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...the economy dependent on foreign labor, especially in vital, skilled technical and professional positions. Most Saudis want to be managers, not computer programmers or members of other professions. A survey of managers and others in the five leading Saudi companies illuminates often conflicting attitudes toward Western business methods that, most agree, would improve organizational performance.
Introduction
In October 2005, Saudi Arabia successfully joined the World Trade Organization (WTO) after 12 years of negotiation. This will have a dramatic impact as it opens the kingdom's long protected economy (Evans, 2005). Foreign investments will increase bringing in the necessary funds for giant projects and businesses as the country's laws and regulations begin to conform to international standards. However, the impact will be felt not only on the economy but also on the culture as well. The need to restrict imports of certain things like pork and pornography that are prohibited by both cultural mandates and Islamic teachings must be addressed. Joining the WTO means that the kingdom's culture will need to be immersed in the melting pot of Western culture, and the ability to implement regulatory decisions based on social, religious, or cultural issues will be restricted. In addition, small businesses that are currently providing a wealth of employment opportunities for the Saudis may suffer from competition from more experienced international companies.
While the economy of the country generally very good, the gross domestic product (GDP) per capita is considered to be low in the region. Therefore, one of the main concerns of the kingdom is create jobs to lessen dependence on foreign workers and reduce the unemployment rate. The main focus of the developmental plans is to deal with the issues of foreign labor and unemployment. This sounds contradictory, but reflects the strong dependence on foreign workers to support all technical and menial jobs. The kingdom is a net importer of technology and depends heavily on the foreign labor to support technical needs. The dependence has hindered the country's ability to develop the required skilled workforce and made it difficult for the private sector to offer attractive salaries to the national workforce (Al-Kibsi et al., 2007).
Cultural effects on business
Executives and managers in Saudi Arabia face great challenges in their endeavor to improve the performance of their organizations. The greatest challenges of all are cultural issues and work practices that limit employee performance levels compared with those in Western international companies. Keeping and raising a wide base of Saudi technical and skilled labor staff is a challenge because Saudis are more motivated by status and position. "Many young Saudis have grown up in luxury, seeing their parents getting well-paid, high-status positions" (Bell, 2005). A 1986 study of Third World labor forces ranked Saudi labor the lowest in terms of productivity for reasons that included the abundance of job opportunities. Accordingly, the Saudi worker was not motivated to stay in lower-rank jobs (Rowings et al., 1986). A more recent report shows that one fourth of Saudi employees in the private sector do not regularly show up, causing a high turnover rate (Al-Kibis et al., 2007).
Although the current situation is different from the 80s and job opportunities are much less numerous, the impact on the culture of the accumulated wealth in the 70s persists, and almost all Saudis prefer to work in managerial positions. Labor-type jobs are considered unattractive and dishonorable. This is deeply rooted to the extent that families and the government protect and support those who pass up the socially unaccepted jobs (Yadav, 2005). Technical Saudi professionals are compelled to seek managerial positions as most companies' systems are not structured to support interesting and rewarding technical and labor career paths. The kingdom has become heavily dependent on foreign labor, and this has hindered the development of a skilled workforce to the degree that the private sector is not able to absorb the new Saudi entrants and cannot provide attractive salaries (Al-Kibsi et al., 2007).
According to Beer et al., supervisors in most organizations do not give honest and candid performance reviews because they might damage the self-esteem of the employees (Beer et al., 1985). In Saudi Arabia, candid feedback on performance might be viewed by the employees as unfriendly and hostile. In the Arab culture, it is customary to give feedback through an intermediary to avoid conflict and sending the wrong message (Gopalakrishnan, 2002). This is aggravated when the performance of the Saudi employees is compared with their expatriate counterparts, comparisons that are immediately understood as favoring the foreigners and not promoting Saudization, the term coined for nationalizing the jobs. Since Saudi Arabia's collective culture values group work, the pay-for-performance system that recognizes individuals is undermined when management tries to downplay it by writing comforting statements on the appraisal forms to compensate for low salary increases for poor performers (Hall, 2003). The prevailing culture is in favor of life employment, so managers are restrained from purging poor performers and replacing them with high performers. Unless the difference in compensation of the high performers and low performers is great, companies risk demotivating the high performers while encouraging the low performers to remain unproductive (Beer et al., 1985).
