HR Assignment

Introduction 3

The strategic role of the Human

Resources Management (HRM)

departments in Saudi Arabia

#02

Human Resource Management

The current state of HRM in KSA 4

Macro Factors 4

Mesho Factors 6

Micro-Individual Factors 8

Conclusion 9

References 10

Outline

Introduction

The role of Human Resource Management (HRM) is to ensure the convergence of three factors –

human capital, organizational resources and management. The human capital of the organization

possesses the actual and potential resources (such as knowledge, skills and capabilities) that can be

harnessed through effective management policies to achieve short as well as long-term

organizational goals and objectives (Nankervis and Compton and Baird and Coffey, 2011).

HRM as a concept and a practice has evolved over a period of time, changing to adapt to the

varying environment in which the organizations operate including social, economic, cultural and

government regulations. Though the concept of human resource management is not a new one the

modern history of HRM began with the arrival of the Industrial Revolution. The sudden explosion

in the number of large factories required a significantly increased workforce. The priority during

this era was on faster and cheaper modes of production (History of Human Resources

Management). Labor and human resources utilized in the industrial sector of the time were

considered as one of the modes of production rather than a valuable resource for the organization.

The industrialist mostly recruited docile workers hired on hourly wages and dependent on the good

will of their employers. These workers were considered mere machines (The War between Capital

and Labor).

However, today the HRM concepts have changed dramatically with main focus of HRM is towards

effective and efficient overall management of human capital so as to achieve the organizations

desired objectives and goals. The functions of HR that include, recruitment, human resource

development, performance appraisal, and remuneration, are considered to be integrated components

of the overall HRM strategies (Nankervis and Compton and Baird and Coffey, 2011). The methods

which are used by an organization to manage its human resources can have a substantial impact on

many organizationally relevant outcomes (Delery, 1998). Researchers and practitioners have always

argued that the human resource of an organization is a source of sustainable competitive advantage

that any organization can obtain (Ramlall and Al-Amri and Abdulghaffar , 2012). Similarly as

Torofdar stated that companies can achieve a competitive advantage by utilizing the workforce and

by maximizing their expertise and creativity, and having a clear goal of reaching the organization’s

objectives (Torofdar and Yunggar, 2012).

There are different approaches to HR policies and practices that each country follows which are

based on the varying socio-economic circumstances of the country. For instance, Mellahi and Wood

reports that the human resource management in Saudi Arabia are formed by the structure of the

economy, the political structure, the labour market conditions, the national HRD strategy, and

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national culture (Mellahi and Wood, 2001). This paper builds upon the previous research and

experience by analyzing HR practices in Saudi Arabian companies to determine that the strategic

role of the Human Resources Management (HRM) in the Kingdom of Saudi Arabia (KSA) has

become critical to the success of organizations.

The current state of HRM in KSA

Macro Factors

Since the beginning of the new millennium the world and especially the business world has been

subjected to spiral of events and changes. Many of these factors are related to globalization and its

impact that have presented new opportunities a well as challenges on business organizations forcing

many firms to adopt to the new changes (Shammot, 2014). Saudi Arabia is also among those

countries that have to adapt its HRM practices with the changing macro factors.

As a developing country, Saudi Arabia’s workforce is growing rapidly. In 2016, the Authority of

Statistics of Saudi Arabia reported that Saudi’s population stood at around 31 million with an

average growth of around 2.7% year over year. According to the analysis conducted by the

economics reporting unit of Al-Eqtisadiah newspaper, the number of expats stood at 33% while the

Saudi population covered 67% (Arab News, 2015). Researchers have highlighted that Saudi Arabia

has undergone through major development in adopting western HRM practices as a result of the

increasing numbers of multinationals in Kingdom. However, these studies have also showcased that

there are various complex factors, such as religious ideals and cultural norms, that must be

considered in managing human resources in Saudi Arabia (Ramlall and Al-Amri and Abdulghaffar ,

2012).

Furthermore, in April 2016, the Saudi government announced the Saudi Vision 2030, an ambitious

plan that focused on strengthening the country’s human resource capabilities and express the long-

term vision for the country. Among the various planned initiatives to attain the objectives of Vision

2030 is to formulate and introduce a green card scheme for expatriates and new labor laws. The aim

of this scheme is to attract skilled workforce as well as investment in the Kingdom of Saudi Arabia.

The details and mechanics of the proposed green card scheme are still under discussion with no

significant details available currently. These are concerns are primarily related to the impact of

Green Card scheme on the Saudization system and threats to Saudi workers.

