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The following paper is a brief text that SpenglerFox Executive Search has put together to provide background on doing business in Saudi Arabia and how it, as an
executive search consultancy, can help clients succeed on the Saudi market. The paper provides readers a quick overview of i) the current business environment in the country; ii) key profiles for highly-sought-after GMs and top executive talent in the country; and iii) how SpenglerFox services can help you launch, grow and sustain your business.
The top five facts to take away from this paper include:
Insights on the Saudi Market
Saudi Arabia is the largest economy among the Gulf States. With a total GDP of 778 billion USD in 2014, the Saudis accounted for 40% of the cumulative GDP of all the Gulf countries. The country’s GDP per capita figures at just over 24,000 USD. The Saudi economy grew at a rate of 5.1% in 2014, while inflation levels remained just below 4%. GDP growth is expected to slow to 4.5% in 2015, with an overall figure of 776 billion USD.
Saudi Arabia has the second largest volume of world oil reserves after Venezuela and is the second largest oil producer after Russia. The country’s economy is highly dependent on revenues from oil exports, with almost 88% of all export revenues going to the State coffers. In coming years though, dependence on oil money is expected to become a problem for the country: the country’s population is growing rapidly and domestic energy consumption will eat into supplies normally available for export. Lower exports will generate less oil revenue and thus limit the scope of funds available future government-financed public works projects.
In recent years the government has pursued an expansionist policy on investment into public works projects. Public expenditure outlays have grown by 12.7% since 2006. Overall larger public works projects do most to support diversification of the Saudi economy. Recent activities have sought to generate revenues from privatisation of State-owned shares in the mining and the petrochemical sectors. The Saudi banking sector is also quite strong, with the majority of banks
owned by local shareholders and a smaller number with stakes owned by foreign bank shareholders. There are only 8 foreign banks (with one branch each) in the
The country’s primary trading partners include the US and China (together representing 27% of all imports), followed by South Korea and Germany. The market has lots of potential for importers of consumer goods: the country has significant urban populations (66% of Saudis live in or around five major centres: Riyadh – 5.3 million; Jeddah – 3.4 million; Mecca – 1.6 million; Dammam – 903,000 and Khobar – 578,000) with an appetite for consumption of consumer goods and trendy articles from the West. The average Saudi spent 64% of his/her salary on credit-based consumption in 2013.
The current government faces a number of challenges; with youth unemployment being a key, problematic issue for the Saudi economy. Over 58% of the Saudi population is aged below 25 and the country produces more than 200,000 university graduates each year. However, almost 87% of private sector jobs are held by expatriates, while local unemployment rates (for Saudi job seekers) hover just under 12%.
Saudi Arabia has started to pursue interesting policies in economic diversity; specifically a programme focused on “economic cities.” This is an idea championed by the late King Abdullah that looks to develop new industries and wean the country, to a degree, from its dependency on oil. The project is also meant to provide new employment opportunities for the 13 million Saudis aged less than 25 years old. The new “cities” projects also look to promote reform and reduce existing bureaucracy.
Key changes include a) foreign ownership of companies, b) shorter turnaround time on visa issuance and customs procedures, c) greater rights for women and d) greater cultural diversity. The logic of the city set-up is that these new economic/trade areas will serve as islands for controlled change and reform but not impact the whole of the country. Each city will also have a specific business focus; for example, a site in Jazan (near the Yemen border) will concentrate on raw materials and manufacturing, while another one outside Medina will host “knowledge-based” companies in the fields of biotechnologies and higher education. Should these city projects take off and succeed, the OECD predicts they could lead to Saudi GDP growth of 50% by 2020.
However, King Salman’s new government appears to be focused on stability. Since his ascension to the throne in January 2015, the new king has left key ministers (for finance, oil and foreign affairs) in place, despite a number of cabinet shuffles and new appointments to head regional governorships. Current concerns among outside observers centre on how far and how fast King Salman pushes reforms and how the Saudi government will work to push for calm in a region of unstable neighbours.
Who is a GM on the Saudi market?
This question will become more difficult to answer in coming months as changes to labour market regulation enter into force. In recent years the executive talent pool consisted primarily of long-term expats (i.e. persons having lived in the country for 20 years or more and very often Lebanese nationals) along with expats who arrived to complete shorter work terms of 3-4 years.
