Metin Mitchell

Metin Mitchell

 I had the pleasure of appearing on the Business Breakfast Show on Dubai Eye discussing the key findings in our report, What Makes An Outstanding Saudi Chief Executive. Presenter Brandy Scott invited me to discuss  what skills will be needed to achieve Saudi Vision 2030 and what impact that would have on skills around the Gulf.

Here I share the highlights of what we discussed and my thoughts on the impactfor the future.

What is the skills gap in achieving Saudi Vision 2030?

Mr research shows that the skills gap is all about management. There are plenty of men and women in Saudi Arabia with big dreams and aspirations for the country, but many lack the skills and experiences needed to manage businesses when times are tough, as they are now.

What does this mean for the Saudi labour force?

Key roles are now being earmarked for Saudi nationals – part of Saudisation – and that is absolutely the right thing to do. Saudis are needed for roles in finance, business development, marketing, CEOs – the full spectrum of senior and business-critical roles. This is because expats need to be replaced with Saudi nationals.

Saudi Arabia is evolving and is making the necessary changes for the long term.  But it is having knock-on effects. Talented Saudi people are demanding a premium – as much as 30-50% mark-up on existing salaries – with the result that salaries are going up in a time of austerity. However, this is also a big opportunity to bring more talented women into organisations as businesses look for the best Saudi talent to fill the skills gap.

 samba1

Rania Nashar has been named chief executive of Samba Financial Group, the first female CEO of a listed Saudi commercial bank. Is this a result of Nitaqat and what does it mean for women?

This is not about Nitaqat, it is about talent and the cost of talent. Saudi men are often overpricing themselves while women are showing they can do a great job and are very cost-effective. Look at Bupa Saudi Arabia. Their big stars are all women and they are recruiting more women because they know it is better for their business. All Saudi companies can learn from this model and many are following suit, regardless of Nitaqat.

Is the target of making 30% of the workforce women achievable, especially when you consider the limited number of fields women can work in?

The number of fields open to women will inevitably expand and the target of making 30% of the workforce female is certainly achievable. This is because women want it. They work hard, they are ambitious and they are doing a great job.

What needs to happen to fill the skills gap and achieve Saudi Vision 2030?

There will have to be a lot of mistakes. People will fail and some will crash and burn but, most importantly, lessons will be learned. There is not going to be an easy way to achieve this. However, it will be achieved because there is a whole generation of people coming in who have the energy, appetite and determination to do it.

In a time of austerity, how does that translate to talented people who are getting pay rises?

It doesn’t add up does it? We are fast approaching the point where Saudi Arabia will get a wake-up call and the nation will realise these inflated salaries for talent are not sustainable. Businesses will soon start to look elsewhere and particularly to women who will be able to do the job better and more cost effectively.

How will this impact on talent in the rest of the Gulf?

We will soon start to see a surplus of expat talent elsewhere in the Gulf as they seek work after being replaced in Saudi Arabia. I expect to see a lot of that talent looking to the UAE and this surplus will start to drive down expat salaries.

There has been a lot of talk about transformation over the years. Is Saudi Vision 2030 actually achievable?

This time it is different. The pressure to recruit Saudi nationals is acute. In 25 years of experience, I have never seen pressure as acute as it is today. There is also a real will to do it among Saudi business leaders. This is all about making sure Saudis are running their own businesses. This determined leadership and appetite among businesses will ensure the Vision is delivered.

What will happen to the labour market in the short-term?

It will be frothy and there will be lots of ups and downs in the short-term, but that is to be expected. The real opportunity is for women. This is not about some feminist agenda, it’s just about solid business sense. Women can transform businesses and the nation. We don’t need new laws, we just need women to be recognised for their capabilities as professionals.

