Equality and Diversity in Multinational Corporations

1 Equality and Diversity in Multinational Corporations, a Case Study of Saudi Arabia and India Introduction Multinational corporations are large business entities that spread across national and continental boundaries, setting up branches in different locations as they endeavour to serve their diverse clientele. These global companies or corporations operate in a generally complex as well as dynamic business atmosphere owing to the varying cultures, regulations, legal requirements and the socio-economic challenges that they face in their various countries of operations.

In an attempt to manage these challenges that have negative effects on business, multinational corporations formulate specific policies that address skills, talent and culture in order that they can effectively handle diversity amongst their employees (Morgan, Kristensen & Whitley 2001). This report attempts to critically analyse the equality and diversity challenges that multinational corporations based in Saudi Arabia and India in particular face in their daily operations.

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2 The culture in Saudi Arabia and India Saudi Arabia has been witnessing steady growth especially in the public and private sectors for quite sometime now. Much of the development in the said sectors is mainly attributable to crude oil exports from the country’s expansive oil fields. The huge oil revenues have been instrumental in funding government’s infrastructural expansion and development plans. However, there is great concern following Saudi’s high unemployment rates (Al-Dosary, Rahman & Shahid 2005). Observers and players in the labour industry are lamenting at the lack of qualified Saudis with necessary skills as the main reason for the alarming unemployment figures. It is against this backdrop that the country plays host to foreign expatriates and workers in the range of 7 million (Al-Dosary, Rahman & Shahid 2005).

Apart from unemployment, the general culture of Saudi’s refusing and generally looking down on handcraft work like carpentry and smith work has not augured well for a majority of the youths. This has far reaching impacts on the country’s national development since no country can project growth without focusing on the development of its labour resource (Mellahi 2000).

Additionally, there have been ongoing efforts which are aimed at nationalising the labour market in Saudi Arabia. The campaigns, dubbed “Saudisation” has heralded a strong social dimension crisis, contributing further to youth unemployment despite the country’s young demography (Al-Dosary, Rahman & Shahid 2005).

Saudi Arabia’s labour force is also highly skewed in favour of the male population. Being a Muslim country, the ‘ulama’ which are groups of clerics who hold high authority and also enjoy the privilege to pronounce religious related questions have been resisting changes aimed at increasing women participation in the labour market ( Al-Dosary, Rahman & Shahid 2005).

3 Ulama’s influence and effects are felt right from women education all through to their role in society.

In India, the situation in as far as gender subordination is concerned has been more less the same as in Saudi Arabia. Gender discrimination in India is so alarming that statistics indicate that the number of young girls who die annually exceeds that of their male counterparts by a whooping 300,000 (Azad India Foundation 2010).

However, the Indian national constitution ensures gender equality through its preamble statement. Further, the state of India has been given leverage by the constitution to adopt positive discrimination measures in favour of the women population by formulating relevant policies and laws (Azad India Foundation 2010). This, together with the ratification of numerous international conventions by the Indian government has seen women ascend local governance structures as more employment opportunities are created for them. Additionally, a constitutional amendment carried out in 1993 effectively ensured that 1/3 of all elected seats falling within local governing bodies were reserved for women (Azad India Foundation 2010). These developments, although might not be adequate, have however, empowered women in India and their numbers in employment today is steadily on the rise.

Human Resource Management Practises in Saudi Arabia and India The Kingdom of Saudi Arabia has been witnessing a modernised trend and practise in its general human resources management. This has mainly been attributed to the influx of multinational corporations that continue to establish themselves in the gulf state (Mababaya 2002). The general practise of human resource management in Saudi Arabia, however, continues to face cultural and religious challenges.

4 The country’s human resource policies and practices are formulated basing on five main factors which are economic structure, national culture as well as political environment. The other factors are labour market structure and human resource strategy (Mellahi 2000). Factors such as fluctuating global oil prices and the lack of a written constitution as well as the Saudi legislation that require private organisations to hire Saudi nationals, ‘Saudinisation’, have had greater impact on the country’s HR structure and policy (Mababaya 2002).

Although Saudi Arabia is endowed with financial capital as well as immense natural resources, the natives are largely unskilled and unqualified (Mababaya 2002). This inefficiency in human resources has pushed the government into seeking lasting solution with investment in both general and vocational training being one of the main resolve. The government has also been pushing for a 5 per cent increase in employment of Saudi nationals by firms at least in every year so as to reduce the relatively high unemployment rates (Mellahi 2000).

Employment of women in this country is still modest. This is despite the fact that the government has spent a lot of financial resources in educating and training women. The main reason for this disparity is the religious and moral belief commonly held by the Muslim majority in the country that women are only supposed to be married and concentrate on child bearing (Doumato 1999).

