Aon Hewitt’s Groundbreaking Research Initiative Dedicated to the Middle East Workforce

Executive Summary Report2

QUD

URAT

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About Aon HewittNote from the AuthorsThe Talent Landscape in the Middle EastRetaining and Engaging the Workforce of TodayPreparing for the FutureA Call for ActionQudurat Research DesignGlossary and Notes

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Contents

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Aon Hewitt is the global leader in human resource solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, healthcare, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit www.aonhewitt.com

The company has been providing thought leadership and data-backed insights in the Middle East since 2002. Based in Dubai, Aon Hewitt Middle East works across the MENA region and has successfully partnered with over 1,000 clients across the public and private sectors.

Contact Information:

DIFC, Currency House Tower 2, Level 5Dubai, United Arab EmiratesP. O. Box 10764

T: +971 (0) 4 389 6300F: +971 (0) 4 386 1690E: info.me@aonhewitt.comW: www.aon.com/middle-east

With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees.Aon H

ewitt

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The workforce and the workplace in the Middle East are in a state of rapid evolution – economically, demographically, politically and culturally. Resilient GDP growth is projected over the next decade. The region’s employable population is expected to double by 20501. The Arab Awakening has transformed political attitudes. More and more youth and women are expected to participate in the labor market. With these changes already in motion, the talent landscape in the Middle East will be dramatically altered over the next decade. The scale and pace of change will be unprecedented in the region’s history.

At Aon Hewitt, we believe that only by gaining in-depth knowledge of the individual capabilities and motivational drivers that determine the performance and productivity of the region’s workforce, can we truly claim to understand the talent landscape. This knowledge not only shapes how Aon Hewitt advises its clients, it also serves as a knowledge foundation, allowing human resource professionals to resolutely grasp and fully exploit the demographic opportunities unfolding over the next decade in the GCC (Gulf Cooperation Council)2.

The Qudurat research project is our ongoing commitment to invest in the region’s human capital development (Qudurat, is an Arabic word that refers to “capabilities” or “capacities”.) We are committed to finding answers based on robust local research. Fully funded by Aon Hewitt, the Qudurat research project is the single largest endeavor to understand the workplace motivators and orientations of the GCC workforce. It is unmatched in scope and scale. Wave one of this

project, conducted in 2010-11, represented the voices of 4,600 employees spanning five countries. In this second wave, our study encompasses the views of approximately 18,500 respondents from approximately 100 organizations and institutions across UAE, Oman, Qatar, Bahrain, Kuwait, Saudi Arabia and Egypt. We sincerely thank our research partners and all of the participating organizations for their encouragement and support.

The analysis from the 2012 findings provides us with tremendous insights into the underlying expectations, aspirations, attitudes, behaviors and orientations of the employees towards their workplace. Our findings also show how these may vary across various demographic constituencies: men and women, young and old, national talent and foreign workforce3, in particular. We gained several compelling and counter-intuitive insights into the changing nature of the workplace based on our analytical outcomes. These insights will continue to shape our advice to our clients and partners.

In this executive summary, we provide you with a snapshot of some of the most critical findings that will be of pertinent focus in the future. We hope that these findings will ground your regional human resource strategies, enabling you to keep pace and effectively leverage the constantly evolving talent advantage in this region.

Best regards,The Qudurat TeamAon Hewitt Middle East

Note from

the Authors

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Despite the global financial crisis and the more recent Arab Awakening, the Middle East continues to provide a positive, optimistic growth story, in contrast to so many regions across the globe. The region’s rapid evolution has certainly captured the attention of political leaders, policymakers and business executives. The Arab Awakening triggered momentous and pervasive changes in the region’s political and economic dynamics and has had significant impact on government policies, private markets and foreign investments. The changes it has set in motion are still unfolding, though early indications of reform, in most cases, seem positive. Much recent global interest and media attention has focused on the economic and political opportunities, as well as the risks prevalent in this region. Favored with an overall abundance of energy resources, GCC countries have experienced strong economic growth over the past decade. Alongside the oil & gas industry, new industries have started to gain prominence. Combined, these have helped the Arab world to achieve an average 5% annual GDP increase over the past 10 years, significantly higher than the Organization for Economic Co-operation and Development (OECD) average of 1.5%, and the World average of 2.5%4.

