Out of the shade | Deloitte Middle East | ME PoV issue 19 has been added to your bookmarks.
Out of the shade
ME PoV Spring 2016 issue
Talent management has become a priority on the agenda of public sector leaders in the Gulf Cooperation Council (GCC) countries as they seek to cope with the peculiarities of the GCC labor market and governmental drivers impacting it.
Technology, globalization and demographic changes are reshaping the way organizations around the world interact with the talent market. At the same time, the GCC’s workforce distribution and governmental drivers are putting further pressure on public sector organizations in the GCC to rethink their talent management approach at all stages of the employee lifecycle (i.e. from hire to exit.) Never before have these public sector organizations faced such a range of talent management challenges that imminently require a sustainable, integrated and comprehensive talent management system across the GCC.
The GCC’s workforce distribution impacts talent management
Both a surplus in the supply of young national professionals and a deficit in the supply of experienced and qualified talent present talent management challenges that public sector organizations in the GCC should address to cope with skill shortages.
The International Monetary Fund (IMF) estimates that up to 1.6 million nationals could enter the GCC labor market by 2019, with new private sector jobs covering a maximum of half the expected labor market entrants. As a result, public sector organizations in the GCC could be pressured to absorb the surplus of young national professionals in order to avoid an increase in national unemployment rates and to comply with nationalization requirements.
Moreover, there is a deficit in the availability of sufficiently qualified nationals for leadership and middle management positions. As such, public sector organizations in the GCC tend to fill these positions with expatriates or newly empowered, and relatively young, nationals some of whom might lack the required experiences or qualifications to effectively fulfill their position’s requirements.
Governmental drivers impact talent management
In addition to the GCC workforce distribution, GCC governments have launched several initiatives that impact talent management.
Nationalization agenda: GCC governments have enforced nationalization requirements on public and private sector organizations in the GCC. These requirements aim to up-skill nationals, address high national unemployment rates, particularly among millennials who constitute more than 50 percent of the GCC’s workforce (IMF), and reduce reliance on expatriates in certain sectors. Not complying with nationalization requirements may hinder the organization’s ability to participate in the labor market. For instance, the Nitakat program in the Kingdom of Saudi Arabia classifies private sector organizations based on their nationalization performance; the better the organization’s classification, the easier it becomes for that organization to participate in the labor market.
As a result, both public and private sector organizations in the GCC face a challenging balancing act to attract and retain nationals while maintaining the right mix of competencies to effectively operate their organizations.
Efficiency and excellence: GCC governments have launched several innovation and excellence strategies to which public sector organizations in the GCC should be aligned, in addition to government awards that acknowledge and reward public sector organizations that provide efficient and innovative services to their customers. For example, the Government of Abu Dhabi’s 2030 Economic Vision sets out guidelines for optimizing the Government’s operations by improving the efficiency and accountability of government departments and related public sector organizations. GCC governments’ drive for efficiency and excellence is further reflected in their performance compared to that of other countries around the world. According to the World Economic Forum’s 2015 Global Competitiveness Report, Qatar emerged as the country with the most efficient government in the world, while the UAE ranked fifth, Oman 19th, the Kingdom of Saudi Arabia 23rd and Bahrain 24th. Because of the emphasis placed on efficiency and excellence within GCC governments, public sector organizations are required to sustain employee engagement and increase productivity to support their government’s objectives.
Budget optimization: Public sector organizations in the GCC are the largest employer of nationals. According to the IMF, more than 75 percent of employed nationals in Kuwait, Qatar and the United Arab Emirates (UAE) worked in public sector organizations in 2013. The ratio is also high in the Kingdom of Saudi Arabia and Oman at 50 percent each. As a result, public sector wages as a percentage of Gross Domestic Product (GDP) in the GCC are among the highest in advanced and emerging economies, totaling 11 percent in the Kingdom of Saudi Arabia and 10 percent in each of Bahrain and Kuwait. However, with budget cuts resulting from the drop in oil prices, public sector wages as a percentage of GDP are unlikely to be sustained at current levels. GCC governments’ efforts to optimize their budgets will present challenges to public sector organizations by decreasing their ability to provide jobs for the expanding national population and forcing them to “do more with less.” Hence, engaging employees and driving their performance becomes of utmost importance.