In India, Human Resource Management has transformed over time and today it mainly focuses on employee productivity (Amba-Rao 1994). The general practise on manpower development and management is focusing more on both equality and skilled labour owing to the high competition occasioned by the presence of multinational corporations.

Much of India’s contemporary positive human resource practices and development results from the long international foreign operations that have been witnessed in the country

5 (Amba-Rao 1994). A number of employment related laws enacted in India have played a significant role in shaping the general human resource management practices. For instance, an Act on compensation of workers which was enacted in 1923 has been instrumental in determining employee compensation by their employers in case of injuries suffered at work (Rao 2008). Similarly, the Act on Trade Union enacted in 1926 formerly recognises the existence and operation of trade unions while the 1947 Act on industrial disputes was instrumental in increasing industrial relations between employees and their employers (Rao 2008). The Factories Act enacted in 1948 and the Miscellaneous Provisions Act enacted in 1952 have significantly ensured employee safety in factories is given priority and the setting up of retirement funds by employers for the welfare of their workers respectively (Rao 2008).

The minimum wage payable to employees residing in various Indian states is also determined and set as stipulated by the Minimum Wage Act enacted in 1948. A salary bonus of at least 8.33 percent must also be earned by employees as stipulated in the 1965 Payment of Bonus Act regardless of the organisation’s profitability situation (Rao 2008).

Recruitment selection practices in Saudi Arabia and India In Saudi culture, recruitment and selection is mainly based on such cultural elements as favouritism and nepotism. The Arab term ‘wasta’ is widely used in reference to the use of connections for individual gains (Budhwar & Mellahi 2006). Employees with strong tribal and family connections often rely on their connections to attain promotions at their workplaces.

Saudi Arabia’s social value system hinges primarily on three major subsystems of religion, family and kinship as well as traditions. Most of the decisions and ideas in the country are made or tackled basing on the country’s main religion which is Islam, family lineage of individual citizens as well as the existence of any royal family members.

6 Multinational corporations operating in Saudi Arabia will need to outsource their recruitment and hiring services in order to achieve equality in their workforce as well as eliminate any probabilities of keeping a homogenous workforce.

In terms of achieving gender parity, multinational corporations operating in Saudi Arabia will also require to formulate policies that effectively address gender equality in distribution of labour. There are more qualified women in the country now following the government’s resolve to train and educate more women and youth as a strategy to curb unemployment. However, it is worth noting that Saudi Arabia is one of the world’s most conservative nations and its dominant religion, Islam, often oppose the involvement of women in seeking employment opportunities (Al-Dosary, Rahman & Shahid, 2005).

Similarly, India’s concept of recruitment was also relying heavily on communal and family relations (Budhwar & Mellahi 2006). However, the flooding of multinational corporations in India has transformed the basis and practise of recruitment in the country to a modernised and merit based one (Budhwar & Mellahi 2006). The concept of outsourcing recruitment services in the country is now widely embraced by organisations. This is a positive step toward the achievement of equality and diversity by multinational corporations who are more interested in hiring of qualified staff as well as maintaining a workforce that reflects gender equality and diverseness.

Human Resource Training in Saudi Arabia and India Majority of private organisations and multinational corporations based in Saudi Arabia had at one point lamented about the lack of local human skill with the right qualification (AlDosary, Rahman & Shahid 2005). This occasioned mass movement of foreigners into the country in search of employment opportunities. Eventually, the Saudi labour market was flooded

7 with people from different countries who got employment opportunities at the expense of the nationals. With unemployment levels soaring, the government stepped in a bid to salvage the social crisis that was looming. Strict regulations aimed at reducing foreign workers were introduced by the government in addition to the establishment of training and vocational institutions whose main objective was to impart skill to the local population. This entire plan by the government was referred to as Saudinisation (Al-Dosary, Rahman & Shahid 2005).

It is therefore evident that Saudi Arabia has attempted to implement human resource development strategies as a way of creating a workforce that can be adequately relied on by investors.

On the other hand, India boasts of a relatively advanced human resource development strategies and culture. The emergence of India as a country that systematically undertakes to develop its workforce is attributed to Dr. Udai Pareek together with his colleague Dr. Rao. T. V. whose original consultancy services in the same field laid the strong policy foundation (Mellahi 2000).

Remuneration of workers in Saudi Arabia and India Saudi Arabia is well endowed with crude oil resources which have ensured the availability of capital in the economy. This has attracted workers from foreign countries who are lured by the lucrative salaries on offer (Fasano & Iqbal 2003).

In comparison, India’s remuneration to its workers is less lucrative. The country has a huge population which eventually implies that the supply of labour is more than the availability of the labour itself (Maghrab 2010).

