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Retaining Talent: Strategies to engage and retain professionals in the Middle East region A Manpower Green Paper engage retain
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green paper brochure Retaining Talent: Strategies to engage and retain professionals in the Middle East region
A Manpower Green Paper
Office contact addresses
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For more information, please go to www.manpower-me.com
Contents
Middle East – its unique talent retention concerns 4
Retention in the spotlight: WHY 6
Retention is an imperative: HOW 7
Some key non-compensation elements to retention 8
The importance of employee engagement in retention 10
Individual motivation for talent mobility 10
Conclusion 12
References 12
2
Talent shortage and talent movement are two important dimensions of staff management that companies throughout the world grapple with. According to data from Manpower’s 2008 survey, “Confronting the Talent Crunch”, 41% of employers worldwide are facing difficulties filling positions due to a lack of available talent, making employee retention a vital requirement for industry leaders looking to maintain their frontrunner status.
This green paper explores the challenges and opportunities of retention strategies in the Middle East region and provides some recommendations for companies looking to retain their talent.
Globalization brings with it the two key characteristics of collaboration and intense competition. In order to remain leaders in their industry, companies need to attract and retain the best talent. Companies are willing to pay over the odds to get the best on board. Competition brings with it a war for talent, resulting in the talent pool having more opportunities to consider. This scenario calls on companies to keep their top players engaged and motivated to contribute to innovation and growth.
Executive Summary
Shifting demographic trends, industry practices, advances in technology and globalization have contributed to talent shortages in growing and developing economies.
Demographics shifts (aging
populations, declining birthrates,
the overall ability of talent but also –
and more significantly – in the specific
skills and competencies required in
industrialized, emerging, and
Manpower White Paper
3
Companies in diverse sectors across the globe will face a growing talent crunch in hiring people with required skills. The World Bank’s GDP annual growth figures1
(of 3.3% in 2000, 4.5% in 2005 and 5.1% in 2006) for the Middle East and North Africa (MENA) region reflect that economic activity and prosperity is high, with huge projects in non-oil sectors attracting global talent to the region. However, demand far outstrips supply in nearly all areas and skill groups.
GulfTalent.com’s survey of September 2007 shows that firms are seeing a constant upward spiral in salaries. This survey pegs the average rise in salaries in the GCC region at 9% in 20072. Grappling with inflation and high costs of replacement, firms in the region are realizing the importance of retaining talent.
Confronting the Talent Crunch
Source: Figure 2: Manpower White Paper, “Confronting the Talent Crunch: 2007”
Men Women
Oversupply of low-skill resources generates unemployment
Number of people available by skill level
Demand for skill Supply of skill
$ per hour
1 World Bank, Development Indicators database, April 2008 2 GulfTalent.com Survey, September 2007, “Gulf Salaries rise by 9%.”
Figure 2: The Talent Supply/Demand Disconnect
4
3 http://yaleglobal.yale.edu/display.article?id=8333
The Middle East has traditionally had a large proportion of expatriates from Asia and Europe, in addition to the local workforce. YaleGlobal Online quotes: “About 13 million foreigners make up about 70 percent of the workforce in six member countries of the Gulf Cooperation Council (GCC)”3 alone. In the United Arab Emirates, the concerted nationalization efforts have brought a higher mix of nationals into the talent pool, but the national population is simply not large enough to sustain the economic growth of the country, hence the strong reliance on expatriate workers.
Clearly, given the differences in ethnicity and culture, these two broad groups of individuals approach their careers differently and seek to satisfy diverse needs through their work. The region has traditionally had a culture of high salaries and cash rewards.
This has changed over the past few years. While local talent is not so concerned with security yet, expatriates are increasingly looking for stability and longevity in an employer. They are often willing and keen to relocate to the region permanently. Earlier, foreign nationals to the Middle East region viewed their stint with a three-year horizon, looking to return home at the end of their assignment. Now they look to move on to other jobs and extend their tenure in the region. This has changed the equation, and the ‘one size fits all’ approach to attracting and retaining talent no longer works.