For insights on the job market in Saudi Arabia, listen to Brandy Scott interview Metin Mitchell with questions including

  • Where do the decision makers in KSA see the skills gap in the transformation plan (Saudi Vision 2030) being laid out for the future?
  • What kind of job descriptions will be needed for the future?
  • Is it achievable that women will make up 30% of the Saudi workforce over the next few years?
  • What needs to happen to fill the skills gap?
  • If Saudis are going to receive 30-50% pay rises to fill the skills gap, how will this work?
  • What will be the knock-on effect for the rest of the Gulf?

Dubai Eye interview podcast image

If you have any problems clicking on the link to listen to this interview please click here

 

Tuesday, 07 February 2017 11:02

Open letter to my Saudi Friends

For the best part of a quarter of a century I have been travelling to Saudi Arabia on a frequent and regular basis. I have seen the country change and evolve and, like any major economy, go through its ups and downs.

During this time I have been privileged to have made some very good and dear friends. I have also come to respect and cherish many of the businesses and business people that I deal with.

At their best I think Saudi companies have something special and unique going for them. In particular what I have come to admire is the long term thinking of these enterprises, their boldness, their decency towards their employees and business partners and the humility of their owners. Those of us who know the Kingdom will each have their own personal examples but I am sure that all will agree that what I describe is particularly true of the businesses of Olayan , Muhaidib and Al-Jammaz. There are doubtless countless other examples.

Today Saudi Arabia is facing considerable economic and demographic challenge – which are linked to lower oil prices, growing population, the need to diversify the economy and create jobs for Saudi Nationals.

The good news is that there is a plan in place (Vision 2030) and considerable energy and resources are being devoted to implementing this plan.

However what concerns me at this juncture is the spike in widespread use of foreign management consultants. There is always a place, there is always value in working with good quality management consulting firms – the best are capable of making a tremendous contribution to an organization.  But…I have noticed recently legions of young management consultants working in some of the newer entities being set up. I have seen their work at close hand - and whilst not wishing to demean their earnestness and long working hours – I believe that what these management consultants  are contributing is, in many cases, of questionable value, expensive and, at worse,  disingenuous. The loser in this are the enterprises that have appointed them.  And worse I know that my Saudi colleagues who work in these organizations would have come up with far better solution for their organizations – and are acutely aware of the poor quality of work that is being delivered to them. But the ‘prestige’ of these foreign firms trump their own judgement and experience.

I therefore urge caution in the blanket use of management consultancy firms to implement Vision 2030– selective use is no doubt required but, in my opinion, not the widespread use that  I am seeing right now. Saudi Arabia has plenty of its own talent and I believe that more can be done to leverage this valuable resource.

What skills will Saudi chief executives need over the next 15 years?  And what skills will ensure the Kingdom achieves its Vision 2030?  A leading international executive research firm has interviewed chairmen and chief executives of prestigious Saudi businesses to share their views of leadership skills for the future.

Metin Mitchell & Company has this week published its report, What Makes an Outstanding Saudi Chief Executive, which identifies the key ingredients business leaders will need as they help guide the nation through a pivotal moment in its history.

Specialists in sourcing chief executives and board members, founder Metin Mitchell says that future leaders must be inspirational and able to clearly communicate their vision through a period of great change, and able to make tough decisions as they drive through new efficient operating models and make the necessary cuts.  They also need to be able to spot opportunities. 

Mr Mitchell adds: “Saudi Arabia has some of the finest business talent in the world, but as the nation faces unprecedented challenges, many businesses will have to transform the way they operate.

“Those changes will need truly great leadership and this report reveals the qualities, skills and attributes our chief executives will need to play their part in achieving Saudi Arabia’s vision for the future.”

What Makes an Outstanding Saudi Chief Executive also looks at the role of women for future success.  Mr Mitchell said: “There was unanimous enthusiasm, among those interviewed, to see more women in senior positions – they are recognised as hard-working and talented and the Kingdom needs their skills. This is certainly reflected in our experience of recruiting – female candidates are generally outstanding.