To manage people in private, public and international sectors, one should understand the labor laws

of Saudi Arabia. These laws are continuously being updated in order to keep them aligned with the

changing socio-economic conditions of the country as well as to fix various loopholes in the current

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schemes. These evolving labor laws affect the way organizations operate their businesses. One

example is the Saudization scheme, which was introduced to encourage hiring of Saudi talent in the

private sector and to strike a balance with expatriate workforce. With the Saudization system a

company should be registered in Nitaqat program. The Nitaqat program has four categories or zones

(excellent, green, yellow and red). These categories have been developed by the Ministry of Labor

to classify private sector organization according to the level of Saudization. The Ministry of Labor

has provided the Saudization targets for every industry sector. Organizations that have achieved the

required level of Saudization in its sector are classified in the excellent and green zones.

Organizations that are lagging behind the required rate of Saudization or have not hired Saudis into

their workforce according to their industry sector requirements are classified in the yellow and red

zones. Organizations that fall in the yellow and red classifications are required to restructure and

meet the criteria of Saudization in order to move to the green or excellent zones. In addition,

companies that are in the excellent or green zone also have flexibility and motivation in requesting

any approvals for hiring of expats besides fulfilling the legal requirements to do so (Sevilla,

Henelito, 2014). The Saudization program thus serves as a catalyst to allow Saudi talent to be

recruited as well as groomed by the private sector and is viewed positively by the Saudi citizens.

On the flip side, the Saudi government tends to provide other alternatives for the expats, as we

mentioned previously, the green card scheme. Conversely, for now, many of the expats are under

the sponsorship system which had caused a major issue known as Tasatour. The term Tasatour

refers to the businesses that are essentially financed and managed by foreigners however it is

licensed under a Saudi citizen’s name who is provided a fixed fee. The Saudi citizen in this case

acts as a null sponsor. This results negatively for the gross domestic product of Saudi Arabia which

is caused mainly due to the increased hiring of non-Saudis by these businesses and streaming the

job market with unskilled workers. In this case, the Saudi government introduced a new labor law

against the Tasatour system, which blocked several undocumented business activities and detailed

many illegal expat business owners and workers. For example, in 2015 Arab news reported that the

Riyadh police department had arrested 866 illegals expatriates involved in undocumented business

operations.

The government of Saudi Arabia in 2014 introduced a slightly more flexible system of ‘Ajeer’,

which literally means a person who works in return for wages (Khoja & Aljoaid, 2015). The Ajeer

system offers three main schemes to non-Saudis who are currently staying illegally in KSA. The

three main schemes: (i) Ajeer for Business Services (B2B), (ii) Ajeer for Dependent Services

(ADS) & (iii) Ajeer for Guest Services (AGS). The B2B service allows companies to temporarily

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transfer their employees to client sites. The ADS allows dependent of expatriate workers to legally

work in selected approved industry sectors and AGS allows temporary work status to previously

illegal expats.

With Ajeer B2B individuals and commercial companies can employ workers who are not under

their sponsorship without violating the laws of labor and residency. Companies that do not fall

under the red category are allowed to lend its employees to other companies. The government has

also identified sectors, for example construction, real estate and maintenance, where this is

applicable. The Ajeer ADS aims at regulating the work of dependents of expatriate workers in the

education sector. Ajeer grants special permissions to qualified dependents which permits them to

work in education sector without fulfilling the requirement of transferring their Iqamas. Currently

this rule is applicable for foreign schools, private schools and kindergartens. Ajeer for Guest

Services (AGS) is aimed primarily at the Yemeni brothers who reside in the Kingdom irregularly

before the date of 20/06/1436 AH (after correcting their status), and the Syrians who are in the

kingdom in a systematic way (regardless of date of entry) to work according to the Saudi labor

regulations. The Ajeer system is still in its initial stages and further plans are required in order to

expand it to cover more industry sectors as well as include wider range of expatriate population.

The above examples illustrate the various legal frameworks within which the HR of an organization

has to operate. HR teams in organizations in Saudi Arabia need to understand these legal

frameworks in order to utilize them to their advantage in recruiting the best available talent for the

organizational goals. These legal environment and systems present the exterior factors that the HR

can not modify but there are other factors that the HR can manage and change.

Mesho Factors

According to Torofdar and Yunggar (2012), many researchers have stressed the importance of the

effect of the organization structure on HRM policies. Ramady states that many companies in Saudi

Arabia are established as family businesses which follows a centralized structure (Ramady, 2005).

A centralized structure is one in which decision making responsibility lies with very few individuals

in an organization and tasks are assigned downwards by the higher authority in hierarchical level.

As a result, many Saudi companies were affected by having a high turnover rate. Many had listed

that such structure had caused job stress, lack of commitment in the organization, extensive job

pressures, job dissatisfaction, low wages, powerlessness, organizational instability, poor personnel,

toxic workplace environment, poor Human Resource Management policies and procedures, and

lack of motivation in the company (Alshanbri and Khalfan and Maqsood, 2016).

