How technology is reshaping human resources (HR) in the Middle East

This situation has resulted in a unique HR environment, raising some key challenges as well. This article aims to review HR practices in the Middle East, how technology is being leveraged to achieve some HR goals and what major issues need to be tackled.

HR CONTEXT IN THE MIDDLE EAST
The Middle East region enjoys high but unevenly distributed wealth: the oil producing countries (Saudi Arabia, the Gulf States, and Iraq) are at the top of the heap and others (including populous countries such as Egypt) are suffering economically.

Thanks to the oil bonanza, the wealthiest countries have been able to engage in large infrastructure projects requiring the significant use of labor from neighboring countries, thus creating a two-tier system in which the Gulf States import labor from the less economically fortunate countries (Egypt, Jordan, the Palestinian territories, and Lebanon).

Most of the positions held by foreign Arab workers are either professional or mid-management, in the service, educational and administrative sectors, where the existence of a common culture and language is key.

SIGNIFICANT USE OF EXPATRIATES AND LOW UNEMPLOYMENT
However, in addition to this cross-Arab labor movement, further workforce expansion was necessary and has resulted in hundreds of thousands of non-Arab workers joining the region's labor pool. Two categories can be identified on the basis of their geographic origin and terms of employment: those who hail from South Asia (mainly India and Pakistan) and East Asia (mainly the Philippines) primarily occupying technical, clerical and mid level management jobs, and the professional and management-level expatriates who tend to be European (mainly UK) or U.S. nationals.

The trend towards foreign workers, albeit still strong, is slowing down due to the increase in the unemployment rate of Middle Eastern nationals in their respective countries. This was already the case in the non-oil economies, which caused many of their citizens to move to the other, wealthier countries.

What is changing now is that even the Gulf States are experiencing unheard-of levels of unemployment. Saudi Arabia, for example, long known for its full employment status, is now enduring an all-time high of 32 percent unemployment.2 In the United Arab Emirates, the number of job seekers is expected to reach 300,000 in 2006,3 out of a population of less than three million, including a majority of non-national residents.

This situation has even prompted the government to set up an HR Authority in charge of matching job seekers and openings.

The Gulf States are also implementing a workforce nationalization policy, whereby organizations (especially in the public and quasi-public sectors) are encouraged to reserve some positions for nationals, or at least give preference to nationals in the hiring process. Since foreigners were initially sought to supplement the restricted local skills base, the results of such policies can only be limited, at least in the short term. Large scale training and career development is essential.

On the other hand the private sector has not been able to provide jobs for nationals in the oil-rich countries largely because of its inability to compete with the kind of work conditions and salaries offered to nationals by the public sector. Observers do not expect the private sector to be able to play its full role in creating jobs for Gulf nationals as long governments continue to offer very favorable work conditions and high salaries to nationals.

STRONG ROLE OF THE PUBLIC SECTOR
Another key labor characteristic of Middle Eastern countries with direct impact on human resource management is the predominance of the government sector in the economy. As Figure 1 indicates, in most countries public employees make up between one half and three quarters of the labor force. The consequences for employment and budget policies are therefore enormous.4 Hiring practices, career management and budgetary issues will be different from what is expected of private sector companies.

Obviously, governments feel compelled to offer more and more jobs for nationals in an attempt to avoid the known consequences of high unemployment rates. The question remains as to whether governments will rationalize their employment conditions for nationals in order to give the private sector a chance to play a role in creating jobs or will continue to offer favorable employment conditions but force the private sector to increase the percentage of nationals on its payroll.



A UNIQUE MIX OF 'OLD'AND 'NEW' HR
The above description helps explain why the Middle East region presents a unique HR landscape that mixes elements of 'old' and 'new' HR. In the non-oil-producing countries, the focus of HR tends to be more on payroll and traditional personnel management issues. Because of high unemployment rates, downsizing is a politically risky option and bulk workforce management with high personnel expenditure is typical.

In wealthier oil-producing countries, the emphasis is clearly shifting towards a more strategic management style of HR as a result of world-class companies' efforts to achieve levels of efficiency and performance similar to those of their global competitors.

Also, as competency-based HR systems enter the mainstream to replace payroll-based HR systems, the compensation gap between nationalities is closing.

A case in point is the airline Emirates, which is widely recognized as a leader in its sector and is clearly becoming an employer of choice for not only nationals from its own home base but for hundreds of young graduates from the rest of the region and Europe. Competency-based management; professional recruitment based on systematic assessment tests and executive searches; and career plans and tailored compensation plans are increasingly gaining ground.

TECHNOLOGY ON THE RISE
At the same time that HR is shedding its traditional past and adopting new processes in the Middle East, technology is being widely embraced, sometimes with tremendous zeal. In Jordan, for instance, the number of Internet users experienced an increase of 27 percent in 2001. 5 New Web hosting providers, online services, mobile commerce and portals are being created every day, becoming as commonplace as telephone services. As can be expected, HR is taking advantage of the introduction of these technologies, creating new opportunities as well as challenges.