“There are still cultural challenges to achieving more women in leadership positions, but chief executives want to see women promoted within organisations and also welcome the number of women who have studied abroad, who bring wider experiences to the workforce.”

The research found that while much can be learned from Western CEOs, it is important that key elements of the Saudi culture are not lost – particularly the genuine care for employees and the long term generational view of business.

Corporate governance is becoming increasingly important.  Mr Mitchell says: “We interviewed a number of chairmen who discussed whether a chairman could be “hands off” in the Saudi culture.  There is no doubt corporate governance will be the big challenge for chief executives of the future. They will have to understand the regulatory and compliance issues, but also learn skills in how to challenge board members – especially when these are more senior family members.”

Interviewees had mixed views about how to train chief executives of the future. While international business schools have their place, the general view was that the new generation of Saudi chief executives must work their way across and up a business, so they understand how different disciplines work.

Mr Mitchell summed up the key findings of the report: “The skills for future chief executives will require a different mindset from that of the boom years. They need to be cost conscious, look for hidden opportunities and inspire their workforces. Get the leadership skills right and this is a country full of opportunities.”

To download a copy of What Makes an Outstanding Saudi Chief Executive learn more about the work of Metin Mitchell & Company, visit http://www.metin-mitchell.com/insights

I’ve worked in executive search for 20 years, recruiting leaders for Middle East organisations of all types. One of the most interesting countries has been Saudi Arabia, where the types of leaders needed have changed as the Kingdom has grown and diversified.

Now Saudi is at a critical point in its development. There is an ambitious future set out in Vision 2030 to transform the Kingdom. At Metin Mitchell & Company, we have been looking at what skills will Saudi chief executives need over the next 15 years in order to help our clients in their recruitment. These skills are what will ensure the Kingdom achieves its Vision 2030.

To play our part in helping Saudi through this evolution, we have interviewed leading chairmen and chief executives to hear their views and add our own thoughts. We are grateful to these leaders who have given their time and wisdom, which we have incorporated into our research report, What Makes an Outstanding Saudi Chief Executive. Below we look at the key findings – you can download the report for free by clicking here

• Mr Loai Abduljawad, CEO, Emirates NBD KSA
• Dr Badr Al Badr, CEO, Dur Hospitality
• Mr Ihsan Bafakih, CEO, MASIC
• Dr Adel Ezzat, CEO, Saudi Paper Manufacturing Company
• Mr Adel Al-Ghamdi, Group CEO, Abdullatif Alissa Holding Group
• Mr Ibrahim Al Jammaz, CEO, Alamar Foods
• Mr Aiman Al-Masri, President and CEO, MESC Group
• Mr Omar Al-Midani, CEO, Beatona
• Mr Anees Moumina, CEO, SEDCO Holding Group
• Mr Musa’ab Al Muhaidib, CEO, Al Muhaidib Technical Supplies
• Mr Sulaiman Al-Rumaih, Vice President, Power & Industrial Group, Tamimi Group of Companies
• Mr Raeed Al-Tamimi, CEO, The Company for Cooperative Insurance (Tawuniya)
• Mr Fahad Al-Zomaia, CEO, United Matbouli Group
• Mr Khalid Abunayyan, President and CEO, Abunayyan Holding
• Eng Talal Al Maiman, Chairman and Chief Executive Officer, Investments and Developments at Kingdom Holding Group
• Dr Hilal Al Tuwairqi, Chairman, Al Tuwairqi Holding

Our interviewees say future Saudi leaders must be inspirational and able to clearly communicate their vision through a period of great change. But alongside this they must be able to make tough decisions as they drive through new efficient operating models and make the necessary cuts. They also need to have an ability to spot opportunities.

In my view, the biggest challenge is going to be how businesses transform the way they operate. Saudi needs leaders who can make things happen and achieve a new type of employee culture to deliver this.