However, as anyone who has lived or worked in the region will highlight, opportunities and challenges are provided in equal measure to the massive numbers of foreign and local workforce who drive these economies forward. Against a backdrop of rapid economic development, there has been an unprecedented population surge,

both in terms of local population growth as well as some of the highest rates of net inward migration. Thus, the Middle East workplace is constantly changing. In fact, the Middle East’s employable population is expected to almost double - from 145 million to 278 million - by 20501. This demographic shift, especially the unprecedented rapid increase in the proportion of young people, along with broader integration of women in the workforce, will exert a notable impact on workplace dynamics.

The Talent Landscape in the Middle East

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Troubling levels of youth unemployment and socio-political strife are leading to a surge in formal and informal regulatory amendments designed to accelerate local talent participation in the labor market. Early efforts towards educational reform

are also evident. As the region struggles to address its key issues from a legacy growth perspective and apparent skill gaps, it continues to depend on foreign workforce to take on both white- and blue-collar jobs that local nationals are unable or unwilling to undertake.

Figure 1: Youth unemployment rates 2013(projected), by region (%)5

Figure 2: Youth unemployment rates in the Middle East 2007-2016 (%)5

2007

24.8% 25.2% 26.5%27.5%

28.6% 29.0%

2009 2011 2013(projected) (projected) (projected)

2015 2016

0

5

10

15

20

25

30

World

17.7

%

14.0

%

14.4

%

27.5

%

27.6

%

EuropeanUnion

South-East Asia & the

Pacific

Latin America & the

Caribbean

Middle East North Africa

12.7

%

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Given these pressures, the labor market changes in the Arab World over the next decade will be more seismic and far reaching than ever before. In turn, these changes will deeply affect the employment and talent development practices of current employers, and all those looking to establish operations in the Middle East.

Transitioning from an economy fed by natural resources to one driven by human capital continues to be the real test for national leaders, policy makers and organizational decision makers. The region, and more specifically the GCC countries, have a compelling opportunity to capitalize on the demographic changes, while sustaining current growth levels, by means of proactive and continued actions that address these unique labor market challenges.

It is critical for employers in the region to prepare for the demographic, socio-cultural and policy changes that will transform the workplaces of tomorrow. Employers need not only to mitigate pertinent talent risks, but also to capitalize on the larger demographic opportunity presented by the region in the long run.

A constantly evolving labor market, coupled with global economic conditions has exerted significant impact on the employment scenario in the region. Retaining key talent is increasingly becoming a primary concern in the region with the improved investor sentiment and the region’s recovery from the financial meltdown, leading to a stronger employment market and positive growth outlook in the near future. More specifically, retaining GCC nationals is a pressing concern for organizations today especially, in view of government initiatives such as Absher in the UAE and Nitaqat in Saudi Arabia, focused towards driving employment of GCC nationals. In addition, given the dynamism and uncertainty characterizing today’s workplace, employee engagement is critical. For large multinational employers operating in multiple regions, a one-size-fits-all strategy for engagement uniformly applied across the globe will not work. Local organizations, both public and private, cannot assume the same levels of loyalty, commitment and motivation from their employees, without making efforts to positively achieve this in some way.

One thing is certain - employee behaviors and performance are at the center of business success (or failure). Ensuring that employees invest discretionary effort in the right behaviors is critical in delivering the organizational performance needed in conditions of recession, stagnation, or rapid growth.

