Can Corporate Social Responsibility Aid Reform in the Maghreb?

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The Rise of Corporate Social Responsibility – A Tool for Sustainable Development in the Middle East argues that companies can contribute to sustainable economic development in the MENA region through corporate social responsibility (CSR). The report was issued by Booz & Company’s Ideation Center, its “think tank in the Middle East [providing] thought leadership through insightful research, analysis, and dialogue that is true to the Middle East’s dynamics.”

The report raises several questions; some are existential, while others focus on distinguishing between short-term – “give him a fish” – approaches and long-term “teach him to fish” options. I have never been a great fan of CSR, simply because it is not, in my analysis, a substitute for investments in sustainable economic development that directly create jobs. This report takes a different tack, saying that “Companies, as good corporate citizens, must become involved in sustainable development and contribute to the broader improvement of their societies … [by aligning] themselves with these national goals [job creation, poverty alleviation, and the environment] that are built around sustainable development, using the powerful tool of CSR initiatives to help achieve them.” CSR, in their assessment, is both a social force for reducing economic inequality and a means of improving environmental conditions. Their case studies in the region are helpful yet do not address the core issue: can CSR have a long-term impact beyond philanthropy that supports greater opportunities for more equitable economic growth?

What is CSR?

Perhaps the first issue is definitional, as the United Nations Development Project (UNDP) defines sustainable development as “distributing the benefits of economic growth equitably, regenerating the environment rather than destroying it, and empowering people rather than marginalizing them.” Is this consistent with what the region is thinking? According to the Booz report, “Companies and government officials interviewed in our study most frequently cited the need for robust job creation to nurture economic growth and spread benefits among the population as the most salient issue.” This is the dilemma, as few of the examples provided in the report are about job creation. More are about philanthropy, which, while laudable, does not necessarily lead to enhancing job growth over the medium to long term.

I am not saying that CSR is not important. In fact it is a key component of a mature approach to economic growth; but it lacks a defined connection to job creation. As the report highlights, “half of the region’s population is under the age of 25…among those 14-24 years of age, approximately 25 percent lack a job…” So building homes for the poor, insisting on higher environmental standards for manufacturing facilities, and encouraging literacy are laudable, yet my assessment is that these programs must be part of a larger coherent CSR strategy that is wedded to generating meaningful employment if it is to go beyond alleviating short-term social and environmental issues.

And the challenges for recruiting partners into CSR programs can be quite daunting, as there are few if any incentives for employees to participate. Less than 14 percent of firms surveyed have formal CSR-related key performance indicators, “and just 11 percent include CSR performance in their bonus schemes.” So to make CSR effective over time, the report points to a process to close the gap between a company’s individual CSR programs and a country’s national development priorities.

Another challenge is that countries diverge in their CSR priorities, making it critical to define local needs rather than using an imported template. In the MENA, the focus is on issues ranging from alleviating poverty and supporting charities and community projects to education and employability. There is not a broad consciousness of the need to address environmental issues, which is a priority elsewhere. “Executives [in the MENA] are struggling to relate environmental issues to profitability and long-term business objectives.” In many cases, environmental concerns are still seen as external to the company rather than incorporated into its internal operations.

Building effective partners

The report also talks about the importance of proactive government and civil society participation and encouragement of CSR. On this theme, a very interesting CSR project is run by SEDCO Holding, a Saudi Sharia-compliant wealth management company. After a national survey indicated that young Saudis have few skills in managing their personal finances, SEDCO initiated a financial literacy program for university students. It is a private-public partnership that involves an international NGO, resulting in a great example of how CSR can make an economic impact beyond charity. Smarter consumers make smarter decisions and can transfer this knowledge into their own business practices. This is a forward-thinking project that benefits all of the stakeholders and provides best practices that can be emulated elsewhere.

A positive recent development noted in the report is the notion of corporate governance – responsible and accountable company leadership. “It was only within the last 10 years that an Arabic word for corporate governance, hawkamah, was coined.” In the transition from family-owned private firms to corporate-managed public entities, a company’s identity shifts beyond the personality of the founders to values expressed in their corporate mission. It is this redefinition of company identities that holds the most promise for the inclusion of CSR in a firm’s objectives.

Just as long as you don’t forget that the bottom line is profitability and job growth!

The challenges to “making democracy” in the Sahel and the Sahara

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One of my favorite debates goes something like this: in conflict environments and/or fragile or failing states, what are the relative benefits of short-term democracy promotion versus longer term development programs?

In the context of what to do in the Sahel, recent charges that Al-Qaeda in the Maghreb (AQIM) has access to SA-7 surface-to-air missiles bring into sharp focus these issues for those striving for stability and security in the Sahel/Sahara region.

At a recent joint hearing before three House subcommittees with responsibilities for African affairs, government, think tank, and private-sector witnesses provided their assessments of efforts to tackle short and longer-term obstacles to securing the region’s future. In reviewing their testimonies, several critical recurring themes emerged in addition to the current military engagement.  At the top of the list are the humanitarian challenges.

Mali pushed to rush elections in July

In Mali, a country of around 16 million people, more than a half-million people are internally displaced or refugees in neighboring countries.  In addition, a severe drought in 2012 put almost 19 million people at risk for food security, “including one million children at risk of severe acute malnutrition.” Today, although the US has expended more than $550 million in humanitarian assistance (not to mention funds from international donors), “an estimated 10 million people remain at risk of food insecurity.”

As Acting Assistant Secretary Donald Yamamoto, of the Bureau of African Affairs at the State Department remarked,

…our short term successes may be fleeting if we fail to address the longstanding political and economic fragility that make the Sahel susceptible to persistent crisis and conflict. Poor governance, weak democratic institutions, and a lack of development and economic opportunity cultivate fertile ground for instability. Helping those countries to strengthen their institutions and be more responsive and inclusive is equally critical to addressing the region’s deep-seated security, political, and development challenges.

And here is the dilemma. When asked by Rep. Chris Smith (R-NJ) if elections in July 2013 could be free and fair, Nancy Lindborg of USAID replied “While we have not yet solved all of the structural issues in Mali that could impede free and fair elections, it is imperative that we hold these elections so that they can begin to rebuild democratic institutions.” What is missing from the public record is a reminder that US legislation prevents foreign military assistance to countries whose governments came to power via non-democratic means, in this case the coup that led to the secession of northern Mali. This type of restriction is also why the French support the July election, because it then allows Paris to write “mission accomplished” and withdraw its forces.

So what are some of the other ‘structural issues’ referred to by Ms. Lindborg. In a response to a question from Rep. Tom Cotton (R-AK) about Mali’s previous attempt at democracy, A/S Yamamoto offered, “Mali was a very democratic country, but its democratic institutions were fragile. What we’re trying to do is give aid in order to stabilize it, address the humanitarian crisis and extremism, and promote dialog between the north and Bamako.” Excuse me…if it was a “very democratic country,” where were the institutions that reflect the bonds between government and citizens? Where was the civil society? Where were the mechanisms for engaging minority and marginalized populations? Where was the independent judiciary and armed forces that protect order and respond to civilian leadership? Where was the transparency that characterizes government transactions and policies both domestic and international? What happened to the previously agreed “dialog between the north and Bamako?” Or as a colleague from the State Department mused, “Why are we so enamored of elections in countries with no functioning civil societies or competing political parties that are at the heart of a democratic process? It allows us to wash our hands and move on to the next hot spot.”

The humanitarian challenge

Quoting Yamamoto again “Creating viable economic opportunities and meeting the basic needs of its citizens remain a daunting task for countries that consistently rank at the very bottom of any measure of human development.” His colleague, Ms. Lindborg, in response to Rep. Paul Cook (R-CA) added “Progress is possible, but it will take time. We need to help countries, communities, the private sector, and regional NGOs feel that they have a And yet the US and France continue to insist that the July elections proceed, while other voices raise concerns with the timing and inclusion issues.

