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Saudi Arabia Report
Marcopolis presents the Saudi Arabia Report focused on the investments, doing business, economy and other topics featuring interviews with key executives. The sectors under review in this issue are industry, real-estate, ICT, investments, banking sector, telecom sector and many more.
InterviewsMay 04, 2015
Saudi Arabia's Employment and Education: Problems and Opportunities
Mohammed A. Moumena, Managing Partner at EWK Edward W Kelley & Partners
- Written by Peter Matay
- Published: May 04, 2015
Mohammed Moumena joined Edward W Kelley & Partners as a managing director, investor and member of the board of directors, as well as head of the firm’s new Jeddah office. Before joining EWKP, Mohammed was CEO of Moumena Investment Group, where he managed the firm’s portfolio of investments in the real estate, trading and financial services sectors. Earlier in his career, Mohammed spent time at Unilever as a brand manager for Lipton Tea in the Gulf region.
Interview with Mohammed A. Moumena, Managing Partner at EWK Edward W Kelley & Partners
One of the major challenges when it comes to Saudi Arabia and its future is employment. Every year, you have nearly 200,000 graduates entering the workforce, but critics say that not adequate employment is being created for them. How do you see this evolving in the future? Do you see the government tackling this issue satisfactorily or do you think they will just continue buying time by creating more universities and postponing the problem?
The capacity of our economy to absorb more Saudi talents is real, but we cannot only rely on the government, the private sector has a crucial role to play here. Until now, there has been a general belief that only the government is responsible for employment and job creation. But I believe that the government and the private sector are equally responsible.
For a long time now, the private sector has depended on expats from different nationalities for different functions across different layers. The government needs to give incentives to the private sector to absorb and attract more talents, especially Saudi talents coming back to the country with proper education in different disciplines.
Regarding female employment vs. male employment, what are the latest policies? Do you see any possible change in reforms in the future?
In the last 5 years, there has been a noticeable increase of women being employed in back office, mid-office, and lately more in front office positions. I think women make up more than 50% of our society and they have the right and duty to contribute to the labor market. Furthermore, due to our cultural specificities there is an obvious need, probably more than in other societies, to have women working on the ground.
We are a reserved culture and having women dealing with other women in the market greatly facilitates transactions and decision making, and is a lot better than limiting all market interactions to a model where only males are serving females. So it is a positive thing, although for various reasons their potential is still not fully used. But lately, we are clearly seeing the fruits of bringing in women to the market, interacting with the public across sectors, including in the government sector and I believe that eventually, reforms in this direction will be implemented to bring more women to the labour market.
Do you feel that the university graduates in Saudi Arabia, especially when Saudi Arabia is building new universities, new campuses, are adequately qualified to join the new market?
We do have an issue of matching education and degrees to the requirements of the employment marketplace. In many instances, students are studying business, engineering or any other field but what they are taught does not match the requirements of the job market. We don’t have a proper match between the type and level of graduates leaving our universities and what is needed in the job market. We need to educate our students on career planning and provide them with career counselling before they chose and engage in their education path.
Today a lot of students get into the university not knowing what they want to do later. There is no proper career counselling, or career planning. However, in the last 3 years, the government and the private sector are trying to manage and match what is coming out into the job market. There needs to be a lot of coordination between the government and the private sector to match what is required. There are a lot people with bachelor’s degree in the market, but the government and the private sector are looking for polytechnic diplomas, skilled labor or talent. So, we are not matching enough.
One of the major challenges is of course that the government is trying to push the private sector. So, they should be main employer, but at the same time they are making it look more lucrative to work in the public sector, offering good security, wages etc. So, many people opt out of a private sector job and seek employment in the public sector. But then the public sector is really not that efficient an employer. What is your take on this?
Yes, you are right the public sector is a less efficient employer than the private sector especially in emergent markets, and job security is of paramount importance to employees in economies where job mobility is reduced and unemployment rate is high. The government is trying to induce the private sector to absorb more of the national workforce, and although it may look that the public sector is more attractive than the private sector this greatly depend on job categories, level of education, and types of positions. Job security is always an issue with any employee especially when you are in an emerging market, even though there is growth and demand for particular job categories is increasing one need to have a feeling of job security.
The government or quasi government institutions do offer job security, but at the same time, they don’t offer training and development as well as or as fast as the private sector. Again, I would like to emphasize that the private sector needs to work more with the government. They cannot work alone. They need to get incentives and support from the government to build the required sustainability to be able to offer security to employees. But job security is only one aspect, training and development is also very important to employees as it is an important drive for career development and progress. An important number of companies in the country, may be 60% to 70%, don’t provide training to their employees.
Employees remain in the same job for 2 to 4 years and they don’t see any enhancement in their skills. The government does offer some training, but it is very slow and still not enough. So, the government and the private sector have to work together to come to a solution. We can’t depend on the government alone to erase unemployment as it is a huge burden; we can’t depend on the private sector without support and incentives from the government, because it will affect the bottom line.