The Middle East is also seeing unprecedented growth and economic activity. Non-oil sectors like construction, tourism, hospitality and banking are experiencing heavy investment and huge projects. This has put significant pressure on talent supply, which is inadequate to meet the growing demand. As a result, firms are paying higher salaries to attract top tier workers, who are then attracted away by the promise of even higher salaries, raising attrition levels and resulting in companies spending even more to replace talent that they have lost to other opportunities.
Middle East - its unique talent retention concerns
5
4 http://www.emiratesgroupcareers.com 5 http:.mercer.com/middleeastbenefits 6 http://www.talentmgt.com/departments/dashboard/2008/August/705/index.php?pt=705&start-0&page=1
As a result of these changes, the Middle East is seeing a unique blend of ‘old’ and ‘new’ HR policies and practices. We see more of the ‘old’ HR practices in non-oil producing countries where the focus was on traditional personnel management and payroll-based policies and HR did not play a role in building the organizational brand or create the Employer Value Proposition (EVP) through dynamic recruiting, onboarding, development, rewards and benefits or retention strategies. ‘New’ policies are generally based on a more strategic style of human resources management, which is competency-based. The Dubai-based international airline Emirates, which is fast becoming an “employer of choice” not only for nationals but also for expatriate professionals from around the world, is a case in point. The airline demonstrates a progressive approach to its HR policies and benefits4 such as concessional airfares, medical and dental insurance, exchange rate protection for 50% of the basic salary, annual leave with passage, furnished accommodation, profit sharing and career growth opportunities that compare with the best in the corporate world. This is to ensure that the airline is not only able to attract, develop and retain key talent, but also provide long term career proposition. With increased competition, demand outstripping supply, more millennials joining the workforce and local laws being amended to make job changes easier, allowing for talent movement and therefore healthy competition in the region, having progressive HR policies is not an option but a business necessity.
Throughout the region, HR practices that promote employee engagement by setting up systems for training, feedback, communication and career planning, and active retention strategies, are gaining ground. Mercer’s 2008 Middle East Benefits Report provides an update of the trends covering areas like employee protection programs, lifestyle programs and other perquisite benefits.5 & 6
“About 13 million foreigners make up about
70 percent of the workforce in six member
countries of the Gulf Cooperation Council.”
YaleGlobal Online
6
Retention in the spotlight: WHY Firms are realizing that it is more cost-effective to retain a talented employee than to climb on to the recruit- train-lose-recruit juggernaut. Research shows that it can cost around 1.5 times the salary to replace existing talent. Direct costs include advertising, recruiting and training, but companies also need to consider indirect costs, such as reduced morale in the workplace, disruption of work flows, dissatisfied customers and overtime put in by others to make up for the loss of the individual.
High employee turnover causes multiple challenges:
• Employers miss out on growth opportunities and sustainable development as they are not able to keep and leverage subject matter experts, highly skilled and tenured employees whom they can place in leadership roles to manage expanding areas of business or new and emerging markets.
• Focus is distracted from the core business because companies are required to constantly induct and train new staff.
• Inexperienced employees negatively impact quality of product or service, resulting in dissatisfied customers.
• Attrition causes a chain effect as more employees defect if they perceive that the senior talent pool is weak.
• The cost of replacing people who have significant knowledge about the company is high.
If retention is not all about salaries, then what are the other factors that can help companies retain the right employee? A survey conducted by Manpower China in 2006 indicated that employees often cited reasons such as lack of career advancement, learning and growth opportunities as reasons for resigning, in addition to compensation. Research into the reasons why people choose to relocate for work show similar results; a recent Manpower White Paper highlighted the motivators for relocation from jobseekers in different regions of the world.