According to Aon Hewitt’s global research, engaged employees6 deliver better performance, which is essential for business success. Engaged

employees understand their role in the business strategy, have a strong connection and commitment to the company, and strive to go above and beyond in their jobs. The bottom line is that employee engagement matters now more than ever. The solutions for maintaining or improving engagement have become increasingly complex for companies operating in today’s environment, characterized by fluctuating economic conditions and instability. Striving to maintain a high level of employee engagement not only contributes towards an organization’s short-term performance, it is also a key factor in longer-term business performance and better positioning. Companies that get engagement “right” will enjoy a source of competitive advantage in their talent strategy and business results, which may be hard for others to replicate.

Retaining and Engaging the Workforce of Today

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When compared with global engagement averages, findings from the Qudurat study reveal that employee engagement in the GCC is the lowest at 49.5% along with Africa at 48%.

This is in sharp contrast to other emerging markets like Latin America, where engagement is usually in the low 70s, or even compared with Asia Pacific at 58%. A significant cause for concern is that the average GCC engagement level has decreased almost 4.5% since the 2010 average of 54%, according to Qudurat study data.

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For expatriates working in the region, engagement levels have remained consistent at 56.14% in 2012 and 57% in 2010. Although the lower engagement levels reported among GCC nationals, compared to expatriates is a consistent finding, the widening gap between these two groups’ engagement levels presents a pressing challenge for organizational leaders and human resource professionals.

GCC average level of employee engagement is from the Qudurat study. All other regional norms are based on Aon Hewitt’s employee engagement studies across the globe covering engagement data analysis and reports based on 6.5 million respondent base from 150 markets, and 65+ industries. Overall respondent data Aon Hewitt in-houses grew to 25 million from 11,000 organizations

A much graver issue is that engagement levels have dropped considerably for GCC nationals, from 51% in 2010 to 43.67% in 2012.

Figure 3: Employee Engagement by Region (%)

64% 64% 63%

2010 2011 2012

North America

53% 52% 57%

2010 2011 2012

Europe

54% - 49.5%

2010 2011 2012

Qudurat GCC

58% 53% 48%

2010 2011 2012

Africa

73% 71% 74%

2010 2011 2012

Latin America

58% 58% 60%

2010 2011 2012

Global

59% 58% 58%

2010 2011 2012

Asia Pacific

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Within the Gulf nations, Saudi nationals are the least engaged at 40.6%, followed by Emiratis at 41.6%. Omanis, Bahrainis and Kuwaitis displayed moderate engagement levels and the Qataris were the highest at 51%. On the other hand, expatriates are most engaged in Bahrain and Kuwait, followed by UAE and Qatar, with lower engagement levels being reported in Saudi Arabia and Oman.

There is an ongoing and alarming trend of low engagement levels among the younger generation of national talent, which has a direct and exponential impact on performance and productivity within organizations, and across nations, as well. The first wave of the Qudurat study highlighted a significant concern with the engagement levels of the 25-34 age cohort of GCC nationals. This group still has the lowest average engagement at 40.1%, but in 2012, we

also observed a significant decline in engagement levels for nationals under the age of 25 at 47.7% (compared to 64% in 2010) and 43.4% for the 35-44 age group (compared to 49% in 2010). These engagement levels among the younger Gulf nationals are highly counter-productive to growth. Key stakeholders need to address these at the earliest in a sustainable manner.

Retaining the regional workforceWhile typically in the region, factors such as pay, growth opportunities and work/life balance are considered important factors in attracting talent, findings from the Qudurat study indicate that the organizational culture is also a primary factor in driving employee loyalty and retention for both national as well as expatriate employees. Our findings suggest that an organizational culture, grounded in strong organizational leadership, trust amongst peers and management, values, fairness and respect for the individual’s contribution, is

Figure 4: 2012 Regional Engagement Levels (%)

KSA

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Overall

Nationals

Expats

Legend:

QATAR

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10

20

30

40

50

60

UAE

0

10

20

30

40

50

60

BAHRAIN

0

10

20

30

40

50

60

KUWAIT

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20

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40

50

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OMAN

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20

30

40

50

60

GCC

0

10

20

30

40

50

6049.55

43.67

56.14

48.40 48.40

61.90

44.80 47.60 43.90

63.60

51.10

63.70

49.4041.60

56.8046.90

40.6051.30 53.30 51.00

56.40

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An employee value proposition grounded in a people-centric culture

led by strong leadership will help foster a sense of belongingness; pride and alignment with the organization that helps retain employees Confidence in Leadership

Our study results revealed a marked void in the leadership area. On average, 39.9% of GCC nationals and 49.4% of expatriates believe that their most senior leaders are making the right decisions in running their organizations and managing their employees. In addition, only four out of every ten national employees are satisfied with the ongoing, regular communication received from their leaders. Examining demographics, professional employees and those in team/member front line positions report the lowest levels of overall confidence in leadership, as do the cohort of 25-34 year olds. The lowest scores related to organizational leadership making the right decisions in running the organization and managing its employees were reported by national employees in Oman (31.7%) and Bahrain (32.9%). The highest levels were seen in UAE (47%) and Qatar (50.2%). Also noticeably significant differences were seen between the employees in the public sector and private sector on the same. The former was much lower at 36.5% and the latter had an above average score of 44.9%.This lack of confidence in leadership is of

the most critical factor that influences employee loyalty and retention in the

GCC. A strong organizational culture helps drive pride in work and a sense

of accomplishment for employees, thereby leading to retention. For both

nationals and expats, findings from the Qudurat study indicate that culture tends to

play a much stronger role in retaining employees than presumably typical drivers of retention such as providing clarity in roles through formal organization structures (clear structures, roles and responsibilities, rules and policies) and work/life balance. Globally, Aon Hewitt’s research on organizational cultures suggests that the key attributes of people orientation, openness/transparency and decisiveness are characteristic of high performance at organizations. Therefore, it is reasonable to state that an increased focus from human resource practitioners on driving a people-oriented culture led by the organizational leadership may lead not only to stronger employee retention but also higher performance.

Engaging the regional workforceWhile delving into the key drivers for regional engagement, a multitude of factors were examined as part of our study. In this executive summary report, we focus on the three key themes that drive engagement. They are as follows:

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Learning & DevelopmentDespite the widespread economic crisis and a general global trend towards more conservative budget allocations for discretionary activities like training and employee development, this seems to be a continuing priority within the region. Much of the credit for this goes to organizational leaders, working in partnership with their human resource and training professionals. These efforts seem to be paying off. A majority of people across the GCC believe that they are actively learning and building up their skills and capabilities within their jobs. The data indicated that, on average, training and development opportunities are being provided

There is a greater need for leaders to invest time in

communication with their

employees. Leaders need to increase their channels for open, genuine

formal and informal communication. Human

resource teams also must ensure that any people-

related projects, policies and practices are actively supported by

the organizational leadership, in order to achieve a larger impact.

across all key constituencies. However, coaching and mentoring are being underutilized as effective development tools in the region. Only 37.9% of employees believe that they received adequate coaching or mentoring during the past six months.

A key measure to accelerate and amplify learning and development is to provide more ongoing coaching and mentoring to employees, across all levels within the organization.

Career Growth ExpectationsThe dominant phenomenon in the Middle East is the region’s economic growth story, which makes its labor market highly attractive to large numbers of foreign and local workforce. The high growth in the economies has led to rapid growth within organizations, which has contributed to higher expectations of pay and career growth among employees. What has been the impact of all this? On average, eight out of every 10 employees in the region, both nationals and expatriates alike, hold moderate-to-high expectations of promotion within 2013, with 47.9% stating this as a given. Remarkably, there are significant differences in the stated expectations between men and women and between the younger and older generations of employees, with women and younger generations having higher promotion expectations. This result overturns any preconceptions that men are more career-driven than women.

It is critical to set and communicate tangible goals for employees and to tie these objectives to actual performance, so that employees hold more realistic expectations for their career growth.