Growth opportunities in Saudi Arabia and India

8 Saudi Arabia provides relatively low growth opportunity for investors. The strict government regulation that aims at locking out foreign workers leaves investors with no choice but to employ a labour force with limited skills (Al-Dosary, Rahman & Shahid 2005). India’s growth opportunity, however, is much promising for investors owing to the availability of cheap labour which is also adequately trained (Maghrab 2010).

Conclusion Saudi Arabia and India provide two different business environments for investors. On the one hand, achieving equality and diversity for multinationals with subsidiaries in Saudi Arabia poses numerous challenges. These challenges range from culture, religion and government regulations, all of which are an impediment towards equality and diversity. On the other hand, India’s advanced human resource development programmes coupled with the readily available labour force makes it an easy destination to achieve equality and diversity.

Personal Reflection This presentation offers an insightful argument that systematically develops questions of concern and seeks to find adequate solutions in as far as the attainment of equality and diversity by a multinational corporation operating in different countries is concerned. It is a comparison between two countries of destination, Saudi Arabia and India, which also have differing cultural practices as well as a varied socio-economic structure. In each point discussed, I have critically researched for facts to support the various conclusions arrived at. These sources of research materials used as reference are authenticated literature pieces that have been professionally produced by scholars and other researchers.

The findings of this report have made me realise that multinational corporations operate in very complex and delicate environments. This has a direct implication on the business

9 prospects. Most conservative countries in the world could also be the least attracting business locations for global entrepreneurs. For instance, Saudi Arabia could easily appear to be a destination of choice for a foreign investor ahead of India owing to her vast resources. For an investor, oil in Saudi Arabia means reduced cost of production because of a readily available energy source. However, this research proves this analogy wrong due to the presence of other complex combinational factors regarding Saudi Arabia.

It is also important for global firms to execute adequate feasibility studies that will eventually paint a clear picture about a country’s viability in terms of profitability before venturing to do business. Different countries are unique in terms of culture, belief, religion and general way of life. These varying attributes are very important in as far as business performance and operations are concerned. An effective feasibility study conducted by a multinational corporation is useful in determining the course of action of an organisation.

Global organisations should also develop flexible structures that can easily blend in and suit a particular society. In this case study, it is evident that Saudi Arabia offers a myriad of challenges which stand on the way of a multinational keen on achieving gender equality on its workforce as well as encouraging diversity. Although this objective seems to be easily attainable in the case of India, it would be prudent for such a multinational to restructure its policy on equality in Saudi Arabia where it is a bit difficult to change the people’s culture over a short time. With slightly relaxed policy requirements, the company can then gradually begin influencing its policies on the people as it embarks on providing social education. Meanwhile, its operations in India where there is minimal resistance on its equality and diversity policies should continue unaffected.

10 Multinational companies can also encourage cultural integration by exporting workers from countries with restrictive regulations on foreign expatriates. In this case, Saudi nationals who are employed by a global subsidiary can be taken to work in India where the government does not restrict on foreign workers. After working in India for a while, these workers will have obtained the relevant experience acquired from their integration with Indian workers.

11 List of References Al-Dosary, A. S., Rahman, S. M., & Shahid, M., 2005. An integrated approach to combat unemployment in the Saudi Labor Market. Journal of Societal & Social Policy, 4(2): 118.

Amba-Rao, S.C., 1994. US HRM principles: Cross-country comparisons and two case applications in India. The International Journal of Human Resource Management, 5: 755-778.

Azad India Foundation, 2010. Azad India Foundation. [online] Available at: http://www.azadindia.org/ [Accessed 31 December 2011] Budhwar, P. S., & Mellahi, K., 2006. Managing human resources in the Middle East. New York, NY: Routledge.

Doumato, E. A., 1999. Women and work in Saudi Arabia: How flexible are Islamic margins?

Middle Eastern Journal, 53(4), 568-583.

Fasano, U., & Iqbal, Z. 2003. “GCC countries: From oil dependence to diversification.”

International Monetary Fund. [online] Available at: http://www.imf.org/external/pubs/ft/med/2003/eng/fasano/index.htm [Accessed 31 December 2011] Mababaya, M. P., 2002. The role of multinational companies in the Middle East. The case of Saudi Arabia. New Delhi: Universal Publishers.

Maghrab, Z., 2010. “Impact of culture on human resource management practices in Saudi Arabia multinational corporation in China.” Masters thesis, Multimedia University.

12 Mellahi, K., 2000. Human resource development through vocational education in Gulf Cooperation countries: The case of Saudi Arabia. Journal of Vocational Education and Training, 52(2), 331-347.

Morgan, G., Kristense, P. H., & Whitley, R., 2001. Organizing across institutional and national divides. New York, NY: Oxford University Press.

Rao, V. B., 2008. Public administration: Steel or plastic frame. New Delhi: Kalpaz Publication.