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Better employment opportunities 79.4% 69.6% 72.7%
Opportunity to learn another language 27.2% 43.4% 47.4%
Opportunity for career advancement 80.8% 71.1% 73.6%
Opportunity to experience a new culture or environment 52.5% 46.4% 51.4%
Move to a better environment (better weather, less crime, etc.) 45.9% 42.3% 43.2%
To live closer to family 26.4% 17.6% 16.3%
Other 8.0% 5.8% 6.1%
Source: Manpower Research, Global: Relocating for Work online survey: 2008
Effective employee retention should focus on strategies and practices that prevent employees being attracted away to another organization. Employees are more likely than ever to expect working conditions to go beyond simple monetary rewards in order to keep them satisfied. So, organizations that creatively offer a range of benefits, such as varied experiences, learning and advancement opportunities, visible career paths, mobility options, travel and working conditions that enhance work-life balance will stand a better chance of retaining their talent pool.
More and more “employers of choice” are starting to recognize that keeping their talent is a top priority in order to maintain higher profitability and stay ahead of the competition.
So, what is happening in the benefits space? While a majority of multinational firms in the region offer total medical insurance, there is the likelihood that they may switch over to a cost-sharing option in view of inflation. Other usual perks that most employers in the region offer are allowances like a company car, flights home, housing and schooling. Today, employees also seek protection benefits in the event of death or disability. Popular retention practices in the region include discounted health
club memberships and long service awards. An employee-friendly compensation structure is a practical way of empowering employees to structure a percentage of their salary according to their need and lifestyle.
Citigroup and BAE Systems are two examples of companies that allow á la carte flexible benefit plans that vary by country, in compliance with local regulations. Companies today set aside 60% of the compensation as the base and allow 20% for housing and the remaining 20% as a flexible basket of allowances that can be allocated by the employee for health care benefits, travel, etc.
Retention is an imperative: HOW “It’s all about giving employees ‘line of sight,’ so they can see
that they contribute to the success of the business. But it’s not good to
tell them you value what they do. You have to demonstrate it
through your action.”
8
With the rising trend in salaries (fuelled partly by pay rises in the public sector, the weakening dollar, competition and economic growth in Asia), Middle East employers are seeking retention options that
aim to meet newly emerging employee needs for security, long-term stability, continuous learning and feeling valued. Clearly, compensation by itself is no longer the magnet that retains talent.
This section aims to examine the different non-compensation elements to retention.
Retention strategies giving talent a reason to stay
Self Management -
empowering the
Innovative benefits programs empower employees with the ability to self-administer
benefits, supported by a robust HR Information System (HRIS). Here, a flexible
basket of allowances up to 20% of the total cost to company per employee is left to
the discretion of the staff to allocate according to their choice, such as leave travel
allowance, continued education, topping up of gratuity, sick leave, holiday rates, car,
and gym membership.
Management
A comprehensive talent management strategy involves a clear line of vision on career
progression - i.e., career path, 360 degree review feedback, encouraging employees to
put in place career development plans, mobility assignments to work in other regional
offices, increased responsibilities, stretch assignments, decision-making responsibilities
and succession planning. Managers engaging in ongoing development dialogues with
employees is a core ingredient in talent management, so that managers can provide
employees with roles mapped to their skills and career aspirations.
Employee and
Career Profiling
A plethora of assessment options exist in the market for employee profiling. The most
common are the Myers Briggs Type Indicator (MBTI), DISC Profile, Hermann Brain
Dominance Instrument (HBDI) and Job Characteristics Inventory (JCI), amongst others.
Employee profiling helps the leadership of the organization to assess and map career
paths, allowing for informed prediction of successful performance.
Shaping - the
managerial tool
Managers are moving to focus beyond the transactional and engage their teams in
transformational thinking in decision-making that benefits the organization. They
demonstrate thought leadership in risk-taking, play a role in strengthening the cultural
DNA of the organization and put in place an environment conducive to creativity and
innovation. Developing employee and manager “ready reckoner” toolkits for career
development and making these available on the company’s intranet as and when
needed is valuable. Organizing team building activities, having Quarterly Business
Reviews (QBRs), and taking teams off-site are all innovative practices that cater to the
needs of the Millennials (see page 10 for more on the Millennials).