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vital concern, as it plays an important role in terms of increasing employee engagement, which in turn drives organizational and business long-term performance. Having the right leadership in an organization is arguably the single most valuable competitive advantage. It proves to be even more valuable during times of turbulence and change, which no doubt will continue for years to come.

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With a stronger policy thrust towards national talent inclusion in the workforce, higher levels of women employed, and the increasing assimilation of youth, the demographic profile of the future workplace will look very different from today. The preferences, expectations and aspirations of these varied employee groups may well be quite different from those of the current workforce. Accordingly, it is reasonable to assume that the drivers for engagement, performance, and productivity for the future will also differ. Based on our findings, some emerging trends that organizations need to examine soon include:

Work PreparednessFindings from Qudurat point to some compelling trends regarding work preparedness, especially among national talent. On average, only 69.3% of GCC nationals, as compared to 85.7% of expatriates, believe that their educational background has prepared them well for their jobs. Surprisingly, the youngest nationals, those under 25 years, reported the lowest scores (62.5%). This is contrary to the common assumption that the older generations would question the relevance of their education due to the unprecedented changes in technology and communication that have so transformed the means of working and the nature of work. Thus, having the lowest scores coming from the youngest nationals clearly points to a current gap in education within the region. Regional employers across the GCC are addressing this issue, by providing their nationals with formal training to augment their skill sets. According to Aon Hewitt’s Nationalization Practices Pulse Survey (2013), the most prevalent learning modes used by employers to develop their national fresh graduates are by establishing formal induction

programs and providing internal/external classroom training. The study further indicates that employers find technical/job specific trainings, training on verbal and written communication skills, planning and organizing skills and MS Office skills as the most effective formal trainings imparted to young national graduates.

Tolerance of DiversityIn the region, diversity is often viewed as an almost effortless “achievement” by organizations, resulting more from the diverse talent pool that exists in the market, rather than targeted HR initiatives. While many employers in the Middle East are quick to acknowledge the cultural melting pot they have at the workplace, few of them focus intensively on whether members of this melting pot are indeed interacting effectively, regardless of their ethnicity, gender, age or background. With three generations of employees and a multitude of nationalities, organizational preparedness for managing diversity in a sustained manner may be a key lever for future growth. Our findings indicate that younger GCC employees show significantly

Investment in stronger entry-level programs for

national talent with a focus on skill development, applied

learning, and basic organizational preparedness courses coupled with

in-house coaching efforts will help drive stronger confidence in work

preparedness for GCC national talent.

Preparing for the Future

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Sustainable inclusion of emerging employee groups composed of national talent, youth and women, calls for stronger organizational and workforce preparation to effectively assimilate them into the organization. Ensuring fairness, adjusting organizational systems to meet the emerging workforce needs, as well as driving employee preparedness through training interventions designed to increase workforce tolerance of diversity, will support organizations’ aspirations to build an inclusive and cohesive culture.

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less tolerance of diversity as compared to their older counterparts. In addition, females (nationals at 61.1% and expats at 84.9%) report significantly higher levels of tolerance of gender diversity in comparison to their male counterparts (nationals at 48.7% and expats at 66.5%), reflecting an urgent need for stronger diversity and inclusion interventions in the region.

In the next decade, the GCC governments will continue to look into legislative and policy amendments aiming at higher inclusion of national workforce at the workplace. Their challenge will remain in keeping the private sector incentivized to absorb higher percentages of national talent. On the other hand, private organizations should leverage elements of the employment value proposition other than pay i.e. learning and development, career growth, and senior leadership, as a sustainable means to attract and retain national talent.

Understanding the emerging workforce of the GCC is the first step towards taking robust and informed action to manage and unlock its true potential. The Qudurat Wave II Report (2012-2013) provides focused and specific insights into key demographic constituencies such as youth and women as well as the varying preferences of national talent across the six GCC countries. In addition, it endeavors to provide advice on what employers in the region could do better to proactively prepare themselves for change.