We asked about the role of women for future success. I was delighted at the unanimous enthusiasm to see more women in senior positions – they are recognised as hard-working and talented and the Kingdom needs their skills. This is certainly reflected in our experience of recruiting – female candidates are generally outstanding. Yes, there are still cultural challenges to achieving more women in leadership positions, but chief executives want to see women promoted within organisations and also welcome the number of women who have studied abroad, who bring wider experiences to the workforce.

Our interviewees agreed that while much can be learned from Western CEOs, it is important that key elements of the Saudi culture are not lost – particularly the genuine care for employees and the long term generational view of business.

It was good that so many recognised the increased importance of corporate governance – I looked at this in my earlier blog, Will corporate governance create a clear path for Saudi Arabia?. There is no doubt corporate governance will be the big challenge for chief executives of the future. They will have to understand the regulatory and compliance issues, but also learn skills in how to challenge board members – especially when these are more senior family members.

Our interviewees had mixed views about how to train chief executives of the future. While international business schools have their place, the general view was that the new generation of Saudi chief executives must work their way across and up a business, so they understand how different disciplines work.

So to sum up the key findings, future chief executives will require a different mind-set from that of the boom years. They need to be cost conscious, look for hidden opportunities and inspire their workforces. But get the leadership skills right and Saudi is a country full of opportunities.

Click here to download a copy of What Makes an Outstanding Saudi Chief Executive. I would welcome other views and am happy to discuss this research in more detail and look at its implications for your own organisation.

Monday, 09 January 2017 15:24

How do leaders ‘make things happen’?

I have spent the last few months interviewing Saudi leaders to gather views on What makes an Outstanding Saudi Chief Executive? (The report is coming out this Monday).

 

There were two things that stood out for me in this report. The over-riding theme was that outstanding CEOs need to be inspirational – in terms of vision and inspiring the workforce – and able to take the tough decisions, especially as Saudi faces changing economic times.

 

But having recruited for the Kingdom over 20 years, I would also put the ability to make things happen as a top skill.

 

How do we recognise people with the ability to do this?

 

JD Meier, the best-selling author of Getting Results the Agile Way, says “Strong leaders are able to translate strategy and ideas into execution. Leaders that make things happen and have a strong ‘ability to execute’ attract and retain raving fans and helpful followers.”

 

He adds: “One category of leadership skills is ‘leading Implementation’, and it includes the following leadership skills: coaching and mentoring, customer focus, delegation, effectiveness, monitoring performance, planning and organizing, and thoroughness.”

 

I think the key in this is how you turn a strategy into action.

 

Richard Coates of strategy consultants, Whitecap Consulting, and author of How to create and deliver an agile strategy, says: “There are two big issues around strategy.  One is that businesses spend days or even months agreeing their strategy and writing up a plan – but it doesn’t get put into action effectively.  The other is the speed of change in business today – long term strategic goals need to be balanced with short term agility of decision making and implementation.”

 

So what are the critical ingredients for making things happen?

1. Get your team on board

Years ago, the CEO of a major bank told me that he had once recruited an FD who was excellent, but he didn’t really warm to him. He didn’t think that mattered. But as he said: “What I hadn’t thought through was, if I didn’t like him, probably others wouldn’t. What happened was people in the business avoided talking to him and, importantly, sharing risks or issues. We had to get rid of him – it is high risk if your teams don’t trust or can’t talk to a senior person.”

 

If you want to make things happen, you need your chief executive to get agreement from their team and agree a clear plan with timescales.

2. Talk action early

A key skill for leaders is to talk ‘action language’. Examples would be to ask action questions such as ‘how will we make this happen?’ and ‘what could get in the way?’. Also to look at areas such as ‘how do we make sure we keep pace on this, after the first month?’.

 

The leader then needs to ensure everyone is absolutely clear as to what they can expect of one another.

