Challenges of Human Resources in the Middle East Countries - Assignment Example

Running Head: Title: Institution: Instructor: Module: Date: Challenges of Human Resources in the Middle East countries Word count: 3397 Introduction There has been a growing importance on the discussions concerning human resources in the Middle East restructuring and localizing of traditionally experts in the heavy work forces was made. In the past there were problems that were encountered during the relocations of foreign workers since employers did not know the amount of money that could be paid to their tax free salaries (Omran et al, 1993). This problem does not exist any more in the Middle East; however the biggest problem is that, the structures in the Middle East markets are not effective enough to serve the current human resources with capabilities. There are no enough financial resources to cater for the construction of good market structures at a faster rate in the Middle East. Currently, the main focus in the Middle East is the establishment of learning institutions, specialized universities and training schools. These institutions are being established for the purpose of developing and promoting main skills and proficiency to students. This paper is aimed at identifying various challenges that are experienced by human resources in the Middle East. It also illustrates the various solutions that have been used to alleviate some of the challenges (United Nations, 1995). Challenges Middle East is a high growth region The continued growth in the economy in Middle East is not felt by many companies who are found to continue investing in organization systems and developing human resource capabilities. It is evident that, in 2002, the economies grew by 74% with Gulf having a growth in GDP above the world’s average. In 2006, the real GDP increased by regional average of 6.3% which was considered the best performance over the last ten years (ILO, 2000). The increase in oil prices improved the liquidity of the region. However, the problems that came with the increase in oil prices increased to more spending on the consumer. Companies spend more on investments in organization systems and human resource capabilities. These companies need plenty of local human resources with capabilities as well as expertise from foreign countries in order to compete successfully in the international markets in the long run. There is a significant growth in human resource The growth of human resource in the Middle East has driven businesses to concentrate on strategies. Organizations in the Middle East operate in overlapping sectors like financial services and tourism in emerging markets. Human resource do not operate any longer the background support function, they are only aimed at achieving strategies to compete in the market without realizing that the central goals of the organization needs to be achieved first (Aoyama, 2001). Available jobs in many sectors are no longer open to immigrants According to (UNDP, 2000), There is a falling trend of the immigrants in the private sector of 24% between 2003 and 2005. Many countries are still reducing the foreign workforce, for example Saudi Arabia have decided to reduce its foreign work force by more than half in the next ten years since 2003. There is also reduction in Asian visas in the United Arab Emirates from 2003 and the ministers of labor and social affairs gave foreigners only six years to live in the countries. They even introduced tougher conditions on recruitment as well expelling excess foreign workers. Renewal of residence permits were also made more difficult. Hence, the immigrants in the Middle East are facing problems to live in the foreign countries. More focus is on localization to change the talent pool and mix The major recruiters of foreign labor and talent in the Middle East are the GCC countries. The foreign workers in these countries are paid low wages and only work in domestic and construction service sectors. For example, Qatar and the UAE employ foreign workers from the less developed areas of Asian or Middle Eastern countries (UNESCO, 1999). The middle level managers and technicians are foreigners from India, Pakistan or Sri Lanka. Senior managers who are lowly paid are recruited from the European Union and North America. The World Bank (2004) advocates that, the existence of low paid foreign workers in the m idle east has led to lack of job opportunities to the well experienced human resource from the countries. The governments have decided to provide employment opportunities to the indigenous people to cater for the continued increasing unemployment levels. Many companies also have policies that indicate the maximum number of foreigners who can be recruited without exceeding the required number. The localization policy by the company is expected to reduce the target by 50% to provide vacancies for the local talent pool. Right talent at the right price Middle East countries are found to have the problem of employee retention. This is because of the existence of foreign workers who are lowly paid. Foreign workers only work for a short time like three to five years and the companies take this chance to use the cheap labor from the foreign workers. It is difficult for the companies to retain local workers who require the right price for their work. Human resource from the countries have skills and expect to be paid well, the companies do not want to spent more to the local employees, rather they get foreign and cheap labor (Jalali et al, 1998). At the end local human resource will have no jobs and if they are employed they have to get less than expected. Employers in the Middle East have a problem of encouraging the right expatriates to stay and developing sufficient local talent since it will take them an additional spending on pay and condition packages. Growth in compensation levels and people costs Demand for labor has surpassed supply in the Middle East companies and this has created pay increases in some sectors. Inflationary pressures associated with economic growth leads to increase in other costs like housing costs which have gone up. The decrease in housing costs cannot be anticipated in spite of the intervention by the government and new property coming in the market. For example, rent prices in Qatar shot up between 2004 and 2006 due to the influence by the Asian games (Omran, et al, 1993). The prices have not yet come down regardless of other houses in the former Games Village coming on the market. The existence of inflation has led to a sharp decline in real income and purchasing power of many people in the countries. In addition, companies have to increase the pay packages to the foreign employees to retain them. The Middle East companies face tough competition from Asian countries who share the same human resource. Companies were forced to spend more on salaries, including hardship premium to attract key talents from the foreign expertise who were impacted on by the political and military crises. It is evident that personnel costs have been increasing progressively in the