Literature Review
There are few studies on organizational performance and the effects of culture on business in Saudi Arabia. Leadership and management are influenced principally by tribal traditions inherited over the years. Management books and literature have only gained interest in the mid 90s in Saudi companies. Most Arabic leadership books and literature are based on the acts of historical leaders revered by the Arab world. To date, almost all of the modern management books and literature are direct translations of foreign materials. Attempts to customize the modern management theories and concepts as detailed in the literature of the Western world have been shallow and did not bridge the gap between the business culture and work practices of Arabia and those of the West.
Management practices
Pillai et al., in their paper "Leadership And Organizational Justice: Similarities And Differences Across Cultures," described management practices in the Islamic world (of which Saudi Arabia is a major part) as influenced by tribal traditions where the manager "is expected to act as a father figure" (Pillai et al., 1999). This means favoring the continuity of the family concept over improved organizational performance and competitiveness. Their study indicated that this dependence on the father-figure relationship means that leaders and managers in the Middle East face difficulties convincing the employees to be part of the solution to management problems. A prevailing organizational structure in which the manager makes all the decisions hinders the process of change, according to Yavas (Yavas, 1997). According to Bhuian et al., the people of the kingdom need to be guided and told what to do and actually prefer government interventions in business practices (Bhuian et al., 2001).
Islam and business
Studies of the culture in Saudi Arabia have indicated that it is fairly homogenous, like most Middle Eastern nations, due mainly to the profound effects of Islamic teachings on the society. Islam infiltrates in all aspects of life in Saudi Arabia, and there is a strong marriage of Islam and state (Lundgren, 1998). Islam influences all decisions for Arabs including business decisions. Walker et al. said that fatalism is away of life in the Middle East, and Saudis believe that the ultimate control over the environment is in the hands of God (Walker et al., 2003). This contrasts sharply with the culture in the United States, which has a strong control orientation regarding the environment. Where Saudis believe their proverb that says "There is something good in every delay," unforeseen delays are unacceptable excuses in the Western world (Walker et al., 2003). It should be noted, however, that the issue is not with the belief itself but rather with people's misguided interpretations of the belief and Islam teachings. While Islam teaches that ultimate control is in the hands of God, it also teaches that people should exert their utmost efforts to better their lives. Misguided interpretations have a strong impact on the business environment and the commitment to setting and meeting goals and targets in the kingdom. Accountability in running businesses is weak, and it is not uncommon to attribute business mistakes to fate (Bhuian et al., 2001).
Collectivistic culture
Alanazi and Rodrigues in their 2003 study "Power Bases and Attribution in Three Cultures," described the Saudi culture as collectivistic with strict adherence to the teachings of Islam, which governs the social behavior and provides a strong cultural fabric that covers the whole nation. Essentially, business is affected by the collective thinking of the Saudis, which dictates that relationships trump business dealings (Lundgren, 1998). Curry et al. cited traditional culture as a major hindrance to achieving improved organizational performance. Studies also have shown that organizational improvement programs and change programs must be accompanied with changes in culture, especially in developing countries like Saudi Arabia (Currey and Kadash, 2002).
The literature review indicated that Saudis are motivated by status and position, which explains their preference for managerial positions. Accepting labor jobs is a cause of embarrassment for a majority of the Saudi population.
However, studies reveal fast and continuous cultural and social transformations in Saudi Arabia. In her book "Changed Identities: The Challenge of the New Generation in Saudi Arabia," Yamani says that "maintaining Saudi identity is difficult when contact with the West is needed in order to advance" (Yamani, 2000). However, this transformation brings the inevitable clash between continuity and change. Continuity stems from the cultural and religion influence on the society while change is imposed by the external forces that compel the kingdom to compete in the international arena in a more aligned way. Saudi Arabia suffers from an acute shortage of skilled Saudi workers, which leads to a lack of advanced technology (Curry and Kadash, 2002).
The need for performance improvement
The trend from the reviewed studies shows that the companies in the kingdom are concerned with organizational performance improvement and quality improvement. In their paper titled "Service Quality Gaps Analysis At SCECO-East, Saudi Arabia," Jannadi et al. showed how the Saudi Electricity Company took a sophisticated approach to improve the organization's quality. It started promoting "a greater understanding of service quality issues in the industry" and used customer feedback in an effort to close...
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