3. Get started

It sounds obvious but I am sure we have all come across managers who spend weeks, if not months, stuck in their office planning a new initiative. For some people there is comfort in the talking and planning and a fear of actually putting the plan into action. The question ‘will it work?’ hangs over them and stops them getting going.

 

Great leaders give their teams confidence and help them take the first steps. Often it is good to break this down into small stages so a major initiative feels achievable to everyone.

4. Creating immediacy

Creating a sense of urgency can be challenging within some cultures.

 

To overcome this, leaders can help by asking questions such as ‘what will happen if we don’t do this?’ – and that could be tied to a timescale – or ‘what happens if we don’t do this?’ and paint a picture that affects the individuals personally if the plan is not implemented.

5. Clear communication

The leaders I interviewed stressed the importance of outstanding chief executives being good communicators – and that is a critical element of making things happen. First to ensure the plan is clear, as we cover above, but then to ensure everyone in the organisation understands what they have to do to achieve it.

 

Of course as a recruiter, our skill is in being able to test and interview candidates to check out how good a leader is at making things happen – among all the other outstanding leadership attributes needed.

 

But it would be good to hear what traits you think ensure a leader can make things happen and a strategy is implemented effectively?

Tuesday, 13 December 2016 16:19

Are Saudi leaders born or made?

I mentioned in an earlier blog that I have had the privilege of interviewing a number of Saudi chief executives to ask for their views on ‘What makes an outstanding Saudi chief executive?

One of the questions we discussed was how best to groom the next generation of Saudi leaders. A large percentage of today’s Saudi chief executives are of course in family businesses and that also raises the time-old question of – are leaders born or made?

If you Google this phrase, are leaders born or made, it produces six million results! It is an issue that leaders often struggle with in terms of how much can you develop someone to become a leader and to what extent do they need to have natural leadership qualities?

An article on the Forbes site says that leaders are both born and made: “It turns out that both camps are right. Researchers have found that leaders come by their talents partly through genetics but mostly through hard work and persistence. In fact, one study from The Leadership Quarterly on heritability (that is, the innate skills you bring to the table) and human development (what you learn along the way) estimated that leadership is 24 per cent genetic and 76 per cent learned.”

What did the leaders who I interviewed think – and what did they think are the best ways to develop future leaders? We will be sharing this information in our report, out shortly, but here are some of the highlights from our discussions.

1. Education is an essential for future leaders

The general view was that the next generation of Saudi CEOs need to have a strong basic education, but they also need a breadth of experience from working in different areas of a business.

Many interviewees are excited at how this education is now extending beyond that of America and Europe, recognising the Far East will bring new thinking around business models, marketing strategies and operations.

There is a real desire for the Kingdom to do more in the way of business school education to help leaders – and perhaps to do more to adapt this to the needs of the country.

2. On the job learning

Several of those interviewed mentioned how they had worked in most departments of their family business to gain grass roots understanding of each area and how they fitted together. This was generally seen as essential for future chief executives - they need to work their way up.

Inevitably there were differing views about which skills and experience actually have the most value for the final chief executive role – should they have held the chief financial officer role, be very good at strategy or be highly skilled in business development?

As a recruiter, I know that good chief executives can come from all disciplines but a good head for finances is essential and also the ability to get things done – I emphasised this in a recent article on creating Saudi leaders; there is a particular need in the Kingdom for chief executives who can make things happen. I don’t think there is any particular discipline that will produce this ability.

There was considerable discussion around how ethics and governance are becoming increasingly important. There is an issue in terms of education – are business schools up to speed – but also our interviewees felt there is a need for a formal plan to develop these skills while working.

3. Mentoring and coaching

Mentoring and coaching is still a relatively new concept in business. Good leaders have always coached and developed those around them, but businesses are increasingly putting formal plans in place to ensure this is done thoroughly – and to teach people how to coach their junior members.

Coaching was often raised by those I interviewed and a few referred to having hired professional coaches for themselves – this was definitely seen as a good thing.   Many referred to the loneliness of being a chief executive and having a coach can help to keep a perspective on the job.

So to sum up, today’s leaders all recognised the challenges facing the Kingdom as it aims to achieve Saudi Vision 2030 and the importance of having outstanding chief executives. Will these leaders of the future be born or made – everyone agreed they need to be made. This will be done through a mix of education, learning on the job, being coached by current leaders and also bringing increased expertise in new areas such as governance.

The verdict from these interviews was that leaders are most definitely made.

I came across a thought-provoking blog on the future of Saudi leadership by Professor William Scott-Jackson, chairman of Oxford Consulting Group last week.

In it he argues that Saudi will need 1.9m leaders to achieve Saudi Vision 2030. With a population of around 15m employable Saudis, this will be a challenge in terms of pure numbers, let alone skills.

leaders for KSA

I have spent the last few months interviewing a number of Saudi chief executives and chairmen to gather views on what makes an outstanding Saudi chief executive – in particular the skills that will be needed to take the Kingdom through a period of great change over the next 15 years and how you develop these skills. This is very relevant to how the Kingdom develops these 1.9m leaders for the future.

We will be publishing this report early in 2017, but here I want to share insights from our conversations and add to – and challenge – some of Professor Scott-Jackson’s comments.

Professor Scott-Jackson says: “The most important capability for achieving Saudi Vision 2030 is leadership, which has a fundamental impact on every aspect of organisational and national success – and indeed the well-being, happiness and productivity of all people.”

And this view was shared by all the leaders I interviewed. However, while I agree leadership skills are critical, I think it is easy to overlook the importance of being able to ‘manage’ and get things done. I would place as much importance on this as ‘leadership’.

It is easy to under-estimate the skills needed for different cultures. I think what will differentiate Saudi businesses will be those with chief executives who have an ability to get things done. Of course, leadership plays its part in that but in doing that, we should not overlook management ability when recruiting and developing future leaders.

In a study by Caliper into the most important and difficult aspects of leadership, 300 presidents and CEOs shared their thoughts on aspects of leadership. They were asked to rank various tasks: creating the right vision, getting people to embrace the vision, maintaining momentum (motivating, influencing and persuading), managing change (strategic planning, problem solving), surrounding yourself with the right people, developing staff (coaching, managing performance, transforming teams), and delegating.

Nowhere in here does it refer to ‘gettting things done’.   You could argue that if you surround yourself with the right people and are good at problem solving and delegating , then this will ensure that things are done. But I think there is another layer of skill needed in here that is specific to getting the best from the Saudi culture.

Saudi leaders need to understand how their business works, particularly the profit drivers and have a particular skill in helping their teams to unblock problems. Aspects of the Kingdom’s culture can make this challenging – especially family dynamics and respect for elders.

There is a lot in the Professor’s article that I like and agree with.

He asks how can Saudi build leadership skills fast – and looks at some specific advantages of the Kingdom. This was something we were keen to do in our interviews – ask leaders to share what is good about Saudi leadership that should be retained as the Kingdom goes through change. There is often a tendency to think the West has all the answers and put the wrong values and priorities on to another culture.

Professor Scott-Jackson says: “There are two exemplary situations in which young males and females are often fast-tracked [in Saudi] and often do a great job.  The first is the royal family itself and the second is the family firms where young successors are trained from birth in the obligations and skills needed to lead. In addition, Saudi (and the Gulf in general) has a unique leadership style which, in many ways, has advantages over the best practice western style taught on courses today.”

In his analysis of Saudi Leadership style (see the table below), he highlights potential weaknesses as ‘task and project deadline management’ and ‘tough decisions and difficult conversations’.

the saudi leadership style

The first, project deadline management, comes back to the point about making things happen – and is one of the most critical skills to ensure success in the Kingdom. The second point – taking tough decisions and having difficult conversations – was discussed by nearly all the leaders I interviewed. In a period of change, a good leader may have to ask loyal and hard-working people to leave, because they do not have the right skills for the job to be done. This is not easy for any leader but it is a question of ensuring the right people are doing the right jobs and that the organisation is ‘fit for purpose’.

How else do leaders need to be developed? The Professor says everyone needs a qualification such as from the Chartered Management Institute and to start leading young. While our interviewees rated qualifications, several were keen to bring ideas and different approaches to the country such as from China, Korea and Malaysia. One leader commented on the Chinese being great risk-takers and focusing on volume and mass markets – where the West tends to lean more to niche markets. They felt a mix of thinking will best benefit the Kingdom.

Many of our leaders also talked about learning the basics in their family businesses from a young age and working their way up. They felt it stood them in great stead – but they talked more about doing and learning than leading when they were young.

Developing Saudi leaders of the future is a big topic and I plan to expand on many of the ideas from our leaders along with our own thoughts in future blogs. I would welcome other ideas and experiences on this important topic.

I have been honoured to interview a number of Saudi CEOs recently to hear their views on the skills needed to achieve Vision 2030. This is for a report we are producing, What makes an Outstanding Saudi chief executive? (You can read my views on the skills that Saudi chief executives will need in this blog)

One of the themes to emerge is the need for a corporate governance framework in the Kingdom. As one CEO said, “We need to have a conducive atmosphere for leadership to flourish, but under a robust corporate governance framework. Corporate governance starts at the top. Audit needs to be independent.”

Corporate governance is still a relatively new concept across the world. I was interested to read Lubna Qassim’s blog (she is on the leadership team and general counsel at Emirates NBD) where she cites the Cadbury report in 1992 as the start of governance in the UK.

What the Cadbury Report did was to introduce the concept of independence. And it is clear that if the Kingdom of Saudi Arabia is to become more open to the world, it will need its own corporate governance framework.  

Saudi Arabia has been pursuing corporate governance reforms, with the Capital Market Authority (CMA) in 2003 and the publication of the Saudi Corporate Governance Code (SCGC) in 2006. In the Saudi Organization for Certified Public Accountants (SOCPA), the accounting standards committee holds the responsibility of developing and reviewing accounting and auditing standards in the country. All of these will play a part in developing Saudi Arabia’s own corporate governance code.

The central components of the voluntary Cadbury Code, are

  • a clear division of responsibilities at the top, primarily that the position of chairman of the board be separated from the chief executive, or that there be a strong independent element on the board
  • the majority of the board to consist of outside directors
  • remuneration committees for board members to have a majority of non-executive directors
  • the board to appoint an audit committee including at least three non-executive directors

So what do I think would be the key ingredients of corporate governance for Saudi Arabia and the challenges and opportunities of this?

1. Independent board members

Saudi Arabia’s businesses are no different from the way American, British and others have been run – and still are in many cases. Before codes of conduct were introduced, the tendency was to recruit family members to the board and appoint ‘people we know’. The phrases ‘old boys’ club’ and ‘old boys’ network’ came from the very normal practice of appointing people you were at school with or were in the same men’s club

old boys    

The Cadbury code is voluntary and it has taken years to achieve the shift in culture to recruit independently – some would say this still has a way to go in the West, especially around finding and recruiting women.

This will be one of the biggest challenges for the Kingdom; to open up family businesses to outsiders.

2. Clear division of responsibilities at the top

Separating out the role of chairman and chief executive has been well established in the Kingdom for some years. While this should be included in any governance code, the practice of executive chairmen in Saudi is not widespread and will be less of a challenge to achieve.

The issue that will need addressing is that, while there may be a distinction between chairman and chief executive in terms of titles, many chairmen act like the chief executive, essentially making the role of the CEO more that of a chief operating officer.

3. Audit committee with three independent non-executive directors

Having an audit committee with independent non-execs will be more of a challenge to achieve in Saudi Arabia. An independent audit committee requires a confident chief executive to accept, and also manage, strong external views.