The Qudurat research provides comprehensive benchmarks, which can be leveraged when assisting governments and organizations in both the public and private sector to design their human capital strategies for the coming decade based on valid, significantly tested and in-depth analysis. The research design focuses on key variables of individual and organizational behaviors that are critical in driving organizational performance and productivity, and more importantly, are actionable to drive long-term change.

The irrefutable evidence from Qudurat is a call for action to HR professionals and business leaders alike in the region, towards building a sustainable future for the region’s workforce. Qudurat provides compelling evidence for decisive and urgent action from policy makers, organizational leaders and human resource professionals in the region. Together, our actions over the next decade will significantly impact how well the region cultivates its human capital to build a positive and sustainable future. Proactive and focused investments in human capital initiatives will not only ensure sustainability and stability in a rapidly evolving labor market, but also will drive definite advantages of leveraging human capital as a strategic business driver.

A Call for Action

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The Qudurat study is the first and largest initiative of its kind, representing the voice of over 23,000 respondents, across 7 countries and over 120 organizations and institutions over the past 3 years. The research design is based on Aon Hewitt’s expertise in the area of Human Resource Consulting and is grounded in the latest organizational behavior and relevant psychological theory. Our research focuses on variables that are changeable and trainable through specific organizational and human resource interventions. The approach throughout the study has been appreciative and positive, in understanding the unique strengths and aspirations of talent in the GCC and Egypt region.

Our study questionnaire was created based on specific research design principles and an extensive cross-disciplinary review of the literature. The questionnaire comprised a total of 91 questions, including 12 demographic questions. The research design is based on five broad dimensions:

1. Self: This dimension focuses on understanding the personal attributes and psychological strengths of employees at the workplace. Research in this area clearly relates personal strengths and attributes to better performance, higher levels of work commitment, job satisfaction, better health, etc. Aspects such as grit, flow, goal setting, optimism, pro-activity, resilience, self-efficacy, zest, perceptions towards own responsibility, and skill expectations were all assessed.

2. Work: This dimension focuses on understanding employee attitudes and preferences towards work. It probes into how people primarily approach their work, their work preparedness, mobility, sense of pride and meaning, growth and pay expectations, and so on.

3. Others: This dimension focuses on the impact of relationships with peers, managers and leaders on an employee’s work life. It also probes into the topic of acceptance of the different elements of diversity, such as age, seniority, and nationality.

4. Work Environment: This dimension seeks to understand the current work environment and the impact of various opportunities available to the employee. It also looks at aspects related to learning and development, communication preferences, and organizational support.

5. Identity: This dimension seeks to understand how various socio-cultural aspects of the employee impact the world of work, including family, work, religion, and national identity.

Qudurat Research D

esign

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1 Arab Human Development report Research paper Series: United Nations Development Program, regional Bureau of Arab States. Population Levels, Trends and Policies in the Arab Region: Challenges and Opportunities By Barry Mirkin 2010.

2 The Cooperation Council for the Arab States of the Gulf, also known as the Gulf Cooperation Council (GCC), is a political and economic union of the Arab states bordering the Persian Gulf and constituting the Arabian Peninsula, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.

3 “National talent” or “local talent” refers to the citizens of the GCC countries who live and work in their home countries. Similarly, “foreign workforce” or “expatriate talent” refers to the immigrant workforce who are living and working in the GCC, but are not citizens of these countries.

4 Education for Employment: Realizing Arab Youth Potential (April 2011).

5 Youth Unemployment Rates: Global Employment Trends for Youth 2012, International Labour Office – Geneva: ILO, 2012.

6 An “engaged” employee can be defined as one who is truly committed, emotionally and intellectually, to an organization. Aon Hewitt’s proprietary engagement model measures engagement on the basis of whether employees speak positively about their organization to others (say), have an intense desire to be part of the organization (stay) and are willing to exert discretionary effort (strive) to contribute to its overall success.

Glossary and N

otes

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