Survey 2006-07 reveals shortfall in leadership and succession planning in private sector organizations
Survey polls CEOs and Human Resources professionals from private-sector organizations across the region
Dubai, May 07, 2007: Ernst & Young, the region's largest professional services firm, has announced the results of its Middle East Human Capital Practices Survey 2006-07. The findings reveal that private sector organizations need to place greater focus on their leadership development, succession planning and employee rewards systems. Findings also show that only a low percentage of regional organizations involve their human resource functions in business strategy formulation.
Participating CEOs declared that the top three business challenges impacting HR in their organizations were retaining and hiring talent, management of rapid business growth and nationalization. They believe that implementing a system of individual development planning, improving the effectiveness of performance management and offering employees market-leading pay and opportunities for rapid career growth are key strategies to winning the war for talent.
Outlining key areas examined by the survey, Omar Bitar, Managing Partner, Business Advisory Solutions, Ernst & Young Middle East, said: "The survey looks at leadership and succession planning, Total Rewards systems, the alignment of the HR function with organizations' business strategies and the effectiveness of organizational structures. Through this survey, Ernst & Young seeks to assist organizations in evaluating and benchmarking their HR practices with those of their regional peers and with global leading best practices."
Leadership & Succession Planning
There is considerable awareness of the need for having effective leadership development practices in the region. However, only 50% of organizations surveyed believe in identifying employees with leadership potential early on in their careers and only 45% of respondents have a formal identification process in place.
Succession planning is gradually assuming greater importance for business continuity especially in times of high workforce mobility as a result of business growth, revealed the survey. Almost 46% of respondents said they identify successors for critical positions within the organization.
"The challenge to succession planning is to ensure that the resources invested are headed towards building an adequate pipeline of leaders in the organization and developing leaders in the right set of competencies. High potential employees need to be identified and provided additional job exposure through greater responsibility and job rotation, in order to prepare them for bigger roles," added Omar.
Total Rewards Management
Findings reveal that 70% of respondents have well-defined compensation strategies in place, with a significant 15% admitting to not having any compensation strategies.
As a best practice, organizations decide on salary ranges for individual positions or grades based on factors such as the overall compensation philosophy, market positioning, job worth and demand. However, only 34% of survey respondents said that they peg their compensation to market levels.
On salary increases, most respondents (92%) have revealed that they base compensation increases on individual performance, while 58% base it on total organizational performance.
"Organizations are increasingly moving towards a Total Rewards approach that entails computing and communicating employee rewards in terms of non-cash as well as cash-based components. There is a growing need for organizations to maximize on their employee reward programs. Often, the key is to allocate Total Rewards across the various components of compensation and benefits to ensure employee satisfaction, productivity and retention," said Omar.
The HR Function
Survey findings show that around 80% of participants have a formal HR department responsible for managing the Human Resource function and well-documented policies that are regularly updated and communicated to employees. 87% of organizations surveyed confirmed their HR function is aligned with their overall organizational strategy.
"The need for HR to evolve from being an administrative function to becoming a strategic partner in the business is becoming best practice. It is essential that HR becomes involved in business strategy formulation," said Omar
Results show that only 35% of respondents have confirmed that HR is considered to be a strategic partner in their organizations, while 37% said that their HR functions are involved only in the development and implementation of key HR processes.
Organizational Effectiveness
More than half of respondents believe that their current organizational structure facilitates the achievement of business strategy and processes and as many as 78% confirmed they have documented and regularly updated job descriptions.
When asked to give an indication of the extent of role clarity within their organizations, 72% of participants said that delegation of authority between different positions are effectively documented and communicated. Only 54% actually carry out systematic job evaluations with a growing number showing interest in adopting this practice.
"High performing organizations are increasingly spending more time communicating with employees about organizational strategy and linking employee performance and satisfaction to organizational outcome. Ernst & Young's Middle East Human Capital Practices Survey is a tool for private sector organizations looking to understand and implement Human Capital practices that are based on regional insight and global best practice," concluded Omar.
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About Ernst & Young Middle East (www.ey.com/me)The Middle East practice of Ernst & Young is an independent professional services firm, which has operated in the region since 1923 and is a full member of Ernst & Young Global. Over the past 80 years, the firm has evolved to meet the legal and commercial developments in the region. Ernst & Young Middle East currently has over 2,400 staff working from 17 offices in 13 Arab countries.
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Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited does not provide services to clients.
© Press Release 2007