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I agree with this opinion and can also confirm my own personal work experience. In my job as a

PM, one of the tasks involved following up with the clients and updating them with the progress of

the project however I was not allowed to do so except with the authorization from the management..

This had led to frustration with the job as not only did it slow down my progress but also took away

the joy of telling the clients that I’m successfully progressing with their project.

The HR department plays a critical role within the organization’s structure to help avoid conflicts.

Alshahrani and his colleagues conducted an investigation of the current state of human resource

management in Saudi Arabia through a case study of Saudi Electricity Company. The study found

that Saudi Electricity Company management aims to appraise employees productivity and

performance, enquire employees development needs and in parallel to the job performance, clarify

the required procedures that is needed for job performance development, and foresee annual

increments or promotions based on job performance of the employees in respect to the

organization’s regulations (Alshahrani and Alqahtani and Alshahrani, 2016). Therefore, in Saudi

Electricity Company the performance management system has been followed through under the HR

supervision and authority. To ensure the accomplishment of the company’s objectives the HR is

required to plan, orient, develop, enhance and appraise the employee’s job performance. This

develops a culture where all employees from top management to individuals accepts the

responsibility for ongoing development of company business and enhancement of their skills and

capabilities so that company targets can be efficiently achieved.

As an example, in one of the private companies in which I was hired as a project manager, I was

hired not only because of my qualifications but also because of being a Saudi. The only other Saudi

hired in that organization was the expeditor who functioned as the HR manager for the company.

There were several conflicts, primarily because of the absent HR function in the company. The

company did not offer any breaks for prayers nor Ramadan timings were observed, which caused

many problems and ultimately pushed me to resign. On the other hand, in another organization,

where I worked as an assistant PM, had an active HR department. A professional HR department, in

my opinion, was able to evaluate my performance with transparency, offered an annual bonus

through my manager’s recommendation and provided training. However, after working for four

years with this company I had to leave because the head of department was against a female PM

working in a construction field. This highlights another point related to the cultural issues in

organizations in Saudi Arabia. The Saudi manager in that organization was against females working

in construction fields due to beliefs and safety. Even though this was not against the company

policies, the HR believed that they couldn’t do anything as he was the head of operations. In most

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firms, HR departments work primarily to meet the demands of the managers and head of

departments rather than working towards providing amiable work environment and policies for the

entire staff. Even though they have the authority to manage the basic system and implement

governmental laws but the department are not adequately empowered.

Micro-Individual Factors

As recent studies showcased that the main responsibility of HRM is to ensure that each firm should

have the right amount of the following- right number, types and skill mixes of employees to meet

present and future requirements (Nankervis and Compton and Baird and Coffey, 2011). Ultimately,

my goal is to demonstrate that the individual factors plays a major role in a company’s success

which brings to a notion that recruitment is very critical element. Recruitment can be identified as

“a knowledge acquisition technique” which includes the determination of requirements related to

organizational knowledge and the aspects of selecting and hiring of individuals who view such

knowledge (Alshanbri and Khalfan and Maqsood, 2016). As companies thrive to succeed and grow,

the selection of individuals who carry the qualified skill and the right attitude is critical for creating

knowledgeable teams and achieve harmony. These individuals differ from one another in many

areas such as educational background, work values, beliefs and attitudes. The professional HR

could see those differences and help in examining and selecting the right person for the right

position.

To relate the above to Saudi companies, one famous example is Saudi Aramco. The company hires

mostly from engineering and science backgrounds, which determines their educational criteria of

the employees of the company. Another factor that is considered important in hiring and that is

gender (at macro-level), where females hold 9% positions as compared to 91% by males. Through

this we can conclude that Saudi Aramco emphasize on hiring a particular group. Despite that Saudi

Aramco is considered an international company that operates under governmental sector (public). In

contrast, Saudi Electricity Company has practices that are quite the opposite to that of Saudi

Aramco do. Saudi Electric Company hires the best regardless of what certificate they hold. Their

focus on adopting best human rights practices is evident from their mission statement, which is as

follows; “We are committed to provide our customers with safe and reliable electric services,

meeting the expectations of our shareholders, caring about our employees, and ensuring optimum

utilization of available resources” Alshahrani and Alqahtani and Alshahrani, 2016).

Another critical factor in the micro-individual framework is motivation. Employee motivation

comes either in the form rewards or recognition or both. In my first company, I was awarded with

both reward as well as recognition. My manager would send a recognition letter through email to all

company’s employee. At the same time I was given a bonus every year depending on my yearly

evaluation. However, in my current job, as there is no formal HR department, there are no

motivation plans implemented. Therefore a comparison between two organization which are in

complete contrast to each other can highlight the importance of a HR department in the overall well

being of the organization’s employees.

