Universal HRM and the Gulf Leadership Style: The Perils of Best Practice

Universal HRM and the Gulf Leadership Style: The Perils of Best Practice

William Scott-Jackson (Oxford Strategic Consulting, UK) and Jonathan Michie (University of Oxford, UK)
Copyright: © 2014 |Pages: 21
DOI: 10.4018/978-1-4666-5067-1.ch001

Abstract

This case study aims to allow students, using various business dilemmas, to explore differences in approach between the most commonly taught “universal” models of human resource management (HRM), mostly based on Western culture and practices (Brewster, Farndale, & Ommeren, 2000) and a more contingent HRM predicated on the leadership culture prevalent in the Gulf Cooperation Council countries (Scott-Jackson, 2008). It aims to generate discussion of strengths and weaknesses of these different approaches to leadership and HRM as well as some recognition that there is a valid, distinctive Gulf Arab Management Style that is worthy of study and provides an alternative to more commonly recognized approaches. The supporting research was carried out between January 2011 and June 2012. It was largely based on interviews with 50 Gulf Arab leaders, together with action research and advisory work in 5 large Gulf companies (including the family conglomerate forming the basis for this case).
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Organization Background

The case is based on a large family conglomerate founded in the early 60s by the present Chairman’s grandfather. Many of the senior directors and leaders of the various sub-businesses were sons, grandsons and relatives of the father, together with one daughter who led a medical subsidiary. The business was formally owned by two brothers, the elder acting as Chairman and the younger as Chief Executive Officer (CEO). The business was originally founded to provide basic industrial supplies to the burgeoning oil industry, acting as an agent for several western brands. In the previous twenty years, utilizing capital generated from the original business stream, the firm had diversified widely into very different sectors, often based on the interests of members of the close family, including luxury cars, a school, medical supplies, a hotel, fish farming and property investment. There were thirty-six subsidiaries, of which only one had more than fifty staff. Many of the subsidiaries were built around well-known western brands, including a mineral water company and a security company. The total group employed just over five hundred people (~400 expatriates and ~200 nationals).The subsidiaries were all run by nationals (almost all relatives) except a construction subsidiary. A western Managing Director (MD) was recently recruited, through a recommendation from a friend to the Chairman, in order to increase revenues ten-fold in three years using group capital to acquire and grow market share.

The group as a whole had maintained steady revenue growth overall, enjoyed profit margins of around 20% (although individual company performance varied significantly) and had £20m available for investment and acquisitions. Reporting was relatively informal. Company accounts were produced for review by the main board annually but information on subsidiary activities was mainly obtained by visits from the brothers and informal discussions with a range of personal contacts at all levels. The chairman says “you can’t rely on systems – people can always fiddle systems – you have to get out and see for yourself, you have to ask people their opinions and build informal networks of friendly contacts to get a feel for things”.

The group was organized in principle as a holding company, where the center mainly makes investment decisions and leaves day to day management to the subsidiaries. However, the CEO and his brother, the Chairman, retained a high degree of personal authority including, for example, check signing for any payment over $3000. They tended to get involved in the management of subsidiaries to a greater or lesser degree depending on external pressure or interest (particularly from members of the ruling family), problems with important customers or their own personal interests. Certain acquisitions have been left largely independent and, given the individual and family wealth of the owners, there was no formal assessment of contribution to group profits, reserves or dividends. The Chairman spent most of his time working with one of the senior members of the ruling family. This was seen as a great honor and crucial for the reputation and success of the company. In principle, the Chairman focused on new acquisitions and investments while the CEO ran the group’s day-to-day operations.

The strategic intent of the two main owners (CEO and Chairman) was to preserve and enhance the good name and standing of their grandfather and the family name within the country, the region and, hopefully, globally. A second key objective was to provide the means for “our children and their children to survive and prosper”. Financial and growth targets were very important, but only as a means to achieving the first goal. The group originally grew through organic growth but had, in the past few years, acquired various disparate businesses in the GCC and Morocco (where the Chairman had a large villa) and had most recently purchased investment properties in London, UK. The CEO believed that most of these acquisitions had done well and contributed to the firm. None of the business lines have ever been closed down, although an early business in the food sector was allowed to run down gradually after the MD at the time decided to live abroad. A recent strategy workshop (facilitated by external consultants) agreed that the group should target revenue growth of thirty times current levels and “to become world-class at acquisitions”.

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