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E&Y finds leadership, succession planning shortfall in ME firms

DUBAI — Private sector organisations need to place greater focus on their leadership development, succession planning and employee rewards systems.

And only a low percentage of regional organisations involve their human resource functions in business strategy formulation, according to the findings of Middle East Human Capital Practices Survey 2006-07 carried out by professional services firm, Ernst & Young.

Participating CEOs declared that the top three business challenges impacting human resources (HR) in their organisations were retaining and hiring talent, management of rapid business growth and nationalisation. 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.

The survey showed there is considerable awareness of the need for having effective leadership development practices in the region. However, only 50 per cent of organisations surveyed believe in identifying employees with leadership potential early on in their careers and only 45 per cent 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 per cent of respondents said they identify successors for critical positions within the organisation.

The findings also reveal that 70 per cent of respondents have well-defined compensation strategies in place, with a significant 15 per cent admitting to not having any compensation strategies.

As a best practice, organisations 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 per cent of survey respondents said that they peg their compensation to market levels.

On salary increases, 92 per cent of respondents revealed that they base compensation increases on individual performance, while 58 per cent base it on total organisational performance.

Survey findings show that around 80 per cent of participants have a formal HR department responsible for managing the HR function and well-documented policies that are regularly updated and communicated to employees. In total, 87 per cent of organisations surveyed confirmed their HR function is aligned with their overall organisational strategy.

Results show that only 35 per cent of respondents have confirmed that HR is considered to be a strategic partner in their organizations. And 37 per cent said that their HR functions are involved only in the development and implementation of key HR processes.

More than half of respondents believe that their current organisational structure facilitates the achievement of business strategy and processes and as many as 78 per cent confirmed they have documented and regularly updated job descriptions.

When asked to give an indication of the extent of role clarity within their organisations, 72 per cent of participants said that delegation of authority between different positions are effectively documented and communicated. Only 54 per cent actually carry out systematic job evaluations with a growing number showing interest in adopting this practice.