Compensation practices and plan effectiveness compensation and benefits review

Page 1

390489 mlall et al.Compensation & Benefits Review

CBR43110.1177/0886368710390489Ra

COMPENSATION/Saudi Arabia

Compensation Practices and Plan Effectiveness in Saudi Arabia

Compensation & Benefits Review 43(1) 52­–60 © 2011 SAGE Publications Reprints and permission: http://www. sagepub.com/journalsPermissions.nav DOI: 10.1177/0886368710390489 http://cbr.sagepub.com

Sunil Ramlall, Faculty, Kaplan University School of Business and Management, Khalid Maimani, Professor, King Abdulaziz University, and Abdulhameed Diab, Chair of Business Administration Department, Associate Professor, King Abdulaziz University

Abstract This article identifies current compensation practices in Saudi Arabia, relates these practices to the local culture and compares the results with practices in the United States. The authors collected data from 130 human resources professionals. This study provided concrete insights about employees’ views of compensation systems and highly useful information about compensation practices for organizations across the world with business interests in Saudi Arabia and other Arab nations.

Keywords strategic compensation, international compensation strategies, compensation in Saudi Arabia, HR strategy Human resource (HR) management practices in general1,2 and compensation systems in particular1,3,4 have been shown to be highly related to organizational performance. Given the quest of organizations across the world to compete more effectively in the global economy, there is an urgent need to review current compensation practices in various economies and to determine how the practices align with enhancing organizations’ competitiveness. Consistently, research findings are supportive of congruency notions that suggest that the effectiveness of the compensation system is partly a function of the fit between pay strategies and organizational strategies.5 The purpose of this article includes identifying current compensation practices in Saudi Arabia, relating the practices to the local culture and comparing the results to practices in the United States. With the continuous changes in the global economy, Saudi Arabian organizations, like others around the world, continue to search for strategies that will foster higher levels of competitiveness and enable organizations to gain sustainable competitive advantages. Many authors6-8 have articulated the need for changes in HR management practices around the world. As these authors have highlighted, changes in the global economy continue to have a profound impact on the nature and structure of the labor markets, forcing organizations to assess the effectiveness of the respective HR practices.

The research documented here examined and analyzed compensation practices in Saudi Arabia, compared current practices and the extent to which HR professionals think the current practices should be used in driving firm performance and compared current compensation practices in Saudi Arabia with those in the United States. The findings not only provide a vital understanding of the effectiveness of current practices but also provide critical insights as to how local organizations can become more competitive through compensation strategies. As Lawler notes9, pay is a promising and largely untapped source of competitive advantage, because it can reinforce behaviors that best serve a company’s business strategy and thereby improve performance and profitability. Furthermore, an awareness of the gap between current practices and what the practices should be enables firms to design compensation philosophies and strategies that will maximize employees’ motivations to engage in behaviors consistent with organizational strategies.10 In addition, this study’s findings provided valuable information to researchers and practitioners around the world, especially those with an interest and market in Saudi Arabia. As observed by Datta, Guthrie and Wright,11 there has been growing interest in the degree to which HR systems contribute to organizational effectiveness, yet limited research attention has been paid to the contextual conditions that moderate the efficacy of these practices.Gomez-Mejia12 Corresponding Author: Sunil Ramlall, 13807 Crosscroft Place, Rosemount, MN 55068, USA Email: sramlall@kaplan.edu


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.