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Ernst & Young's HR survey shows a wide gap between acceptance and implementation of practices

The Middle East Ernst & Young Human Capital Practices Survey 2006-07 looks at the trends and concern areas in the field of HR. The big news of the survey is that 80 per cent of the organisations surveyed had a formal department to manage its HR functions. Says Mohammed Salem, partner, Ernst & Young, "The corporate sector in the region has star-ted to gain an understanding of HR and stopped treating it as a back office." The flip side of the equation is that only 35 per cent of respondents saw HR as a strategic partner for their business. This is a sad commentary on the state of affairs, as an alignment of the two is a prerequisite for HR to be effective.

Leadership development

When quizzed about the three most critical HR areas, most CEOs cited compensation and benefits, performance management and talent management as the biggest HR challenges facing organisations.

On a number of parameters, there is a yawning gap between acceptance and implementation. For instance, there is considerable awareness about the need to have leadership development practices across the region. However, only 50 per cent of the respondents believe in identifying employees with leadership potential early on in their careers. And only 45 per cent have a formalised process to identify future leaders.

The same holds true for succession planning. As business grows in the region, it is leading to a greater level of workforce mobility. This puts succession planning in the spotlight as it ensures business continuity in a time of flux. Here's a reality check, only 46 per cent of the respondents identify successors for critical positions in their organisations. If this was not bad enough, only 33 per cent have well communicated career paths in their organisations. The training and development (T&D) function makes for better reading – 63 per cent of organisations surveyed in the Middle East have a formal T&D function in place.

Career planning

Evaluating the future potential of employees along with their performance contributes to the effectiveness of career planning and staff development. Only 68 per cent of organisations across the ME evaluate employee potential in addition to their performance. Non-uniform coverage of appraisals is an area of improvement for a large number of organisations in the region, only 24 per cent of team members and 22 per cent of senior management are covered by appraisals.

A big concern area is the lack of adequate performance feedback to employees. Close to 32 per cent of organisations do not provide employees with timely and regular performance feedback. Multi-rater feedback tools such as a 360-degree appraisal is employed by leading global companies for diagnosing performance of its employees on a variety of parameters. Only 17 per cent of the organisations surveyed use such tools. Diagnostic tools such as employee satisfaction surveys have not been traditionally popular in the region but in the recent past more and more organisations have realised the need to conduct them to determine satisfaction levels and plan appropriate actions.

Attrition remains one of the key challenges facing organisations across industries in the ME. The survey shows that 11 per cent of the respondents face high attrition levels of 20 to 30 per cent. Despite being aware of the problem, few organisations have addressed it with any seriousness. Only 65 per cent of organisations have no specific retention programmes for their high performers.

Compensation matrix

Organisations are increasingly moving towards a total rewards approach which factorises non-cash and cash-based components of compensation. Says Tareq Wehbe, senior manager, business advisory services, "The compensation strategy followed by a company has an impact on its ability to retain people." 70 per cent of the respondents have well defined compensation strategies in place, but only 34 per cent of organisations surveyed peg their compensation at market levels. Performance-linked pay is growing in popularity within the region mirroring global trends. While most companies seem to have their hearts in the right place there is a need for them to take a few tough decisions.