last few years. Personnel’s are encountering challenges in justifying the extra costs through the creation of stronger business growth. In addition, the human resource costs have been rising at a faster rate than the operating expenses. For example, the ratio of rise in human resource costs to operating expenses increased from 0.57 to 1.08 between 2003 and 2006 (Population Reference Bureau, 2001). Without the local talent supply increasing, the high skilled foreigners will continue demanding for high salaries. Localization has also contributed to the rise in local salaries to match the ones of traditionally paid foreigners. To resolve the problem, employers are required to make engagements among employees as well as improving retention rates among this expensive resource. Evolution of leadership and human resource programs to drive employee engagement Employee engagement rate in the Middle East countries is below other countries. As advocated by the Middle East forum (2002), it averages 47% and this is below the Asia pacific average of 56%. It is also below the international average of 58%. The best employer or employer of choice is a new concept to the Middle East countries. These countries only focus on helping organizations in the fast development of people management abilities to the best international standards. The solution to this challenge is that, the companies must realize the power and relevance in using strategic human resource practices that can improve the engagement and retention of workers. This step is a sign that the companies are willing to develop and execute effective human resource policies that will ensure that talent supply issues do not put at risk the long term growth. The countries need to change from a buyers market to a growers market concerning abilities of the human resources. The achievement of sustainable development and sustainable success among employees will ensure that operational excellence is attained in the Middle East countries (UNDP, 2000). The introduction of the sage software will enable medium and large organizations to attract the best practices from the international human resource and comply with the local labor law by individual countries in the Middle East. The sage software will automate and organize human resources processes by replacing the paper based records which are time consuming. There will be fewer errors in reporting and better management of employee information. The region requires a powerful and standardized HRMS solution that will act as a tool for reforming human resource employment, training and payroll procedures. The sage Abra family of human resource management provides these solutions and gives the Middle East companies a chance to implement international standards in human resource management for recruitment, training and payroll management. The use of sage Abra human resource management system in the m idle east countries will help human resource managers to undertake their processes at a greater level. Human resource managers will be empowered to face the challenges by drawing and maintaining talent in the area (ILO, 2000). Recruitment and employee management challenges With the increasing need for funding and maintaining good talent in the organizations, human resource managers face cost challenges to meet the demands of workers. Human resource managers require a variety of features and expertise options to choose from. According to Aoyama (2001), the sage Abra goal is to convey all the functional power to the market with the required technology that can solve various needs of companies of different sizes. The solution that comes with sage Abra is that, it reduces administrative overhead, decrease costs and increases efficiency in all the aspects of human resource administration. Uneven distribution of wealth Middle East countries have been experiencing uneven distribution of wealth among its human resources. Countries like, Saudi Arabia, the Gulf States an Iraq has remained at the top while other countries including the popular Egypt are still facing economic challenges (World Bank, 2004). The impact of using foreigners and low unemployment Middle East countries are found to advocate for cross Arab labor movement which led to the expansion of non Arabs getting onto the labor pool. Some of them come from south Asia in countries like India and Pakistan, and Philippines in East Asia. These foreign workers occupy most of the technical, clerical and middle level managerial jobs. The European and U.S nationals occupy the professional and management expert levels in the Middle East countries. However, the growth in foreign workers is decreasing due to the increase in unemployment rates in the Middle East countries where they are forced to look for jobs in wealthier countries. The Gulf States have not been left behind and are experiencing high unemployment rates. For example, Saudi Arabia which is long known for having a full employment status is currently experiencing high levels of unemployment at 32% (United Nations Population division, 1999). The number of job seekers in the United Arab Emirates increased up to 300, 000 people out of the three million population capacity with majority being non residents in 2006. In addition, the private sector has not had enough capabilities of providing jobs for the national in the rich oil countries in the Middle East. The reason is that, the private sector cannot meet the expected work conditions and salaries offered by public sector to the nationals. The private sector will not be able to offer jobs to the nationals in the long run with the government continuing to offer the nationals better working conditions and high salaries (Khalegian et al, 2004). The government has taken charge to implement a human resource policy to match job seekers and openings to reduce the challenges of increasing unemployment rates. The Gulf States have implemented a workforce nationalization policy where companies are expected to set aside some of the positions for nationals. Organizations are now being encouraged to hire nationals in their hiring process in stead of taking foreigners. Weak role in the private sector The public sector in the Middle East has dominated the economy without leaving any space for the private sector. Jalali et al (1998) argues that, employees in the public sector form half and three quarters of the labor force in the government. This leads to more spending of the government in budget issues, hiring practices and career management. It is the duty of the government to provide employment opportunities to the national in the Middle East. The problem arises when the government cannot rationalize their terms of employment for the national to provide a chance to the private sector in playing a role in the creation of jobs to the nationals. Technology challenges Middle East countries have recognized the need of using new technologies to optimize the human capital. However, the use of information technology has brought other challenges of attendant shelfware syndrome. Organizations are investing more to acquire soft