At­tract­ing, Re­tain­ing And Mo­ti­vat­ing Long-Term In The Mid­dle East

Forbes Middle East - - CONTENTS - By Ali­ab­bas Vi­rani

Coun­tries in the Mid­dle East have pub­lished long-term strate­gic vi­sions with an in­creas­ing fo­cus on at­tract­ing and re­tain­ing the best and bright­est tal­ent. This has re­sulted in, for ex­am­ple, the in­tro­duc­tion of 10-year visas in the U.A.E.

Busi­nesses also recog­nise the im­por­tance of tal­ent and that it is the peo­ple within an or­ga­ni­za­tion that pro­vide the in­spi­ra­tion, agility and drive that en­able the or­ga­ni­za­tion to suc­ceed.

Given the dy­namic na­ture of the econ­omy in the Mid­dle East, busi­nesses need to stay ahead of the game and en­sure that they at­tract and re­tain the best tal­ent to ex­cel, par­tic­u­larly in re­la­tion to se­nior or spe­cial­ist po­si­tions.

Tal­ent-re­lated chal­lenges in the re­gion may arise be­cause of a high de­mand for lo­cal tal­ent, or ex­pa­tri­ates who may wish to re­turn to their home coun­tries. The chal­lenge may be greater where in­di­vid­u­als are to re­ceive a sig­nif­i­cant end of ser­vice gra­tu­ity pay­ment when they cease em­ploy­ment.

A way to en­sure that busi­nesses can op­ti­mise their tal­ent is to im­ple­ment a long-term in­cen­tive plan (LTIP). A well-de­signed LTIP at­tracts and re­tains the right peo­ple. It in­cen­tivizes peo­ple to lead their or­ga­ni­za­tions to per­form, mo­ti­vates them to fo­cus on key per­for­mance indi­ca­tors (KPIs), aligns teams and pro­motes the right or­ga­ni­za­tional be­hav­iour.

LTIPs can be struc­tured in a num­ber of ways, which may add com­plex­ity to the de­sign process. Widely pop­u­lar in the re­gion are cash pay­ments to em­ploy­ees upon achieve­ment of cer­tain KPIs, for ex­am­ple based on the or­ga­ni­za­tion's earn­ings or a balanced score­card. These KPIs should ideally be ob­jec­tive, mea­sur­able and achiev­able.

Other or­ga­ni­za­tions im­ple­ment eq­uity plans, where em­ploy­ees are awarded shares in the busi­ness. Em­ploy­ees can re­alise value by selling the shares on the fi­nan­cial mar­ket, to other in­vestors or even to trusts and foun­da­tions.

De­liv­er­ing eq­uity can in­tro­duce com­plex­ity, so in­stead, or­ga­ni­za­tions could re­ward em­ploy­ees with the right to re­ceive a cash pay­ment cal­cu­lated by ref­er­ence to share price in the fu­ture. Where there is no listed share price, or­ga­ni­za­tions can use a for­mula, like a mul­ti­ple of earn­ings that may be re­flec­tive of the share price. How­ever, this may be chal­leng­ing de­pend­ing on the in­dus­try or the or­ga­ni­za­tion's phase in the busi­ness life cy­cle.

Where the ob­jec­tive is to re­tain a wider pop­u­la­tion of em­ploy­ees, sav­ings plans may be more rel­e­vant. Here, con­tri­bu­tions are made to a sav­ings scheme for a pe­riod of around three to five years by the em­ployee and em­ployer. These may or may not be sub­ject to spe­cific per­for­mance con­di­tions. At the end of the rel­e­vant pe­riod, em­ploy­ees can with­draw the em­ployee and em­ployer con­tri­bu­tions plus any in­vest­ment re­turn. Where in­di­vid­u­als cease em­ploy­ment be­fore the end of the pe­riod, de­pend­ing on how they cease em­ploy­ment, they may be en­ti­tled to with­draw only em­ployee con­tri­bu­tions.

When de­sign­ing a long-term in­cen­tive plan, there are a num­ber of fac­tors that busi­nesses should con­sid­ered. Some con­sid­er­a­tions when de­sign­ing LTIPs in­clude:

• Com­mer­cial ob­jec­tives—what is the group try­ing to achieve?

• Per­for­mance mea­sures—what are the right KPIs?

• Ap­pro­pri­ate time­frames—what is the ap­pro­pri­ate per­for­mance pe­riod?

• Tar­get par­tic­i­pants—should these be all em­ploy­ees or only key em­ploy­ees?

• Ac­count­ing im­pli­ca­tions—im­pact on fi­nan­cial state­ments can be dif­fer­ent de­pend­ing on the struc­ture.

• Le­gal—reg­u­la­tory obli­ga­tions may be cre­ated and le­gal ad­vice is nor­mally ob­tained to pre­pare the LTIP doc­u­men­ta­tion.

• Im­ple­men­ta­tion and main­te­nance costs—who would be re­spon­si­ble for im­ple­men­ta­tion and the on­go­ing oper­a­tion of the LTIP?

While there are dif­fer­ent el­e­ments to con­sider, ev­ery or­ga­ni­za­tion is unique and there is no “one size fits all” ap­proach. There should be in­vest­ment to con­sider the ap­pro­pri­ate de­sign be­cause a well-de­signed LTIP can sig­nif­i­cantly con­trib­ute to the long-term per­for­mance of the or­ga­ni­za­tion.

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