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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-à-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 µtwo-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. The
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: