Looking beyond salary structures in the GCC

‘Cautious expansion’ continues to remain the operative mantra for organisations in the GCC in 2017.

While employers are adopting a fairly conservative approach with regards to their spending on fixed salaries, many companies are seeking innovative, alternative and sustainable mechanisms to engage and reward employees.

This is supported from a macro point of view, wherein on-going increase(s) in salary and pay levels, without relative increases in overall workforce productivity is not sustainable for private sector or public sector employers.

The GCC continues to be a very segmented labour market, and for many expatriates and nationals who work here, financial security is absolutely critical, as is a perceived sense of equity in how pay and benefits are disbursed amongst colleagues and peers.

While we continue to have segmented pay structures based on nationality, as the region matures and there is increased global scrutiny, we hope to see a shift wherein everyone, irrespective of where they come from, gets paid the same for the same role.

This remains true for equal pay based on gender as well. As an example, a recent study by Accenture highlights that the gender pay gap in the UAE could close by 2066.

As companies closely monitor their profitability, cash based bonus schemes are also being revisited, and there is a greater emphasis on how performance is managed and recognised.

A recent survey by The Talent Enterprise and CIPD Middle East on the ‘future of performance’ showed that over the next 24 months, only 12 per cent of organisations would retain current performance management processes, 44 per cent would modify their current state, while 39 per cent of organisations were expected to make significant changes.

Only 36 per cent of employers believed that their current performance management system delivered exceptional value to the business; and only 50 per cent of leaders thought that their current performance framework differentiated high performance.

In addition to focusing on short-term performance, more than ever organisations are also seeking to offer longer term incentive plans to retain their key talent. While employers continue to rationalise their workforce, increased flexibility around the overall work environment including flexible benefits, part time work, unpaid leave policies, reduced working hours etc. help manage costs without a significant permanent reduction in overall staff count.

The trigger for more agile workplaces may be cost management versus innovation, but many are welcoming the change as a much needed and well overdue shift from more traditional working cultures that have prevailed in the region for too long.

Money as a motivator?

We are often asked by our clients about the role of money as a motivator, and the research on this to date can be summarised in one line – money is a necessary but not sufficient condition to engage and retain your workforce.

Daniel Pink, a leading author and business thinker, reiterates this by saying: “pay people enough, so the question of money goes off the table”.

So, does money motivate? The answer is yes and no, depending on the requirements of the role. This is extremely important for organisational and HR leaders to note.

Research on the role financial rewards play has established that when the task at hand is simple, mechanical or straightforward, like pressing a button or working in an assembly line, monetary incentives work.

However, if the task or job involves more complex activities, creative or critical thinking, problem solving or a generally higher level of competence, then financial incentives are detrimental to performance.

Rewards, by their very nature, narrow our focus. While they work for routine tasks, they stifle performance and reduce creativity when tasks demand flexible problem-solving or conceptual thinking. One ends up missing the forest for the trees.

The Talent Enterprise’s research in the region endorses this. Higher pay alone doesn’t drive higher motivation or performance. Or broader happiness, wellbeing or life satisfaction for that matter.

Our motivations are much more complex, and a variety of factors, such as social support, learning and career development impact how we feel about work and the discretionary effort we’re willing to invest to drive individual and organisational performance.

In today’s world, where our employees are getting younger and arguably more sophisticated, organisations can truly motivate and manage their human capital by creating work cultures which focus on our innate need to direct our own lives, a sense of autonomy; to learn and create new things, a feeling of mastery and to do better by ourselves and our world, which is to have a sense of meaning and purpose.

David Jones is CEO and Radhika Punshi is managing director at The Talent Enterprise