For example, Rudy Atallah of the Michael S. Ansari Africa Center at the Atlantic Council told the hearing “I agree that we should push elections, but first it is critical that we address the local grievances that precipitated the beginning of the crisis. If we force the election without addressing these grievances, it will just be another failed election.” And I will add, perpetuate another failed or failing state in the Sahel/Sahara.

After Iraq, Afghanistan, and other setbacks in US foreign policy, wishful thinking and pious statements about the efficacious effect of elections in troubled countries should not play a role in next steps in the Sahel. History and common sense argue against rushing into an election without a Plan B, which is this case means BEFORE any election is on the short-term agenda. As Nii Akuetteh, a well-known African policy analyst told the Members, “I have to reiterate that we must come up with a contingency plan should the Malian elections become problematic, and we need to more thoroughly review what went wrong with Mali.”

For the best antidote to instability, as A/S Yamamoto said, “we must continue our efforts to approach the Sahel and the Maghreb’s interconnected problems with a comprehensive regional and international effort…to address the immediate security threat posed by violent extremists and transnational criminal networks, while at the same time building the institutional capacity needed to address the Sahel’s political, economic, and humanitarian challenges.”

Amen to that, and to some common sense in our strategies for moving the Sahel/Sahara into functioning democracies.

MAKING FINANCIAL SYSTEMS PART OF THE SOLUTION IN THE MAGHREB

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A recent article by a former deputy director of the IMF highlights the challenges the Maghreb countries face in energizing their financial sectors to promote large-scale and equitable economic development. Amor Tahari is not promoting wealth redistribution or onerous regulations but rather a freeing up and development of mature financial services to generate greater opportunities for more actors.

“Achieving higher and more inclusive growth in the Maghreb region in thus required to bring down the high unemployment rate, especially among youth, and to raise living standards…Maghreb countries have to accelerate their economic reforms in various areas, in particular with regard to their financial sectors.”

Mr. Tahari notes that although Morocco has the “most advanced and diversified financial system, all the countries in the region still need to further modernize, deepen, and regionally and globally integrate their financial markets.”

Morocco’s Central Bank Moves Ahead

As if on cue, the central bank of Morocco issued an update this week on the economy’s performance, which spelled out its assessment and proposed actions. The good news is that due to external factors such as the fall in energy prices, the inflation forecast for 2013 is down to 2.1 percent. There is a general consensus that good harvests and fewer energy imports will contribute to a 5-5.5 percent GDP growth rate. The not good news is that “the international environment was still characterized by a ‘continued worsening of economic activity and the persistently high levels of unemployment,’ particularly in the euro area.”

In response to the kingdom’s unemployment challenges, the “Bank Al-Magrib said it would implement a new program to encourage banks to lend to very small, small, and medium-sized enterprises, particularly industrial companies that are export-oriented due to a continued deceleration in non-agricultural activity and bank credit.” It is this latter issue of growing the economy in non-agricultural sectors with sufficient financial support that holds back broader growth in the region. Even this program “provides banks with liquidity collateralized mostly by private securities issues by such businesses.” This is part of the problem: what banks will make loans based on collateral provided by companies with unproven or marginal performance? It is a contradiction that Mr. Tahari notes that blocks diverse and inclusive growth strategies. He calls on Maghreb countries to “double their efforts to improve access to financing and make it available to a larger part of the population…”

Reforms Captive to Politics

As in the US and Europe, financial reforms often get caught up in the political dust-ups between and among political parties seeking to take advantage of the public mood to score points against their opposition.