A report by Independent Business Research on Corporate Governance and Auditor Independence in Saudi Arabia: Literature Review and Proposed Conceptual Framework looks at the emerging role of the auditing profession and the role of audit generally. They say

this end

Vision 2030 has set out a clear direction for the future of Saudi Arabia – should a corporate governance be part of this to ensure a robust and sustainable business community in the Kingdom?

Last month I wrote a blog on Will Saudi’s chairmen of 2030 need to look different from today? I have had a number of comments and discussions on this, both when I have been in the Kingdom and also online - and one comment in particular got me thinking.

 

Mohammed Abdul Gaffar of KFB Holding Group said “It is not just the chairmen who need to look at business differently from today” – and of course he is absolutely right. He continued: “The idea of Vision 2030 has to be trickled down to each and every individual in an organization. Proper communication of the Vision 2030 to everyone and encouraging participation from all groups is paramount to achieving success. Just my 2 cents.”

 

Well they are a good two cents and lead nicely into what I have been thinking about concerning the skills that will be needed for chief executives to achieve Saudi Vision 2030.

 

What will be the biggest challenges for Saudi chief executives?

In my view the toughest challenges for chief executives will be how they cut costs without harming businesses.

 

Just last week, Reuters reported that “Saudi Arabia will cut ministers' salaries by 20 percent and scale back financial perks for public sector employees”

 

Inevitably oil prices are having an impact in the Kingdom and the ability to make these tough decisions wisely will be critical for the long term success of both companies and the country.

 

But the biggest challenge is achieving operational efficiency through cuts – and also knowing when to keep innovating and investing. Great leadership is about achieving this balance and also bringing employees with you so they can see the better future in return for a more difficult time now.

Building a pipeline of skills

You might say that anyone can cut costs. The harder task is to manage through a recession and still build the skills needed for growth.

 

To do this, salaries are going to have to be more aligned to performance and – another tough decision – not reward people who have not performed. That is going to take a big culture change in many organisations, but bonuses have to be earned.

Connectivity with employees

In the next few years, chief executives are going to have to ask their employees to work longer hours and find new ways of doing things to be more efficient. Leaders need to create a team spirit of everyone pulling together and getting people to rotate around departments to learn these wider skills.

 

This is where Mohammed Abdul Gaffar’s comment is so important – leadership that will bring a future vision alive and encourage every employee to participate fully in the company.

We must not lose the existing outstanding qualities of Saudi chief executives

Whenever we look at change and new futures, there is always a danger of forgetting to identify and keep what is outstanding about the present.

 

In the case of the Kingdom, many Saudi chief executives are extremely compassionate towards their employees and often look after them secretly to ensure they are supported and they do the right thing.

 

There is also another very special attribute in Saudi leaders which the West would do well to learn from – they think about and plan for the longer term, looking 10, 20, 30 years ahead or even generations.

FT article on Paul Polman

I loved an article in the FT this weekend. When Paul Polman became chief executive of Unilever in 2009, the FT article says “He immediately said that he only wanted investors who shared his view that Unilever needed to shepherd the Earth’s future as carefully as it did its own revenues and profits. As one of his first acts, he announced that the company would no longer publish quarterly profit updates, as they encouraged short-term thinking. Simon Zadek, a long-time British sustainability campaigner….[said this was] more than just tinkering or public relations, it was a new business model.”

 

Well the Middle East is way ahead in this respect. Muslim teaching is that every individual must protect the Earth’s future and Saudi leaders take this long term vision and planning very seriously. It is not just talk but a daily reality.

 

If the Kingdom of Saudi Arabia is to create more businesses that are globally competitive, its leaders will have to balance retaining the best parts of their culture with the need for tough decisions and still investing for the future. There is a clear strategy to do this – we just need to find the leaders who can achieve this.

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