Another challenge is education itself. When it comes to the economy, it seems that there are very few well-paying jobs. Then you have these service sectors where these employment positions are used by foreigners in Saudi. If these positions were given to Saudis, there wouldn’t be any unemployment problem at all. In the West, this is the case. Most people work in the service sectors, in hospitality etc. Germany has a very good vocational training system in the high schools, where the students are trained professionals, mechanics etc. In Saudi, everybody is looking for good education. Do you think there is a need for any major reforms here to bring in the system of vocational training?
Yes, it starts with education. The government, being the custodian of education here, needs to bring about some reforms. This is best done in partnership with the private sector so that there is a match between the curriculums and materials taught to our students and the skills and specialties required in the economy. The government needs to see how they can create institutions, locally and internationally, which can impart job-specific training and education to supply skilled and talented employees to the market. There is an obvious lack of vocational institutions.
Today, there are very few institutions who supply skilled Saudi talent with diplomas in mechanical and electrical systems, IT and so on and so forth. There is a big gap here. We have bachelor’s degrees, masters, PhDs and high schools. Skilled Saudi talent is rare. Take the example of Saudi Airline. There is a lot of skilled talent, because it offers a lot of training and development and they build them up. We need more of such. There are flagships here that can help in training and promoting talent. But the private sector would also expect these talents to have a minimum of basic education, which is missing.
Should the private sector do something about it?
There are a lot of good initiatives from the private sector today, where they have developed institutions. But again, with respect to the size and population of the country, these are very minimal. The demand is greater than the supply. This is true across all sectors, healthcare, education, automotive, consumer products. We only have one or two mature sectors in Saudi Arabia. Everything else still needs a lot of development.
In five years’ time, do you foresee any major breakdown or major crisis if this situation continues? Or do you see these reforms being adequately implemented on time?
I think the reforms are in place. Maybe their implementation is somewhat slow and should be faster. We need to use what we planned 10 years ago, by sending Saudi male and female students to get a good education with adequate training and to absorb them back into the job market. It is a golden opportunity that we have today – talent, education and proper schools around the world, and we have a strong and booming economy which could easily absorb them back. The timing is right, and Saudi talents are gradually coming back to the country.
All you need to do is to match the talent with the job market. Even if you sometimes have to retrain them, it is not an issue, because whatever training the students get prior to actually taking on a job will be a basic starting point. Let’s say, you hire someone, who is not specialized in a certain area, but he/she has all the basics in engineering. We can take that talent and build on it. There is no harm if the specific field of education does not exactly match the job criteria, at least he/she has the required basics to build on.
Let’s take a closer look on the executive search. One of the major challenges of any company in Saudi is to find good executives. You are providing these services. Do you think there is an adequate supply of good managerial talent in Saudi or do you often turn abroad?
The GCC is a very tough market to find talent. The issue is not only in Saudi Arabia. It is a problem all around here. Good talent is rare to find. It is also difficult to shift them from one job to another. If a person is doing a good job in their current role, why would you move the person? You need to find the right challenge, the right motive. You need to find the right employer.
So, in general it is a huge challenge to find the right talent in the market. Everybody is facing this problem. On the senior level, it is not about technical competency, it goes beyond, because you are looking for leadership, decision-making, business dynamics, and experience. Saudi Arabia has its own sphere of business dynamics, different from other parts of the Middle East. So, it is challenging to find talent. Sometimes, it is also not easy to attract talent to Saudi Arabia, which is another issue due to cultural reasons. You may be able to attract them to another Arab country, but not to Saudi Arabia.
Do you have a statistics on how many senior positions are currently needed in the market and also the demand and supply?
The demand is much higher than the supply. That is certain. I don’t have the exact numbers, but the demand is definitely higher than the supply. The demand for talents who understand the business dynamics and culture is high. You can hire someone, who is very capable technically, with the right competency in his area, but the question is ‘can he/she develop his skills or can he/she produce in such a culture?’
What exactly is the Saudi dynamics? Please elaborate.
We have a relatively large economy, which have been and continue to be in a growth mode. We have a lot of family businesses that contribute to the economy, and the dynamics within family businesses is not known to a lot of people. You can bring a talent from the corporate world, but he/she might not fit into the family business environment. These family businesses are not yet structured in a corporate manner. Most of them are still a one-man show, and bringing in top talents might not help because they might not be able to absorb that culture. We have a lot of institutions here. They are called institutions or establishments, but do they have the right corporate governors?
Do they have the right policies and procedures? Is the management split from the ownership? This is still an area that needs to be extensively developed in Saudi Arabia. Any senior talent feels comfortable if he/she is in corporate environment because his role is clearly defined and objective Key Performance Indicators (KPIs) are in place to measure his achievements.
Whereas if you don’t have the right policies and procedures, if ownership is not split from management, if you have no governance his role becomes a bit vague, and the evaluation of his contribution to the business becomes problematic. Where does he/she stand? Is he/she more into execution or strategy? Does he/she need to play politics? All that matters. This is not just in Saudi, during a booming or growth phase, a lot of countries around the world where family businesses constitute a large part of the economy, this has always been an issue.
Do you think that is going to change anytime soon?