Some key non-compensation elements to retention
9
Mentoring Mentoring is a powerful tool that provides an opportunity to meet and interact with
senior leaders of the firm. Campus and lateral hires benefit immensely with guidance in
setting personal and professional goals, skill development, cultural orientation, and in
navigating the firm. This allows employees to build their own personal “board of
directors” to leverage through their careers with the company.
Flexible Work
Policies
It is imperative for employers in the Middle East to start implementing retention
practices that expatriates from European countries are already used to. One of them is
workplace flexibility, which enables employees to complete their tasks and yet enjoy a
life outside the workplace. Examples would include flexible hours, compressed work
weeks, telecommuting options, on-site childcare, concierge services, job sharing,
membership to local health club or on-site gym, and work scheduling options. The pay-
offs from having such benefits are multifold - from having engaged and loyal employees
to increased productivity, the development of management skills that can work with
virtual teams, reduced absenteeism to developing trust and meeting business goals.
Learning and
Development
Identifying critical competencies for success for managers and employees is a pre-
requisite to arriving at a relevant learning and development curriculum for the various
levels in an organization. Employees need holistic professional development
opportunities to benefit from. These include live instructor-led sessions (internally and
public) to self-initiated learning behaviors promoted by establishing a comprehensive,
on-demand library of online learning modules accessible to employees. This blended
learning approach sets the tone in developing a culture of learning in organizations. A
robust Learning Management System (LMS) allows both manager and employee to
track completed learning and any credits earned. These are then taken into account
during performance reviews or to direct employees to develop required skills during
feedback sessions. Leadership and business speaker series led by senior leaders of
the company provide learning opportunities for employees about the firm, its business
and leadership principles. Top firms typically adopt a 70:20:10 approach where 70% of
learning takes place on the job, 20% through professional interaction and 10% through
formal learning opportunities. On-the-job learning not only provides opportunities for
transfer of learning from senior employees, but the knowledge gained is also retained
better than in formal training. The best organizations today have successfully mapped
learning curricula to critical skills required to perform successfully at different levels of
the organization. This provides a structured and well laid out learning path for
employees to benefit from.
Employee
Engagement
The expectations of today’s talent have changed from merely being satisfied with a top-
down approach to that of wanting to be informed, consulted on decisions and
participating in the management of the organization. The Gallup Q-12 questionnaire is a
good tool to use to measure employee engagement. Other employee engagement
mechanisms include social committees, affinity networks and employee benefits
committees, using data from exit interviews and employee surveys to develop policies
to enhance the employees’ working environment.
10
Employee engagement is vital, not only because these employees work harder and are more productive, but also because engaged employees are retained. The Blessing White (2007) study7 reveals that 85% of employees that were engaged indicated their intent to stay with their current employer. Employee engagement not only has a positive correlation with retention, but engaged employees tend to ‘give’ to the organization by way of creativity and innovation that in turn have a positive impact on the earnings per share versus disengaged employees who are only looking to ‘get’ from the organization. Key drivers to engagement include:
• Linking employee work objectives to business goals
• Employee confidence in senior management’s ability to drive the organization forward
• Compensation
• Being looped in on organizational developments
• Being included in the decision-making process, rather than just being told after the fact
• Employee feedback on policies, working conditions, benefits administration, work place flexibility and other issues.
The importance of employee engagement in retention
Millennials and their expectations
The millennials8 are known by other names such as Generation Y and the Digital Generation. This subset of the demographic consists of those born between 1981 and 1993. The expectations of the millennials from organizations differ significantly from those of previous generations as they challenge older, accepted business models. This tech- savvy generation has no hesitation in questioning the status-quo, expects more choices, flexibility in working conditions, a quicker pace of career development and having greater control when making career decisions.
The Manpower Latin American Mobility study conducted in 2007 reveals that attractors and retention factors can be slightly different for people with different skill sets. A critical aspect for HR practitioners to bear in mind is that factors that attracted people to the company will always have some intrinsic value in keeping them there. In other words, it is essential that the organization delivers on what was promised when selling the job. So, to the extent it is appropriate, these should be leveraged to the fullest to retain talent.
