Labour market: HR to the fore as businesses hit ‘reset’
Author: Georgi Gyton
Oil price spurs rethink in organisational structures, as companies bid to remain competitive
Shaky economic confidence has led to fears for the health of the GCC recruitment market, and sparked layoffs at a number of organisations. But for some HR departments, the falling oil price has ushered in a much-needed opportunity to restructure and refocus.
Oil exporting countries in the MENA region lost more than $340bn in revenue during 2015 and, while there are signs of a slowly stabilising market, workforce investment remains low.
Organisations are frequently turning to HR to respond. According to Deloitte’s recently published Global Human Capital Trends 2016 report, 40 per cent of Middle Eastern businesses are currently engaged in a restructuring exercise, and they are focusing on three key areas: nationalisation, efficiency and budget optimisation.
Bharat Gupta, senior director at management consultancy Alvarez & Marsal Middle East, dates this trend to the immediate after-effects of the global financial crisis, when companies looked to expand both product offerings and geographical reach on the back of easy credit and improved business sentiment. “However, the sharp correction in oil prices since September 2014 has resulted in a domino effect of reduced liquidity and a slowdown in demand,” he says. “As a result, the organisations that over-extended themselves are now adjusting their strategy to focus on their core businesses, or segments with better cash return ratios.”
Gupta says there have been several notable implications for organisational structures, including the strengthening of certain capabilities – such as hiring mid-to-senior managers and retraining employees – as well as the downsizing of some teams, and the boosting of support functions such as IT, finance and procurement, which may have been overlooked in the past.
One area that hasn’t seen much focus so far is middle management, he adds: “Strong and empowered middle managers carry the burden of the organisation – [they] deliver the strategy and free [up] senior management to focus on strategic matters.”
Gupta suggests that HR can bring itself to the fore by helping offset the time it takes to develop experienced managers through an empowerment of more junior managers, as well as investing more in learning and development and other career development practices.
The macroeconomic disruption has spread beyond oil and gas to affect hospitality and tourism, as well as retail and manufacturing. Abu Dhabi’s GDP, for example, is likely to fall from 4.4 per cent to 1.7 per cent this year, and successive surveys have shown recruitment remains sluggish.
But governments, as well as individual businesses, are refreshing their strategies in response. Saudi Arabia, for example, has unveiled ‘Vision 2030’, which aims to diversify the country’s economy. Deputy crown prince Mohammed bin Salman has said he wants to reduce overall unemployment from 11.6 per cent to 7 per cent by 2030 by expanding the private sector, promoting enterprise and improving education.
The plan includes the sale of 5 per cent of Saudi Aramco to create the world’s largest sovereign wealth fund, and follows the announcement of broad economic rebalancing strategies from the UAE and Bahrain.
Trefor Murphy, managing director for MENA at Morgan McKinley, says such moves – at both a national and organisational level – are leading to pockets of opportunity: “There has been a noticeably huge increase in the demand for consultants and consultancy firms – organisations specialising in lean process improvement or anything that makes a current process more efficient, whether that’s someone with expertise in reducing discrepancies in a retail bank, or bringing new technology to improve the [operational] efficiency of any organisation,” he says.