This labour market status quo has led to a number of problems/concerns relating to performance quality, i.e. a constant battle with practical impacts: experience yet stale ideas vs. younger generations with a mind toward innovation yet unwilling to commit for longer stays in the country. This creates a major talent gap, because companies on the market lack access to a mid-level pool of executive talent and senior managers, who embody both experience and innovation or enthusiasm toward their work assignments.
At the same time, companies seeking the right GM for their business also now have to work within stricter regulatory frameworks on preferred employment of Saudis over foreign nationals. We call this the Saudization of upper-level or senior management positions, which now affects 58 industry sectors in the country.
This process carries with it a number of issues and potential pitfalls that companies must look out for. These range from mismanaging the “sell” to attract and lock in top executive talent (i.e. persuading them to leave their current job) to unexpected, perhaps excessive, demands from candidates during negotiations on salary packages: in various cases we have monitored over the years, salary bumps have involved increases anywhere between 15-50%. Additionally, we also see local companies suffering from their wanting too much. This means that companies sometimes miss out on opportunities to secure potentially strong executive talent by unrealistically benchmarking against standards in more developed markets.
Generally, Saudization efforts are a government response to high levels of youth or post-university unemployment. But said efforts put companies in a dilemma: does young Saudi talent have the skills sets and experience needed to succeed in managerial positions. If we look at a typical, talented, young Saudi, they usually have studied abroad; have 3-5 years of work experience along with fluency in English and possibly another language like French. They tend to have an appetite for progress and improvement; both in the workplace and in society.
Bearing this situation in mind, we recommend that our clients and partners take a pragmatic approach to the executive recruitment process. Our first piece of advice is that companies sell themselves. Even if sought-after candidates do not immediately see a fit for themselves with your company during the first meeting, persuasive communications about your business and brand will likely stick with them. It’s also very likely that they may come knocking on your door when the labour market tightens.
Then prepare for the worst to settle for the best. Ultimately, you may find that you are paying a very high salary for someone with very low qualifications. This situation is, of course, not optimal, but when working on a market with limited executive talent resources, the recruitment process is more about managing expectations than always securing the best candidate. That said, by using this approach based on “low expectation” extremes, it is more likely you will find a candidate the fits nicely somewhere in the middle between the skills sets you were looking for and the price you wanted to pay. Finally, we recommend that you treat the executive search process strategically, i.e. pretend it’s a game of chess. This means that you can take a longer view of the search process and mix and match where to make Saudi placements vs. using expats. A classic example we dealt with involved a search for a Saudi CFO. Ultimately, we found that the best, most economical solution was to hire an expat CFO in tandem with a Saudi Risk Manager: the client still hit its target for employment of Saudi nationals.
Over time it will become important to assess whether government efforts to enforce employment quotas will achieve their desired effect. Both foreign companies/investors and expatriate talent benefit from the option of transferability to other regional markets. This means that should employment quotas make it harder to find and employ the right talent to run successful businesses on the Saudi market, foreign companies or multinationals can relocate to less regulated regional markets (i.e. Oman, Qatar and the United Arab Emirates (UAE)).
One small glimmer of hope, however, that runs contrary to current trends to regulate labour markets involves small steps to boost the role of women in Saudi business. Women currently make up only 13% of the Saudi workforce. Yet a new study by the Al-Sayedah Khadijah Bint Khawilid Centre of the Jeddah Chamber of Commerce and Industry and Strategy & (formerly Booz & Company) reports that increasingly family-owned businesses in Saudi Arabia offer opportunities for women to play a greater role in business management and development. This includes learning skills in the fields of financial management and personnel management. This evolution stems from the fact that family businesses often wish to keep their operations “in the family” and involving female family members has proven of late to be a more cost affordable option for doing so. In the process though, this is providing Saudi women access to new skills and access to
decision-making roles. Additionally, businesses are also involving female family members in succession planning processes. Although it may be strategically emporary, i.e. until another male family member can fill a departed patriarch’s spot, again it does help women learn about business. So it truly seems that there are small islands of labour openness in a market that is generally perceived as comparatively restrictive.
