HRM FUNCTIONS IN AL FUTTAIM GROUP

We have chosen Al Futtaim group as the subject of our research. The aim of our research is to review the HR department and point out the weaknesses. To achieve this goal we will review the background and history will give us an idea about the achievements and/or obstacles that faces the company. Also, we will look at the organizational structure of the group and the key people who are managing it. It is important for our research to have a complete idea about the managerial practices and the HRM role in accordance with the other departments. We will evaluate the strength and weaknesses of the HRM and we will end our research with recommendations with for possible improvements.

HISTORY AND BACKGROUND

Al Futtaim group is a family business which was established in the 1930’s as a trading company. The owners of the group hold the upper management positions headed by Majid Al Futtaim as the chairman of the board of directors. The companies working within the group have developed quickly and became a regional integrated commercial, industrial and services business located in the Gulf Area. Currently, the group consists of more than 40 companies dominating many market segments in the UAE, Bahrain, Kuwait, Qatar, Oman, Egypt and Pakistan. The group has four subsidiaries which are Majid Al Futtaim Properties, Trust, Retail, and Ventures. The group was created with a purpose of managing its subsidiaries and supervising the work in order to develop the business and achieve unified goals. The management’s promise is to respond quickly to the customers’ need and satisfy the group’s shareholders. Moreover the management gives its word to provide challenging opportunities for the employees in order to enhance their performance. Another promise is to serve the community, protect the environment and achieve a notable corporate social responsibility. (company’s official website)

MANAGEMENT PRACTICES

The Group consists of several core businesses that complement each other, however they are separately managed. This strategy provides higher flexibility and better potentials because the separate operating divisions can grasp different opportunities. At the same time, different divisions work together on key projects and contribute, as a group, to the achievements and the profit. There are business agreements of cooperation and management within the group. The management relies on the differentiation of the retail brands in order to gain customer loyalty which in turn will enhance the sales growth and business development. (company’s official website)

To face the market challenges, and because the group has large companies and diverse employees which serves diverse customer segments, the management has continually brought innovations and change to a conventional industry. The group declares that they are both; socially and environmentally responsible which has positive consequences such as increasing employee’s loyalty, ensuring growth and increasing profit. Moreover, the group’s strategy is built on creating a win-win situation for the organization, main stakeholders (such as employees and customers), and the communities where they are functioning. To achieve this strategy, the group has a well established HR department responsible for a large number of employees and workers.

With its objectives and goals in mind, Majid Al Futtaim group cares about the human resources working for the group. As an example, we can look at one important division which is ‘Al-Futtaim Electronics – Sanyo’. In this department, the management has laid down the ground for its human recourses to take ownership of the initiative called ‘Customer 2000’. This initiative calls for a change in the staff attitude and approach as well as a change in the working environment as a whole. In other words it is a call for a change in the way business is conducted. This initiative is a mean to enhance productivity and effectiveness of the employees. They are trained to become more alert and aware of the Internal Customers and at the same time they should have the ability to focus on the External Customers. By taking this step, and to be able to coordinate the efforts and expertise of their staff, the management formed a core committee whose role is to open the communication channels between the management and the employees. The committee performs as a forum to convey and formalize the concepts and ideas that will eventually lead to the objective of ‘total customer satisfaction’. The committee organizes open sessions and ensures the participation of all the managers and department heads of profit-centers. These sessions provide a chance for healthy discussions and exchange of ideas and points of views. The group functions according to the philosophy of ‘Prosperity through Customer Satisfaction’. To face the new challenges and to maintain the growing thrust, the core committee holds its sessions on a weekly basis and ensures through one on one meeting that the information is absorbed by all the staff. (company’s official website)

THE ORGANISATIONAL STRUCTURE

Strategy and planning process need a powerful management to transfer the perspectives into reality. Al Futtaim is a diversified group and a large organization managed by the owner, Majid Al Futtaim, as the president and the head of the management hierarchy. The chairman is Sir Michael Rake, an international expert who is an asset for the group because of his long experience and professional background. The board consists of a group of members who have particular expertise in certain areas and who can contribute to the decisions and the prosperity of the group. The CEO is Mr. Iyad Malas a young Arab who earned his education in one of the American universities in the region. Mr. Iyad and his executive team are responsible for the strategy for the whole group which includes what the businesses are in addition to the whole financial performance of the group. At this level of the management planning includes anticipation of change in all the functions of the group.