In Morocco, according to an article in Al-Hayat and elsewhere, “A delegation from the International Monetary Fund (IMF) threatens to withdraw the $6.2 billion in loan guarantees earmarked for Morocco if the Moroccan government doesn’t announce a schedule to reform the compensation fund, which will cost $6 billion this year….The IMF…said that the financial situation and the overall economy were worsened by the government’s inability to stop the financial waste caused by political differences.” Morocco has already been downgraded from an “emerging market” to a “frontier market” on the MSCI Index, which may affect its ability to borrow internationally. Morocco needs to borrow $6-8 billion annually to financial some development projects and pay for some economic and social obligations.

While Algeria and Libya do not face a financial crunch due to their energy exports, their financial systems are seriously lacking in the infrastructure, systems, and regulatory environment that act to stimulate business and minimize risk. In Tunisia as well as Algeria and Libya, the financial sectors are paying the price for years of neglect.

For example, financial systems are dominated by government banks and heavy public sector presence in lending portfolios. Non-performing loans (NPLs) burden the liquidity of banks and there are few if any secondary markets for fixed income (bonds) and equity (stocks) products. Insurance similarly suffers from weak guidelines and, along with banking, will be affected by the coming implementation of Islamic banking.

Regarding the banking systems, Tahari proposes that “it is urgent to increase competition and openness in the banking system in most countries.” Allowing private banks to enter the market, increasing the scale of micro-financing and micro-lending, eliminating poorly performing state banks and their high ratios of NPLs, and promoting the growth of a range of financial services and non-bank financial institutions within the context of international standards and transparent regulations, will enable Maghreb financial sectors to be on firm ground for greater regional integration.

As Tahari concludes, reducing youth unemployment “will require achieving a significantly higher and more inclusive economic growth…[by accelerating] reforms to bring about considerably higher productive investment…[including] further financial development and deepening, as well as regional integration within the Maghreb Block.” If the Maghreb countries are to make good on their promises made during the Arab uprisings, key to their progress is a sound, vibrant, equitable, and proactive financial sector.

Morocco in a rising Africa: Expand opportunities, extend friendships

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Last week, the annual meetings of the African Development Bank (AfDB) were held in Marrakech, Morocco under the theme “The Structural Transformation of Africa.” It has been 29 years since Morocco last hosted the meeting and the event and its location demonstrate how few divides now exist between north and sub-Saharan Africa.

In the past, policy analysts and companies treated North Africa as part of the Middle East; to many, Africa began at South Africa, and extended upwards to Nigeria and Kenya, encompassing the largely English-speaking areas of the continent.

While that is still the dominant perspective, leaders in the Maghreb have increasingly forged closer and more robust economic, commercial, and political ties with their counterparts in central and West Africa.

Some of these efforts were clearly political, as with Gaddafi’s investments throughout the continent. Other ties have grown out of the need to have common efforts against smugglers, militants, terrorists, and extremists who populate the poorly guarded territories along common borders. The bottom line is that building long-term south-south relations is now a permanent feature of intra-African affairs.

In his message to the annual meetings, King Mohammed VI of Morocco emphasized that Africa’s human capacity and natural resources are great assets in the economic and social development that is occurring. He also noted that “we must root out the causes of national and regional conflicts so that peace may prevail throughout Africa.”

The King called for “major projects at the level of sub-regional groupings, and to insure the sustainability and optimal management of our resources, for the mutual benefit of our populations.” In outlining his vision, the King calls for Africans to take the leadership in the development of their countries without becoming dependent on foreign entities.

King Mohammed VI also spoke to the need “to ensure food security for all our African peoples and to reduce our dependence…through the creation of a common African agricultural market. Finally, we should promote support and assistance programs to reduce social and spatial inequalities and ensure inclusive, shared growth.”

These challenges echo themes of conferences held earlier this year in Morocco on south-south dynamics, most recently the 8th Morocco International Exhibition of Agriculture in Meknes, where attendees discussed topics related to regional markets, food security, and innovations in agriculture.