GE engages Saudi universities to support female employment
GE recently announced that it is in discussions to build partnerships with Saudi universities. Of particular interest are its negotiations with the Princess Nora Bint Abdulrahman University (PNU). GE currently employs a number of Saudi women at its GE Manufacturing Technology Centre in Dammam. It also has a business process centre (exclusively for women) that it runs in cooperation with Saudi Aramco and Tata Consulting Services (TCS). The centre employs around 400 Saudi women and also provides them work training. Employees there work on back office activities including accounts reconciliation and payables and they support GE’s business both locally and in 37 countries around the globe.
GE vice chairman, John Rice, recently told the Arab News server that efforts to support employment of women go hand in hand with GE’s larger focus on supporting the Kingdom of Saudi Arabia in enhancing energy sector efficiency and promoting localization. GE has had a commercial presence in Saudi Arabia for nearly eight decades now.
Key areas of business that GE focuses on in the Saudi Kingdom include
- industrial internet along with big data and analytics solutions
- renewable energy
- oil and gas
- power generation
SpenglerFox services and how our opening of Saudi offices will benefit our clients
SpenglerFox has had been active in the region since 2003 with over 350 projects implemented on this market. In February this year, we decided to expand our operations to Jeddah. This expansion allows us to offer our core consultancy services to a broader market. These services include:
This is all about SpenglerFox using its vast experience, access to critical networks and industry expertise to help clients and partners find the executive talent hey need. Our executive search process is people-facing and we are committed to customer satisfaction; working hard to maintain a 90% client retention rate. We thrive on business challenges and thus work to find the right executive talent matches in both developed and emerging markets. Moreover, we have a top-level team of 40 researchers that informs the complete talent search and management process. These researchers, together with our executive search principals, work from a network of 19 hub offices around the globe. This ensures that we can recruit executive talent from the broadest pool possible and with qualified assessments provided by the leaders of our global Practice Groups (Consumer and Retail, Life Sciences, Human Capital Solutions, Industrial & Manufacturing and Business Services).
Executive Search in Saudi Consumer Goods Sector:
Commercial Director, FMCG
An international company operating in the entertainment industry intended to take greater control of its business in Saudi Arabia. After more than a decade of
remotely managing the business through a single distributor, they felt the model would not continue to generate sustainable growth. So they gave SpenglerFox a
mandate to scout out qualified potential candidates for a newly created Commercial Director role. The search came up with 73 potential candidates based primarily in Saudi Arabia. Given that the client operates in a niche industry, less than 4 candidates proved to have direct experience in their field of business. SpenglerFox had to source candidates from companies with comparable industry segments and corporate cultures; and with similar distribution channels.
Executive Search in the Saudi Pharma Sector: Plant Manager, Multinational Pharmaceutical Concern A major multinational pharmaceutical company needed to replace a production manager. At the same time it needed to evolve the role into a Plant Manager position. The current production manager (of Western nationality) had been with the company to complete a one-year assignment: to boost professionalism at the high-tech plant and put in place higher work standards overall. The company is looking for an Arabic-speaking candidate with strong leadership skills. Its long-term goal is to groom the candidate for the local GM position.
The search strategy looked to identify and source talent from the region: we thoroughly mapped markets such as Egypt, Jordan and Saudi Arabia. Meanwhile, we also engaged with Arab nationals abroad – typically in Europe, Canada and the US. Given that it can often be difficult to attract talent to the Saudi market, we used the position’s high level and prestige, the company reputation and career development opportunities to attract the best possible candidates. After 5 weeks of intensive search we had a strong shortlist for the position. An Arab national, with more than 10 years of experience in the US pharmaceutical production environment and with a wish to return to his roots, was offered the position.
Executive Search in Saudi Industrial Sector:
Full Management Team Replacement
An industrial multinational corporation that bought an asset in Saudi Arabia’s Eastern Province needed to replace its management team completely. A key role
that SpenglerFox had to find a suitable candidate for was that of HR Manager, which needed (per the client’s request) to be a Saudi national. After a tough search
and review to identify the ideal candidate, we managed to find a talented female Saudi national (an extremely rare profile for the industry sector), who worked well
with the company and its top management.