The CEO Deputy is Mr. Ahmad Bin Brek, who is also a competent manager who has the ability to lead the group to its goals. The next level is the business executive team which consists of several young and well educated employees who implement the plans and run the business according to the agreed upon and well thought out strategy. Based on the bottom-up input, the business executive managers report to Mr. Iyad and contribute to the business strategy process.

The following level in the hierarchy consists of the department heads and their assistants. Their roles are to orient, empower and manage their staff in order to contribute to the general performance of the company. The line managers report to their managers and they in turn report to their presidents who are responsible for the specific business strategy. At the end of the management hierarchy come the line and office managers and their assistants who work in the field with the staff and monitor the implementation of the plans and report to their superiors in the same business unit. At this organizational level the unit executive managers are responsible for the strategy. Part of the group’s business planning scenario is the industrial context; economy, government, territories, existing market cultures. The other part is of the planning is the goals and targets which are specified in the group’s strategy and the strategic group model.

In the second level come the department managers then the line managers then the supervisors who report to their direct managers. In each department there are the employees with different jobs and responsibilities. If the whole working team does not work together, no goals will be achieved. And if the human resources are not satisfied by the working environment in general they will not be able to perform well. (company’s official website)

At this point, HRM has a main role to play. Without the human resources, none of the aforementioned strategies would be achieved without having efficient employees. These employees must be managed effectively in order to gain their loyalty and ensure that they will perform t the best of their abilities and lead the company to meet the vision, mission, and goals of the company.

HRM has several functions all of them are related to the human resources in the group. Some of the functions are the following:

RECRUITMENT AND SELECTION

One of the most important functions of HRM is the staffing process. This process is costly and time and effort consuming. The HR professionals know that this process should be well planned to save the group the continuous expenses of advertisements, legal procedures, and training the new employees. HRM is responsible for analyzing the jobs, generating job descriptions, advertising the openings, analyzing the applicants’ CVs, interviewing the candidates, selecting the best candidates and closing the deal by offering the new employees the contract. All these processes are completed in cooperation with the managers of the different departments

After signing the contract, the HRM is always ready with an orientation program delivered by the direct managers. The orientation includes the policies and procedures, group culture, security and safety issues, work practices and other related issues to help the new employee to get acquainted with others, place and the new tasks he/she will perform.

Later on, when the new employee starts the job, the HRM is responsible, in cooperation with the managers, for the appraisal process. The result of the appraisal helps the HR professionals to set the training plan in order to empower the employee with any required skills.

Majid Al Futtaim group has a strategic vision concerning its employees. The strategy recommends that employees be chosen based on fixed criteria. The staffing process, to an extent, ensures recruiting the experienced and efficient employees. As a private LLC, the management worries about the shareholders value and prosperity and the strategies and plans revolve around increasing sales, profit and expansion of business. These reasons are behind hiring effective people who can contribute to the group’s success.

HUMAN RESOURCES PLANNING

Also, HRM controls the number of employees and keep it in the appropriate range; too much employees is costly and wasteful of resources. On the other hand, too little employees is a barrier to meet the goals and affects the overall performance of the group.

Staffing in Al Futtaim group is affected by many factors such as the budget, the need of expertise and the turn over of employees. Also, the need to control the staffing process depends on the yearly appraisals, business outcomes, and the efficiency of current employees in relation to the change and development. Government regulations and changes in business trend are important factors in terms of increasing or decreasing the number of staff.

The role of HRM goes beyond the planning role to implement the plans and take decisions about what is better for the organization. HRM in AL Futtaim Group are seen as reactive rather than being proactive because they are doing the minimum expected from a big and rich group. The reason is not the inefficiency of the HR professionals or in the plans and documentation. The issue is that the group is owned by a family and the last decision is for the owner. Usually in this type of company what really matter is decreasing the expenses and increasing the profit. In this case the HRM cannot implement the change nor can they function according to the international high standard and ideal practices.

EMPLOYEE MOTIVATION

Empowering and motivating employees to complete their tasks efficiently is an HRM responsibility. Employees must be rewarded for their efforts or else they will transfer to another company and the company will lose their experience and knowledge of the ideal work practices. As mentioned before, recruiting new staff member will cost the company money, effort and time. Moreover, a company with high retention is never the choice of professionals who look for job security.