Yet the AfDB’s mission is built around the capabilities of its 79 members (54 African, 25 non-African) to not only grow their GDPs but put into practice the means of further reducing poverty, inequality, and discrimination. Despite a doubling of GDP since 2000, great disparities remain and there is an over-reliance on FDI to drive growth that is often uneven among and within countries.

As reported in the final communiqué of the meetings, there is a need to use the current UN discussions on revising the Millennium Development Goals (MDG) to set realistic goals regarding the inclusion of youth, women, and other vulnerable groups.

The final AfDB statement included a strong emphasis on committing higher levels of investment in human and infrastructure development, promoting strategies that accelerate economic growth including support to small and medium-size enterprises (SMEs), improving human capacity and skills development especially for youth, and renewed efforts to build efficient regional markets through joint public-private investments.

In his remarks at the closing session, Nizar Baraka, who was named “Minister of Finance of the Year” in Africa, pointed out that a key outcome of the meetings was to review, evaluate, and discuss AfDB’s activities to better develop strategies to mobilize financial resources for the structural transformation of Africa so as to better serve the African people and “meet their expectations for a dignified life, social mobility, and job opportunities.”

Morocco garnered additional awards including Best Bank of North Africa to Attijariwafa Bank and Best Development Financing Institution to Credit Agricole, which was cited for “working hard…to build a model of sustainable and efficient financing for development in rural areas, with good management practices.”

These institutions and their counterparts throughout Africa are key players in the fact that 13 of the 20 fastest growing countries in the world in 2012 are in Africa. In its third annual financial review, the AfDB noted that regional economic integration is the “key factor” for African producers to develop regional value chains, to achieve economies of scale, and become competitive internationally.

And for AfDB, the private sector is the main engine of growth and poverty alleviation, providing 90% of the jobs, two-thirds of the investments, and 70% of the earnings growth on the continent.

Morocco and the rest of the Maghreb will gain mutual benefits from a heightened involvement in Africa, one that shares a common vision for dynamic human and economic growth.

Global business in emerging markets: Transformational partnerships

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At a recent corporate presentation in the Maghreb on the potential transformational effect of foreign direct investment (FDI), I focused on two points: the notion of impact investing and the corollary dynamic of how FDI impacts human development beyond the benefits of economic growth.

The discussants were company leaders and employees discussing how to build a globally competitive company culture integrating local sensibilities and priorities with technologies and industrial know-how developed abroad.  The initial discussions, following the usual pattern of strategic planning sessions, concentrated on building a common vision and purpose among the participants. The vision that coalesced was then defined in a series of core values and principles that would become the “brand” of the emerging company culture.

As I listened to insightful and well-presented points of view, it became apparent that as the new company drills down from values and principles to behaviors, it is critical that both sides examine the scope of their assumptions and expectations. While there was a strong consensus around the vision and principles, agreement was not so clear on the behaviors that would then follow. It reminded me of the iceberg metaphor in cross-cultural communications, where the core values, principles, attitudes, and beliefs are unseen below the waterline, while the behaviors, which are visible above the surface, are subject to interpretation by the other party who cannot see below the waterline. The lesson: we make judgments about others based on what we see, rather than what we know lies beneath the surface.

Given this observation, I asked the group to consider a broader perspective, moving above their particular iceberg to consider the implications of the new partnership beyond the terms of the company’s goals and objectives. I began with what I know best—defining the mission of the new company and how training impacts its brand.

The Arab uprisings pointed out the need for rapid economic growth to stimulate broad and meaningful employment and drive education relevant to the marketplace. This is not a simple task; it is not merely about providing skills training to enhance work opportunities; it is about the core aspirations of people and what this means to their country. Employees and employers are not the only beneficiaries of FDI; all of the country benefits from a more capable and effective workforce.  The workforce that is emerging will have better technical capabilities, operational sensibilities, and soft skills that enable them to define options and make choices about their futures.