Interim Management Solutions
SpenglerFox focuses on finding the most talented senior executives and/or specialists to provide immediate, flexible, short-term injections of management skills,
which in the long-term add value to your business. SpenglerFox operates internationally with all industry sector and functions areas. Interim Managers can be
an excellent solution for businesses dealing with challenges, leading change or fulfilling a gap. Key tasks that Interim Managers can oversee include line function
management, leading transition, M&A process management, start up operations, filling an executive personnel gap and crisis management (i.e. helping turn around businesses in trouble).
Human Capital Solutions (HCS)
Our Human Capital Solutions (HCS) services draw from our passion for developing and nurturing talent. They include a comprehensive range of HR consultancy services that can be implemented individually or be used to complement our Executive Search work; these include namely counsel on leadership development, areer transitioning, competitor benchmarking and brand diagnostics. Each of our Human Capital Solutions is designed specifically to address the challenges that you face in your organisation. The SpenglerFox team of consultants has wide ranging and varied experience in multiple geographies and industry sectors. We provide analytical and advisory services in three key areas:
Leadership Assessment and Development:
this focuses on running diagnostic tests and evaluations to identify strengths and weaknesses in individuals’ leadership skills. Evaluation results are then used to set up special personal development programs to improve executives’ skills and make them better leaders in their corporate teams. In this area SpenglerFox collaborates with the best partners offering assessment solutions: Saville Consulting and A&DC.
Other services in this area include set up and running of development centres, succession planning and 360° feedback programmes.
Career Transition Services: in this area SpenglerFox offers support to companies that need to do corporate reorganisation or restructuring or who find they are facing employee redundancies. SpenglerFox consultants work with partners to help company teams transition into new jobs, identify career opportunities in different companies or industries and to provide executive counselling support to persons managing restructuring processes.
Competitor Benchmarking / Employer
Branding Diagnostic Enhancement: this service helps companies understand how their teams and talent are performing in comparison with industry competitors. Key evaluations and diagnostics include peer benchmarking, review of benefits and compensation packages, one-to-one industry comparisons and employer
SpenglerFox Case Studies – Samples of our HCS Activities in Saudi Arabia
Development Centre for Competencies
SpenglerFox was invited by an international client based in Jeddah to evaluate a team from one of the client’s business units. The evaluations focused on a range of competencies: Industry and Business Expertise, Problem Solving, Empowerment and Coaching. The project’s main goal was to assess the competencies in line with the client’s corporate values.
We put together a workshop for a leading company in the FMCG segment in Saudi Arabia. During the workshop we spent two days interacting with a group of seven people: the first day in group sessions, the second in one-to-one follow up exercises. The workshop addressed issues such as theories on leadership, group dynamics, interpersonal tensions and synergies across a group that included five different nationalities representing a range of business departments: sales, quality control, finance, IT, HR and production. Participants observed different leadership styles and learned how they and their colleagues work to raise awareness of company needs and to promote acceptance of themselves and others. Activities took place in the form of role-playing games (i.e. how to push forward difficult decisions in business OR working as a team to build Kingdom Tower). The workshop also taught participants how to develop their skills in giving feedback (using a simulation of a 360° feedback model).
We led a series of one-on-one sessions and a group discussion for a local client in the healthcare sector based out of Riyadh. The project involved three members of the company’s executive team who were dealing with issues of misunderstanding, lack of trust, confusion and problems bridging a cultural gap. A SpenglerFox consultant met with these executives to carry out a diagnostic review of their behaviour. The consultant then discussed the results of the review with the client and worked with them to resolve their differences.
For more information about SpenglerFox’s services and activities in Saudi Arabia, please contact:
Emerging Markets Director - MEA, Russia,
We are delighted to announce the hire of Dr Eva Wuellner, Regional Practice Group Leader, MEA - Family Businesses and Technology “Based in Dubai, Eva will support our clients in both Executive Search assignments and Human Capital Services projects (Leadership Development, Assessment Centres, HR organization…). Having worked in multinational enterprises and family groups (Unilever, Amazon, FANUC, Lindab, Wadi Group), Eva has gained a broad cultural and professional expertise while working in Germany, Luxembourg, Russia, Czech Republic, Hungary, Egypt and Kuwait. Along her career, Eva grew her expertise in Talent, Change and Performance Management and Recruitment/Talent Acquisition. Eva holds a Master degree in Economics from the University of Passau, Germany, and an MBA General Management from the European University of Economics and Management in Luxembourg. She earned a Doctorate of Business Administration from Surrey Business School, UK, with the doctoral thesis titled “Talent Management in Luxembourg”. Eva is a fellow of the University Forum of Human Resource Development (UFHRD) and the European Institute for Advanced Studies in Management (EIASM). Eva speaks German, English, French, Italian, Spanish, Arabic, Russian, and Portuguese.” Says Cedric d'Halluin, Partner, Emerging Markets - Middle East, Africa, Russia, Turkey. “I am thrilled to join a multi-cultural team of Executive Searchers and HR professionals in a company that is grounded on high ethical values and family spirit with a strong customer-centric approach.” Says Dr Eva Wuellner, Regional Practice Group Leader, MEA - Family Businesses and Technology.