Individual motivation for talent mobility
7 Engagement Level, Performance and Retention in the Development of Successful Emerging Leaders, David Samuel, 2008 8 http://www.deloitte.com/dtt/article/0,1002,sid%253D26551%2526cid%253D120906,00.html 9 ASTD State of the Industry Report, 2002; http://www.astd.org/NR/rdonlyres/2E06A797-1EF6-44A9-B387-0AC7D14C1157/0/SOIRpress_release.pdf
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• Investment in Training - with change being the only constant today, employees are keenly aware of the need to upgrade knowledge and skills to remain marketable in a competitive work environment. This drives the desire for them to be associated with a learning organization that provides them the platform to develop these skills. Given the trends towards seeking stability and longevity in an organization, employers have recognized the need to work closely with local universities to develop suitable courses. A case in point is Accenture tying up with the Xavier Labour Research Institute in India through which they provide executive education for upcoming HR professionals. Re-skilling, up-skilling and allowing employees to set their own development course will also go a long way towards fighting the talent crunch. The American Society for Training and Development9, a leading authority on workplace learning, in its 2002 study, indicates that companies generally spend from 1 to 3% of the payroll on training. This contributes to the development of a positive ‘employer brand’ for the organization and positions it as an ‘employer of choice’.
• Both national and expatriate employees in the Middle East cite relationships with co-workers as vital to their remaining in the firm. While nationals place their relationship with their managers as more important, expatriates indicate that they need a positive relationship with their colleagues and peers to stay with an organization. It is necessary, therefore, for firms to realize that employees often leave managers, not company. The manager can make members of his team stay on with the company by offering transparent career paths, and also relevant leadership skills development opportunities that are appropriate to the ethos of the organization, and to a larger context, the region.
• Recognition programs focus energies on achieving the firm’s business goals, and there are several low cost options available to HR managers. Certificates and engraved plaques have now become banal. Innovative recognition programs include public acknowledgement of contribution at seasonal celebrations, an extra paid day off, reserved parking, bonus airline miles, movie tickets, dinner coupons, breakfast with the CEO/boss, ‘top star’ ribbon, monogrammed company merchandise, a video scrap book featuring the star employee as well as more profession- orientated rewards such as the opportunity to cross- train, or nomination to a stretch assignment in a coveted, high-visibility project. Employees can be rewarded by informal and simple handwritten notes of appreciation as well as formal ‘employee of the month’ rewards.
Figure 2: Individual Motivation for Talent Mobility Source: Manpower Latin American Mobility Study, 2007
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Conclusion Globally, employee retention is a top agenda item for organizations. In the Middle East, with employers finding it increasingly difficult to attract and retain talent, and inflation and high salaries further compounding the situation, employers in the region have realized that their HR strategies need to be revisited to include innovative and progressive retention programs and practices if they are to retain and nurture the top talent they own.
References http://ddpext.worldbank.org/ext/ddpreports/ViewSharedReport? &CF=&REPORT_ID=9147&REQUEST_TYPE=VIEWADVANCED&HF=N/CPProfile.asp&WSP=N
http://www.bi-me.com/main.php?id=21727&t=1&c=62&cg=4&mset=1011
http://www.expatica.com/hr/story/Western-style-benefits-on-rise-in-Middle-East.html
http://www.ameinfo.com/42459.html
http://www.allbusiness.com/public-administration/administration-human/4011093-1.html
http://www.employeebenefits.co.uk/item/4450/pg_dtl_art_news/pg_hdr_art/pg_ftr_art
http://www.baesystems.com/Careers/CareersinYourCountry/US/LifeatBAESystems/FlexibleBenefitsPlans/index.htm
http://www.flexibilityworks.dewr.gov.au/why_1.htm
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Each year, Manpower publishes a number of research papers that address the current labor market and employer issues.
All Manpower white papers can be downloaded at www.manpower.com
Manpower, Middle East LLC www.manpower-me.com
© 2008, Manpower Inc. All rights reserved. GC-21