In the MENA countries that I have surveyed in terms of technical and vocational training needs, soft skills are defined as more than communications and teamwork; they include the capabilities to pursue a career and anticipate and grasp needed learning opportunities. This involves creativity, innovation, and judgment. Thus, these enhanced soft skills are more complex and encourage what is called “global dexterity,” blending awareness and knowledge that lead to effective behaviors in the workplace while securing one’s core values.

The Arab uprisings remind us that there is a related issue that needs attention: that what we are dealing with is more than better training, education, and employment; Arabs are redefining the social contract that existed between regimes and their people. At the heart of it all are the issues of identity and the basis of legitimacy of the governments: political, religious, ethnic, cultural, etc.

Historically, the social contract was an exchange between a government that provided order, stability, and a bit of prosperity to citizens who felt protected and secure enough to have sustainable livelihoods.  That balance has, in many countries, been shaken to a large degree by demographics, the global economy, technology, more gender equality, a reduction in social distance, and education, which are providing the ingredients and tools for reshaping and recalibrating social contracts. So it is this redefining of the social contract that is at the heart of the struggle for political legitimacy and national identity.

In this context, skills training and professional development enable employees to access careers and benefits that equip them to be part of a generational and transformational shift. These empowered employees become capable participants with tools to achieve aspirations for themselves, their families, and their children. This confluence of skills and knowledge has the capacity to impact the debate on the social contract, which has implications for the MENA region. This may sound a bit grandiose, but it is a historical lesson that economic development and human development go hand in hand. What was once considered a business relationship has the potential, in today’s highly connected and able public space, to be a link between global markets and local human development.

By raising the performance of employees to better engage the global economy, we build a platform for moving beyond issues of economic growth as both employees and employers seek growth opportunities that require more effective governance and use of human capital. People become internal change agents that provide the role models, mentors, and early adaptors missing from the broad business landscape in the MENA countries. These local transformation agents link with others throughout the region and larger markets to promote global dexterity – adaptive behaviors built around core values.

And what is the external partner’s role in this? The concept is “impact investing,” which focuses on projects that have social and environmental benefits and generate profits. At its core, impact investing reflects business models that are sustainable, advance human capital, provide opportunities for community development, and have results that are attractive to long term relationships with the private sector. The key consideration is to move beyond social and community outreach that is beneficial in the short-term but does not significantly alter the future prospects of the communities touched. By promoting an investment perspective that recognizes that broader and deeper FDI requires long-term returns, countries and companies make mutual cause for mutual benefit. Governments have their role to play but no more than is usually needed to attract serious FDI, ranging from needed infrastructure to incentives for training, use of local materials, and similar inputs.

There are several revolutions going on in the MENA and elsewhere, some messy and unwieldy while others are barely perceptible. The role of workforce development in crafting solutions should not be overlooked or minimized as simply giving people jobs. Companies exist for a purpose, to be profitable and grow. Employees share these goals, to profit from their employment by acquiring skills that free them to know and exploit opportunities for themselves and their families. Partnerships between local and international private sectors that are emerging will, in many respects, help governments in their mission to build a new social contract with their citizens by greatly reducing demands for counterproductive government intervention in the economy. Good business making better jobs and great citizens and governments is a goal worth pursuing.

Worker incentives: Are MENA employee stereotypes shifting?

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 In reviewing comprehensive strategies for closing the gap between education and employment—an unresolved agenda of the Arab uprisings—one area where there is no ready agreement is non-monetary compensation. Everyone acknowledges that money is the chief incentive for attracting employees, but there is a dilemma when taking a longer view of the “employee value chain,” that is, from graduation to employment to career, what matters for recruiting and retaining good workers? In looking for possible answers, there are clear differences between countries that have plenty of people and plenty of funding, such as Saudi Arabia, and countries that have plenty of people and limited funding, such as Morocco. In both countries, young people assert that they want to and are ready to work. Yet in both countries there are wide gaps in expectations between those with secondary and university educations, which preclude a “one size fits all” approach.

