DUBAI – June 9, 2009 – Organisations in the Middle East are managing costs tightly in response to the economic climate, but cost cutting efforts are changing focus in the second quarter of 2009, according to consultants Watson Wyatt.
A survey of participants at a recent Watson Wyatt Middle East seminar found that most organisations have already implemented cost cutting ‘quick wins’, such as reduced international travel budgets (69 per cent), recruitment freezes (56 per cent) and reduced salary and bonus budgets (52 per cent). Other plans include altering overall HR strategy (69 per cent), improving HR focus on internal customers (56 per cent) and reducing the HR department budget (52 per cent).
The new focus is on differentiation in pay – with 44 per cent of organizations looking to introduce greater differentiation in pay schemes to retain and motivate key employees.
“At the end of 2008, organisations were reducing their costs by laying off staff and delaying the roll out of HR programs and initiatives,” said Billy Turriff, a senior consultant at Watson Wyatt Middle East. “However, now a key focus area for organisations is to maximize what small pay budgets or bonuses they have so that any increases or bonuses are directed towards top performers. While average bonus payouts will have decreased, higher performers may receive a proportionately higher award.
“Organisations are now also starting to plan what they will need their employees to do differently when the recovery starts and also what initiatives they need to put in place currently, to ensure that employees remain engaged and motivated in what are still difficult and uncertain times.”
All organisations surveyed had issued an immediate communication to their employees in response to the economic conditions and the potential impact on business. However, there was a split between those that had increased their level of internal communication (44 per cent) and those that had done nothing different (54 per cent).
The survey, which including 98 organisations from across the region, found less than 60 per cent of participants’ internal communication focus on tactical areas such as training and development or the non-tangible elements of total reward. According to Watson Wyatt, it is important in a downturn to take the emphasis away from compensation, and refocus on other elements of an employee’s reward package or experience at work. This is why the Employee Value Proposition (EVP) is a growing area of focus for a number of organisations. It helps take the pressure off monetary reward, and when communicated through a strong employer brand can facilitate engaging communication at the tactical level which subliminally reinforces EVP messages.
“Our survey shows that responses to the financial crisis by HR in the Middle East can be broadly split into two phases,” said Billy Turriff. “The quick wins implemented at the end of 2008 are now being complemented by a greater focus on rewarding key talent and developing new people initiatives in order to retain and motivate employees them in readiness for a recovery in the financial climate.’’
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