Key talent management challenges
We have identified key talent management challenges that are further amplified by the GCC’s workforce distribution and governmental drivers. These include:
Skills matching: Skills mismatching is the root cause of the youth employment problem in the GCC. There need to be national education policies that bridge the gap between labor market demand and supply, and enhance young nationals’ employability. Skills shortages are putting pressure on public sector organizations to attract and retain scarce talent.
Workforce optimization: In their drive to nationalize the workforce, some public sector organizations in the GCC have tended to recruit more nationals than they require, resulting in overstaffing. As a result of budget constraints that are impacting the way public sector organizations recruit, there is a need to adopt a scientific method of determining future workforce requirements while factoring in nationalization targets.
Productivity improvement: Public sector organizations in the GCC have had limited success in promoting engagement among most nationals partly due to the guaranteed benefits they are entitled for, and which are not necessarily directly linked to their productivity or performance. As a result, there is a need to revisit the workplace culture and rewards philosophy by focusing on productivity and performance.
Talent development: Public sector organizations in the GCC often employ individuals who require further development to effectively fulfill their position’s requirements. This is mainly due to the unavailability of sufficiently qualified talent, particularly in leadership and middle management positions. As a result, there is a need to develop and implement learning programs to upskill talent and groom next generation leaders.
Revisiting the talent management perspective
To effectively address their current talent management challenges, public sector organizations in the GCC should revisit their perspective on talent management and be prepared to question longstanding practices and beliefs.
Talent management tied to a strategic plan: Currently, the majority of talent management activities such as planning for recruitment and implementing trainings are reactive, driven by incidental requests received from concerned line managers. To be viewed as a strategic partner rather than a transactional support function, the Human Resources (HR) function should develop a strategy that is in line with that of the organization and broader government priorities (e.g. nationalization.) This strategy should also include a talent component that both focuses on enabling the organization to achieve its objectives from a talent point of view and guides proactive talent management activities such as recruitment and learning.
Competency-based talent management: In order to achieve integration across HR functions, a competency framework should be developed and used as the base to drive interdependency across talent management initiatives. The below highlights how competencies link various HR functions:
- Workforce planning: Competencies enable the development of a competency-based workforce plan that matches demand and supply. How can an organization determine its workforce needs without knowing what skills are required?
- Recruitment: Competencies enable recruitment activities to be focused on job-specific ability through competency-based candidate screenings and interviews.
- Performance management: Competencies enable the setting of goals and development opportunities related to critical job requirements.
- Learning and development: Competencies enable the targeting of skills development areas through appropriate learning programs.
People and performance-focused culture: Organization cultures should be shifted from cultures focusing on policies to cultures focusing on people and rewarding performance. This could be achieved by revisiting the rewards philosophy to focus more on productivity and performance and by accommodating for factors that might improve employee happiness at work such as flexible working hours, job rotations, contingent work arrangements (e.g. working from home, part-time work, other forms of work arrangements that suit working mothers’ requirements.) In addition, shifting organization cultures requires employees to understand how their performance affects the broader organizational strategy and how their individual contributions impact its mission. As a result, a people- and performance-focused culture increases employee satisfaction and engagement levels, thus enhancing talent retention and productivity.
Talent analytics: Currently, talent management activities are not consistently monitored and, as a result, lessons learned and trends are not extracted. To support the decision-making process, HR functions could use talent analytics tools to provide talent-related insights and trends. HR functions could use talent analytics as a descriptive and monitoring tool to measure employee metrics such as productivity and turnover, and determine trends and corrective actions. Talent analytics could also be used as a forecasting tool to support the workforce planning process.
Integrated talent management
In order to plan for the talent management transformation, organizations should assess the maturity of their current approach to talent management, and determine the desired future state. Based on our experience working with public sector organizations in the GCC, the desired future state tends to be at an integrated talent management maturity level, one that focuses on connecting and integrating HR systems and processes. This poses a realistic target that public sector organizations in the GCC could achieve in the short- to medium-term.