AL Futtaim group care about its human resources. The HRM has a training plan and it was implemented for many years in the past. Now things are changed. The world financial crisis affected the business in general and the extra benefits for the employees are reduced to the minimum and the new workers are getting lower salaries and zero benefits. According to one of the group’s employees, the workers are complaining in regards to their salaries and the overall standard of living. As everyone knows, the rents have risen tremendously in the last year. This issue has put a burden on the foreign employees and some of them left the work to another job for less then AED 300 raise in their salaries. This would not happen if the HR management in accordance with the financial department adjusts the pay rate and implement a plan to offer financial reward to the good employees so that the group will gain their loyalty.

The employees need to be motivated in order to increase their efforts and work to the best of their abilities. In AL Futtaim Group, Bonuses as incentives are offered to the managers and they are excluding the workers. The common way to encourage the workers is choosing one of the good workers as the employee of the month. This will influence the workers appraisal at the end of the year and the chance of getting a raise becomes higher. More incentives are required if the group wants to attain the loyalty of all the employees.

EMPLOYEES APPRAISAL

HRM has a main role in assessing the performance of the employees. It is a very important process because the decision makers will have a full picture of the strengths and weaknesses of the staff. Based on the appraisal decisions will be taken to improve the performance of individuals and to point out the potentials within the company.

Al Futtaim group HRM pays a special attention to the assessment process. The employees are assessed formally and informally through the year. The main appraisal is conducted on yearly basis and based on the results, some changes are made.

Based on the result of the appraisal HRM sets a training plan to enhance the performance of the staff members. Another importance of the yearly appraisals is to link the payments to the competency of the employee. What is happening now is that due to the recession, the group did not give a pay raise to the majority of the staff which has a negative impact on their performance of the individuals. Yet, the appraisal is used efficiently to make use of the talents which already exist in the group. When openings are posted internally, the chance is given to the employees to apply and they are chosen based on their performances, yet not for the upper management posts. The weakness in this process is the results of the appraisal are not used to give the employees the incentives they deserve. The raise in the salaries and wages, if decided, is based on the market situation not on the performance and achievement of the individual.

EMPLOYEE RELATIONS

Among the HRM roles is to manage the complex employee (industrial relations) between the following parties:

Workers and their official and unofficial representatives.

Workers and their managers

Government, organizations and related agencies.

The UAE is shifting to a service based industry. The business requires qualified and skillful people to do the jobs which make the influence of workers more influential. The wise management of the group is aware of this issue and has built, to an extent a relationship with the employees and to maintain the psychological contract with them. HRM in Al Futtaim Group have an industrial relations program. The employees do have a voice and it is reflected in the management actions. A good example is the (customer 2000) project where workers can express themselves while developing their skills. It gives them a chance to get involved in the planning for offering better services to the customers.

There are several evidences demonstrating that HRM policies demonstrate group’s concern of the individuals’ performance. As a result we expect to see these policies are well implemented for the benefit of these individuals. Cost based barriers could be responsible for not taking the right actions. Workers are still considered as machines and no margin for mistakes is allowed. The work time is calculated by minutes and the overtime payments are less than the working hour’s wage. In al Futtaim group there is no win-win situation because the main concern as we have mentioned before is the customer. Satisfying the customer means more profit tor the shareholders. The only benefit for the workers is that they keep their jobs. There are hard workers in the company who were never acknowledged or took any bonus as an appreciation for their achievements.

It is true that HRM in A Futtaim Group is effective in terms of generating all the documents which govern the relationship with the employees. HR professionals prepared the job specification, job appraisal, induction programs, training courses, performance management and reward management, malpractice policy, etc. But in general all these documents are for the benefit of the business first and none of them demonstrates the importance of the employee as an individual.

So we can say that the importance of the psychological contract is not fully considered. For example, competent employees in Al Futtaim group are offered opportunities to upgrade their positions and their income but these chances are never open to reach to the upper management positions. Such actions affect the relationship with the employees and reduce their loyalty and level of job satisfaction. Another issue is that the cost based management implemented in Al Futtaim’s private companies affects the psychological contracts with the staff members. Employees lose trust in their management and it would be impossible to retain them. The minute they find a new job they will leave taking with them their experience and their relationships with the customers.

A part of the HRM is that the employee relations professionals prepare reports for the management to keep them updated about the current situation, changes or new trends. The mangers/ owners use this information in negotiations, conferences and press releases. The staff interprets and administers the contract in terms of problems, salaries, insurance, safety, management practices etc. in AL Futtaim Group as there are no labor unions or employee association representatives, and this is done with individuals who have no power over the management of the group. So, the real purpose of these negotiations is not achieved.

PROVISION OF EMPLOYEE SERVICES

Caring about the employees’ well-being functions is one of the HRM functions which aim to retain good staff and attracting others to work with the company. Services that can be offered to the employees are many. They vary between understanding the personal circumstances of the employee such as extended sick leaves, allowing emergency leaves, and offering loans to the employee in need. Another service is to help the employees to resolve personal issues, to move them to an easier work in case they have special medical needs, and assisting the sick people to benefit from better treatment in better hospitals.

In Al Futtaim group HRM has a plan for the provision of employee services but it is not fully amended. The following points can be seen as weaknesses:

Number of the disabled people working in the company.

Lack of financial and other activities conditions such as sports and hobbies related to the work

Offering financial aids to workers in need or maybe having a fund program to help workers in difficulty.

On the other hand the group has good safety and security practices. They have a good safety manual with clear policies and procedure. The employees are trained on first aid and evacuation in case of fire. SO we can say that HRM in Al Futtaim group care about their employees in terms of maintaining safety by raising the workers awareness and training them on the policies and procedures.

EMPLOYEES TRAINING AND EDUCATION

Training the employees to develop their skills and to raise their awareness is one of the HRM functions. Also the training courses are necessary to prepare some of the employees to acquire higher positions. Training and empowering the employees in Al Futtaim is part of the group’s promise. The aim behind focusing on training the employees is enhancing the performance of the staff members.

As a result of monitoring and assessing the employees work a training plan is set. Lists are prepared and training agencies are approached but, not all the plan is usually implemented. Financial factors affect the process, so sometimes the training courses are cancelled or the number of participants is reduced. The other option is

Another plan is usually set for the in house training courses which are better implemented because of the cost is less and the timing can be adjusted. Also from time to time the Group outsources some technical or information based training courses. These trainings are usually attended by the supervisors whom in turn give the information to the workers. This does not work well all the time because not all the supervisors have the ability to train and convey clear information to others.

OUR COMMENTS

In any organization the HRM is effective when the functions are related to the vision, mission and vision and values. The organizational structure influences the implementation of the plans. In Al Futtaim Group, the HR department is managed by professionals who are aware of and experienced in the best practices of HRM. There are some obstacles which derives from the type, culture, policies and procedures of the Group. As a family business, the main purpose is to satisfy the customers in order to increase the profit. In this case the employees are required to perform to the best of their abilities and no mistakes are allowed. Individuals who have any special circumstances and cannot do the job effectively will not be given the chance to go back to the track. The management will look for a substitute who will not cost the Group extra expenses.

The recruitment process is done carefully because the management wants to decrease the expenses. They look for the good qualification in the applicant but the person who will cost them less will be employed. The relation between the management and the individuals is limited to how much this person will benefit the company rather than how can we make this person comfortable and satisfied. The global political and economical issues affects the plans as the group is managed based on cost. Any factor can affect the employees benefit and the company will not accept to pay any extra expenses or increase the HRM budget. In the contrary, if the market is down the budget is decreased.

If we are going to compare HRM in Al Futtaim with other similar companies, we can say, as aforementioned, that it has some advantages. Yet, what we are looking for is an HRM who has the authority and the power to fulfill the functions as they should be done. HRM is about the human resources in the group. Their satisfaction influences the outcomes of the group positively. It is not enough to pay the minimum salary and follow the basic labor laws in the country to gain the loyalty of the workers. There are several functions for the HRM that should be decided and implemented internally to distinguish the employees and the business as a whole from others. Open channels with the employees, empowering them, building a relationship with them, offering them opportunities to meet their personal goals, helping them to solve their problems and supporting outside activities will enhance their belonging top the group and will reflect on the work environment and the business as a whole.

APPENDIX

MANAGEMENT ORGANIZATIONAL STRUCTURE

The organizational of the group give an idea of the hierarchy of power in the group. We can see there is a diversity in the manager’s nationalities which adds to the experiences and the qualifications of the management team as a whole. Al Futtaim Group is managed by qualified people who have a long experience in management of similar industries and who are able to lead the company according to the international standards. .The local and foreign managers are working hand in hand for the benefit of the company and its stakeholders. The group includes several companies and a diverse work force which has to be managed effectively by managers who have cultural awareness and UAE work experience. In AL Futtaim group, the management has proved its efficiency in running the business. In the following page, we included the biography of the chairman and other managers to demonstrate their effectiveness and experience in managing the group and meeting the goals.

President

Majid Al Futtaim

Chairman

Sir Michael Rake 

Chief Executive Officer

Mr. Iyad Malas

Board Members

Sir Michael Rake 

Mr. Waldemar Schmidt

Mr. Tarek Ben Halim

Mr. Richard North

Dr. Fahad Almubarak

Mr. Paul Manduca

Mr. Trevor Coates

Mr. Philip Yea

Dr. Khalid Alkhazraji 

Management

Mr. Iyad Malas 

Chief Executive Officer

Mr. Ahmed Bin Brek

Deputy Chief Executive Officer

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BIOGRAPHY

Majid Al Futtaim

Majid Al Futtaim, the Founder and President of the Majid Al Futtaim Group has successfully brought the concepts of regional shopping malls and hypermarkets to the region. His pioneering vision has changed the face of shopping, entertainment and leisure in the Middle East and North Africa (MENA).

Majid Al Futtaim opened his first shopping mall in 1995 and has since created a business of international significance. Over the past decade the Group has taken his groundbreaking concepts into other major cities in the United Arab Emirates and throughout the Middle East and North Africa including; Oman, Qatar, Saudi Arabia, Bahrain, Egypt, and Lebanon.

Sir Michael Rake 

Sir Michael Rake is Chairman of BT Group and the UK Commission for Employment and Skills, as well as a director of Barclays PLC, McGraw-Hill Inc and the Financial Reporting Council. He is also chairman of the private equity oversight group the Guidelines Monitoring Committee. BT pays him an annual salary of £600,000.[1]

From May 2002 to September 2007 Rake was Chairman of KPMG International. Prior to his appointment as Chairman of KPMG International he was Chairman of KPMG in Europe and Senior Partner of KPMG in the United Kingdom. He joined KPMG in 1974, and worked in Continental Europe before transferring to the Middle East to run the practice for three years in 1986. He transferred to London in 1989, became a member of the UK Board in 1991, and had a number of leadership roles in the UK before being elected UK Senior Partner in 1998. Rake is also a Vice President of the RNIB, a member of the Board of the Trans Atlantic Business Dialogue, a member of the CBI International Advisory Board, the Chartered Management Institute, the DTI’s US/UK Regulatory Taskforce, the Advisory Council for Business for New Europe, the Ethnic Minority Employment Taskforce, an Association Member of BUPA, The School of Oriental and African Studies Advisory Board, the Advisory Board of the Judge Institute at the University of Cambridge, Senior Adviser for Chatham House and the Global Advisory Board of the Oxford University Centre for Corporate Reputation. He was Chairman of Business in the Community from 2004-2007 and a member of the board of the Prince of Wales International Business Leaders Forum from 1998 to 2007. Rake is also a Governor of Wellington College and a board member of Guards Polo Club.

He is married with four children and five stepchildren, and was knighted in 2007.

Mr. Iyad Malas

Iyad Malas is the CEO of Majid Al Futtaim Trust, the family office of the Majid Al Futtaim family in Dubai. Previously, Mr. Malas was the Regional Director for South Asia for International Finance Corporation, based in New Delhi. He had responsibility for all of IFC’s investments in all sectors in the South Asian markets, including India. Mr. Malas worked with IFC beginning in 1987, investing in many regions of the emerging markets and was the Division Manager for Central Asia, Middle East and North Africa before working for four years in Egypt, first as CEO of Fleming CIIC and then as the Chief Operating Officer and Head of Asset Management for the preeminent Egyptian investment bank, EFG-Hermes from 2000 to 2004. Mr. Malas was educated at the American University in Beirut and earned an MBA from George Washington University. Mr. Malas is also a Chartered Financial Analyst.