The case of Saudi Arabia

In Saudi Arabia, where hundreds of thousands of new jobs are needed annually over the next 5-10 years to fill employment needs of locals under 25, the clear preference is for white collar jobs, even though industrial workers are in high demand throughout the country. While there has been extensive research on the categories of jobs available to Saudis, the most difficult step—motivating young people to fill the potentially available slots, has yet to be taken.

The kingdom has a three-pronged approach: 1) pushing the private sector to hire more Saudis and provide incentives for companies to have in-house training programs; 2) upgrade government coordinated training programs to enable young Saudi men and women to acquire skills linked to the rising demand centers for employment; and 3) educate and motivate Saudis to take seriously employment as a career.

The majority of the general population as well as university graduates are female, who, while seeing a gradually growing number of workplace opportunities, are also facing a dwindling pool of eligible husbands. This fact impacts the career aspirations of both men and women and cannot be overlooked as a normative peg is promoting employment.  

 

The case of Morocco

Morocco has different challenges since its young people are attracted by both blue and white collar jobs but the labor supply exceeds demand, especially if potential employees are reluctant to relocate. University graduates who prefer government-related jobs are disappointed in that few are being chosen under the accelerated hiring program of the current government. Since it has limited funding, the government is incentivizing the private sector through subsidies and grants to train in specific sectors. This is especially important since government training facilities are limited in number and unable to carry the full burden of training across a range of jobs. While there is an increasing emphasis on entrepreneurship and start-ups, the overall environment for promoting new businesses is still difficult to navigate. There is a large pool of entrants into blue collar work if they can access effective training programs.

Non-monetary incentives

Given the challenges in both countries, another motivational tool is identifying non-monetary incentives that could be part of an effective recruit and retain policy. Offering some ideas are two articles. McKinsey & Company just republished a seminal article on the topic “Motivating people: Getting beyond money.” And IESE Insight published “Remuneration Tips for a More Motivated Workforce,” which covers a study conducted by this Spanish economic institute. Both are based on surveys done with a variety of companies, ranging from mid-size to large corporations.

The McKinsey article found that:

“…praise from immediate managers, leadership attention…, and a chance to lead projects or task forces—[are] no less or even more effective motivators than the three highest-rated financial incentives: cash bonuses, increased base pay, and stock or stock options. The survey’s top three nonfinancial motivators play critical roles in making employees feel that their companies value them, take their well-being seriously, and strive to create opportunities for career growth.” 

The IESE Insight article found that:

“variable remuneration schemes, although increasingly widespread, do not always achieve their main objective: to motivate people.” In these schemes linking benefits to company profits (however measured), the author found that the relationship between variable remuneration and motivation is too complex as “numerous factors that cannot always be controlled influence the equation.”

In the MENA countries, using Saudi Arabia and Morocco as examples, both the financial and non-financial motivators cited in the two articles are not common practice. Yet the McKinsey article noted that “…in developing markets…[respondents] cited employee motivation as a key reason for modifying incentives.”

The Way Forward

So where to begin? Promoting one’s initial job as an entry into a career will be a major culture change in how Moroccans and Saudis perceive employment. Too often, either the job in industrial settings has defined limitations, or traditional job security has meant that there was little turnover to allow movement upwards for young, talented employees. Senior management must become committed to integrating their traditional role as benefactor/bureaucrat with a balanced style that demonstrates appreciation for talent, initiative, and loyalty.

Both articles warn that nonfinancial compensation schemes must be fair, objective, and realistic to discourage employees from “gaming” the system by working for the reward and not the overall benefit of the company. Discussions about how to motivate through nonmonetary rewards are a very useful device for engaging employees, if the option for these benefits is available. In addition, until middle management and supervisors also adapt their behaviors to support a corporate culture that recognizes and rewards teamwork and respect for diverse skills, talents, and personalities, any incentive-based motivational program will be eroded by a “do as I say, not as I do” credibility gap.