The high-impact talent management framework (left) illustrates how talent management functions across the employee lifecycle are integrated.
From an implementation perspective, not all the components within the talent management framework can and should be implemented at the same time. Key solutions within the talent management framework should be exploited first based on their importance to public sector organizations in the GCC. The following key talent solutions should be implemented first:
Talent strategy and organizational alignment:
The talent strategy guides all other talent solutions; therefore, it should be developed first. The talent strategy should complement the organization’s strategy by outlining the talent challenges and implications to achieve the organization’s strategic objectives, and then defining key talent initiatives to address organizational needs and talent challenges. Considering the importance of the talent strategy in achieving the organization’s objectives, it should be business-driven and HR-enabled, requiring a joint effort between the HR function and organization leaders.
Workforce planning: Public sector organizations in the GCC generally develop recruitment plans, however strategic workforce planning is hardly done. Given the talent management challenges that public sector organizations in the GCC are facing, it is time to move beyond gut instinct when making workforce decisions. As such, it becomes essential to use a more scientific method of determining workforce requirements. The aim of the strategic workforce planning process is to develop actionable priorities for bridging competency gaps by identifying the required competencies to achieve the organization’s strategy, defining critical workforce segments based on positions requiring scarce skills and of high value to the organization, and conducting a competency gap assessment to forecast talent requirements.
Capability and competency management: Competencies are defined as the combination of knowledge, skills, abilities, and personal attributes that are required to effectively perform a job. Additionally, competencies should be aligned with the organization’s strategy and values to help foster common purpose and organization success. Competencies, therefore, when used holistically across the talent management process, can serve as the common language that integrates talent management activities such as workforce planning, recruitment, performance management and succession planning. As such, the development of a competency framework and job profiles are essential to integrate talent management processes.
Leadership development: Public sector organizations in the GCC should implement tailored learning programs aimed at developing technical and general leadership competencies of leaders to better equip them to achieve organizational objectives, respond to challenges and engage employees. Leadership development initiatives can also include the participation of high-potential talent, as identified in the succession management process, in order to groom next generation leaders and ensure a smooth transition between them. Moreover, leadership development programs should not only focus on traditional and class-based trainings, other channels should be explored as well such as coaching, mentoring and job rotation.
Succession management: To comply with their governments’ nationalization agendas, public sector organizations in the GCC might find it beneficial to develop robust succession management processes which aim to identify “high-potential” talent, particularly among nationals, at the early stages in their career, and develop their competencies to fulfill potential future leadership responsibilities. As such, succession management can enable these organizations to reduce their reliance on expatriates and smooth the transition between expatriate leaders and up-and-coming nationals.
Performance management: Currently, performance management in public sector organizations in the GCC is mostly an “appraisal system” rather than a system focusing on competencies and objectives. Additionally, the link between performance and other talent programs is not clear. Public organizations should develop and enforce a standardized and transparent performance management framework that rewards and recognizes performance by accurately assessing and evaluating individual contribution to the organization’s objectives. Building and maintaining a pay-for-performance culture will increase employee productivity and drive employee engagement.
Learning and capability development: Learning and capability development initiatives in public sector organizations in the GCC generally do not address targeted competencies, and are largely viewed as a break from work. Organizations should strive to become learning entities by developing a learning strategy that is driven by organizational priorities and integrated with the overall talent strategy. Learning initiatives should be in line with employees’ job requirements and areas for improvements, as per performance management results, thus fostering interest and active participation. Additionally, public sector organizations could explore the idea of partnering with private sector organizations for joint learning initiatives where mutual interests coincide.
The timing could not be better for public sector organizations in the GCC to rethink their talent management approach as a result of the talent challenges they face. HR functions stand at the center of these changes. However, achieving the necessary transformation to effectively address talent challenges requires both leadership sponsorship and bold and innovative thinking, with a greater focus on integrated talent management as a key element in driving both workplace change and organizational success.