Deloitte: Organizational Design a Top Priority for Middle East Companies

Digital technology, changing workforce demographics and speed of innovation are causing companies to redesign organizational structure, evolve leadership models, and drive an employee-centric culture and experience

Responding to disruptive changes in digital technology, business models and workforce demographics, 92 percent of business and HR leaders around the world have identified the critical need to redesign their organization to meet global business demands. This is according to Deloitte’s fourth annual report, “Global Human Capital Trends 2016: The new organization, Different by design.” Yet, only 14 percent of executives believe their company is ready to effectively redesign their organization.

Conducted among more than 7000 HR and business leaders from the Middle East and all around the world, Deloitte’s Human Capital Trends 2016 survey is one of the largest ever global studies of workforce, leadership and HR challenges. In the first three years of the study, companies placed a high priority on increasing employee engagement and retention, improving leadership, and building a meaningful culture. The 2016 study found, for the first time, nearly half of respondent companies (45 percent) are either in the middle of a restructuring (39 percent) or planning one (6 percent).

“The main observation in this report is that the relative importance of key human capital trends for Middle East organizations is not the same as global with different priorities identified in the UAE,” said Ghassan Turqieh, partner and Human Capital consulting leader at Deloitte Middle East. “This could be because the Middle East is an emerging market facing change, struggling with socio-economic and political challenges, and leveraging various forms of wealth.”

Fuelled demand for a “new organization”

The Deloitte survey shows that 54% of respondents in the Middle East claim to possess good to very good understanding of good practices in organization structure. While organizations globally are decentralizing authority, moving toward product, service and customer-centric organizations, and forming dynamic networks of highly empowered teams, Middle East organizations are working towards an organizational structure that aligns with business needs, as 46% of respondents believe that their current structures are effective or highly effective in achieving business goals.

Despite this, many organizations in the Middle East revolve around traditional and functional structures that lack both the flexibility required to adapt to the changing business landscape and the capability to achieve end results effectively.

Currently a number of key drivers are impacting the economy and society in the Middle East, and those same drivers are also creating pressure on organizations to restructure. Approximately 40% of respondents are currently engaged in a restructuring exercise that would help them align further with their strategic direction and the requirements of the market. These key drivers revolve around nationalization agenda, efficiency and excellence, and budget optimization.

“According to the report, 60% of survey and interview respondents demonstrated ability and readiness to keep up with the requirements of organizational design,” said Turqieh. “However, organizations in the Middle East are still behind in terms of readiness to match other international trends such HR analytics, as only 35% of respondents believe that they can match international tendencies and market requirements. This capability gap means that this trend warrants more attention and investment than others.”

Leadership models are changing

Leadership continues to top HR and non-HR executives’ priorities with the need to strengthen, reengineer, and improve organizational leadership. In the Middle East, there is a pressing need to produce leadership fast enough to keep up with the requirements of the economy and society. Yet, about 50% of respondents in the Middle East have neither formulated nor executed a leadership development strategy.

The economic slowdown in the Middle East is expected to have some negative consequences on leadership development. Approximately 80% of respondents do not expect more than 5 to 10% growth in investments in leadership programs for 2016.

“There is a pressing need to identify talent within organizations at early stages (i.e., junior to middle level careers) and to develop leadership competencies by engaging in talent management initiatives,” commented Turqieh. “These comprise succession planning, career development, and others typically integrated in a comprehensive framework.”

Catering to the employee experience is a top priority

Learning ranks fifth globally while it ranks third as a top priority in terms of Human Capital Trends for the Middle East. The difference in ranking can be attributed to this being an emerging region with a workforce that is eager to grow and develop.

While most organizations still perceive learning as the way to build competencies and as synonymous with classroom-based training, Deloitte strongly believes that it is part of the employee talent life cycle; a key driver for employee attraction, deployment and engagement through proper blended learning and a strong workplace culture.

Middle East respondents appear to be making strides in adopting new technologies and embracing new learning models. In fact, 22% of respondents are using massive open online courses (MOOCs) as non-traditional means to support employee development (compared to 43% globally, 2016).

“Despite the fact that a number of organizations across the Middle East do have learning and development functions, the practice is not an accurate reflection of the name. Most of the learning and development activities do not address targeted competencies nor are they taken seriously by employees,” said Turqieh.

“Organizations should strive to become learning entities by developing a learning strategy that is driven by organizational priorities and integrated with the overall talent strategy.”

Access the full report here.