Family businesses today need to change in order to survive and assure continuation. They cannot continue the way they are. Going from 1st generation to 2nd generation to 3rd generation is becoming more and more difficult. We don’t see the 3rd generation smoothly taking over to assure continuation of the family business. We may see the 2nd generation. We have seen good examples. Once you start talking about the 3rd generation, things get tough. In Europe, you see the 1st generation transferring knowledge to the 2nd generation and then it gets tougher.
That’s why they bring in investors or try to go public. That’s why private equity firms are more and more accepted and welcomed to invest in family businesses. For sure families don’t want to lose their businesses. Some of them are opting for IPO to cash in, but keep a portion of their business under their control, some try to bring in professional management, and some to be regulated by the governmental or regulatory bodies like the Capital Market Authority (CMA). So, they need to do something for surviving, otherwise those of them who don’t react will find themselves lagging behind.
One of the major challenges I see in Saudi Arabia and in the entire Arab world, is that it is a consumer market. Except for oil or petrochemicals, wherever you see a person, he has his IPhone, he drives his Mercedes. These are all manufactured in China, in Europe or in the States. Do you see this changing in the future? Do you see the local brands being competitive abroad? A strong manufacturing base can really create jobs and jump start the economy.
It will take time. It took others a long time. I think there are good initiatives on the ground. The government was a pioneer in some areas. There are some good initiatives in the private sector. These initiatives have succeeded, some large flagships have succeeded, but these are very rare examples. So, I believe it will take longer than it should.
Before the interview, you mentioned that the general approach towards the HR in the Saudi companies is still in its infancy. What would you advice the companies to do? What is the situation on the ground in this regard?
I would advise owners and shareholders to look at HR as business partners. This is something that is not yet well understood in the local market. They need to understand that they need HR just the way they need finance and other crucial functions. They are business partners. They need to be partners in business decisions. They need to be partners in carrying the business forward during the good days and bad days. During the good days, they need HR to find and train the right talent, to compensate the right talent, to serve the right talent.
You also need the HR during bad days to make sure that your policies and procedures do not hurt your employees. At the end of the day, these are employees who have families and responsibilities. So, the HRs is really a business partner in any organisation. This attitude is yet to be adopted. Very few institutions in Saudi treat HR as business partners.
What is the single most important challenge you face when you are looking for executives? Is it their resistance to come to Saudi or what is your major obstacle during your operations? Something that other people face as well?
It is a challenge to find the right person with the right talent, at the right time. You might be able to find a good talent, but he/she is not ready for that challenge. So, he/she is the right talent in terms of competencies and personality, but he/she is not ready for the challenge. Or the company is not fit. To be fit is not only about knowing what to do, it also includes right timing, readiness to take the challenge, the willingness to do, to be motivated. Compensation is not always the most important aspect, especially for senior talents. It is finding the right employer, the right business environment, the right challenge, with the right career path and progression. As for employers, they should be able to answer the question, ‘can we work with this talent’. Don’t forget that these talents are the new blood flowing into these organizations.
So, can we trust them? Can we work with them? Can we give them the opportunity to do mistakes? The majority of family businesses are a bit reluctant. They would rather work with somebody they trust rather than with somebody new even if he/she has the right competencies to take the business forward. And that person they trust might not be the right person, but he/she is trustworthy, loyal. So, it is a risk for them to get a new talent on board. For him it is a risk to move from one job to another. All good talents see movement as a risk and they try to minimize it. That is why they need to do thorough due diligence on the company. We help them do that. We do due diligence on the client. It needs to be a win-win situation. We can’t look at the interests of the clients without being very transparent with the candidate. It goes both ways.
You have been doing business in Saudi Arabia for a long time. I suppose, you have seen the evolution of business, or the changes in the attitude. Where do you see the country heading? Do you see a steady progress? Do you see any curvature to the way up or down?
I have been doing business for around 18 years and executive search since 8 years. I am optimistic. When you are building an economy, you can’t build it overnight. It takes time. From the human resources point of view, I see there is a lot of potential in young Saudi males and females. The question is that we need to put our hands together to bring them to the table, to train them and coach them to move forward. There is big gap between what can be done and what is actually done. It will take efforts from both sides to do that, because there is a hunger for learning in Saudi.
There is a big need in the market to educate the Saudis and they are available today. There are hundreds of talents available today, whereas 15 or 20 to 25 years ago you would not have these numbers. The question is to hire them, to train them and to show them the path in their career. That is not happening. Lots of good students are available. They can’t see what lays ahead. They don’t get any career counselling. They take up jobs without know where they are heading.
Where do you recruit people from? Which part of the country mostly? Is it mostly from the Arab countries?
I can claim that we are specialized head hunters for talents with Middle Eastern experience. So, they could be any nationality with Middle Eastern experience. You would go to other firms who will be better than us if you are looking for talent in the US, because we don’t have research capability in the US. But if you come here and tell me, ‘Mohammed, I am looking for a talent with Middle Eastern experience,’ I will be able to get you this talent – Arabs and non-Arabs, basically people who understand this part of the world and are at the same time technically capable.
But it is mainly from the Middle Eastern countries, right? With origins in the Middle East?
No, there are also lots of Europeans, Asians in the Middle East with very good talent.