Xenia Becker and Cedric d'Halluin of SpenglerFox collaborate with GoINPHARMA to discuss compliance and globalization changing approach to leadership search in pharma and healthcare. Executive search and recruiting have changed rapidly over the past decade. Most of these changes stem from a deep restructuring of client needs. Whereas, some 10 years ago, businesses were asking executive search firms to fill top leadership and sales management roles, clients, in the past half-decade, started asking for placements in the fields of Market Access or Medical Affairs. The way larger pharma companies approached their business had changed. Many went from a commercial sales view of doing business to adopting a more scientific approach to bringing goods and services to market. Demand for leadership with deeper technical know-how grew. In emerging markets, the situation is not that different. Compliance issues have had a big impact on how corporate HR picks new leadership hires. The expat vs. local approach to hiring has come full circle. Initially, expats were brought in to emerging market countries to mentor and help with transition and economic restructuring, then local talent hires gradually replaced them. However, during the last five years or so, the environment in many emerging markets (i.e. Brazil, Russia and Turkey) has changed. Markets have become more regulated and subsequently ways of doing business have changed. Market buzzwords no longer include “expansion”and “adding headcounts”; instead, headquarters for multinationals in these markets now speak of “compliance” and “rational growth”. Because of new regulatory demands, company leadership teams are generally more cautious and calls for expat-influenced management have once again grown: due to their more extensive experience in handling compliance-related decision-making. Management and Leadership Skills Candidate skills have always been important. However, businesses (as our clients) have gone through significant evolution and this has changed their demands. If you go back a decade, it was very likely that a German company filling an executive post abroad preferred to, and did, hire a German candidate. This is no longer the case. Also, mobility is an increasingly important factor. More businesses seek people for leadership roles who are willing to relocate. This fact breaks with previous industry standards where business executives and upper-level managers focused primarily on career development. They took on a position expecting to advance within that specific worksite (geography). Today, however, markets like Germany are opening up to foreign talent: businesses are putting knowledge and skills at the top of their recruitment qualification wish lists. Key Skills in Demand Soft skills have grown in importance. This is particularly true for the pharma industry, and this stems from the fact that regulatory norms have changed a lot over the past twenty years. Previously, sales teams (and their leadership) had much more freedom in their approach to business. However, this has all been halted by regulations that look to curb potential corruption. This means that companies have had to look for new ways to build relationships with healthcare professionals. Businesses need leaders that keep an eye on compliance and work within the letter of the law and focus on sales team monitoring. Alongside that, pharma businesses now also place greater importance on executives’ ability to manage multicultural teams and to work within so-called matrix organizations. This means leading and providing guidance not only for local business units, but also therapeutic divisions, which can be a challenge. A further critical skill is executives’ ability to optimize production processes. Business leaders now look more at efficiency alongside improved production. This has been the case for the past few years: businesses are looking to minimize waste and focusing on lean management tools. The Great Recession did much to push this trend. Prior to the economic slowdown, there had not been such a big need to focus on efficiency. Now, this has all changed. Clients have excellence centers for lean management in pharma production. This, in turn, has changed pharma companies’ approach to talent sourcing. Previously, businesses had been more conservative, i.e. they hired talent with pharma backgrounds for pharma roles. Yet in recent years, they have switched up their search approach in the quest for efficiency. Now, it is common that a pharma company will look, for example, to the automotive sector to find the efficient leaders it needs. In emerging markets, retention and development of executive talent is just as important as the search process. Businesses increasingly focus on leadership development and use of assessment centers. Executive HR teams have moved from mass recruitment of new employees to intense development of existing teams; businesses are moving away from operational approaches and focusing more on strategy. They put more effort into strengthening the teams they have in place, rather than running external searches. One could say that companies have moved from an expansionist view of doing business to a strategist one. Impact of