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