Conclusion

The current status of HRM in KSA and the practices that have been adopted by the companies

highlight that Saudi Arabia views HR as a core strategy for improving organizational performance.

With the focus of the Ministry of Labor on improving all aspects that falls under the umbrella of

individuals prospect and rights, they have developed The Human Resources Development Fund

(HRDF) which focusing on providing grants for qualifying, training, and recruiting Saudis in the

private sector (Torofdar and Yunggar, 2012). The main aim of this fund is to to develop and

increase the competitiveness of the national workforce in partnership with the public and private

sector through:

• specialized and distinguished training

• up skilling and employment programs, that satisfy beneficiaries’ (customers’) needs,

provided by qualified human resources, advanced information systems, and integrated knowledge

and research methodology (Hrdf, 2013).

Considering the current situation with regards to HR models and practices currently in Saudi

Arabia, my view is that the most optimal model of HRM practices is the Harvard model. This

model proposes that HRM strategies, policies and processes can be categorized into four broad

categories. These are:

• Involvement of Employees and Their Influence: This refers to the consultative approach in which

employees are encouraged to participate in organization’s decision-making process

• Human resource flow: This refers to the sequential steps of HRM functions that are involved in

management of employee. These steps include HR planning, job design, recruitment and selection,

performance review and termination

• Rewards systems: The reward system comprise of the monetary and non-monetary methods which

are used to remunerate the employees and recognize their contributions.

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• Work systems: This involves development of policies and work environment which forms the

most optimum fit between the employees and the workplace. This includes technology being used

for work, design of workplace and structure of teams.

HRM has evolved into a multidisciplinary area over the period of time. The role of HRM is

becoming more strategic with the changing work environment as well as the changes occurring in

the socio-economic situation. The practices and policies developed by HRM directly impact the

workplace environment, employee motivation as well as the organizations bottom line, as well as its

contribution to the long-term objectives of the country. The HR practices that are being

implemented today in organizations in Saudi Arabia, both local as well as multinational, will play

an important role in helping the country reach its long term objectives. The most optimum HRM

practices will assist KSA in realizing its goals that have been outlined in the Saudi Vision 2030 that

was announced this year.

References

A. (2016, April 25). Saudi to introduce expat 'green card' Retrieved from

http://www.emirates247.com/saudi-to-introduce-expat-green-card-2016-04-25-1.628313

Alshahrani, S., Alqahtani, M., & Alshahrani, S. (2016). Saudi Electricity Company, HRM,

Employee Well-Being, Saudi Arabia. Retrieved October 25, 2016, from

http://researchleap.com/exploring-human-resource-management-system-of-saudi-electricity-

company-a-review-of-policies-for-effective-workforce-management/

Alshanbri, N., Khalfan, M., & Maqsood, T. (2016). Retention of knowledge within the private

sector organizations in the Kingdom of Saudi Arabia. Retrieved September 28, 2016, from

http://www.mejb.com/upgrade_flash/July 2016/Analysis.html

Hrdf.org.sa. (2013). Retrieved October, 2016, from http://www.easycounter.com/report/hrdf.org.sa

Khoja, S., & Aljoaid, N. (2015, November 18). Ajeer: Legalising secondments and facilitating

supply of temporary work in KSA. Retrieved from http://www.clydeco.com/insight/article/ajeer-

legalising-secondments-and-facilitating-supply-of-temporary-work-in-k

Ministry of Labour. (2015). Recruitment Standards. Retrieved from

http://nitaqat.mol.gov.sa/Documents/NitaqatManual.pdf

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Mellahi, K. and Wood, G.T. 2001, Chapter 9, Human resource management in Saudi Arabia in

Budhwar, P.S. and Debrah, Y.A. (eds.) Human Resource Management in Developing Countries.

London: Routledge.

Nankervis, A., Compton, R., Baird, M., & Coffey, J. (2011). Human Resource Management:

Strategy and Practice (7th ed.).

Ramady, M. A. (2005). The Saudi Arabian economy: Policies, achievements and challenges. New

York: Springer.

Ramlall, S., AlAmri, H., & Abdulghaffar, N. (2012). International Business & Economics Research

Journal (IBER). Retrieved from

http://www.cluteinstitute.com/ojs/index.php/IBER/article/view/7261

Saudi Aramco. (n.d.). Retrieved October, 2016, from

http://www.payscale.com/research/SA/Employer=Saudi_Aramco/Salary

Rasooldeen. (2015, March 13). More illegal workers arrested. Retrieved September 28, 2016, from

http://www.arabnews.com/saudi-arabia/news/717646

Shammot, M. M. (2014). The role of human resources management practices represented by

employee's recruitment and training and motivation for realization of competitive advantage.

African Journal of Business Management, 8(1), 35-47.

doi:http://dx.doi.org/10.5897/AJBM2013.7263

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