wares but they cannot use them due to lack of employee training and understanding. Employees are less motivated with the introduction of new technologies that focus on what is to be achieved than the employee needs. This is an indication that, the Middle East companies need to invest more on human resource technology that will cater for employees needs through economic and social developments in the region (UNESCO, 1999). Population trends challenges The continued increase in population in the Middle East countries has led to challenges that, the governments cannot provide the basic needs to the citizens. Many citizens do not have adequate housing, sanitation, health care, education, and jobs. This has led to increased poverty in many areas with the gap between the rich and the poor still increasing. Khalegian et al (2004) denotes that, governments in the region need to address these problems facing the citizens in order to narrow the gap between the poor and the rich as well as improving the standards of living. The region is still encountering challenges of scarce water resources due to the expanding growing demand by the large number of citizens. The young population in the Middle East counties is growing at a very fast rate. The number of women at child bearing age is expected to double in the next 30 years. There re no quality reproductive health services to the women of child bearing age that can slow the increasing number of births in the region. The increase in total population increases the population of the elderly people. A large number of elderly people bring the challenge of costly healthy systems which are expensive to the citizens. For example, the increase in the population of the elderly people in Saudi Arabia is expected to increase from 1 million in 2000 to 7.7 million in 2050. The working age population is still increasing with the number of young people ready to work after the retirement of an old person ranging at the ratio of 8:1 in 1996 (Population Reference Bureau, 2001). Economic dependency in the region is the high since the ratio of the economically active population to the economically active population is the highest in the world. The structure of the young age and the low levels of women participation in the labor force have led to a low proportion of the economically active population in the region. Countries in the Middle East must invest in political stability, health and human resource as well as sound economic policies to deal with the population challenges in the region. Populations in the regions need to be well educated, trained and ready to engage in the market economy to contribute to the national economy. The region experiences the highest rates of unemployment in the world. Between 1996 and 2010, Middle East countries have to create more that half of the current existing jobs in order to cater for the prevailing unemployment rates in the region (UNESCO, 1999). Women are the ones facing the highest rate of unemployment in the region. It is evident that women are the most affected gender when it comes to job discrimination in the world. For example, Middle East countries like Egypt reported unemployment rates of 24% in women as compared to 7% for men in 1995 (Population Reference Bureau, 2001). The era of global globalization, requires Middle East countries to invest more in human resources. The government has invested a lot in education but the rate of illiteracy in the region has been increasing tremendously. There are many challenges in managing the fast growing urban populations due to the shortage in housing and insufficient infrastructure. Reward challenges The increase in economic growth in the Middle East that was experienced due to increase in revenues from oil and gas price increases. The public as well as the private sector are investing on infrastructure projects and multinational companies are forming strategic coalition’s wit partners from the Middle East (World Bank, 2004). The different economic and cultural ideologies in the region presents reward challenges to the local companies and the new entrants. The region faces shortage of local labor and companies are forced to use foreign workforce in many circumstances. Companies face challenges of little local labor that have to be paid according to the employment policies in the region. Nationals have to be paid high salaries which employers cannot meet hence leading to high competition from the foreign workers who are employed not on the basis of qualifications. The problem has even increased by foreign workers who do not want to seek jobs in the region due to the declining local U.S dollar currencies in the region. The region is still competing with high economies like china and India which has led to the increase in housing rates. In the Middle East, there is no law that protects the employee and employment. There are no trade unions, collective bargaining and minimum wage legislation in the region and this makes employers to dictate the terms of employment (UNDP, 2000). Government and local owned companies compensate employees on the basis of employee national origin, gender and marital status. The companies are aimed at tracking nationals fast instead of focusing on rewarding performance. There are different employment packages in the companies depending on employee segments. Employees are paid as nationals, foreigners from the western countries as well as Asian and Arab foreign workers. Market bench marking is not considered to determine compensation levels of employees in the region. Compensation levels are based on the organizations capabilities to pay its employees. Market benchmarking as a way of determining compensation levels is not able to get any reliable information from the region. Conclusions In conclusion, in order to deal with most of the human resource challenges in the Middle East, organizations are required to position human resource as strategic business partners. Human resources in the organization should be supported to implement different human resource processes to the company. There should be frequent communication with employees concerning the organizational strategies as well as linking their performance to organizational results to ensure a high performance culture in the organization is achieved. Organizations should hire the right talents who have the right skills required for the job. They should work towards retaining talent in the organization which is the most important asset for the business. Multinational must identify the key employee segments in the region before entering in a business in the Middle East. Many people in the Middle East are interested in entering in a long term career. Multinational must realize that, the younger nationals are motivated by career development and training in the total reward package. They must be aware of the rapid changes in the housing costs in the local economy and set up a culture of accountability. References International Labor Organization (ILO). (2000). World Labor Report. Geneva: ILO. 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