders, though, indirect, yet, an invaluable consequence of good HR management. Written by : Safi H. Jannaty, Al Ghazzawi Professional Association, Dammam, Saudi Arabia Contact : 050-6857929 email:


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