Technologies and External Influences Businesses increasingly talk of pushing forward with technological advancement; for example, as part of phenomena like Industry 4.0. However, the key ask organizations now have for their leadership at present is greater creativity. Businesses want their executives to be more flexible. You also see a greater push for a bottom-up approach to leadership versus traditional top-down models. Company leadership increasingly feels that customer-facing team members have a more direct relationship to the consumer: they have direct feedback on what the market wants. A specific reality impacting emerging markets involves local manufacturing. This is the case in Brazil, Russia, Saudi Arabia, South Africa and Turkey. Governments now have requirements that businesses invest in local manufacturing in order to get approval for price reimbursement for medicines and medical devices. Essentially, companies must localize production or they get booted from the market. This creates a further dilemma for multinationals as the talent for managing production is not always readily available on local markets. Overall, this is part of a broader cycle involving the expat/local/expat-hybrid recruitment cycle mentioned earlier. Some businesses have looked to bridge the expat-local talent gap by recruiting via national diasporas. They put together special packages to bring their countries’ expats back to their home markets. This has been a preferred recruitment strategy for emerging markets in recent years: businesses search among talent that has relevant, important cultural ties but who have also worked in different cultural environments and can offer a fresh perspective. The Future Executive Executive talent must increasingly be people-oriented. Businesses are shifting away from hierarchical leadership; these days, the focus is more on the team. This also stems from generational changes within businesses where younger leaders place greater importance on meaningful work assignments. Meeting this need has also become critical due to a lack of talent in many areas: need for retention is a key motivator. Leaders also need to focus on the needs of their teams and what younger generations now expect of work environments. For example, perks like home office have become standard. Whereas, a decade ago this was rare or unthinkable, most businesses now offer a mix of on-site (workplace) presence coupled with home office days. On-site vs. home office arrangements also place a new set of demands on executive leadership. Directors need better communication skills and they have to invest in developing trust across teams that may not be physically present on a daily basis. Executives have to check in regularly with their managers and lower-level teams and agree on reporting schemes that satisfy both sides. In emerging markets, executives increasingly expected to focus on effectiveness and efficiency. For example, you see pharma companies moving to an FMCG mindset. As the market for OTC products begins to grow more rapidly, sales demands a more aggressive approach. Pharma companies are looking for consumer-empathetic (consumer-minded) talent to drive and manage operations. Moving Forward: Take-aways As has been summarized in the text above, global economic forces are rapidly changing what businesses need from their top executive management. Our view at SpenglerFox is that clients must consider leadership placements within the framework of ever-changing business environments. Top executives will need to put together teams that can work within new regulatory structures, run flexible organizations that react quickly to new production needs, and introduce management styles that accommodate multi-generational employee teams. Investment in the development of forward-thinking and strategy-focused executive talent will ensure that your business succeeds on global markets in the coming decade. For more information please contact Xenia Becker Image credit : rawpixel
We are delighted to announce the appointment of Maciej Kotowicz, Country Manager - Poland. “It is with great pleasure that I announce our latest addition to the SpengerFox Group, Maciej Kotowicz, who will assume the role of Country Manager – Poland. Maciej will be based in Warsaw, one of our firms strategic hub locations and drive further growth in Central Europe as part of our overall business strategy.” Says Jens Friedrich, CEO of SpenglerFox Before joining SpenglerFox, Maciek spent the past 12 years as a Partner at Heidrick & Struggles in Poland. His focus has been on Executive Search and Leadership Advisory mainly within the Consumer and Industrial space in CEE. Prior to that Maciek gained substantial experience in General Management as the MD of Tate & Lyle as well as in strategic HR as the HRD of Ahold. “I am delighted to have joined SpenglerFox during this exciting chapter in the companies history and bring my experience to grow and develop the business and team in Poland as well as across wider geographies of SpenglerFox. To succeed in this industry you have to be a true expert and that is the minimum requirement of our clients, the generalist era is over” Says Maciej Kotowicz, Country Manager - Poland of SpenglerFox