HR AND TECHNOLOGY IN THE MIDDLE EAST
PAYROLL AND PERSONNEL ADMINISTRATION FULLY AUTOMATED
Legacy payroll-based HR systems are increasingly becoming a thing of the past with all major organizations, both governments and businesses, adopting standard software packages, thus allowing them to reduce HR administrative manpower, streamline operations, allow 24/7 access to employee records and achieve dramatic cost reductions. Here we find, again, the dichotomy between oil-producing countries and non-oil-producing states, where the latter still struggle with legacy-based system, and the former have adopted standard ERP systems more readily.

Another feature of the HR IT landscape is that because of the relative newness of the administrative institutions (with the exception of Egypt), statutory requirements tend to be less cumbersome than in Europe, thus lessening the need for complex features in software use and facilitating the implementation of such packages initially designed for Europe
and North America with minimum customization.

An example of such features, or rather lack thereof, is the absence of a tax regime in the Gulf States, which, with limited gross-to-net calculation requirements, both makes for a better fit of standard payroll systems, and facilitates their implementation.6 Features such as the Oracle Saudi Localization Enhancements demonstrate the technology's flexibility, as well as vendors' commitment to fulfilling local HR requirements where necessary.

STRATEGIC HR ON THE RISE
Among the functional areas that are increasingly automated (especially in the Gulf States) we find recruitment; in particular, Internet-based recruitment used for employee sourcing. The advent of the Internet has been a blessing for the Middle East, which as said earlier, makes
significant use of expatriates. In the area of employee development, training is one of the key priorities for the region, with technology playing a major role through e-learning projects.

This is happening on a par with the increasing resort to self-service applications; in spite of traditionally high illiteracy rates, self-service applications are enjoying great popularity with all employee categories in the Middle East, for classic administrative purposes (updating personal details, checking salary payments) and also recruitment purposes. A case in point is the Qatar Foundation, which has adopted a self-service model that enables employees to perform their own administrative processes via the Internet, even if the size of the organization is smaller than one might expect (360 employees).

From there it's only a small step to conducting training online, to which the region has taken to enthusiastically: most large organizations are reorienting their training programs to leverage online systems.

STRONG SIMILARITIES BETWEEN B2E AND G2E
Since most of the Middle Eastern states as we now know them were set up in the last half century (Iraq, the oldest one, achieved independence in 1932), government institutions have not evolved in such a way as to develop a radically different set of rules and regulations applying to public employees.

Apart from some budgetary constraints, the relatively broad similarities between them and the private sector means that civil servants are not systematically managed in a radically different way from private business employees. The software implications are similar to the above discussion on payroll and personnel -- there is no need for complex career management functionality as we know it for the federal government in the United States or the various European countries (as well as the European and United Nations bureaucracies).

THE EMERGENCE OF E-GOVERNMENTS
Unlike other parts of the world, the public sector in the Middle East was, and still is to a large extent, at the forefront of the IT revolution sweeping over the region. As part of the digitalization of their societies and economies, many Middle Eastern states have embarked on e-government projects, of which the G2E (Government-to-Employee) component
is a key part. These G2E initiatives aim at achieving several goals at once:


• Ensuring good governance by providing civil servants with relevant rules and regulations to ensure compliance through a portal. Considering the corruption issues that arise from time to time in different parts of the region, expectations are relatively high.


• Enhancing recruitment experience of future civil servants, especially expatriates.


• Guaranteeing employee development and performance through online training (assessment, knowledge transfer and course tracking and evaluation).

One of the most ambitious e-government projects in the Middle East region is undoubtedly the one launched by Dubai in the United Arab Emirates, which, in its HR component, will link the Emirate with its 40,000-strong public sector workforce in a move similar to others being embarked upon by other countries in the region, including Oman and Bahrain.

Since the summer of 2003, more than 10,000 Dubai public servants have gained access to Oracle HRMS, with more government departments planning to go live on the system in months to come.

THROWING TECHNOLOGY AT HR PROBLEMS
The above experiences show that the Middle East is particularly well aware of the potential of technology in optimizing its human capital, which has suffered from the well-known ills of illiteracy, inadequate training and lack of infrastructure. The fact that most of the region's states have large budgets to dedicate to these initiatives has certainly played no small part in that awareness. One is entitled, however, to wonder to what an extent governments
in the region are trying to solve key HR problems by throwing money and technology at
them.

FROM ACQUISITION TO IMPLEMENTATION: THE BIG CHALLENGES FOR THE MIDDLE EAST
No matter what the approach and rationale are, the Middle East could soon find itself awash in IT with the attendant 'shelfware' syndrome: organizations acquiring millions of dollars' worth of software but being unable to use it for lack of motivation, employee understanding or project skills. As the basic HR infrastructure is consolidating, energy and focus are moving to a different mode: eliminating the last remnants of the legacy systems and making sure that what has been implemented not only actually works but delivers what it promised.

This is easier done with payroll and administrative HR where the quantitative aspects predominate and where functional experience is less of an issue. For recruitment, training, online learning and other aspects of strategic HR where benefits assessment is as
much art as science and the area itself is relatively new, the jury is still out.

Only by confronting these issues head on, instead of sweeping them under the rug, will Middle East countries be able to show that their huge investment in HR technology has been a wise use of their financial resources that clearly supports the economic and social developments of the region.