Introduction
Research shows that performance management is one key function of management through which companies seek to attain a highly competitive position within industries and in the larger market. Most companies are shifting attention from personnel management, which embraces centralized structures of organizations, to strategic human resource management which centers on processes and systems of managing people and other organizational resources for the sake of improved organizational performance.
Performance management is a comprehensive exercise that involves the alignment of the needs and demands of organizational employees to their delivery and organizational performance. Employee compensation, which often goes hand in hand with benefits, is one of the critical functions that are rooted in performance management.
One way through which the needs and demands of the employees can be managed is through the paying of attention to the monetary and other benefits. Employee work because of the monetary benefits, thus organizations that pay a considerable amount of attention to crafting an environment that embraces compensation are bound to attain a higher level of competitiveness in the market.
Abu Dhabi National Oil Company is one of the most competitive companies in the United Arab Emirates. The company manages to thrive in a competitive oil and gas industry through the embrace of best practices of performance management. This paper argues that the intense focus of the Abu Dhabi National Oil Company on catering for the needs of its employee through intense benefits and allowances helps the company to motivate and retain its employees.
This paper is divided into four main parts. This part begins by presenting the company. Here, the paper puts the company into the picture by expounding on the history and background of the company. The second part of the paper presents an overview of the human resource policies and practices in the company. This part is critical in bringing out the pointers of best practices in the management of the employees of the company.
This is followed by the second and, perhaps, the most critical part, which is the exploration of the best practices of compensation in the company, is how they contribute to the high level of employee motivation and retentions. Here, the paper expounds on the wide range of compensation schemes in the company and links each to the sustainability of a favorable work environment in the company and the retention of employees.
The fourth part of the paper focuses on the negative attributes of employee compensation in the company and how they impact negatively on the attributes of employee compensation and motivation. Of greater essence in this part is the presentation of policies and restrictions that makes it hard for Abu Dhabi National Oil Company to embrace the best practices of employee compensation and the remedy to the situation that is presented by such policies and practices.
Historical overview and background of Abu Dhabi National Oil Company
ADNOC is a government owned corporation that is headquartered in Abu Dhabi. The company began its operations back in 1971 and has managed to expand its operations in the United Arab Emirates and abroad. ADNOC operates in the oil and gas industry and deals specifically in the exploitation of oil and gas reserves in the UNITED Arab Emirates, especially the Emirate of Abu Dhabi that is rich in oil and gas.
Approximately 90 percent of the oil and gas reserves in the United Arab Emirates are exploited by the Abu Dhabi National Oil Company, making the company to be listed among the largest companies in the oil industry across the world. ADNOC is classified as the leading company in the oil and gas industry within the United Arab Emirates and the fourth when placed in the global oil and gas industry.
The company operates two main oil refineries in the United Arab Emirates. These are Umm Al Nar and Ruwais. The company has kept growing courtesy of technology, which enables it to produce more than 3.5 billion barrels of oil in a single day, besides the production of over 2 billion cubic feet of natural gas per day. The company has established approximately 150 petrol stations across the United Arab Emirates (“ADNOC and its group of companies”1-2).
The other important thing to note about the company is that it has expanded its operations at a highly accelerated pace. This has been enabled by the expansion through the subsidiaries that carry out specific functions for the company. As of now, the company has a total of 14 subsidiary companies that operate in the downstream and upstream. The company keeps working on the development of offshore and onshore field of gas.
The fourteen subsidiary companies that operate under ADNOC are important in that the company is considered to be a fully integrated gas and oil industry; therefore, the fulfillment of all aspects of exploitation and the supply of oil and gas in the United Arab Emirates are only enabled by the fourteen subsidiaries that are specialized in certain aspects of exploitation and distribution.
The subsidiaries of the company also enable the company to be a strong player in the petrochemical industry, which is one of the periphery industries within the larger oil and gas industry (“ADNOC and its group of companies” 1-5).
In a bid to increase its presence across the world, the company keeps engaging in strategic business talks with other companies in the world, aspects that result in strategic agreements with a substantial number of large oil and gas companies across the world.
Also, the company fosters talks with governments around the world appertaining to the supply of oil and gas because more than 70 percent of the total annual production of the refined products of the company are consumed in the international market. This reiterates the importance of the international market to the company and the extension of the human resource potential for the company (ADNOC 44).
The human resource environment in the Abu Dhabi National Oil Company
As observed in the introduction, the key to the better management of the employees in the contemporary organizational environment is the embrace of strategic practices in human resource management. Therefore, it is important to explore the human resource environment in the Abu Dhabi National Oil Company to link the best practice of employee compensation to the best practices of human resource management in the organization.
First of all, it is critical to observe that the Dhabi National Oil Company employs approximately 20, 000 employees. Contrary to many other companies, approximately 50 percent of the employees of ADNOC are expatriates. Therefore, the company has as a large number of multinational technical and administration staff. The company has a department that deals with the management of the organizational employees (The Human Resource Planning at ADNOC, 1).
According to The Human Resource Planning at ADNOC (1), the main considerations in the human resource department of the company deal in three critical aspects of employee development.
These include the recruitment, checking on the turnover of employees in the company, and the management the prevailing manpower in the company. Thus, it can be said that all the efforts of human resource practices in ADNOC are geared towards developing a favorable environment for the employees, which is key in the motivation and retention of the employees.
The department of human resource in ADNOC continuously works towards enhancing the perspective of job planning and delivery by all the employees of the company. Other important aspects of employee management in the company include job planning, job design, career development, performance appraisal, work measurement, and the training and development of organizational employees.
The director of Human Resources and Administration is Mr. Saeed bin Saif bin Butti Al Qamzi. The company has another department known as the Employee Development Department. This department works in unison with the human resource department. The directorate of human resource plays the role of ensuring that the employees of the company are provided with a set of unique services that are critical for their delivery (“The Human Resource Planning at ADNOC” 1).
Aspects of human resource planning in the company centers on the recruitment of employees based on the internal and external needs, as well as the development of the capacity and potential of the employees to deliver through paying attention to their needs and demands.
This is another pointer to the enhancement of performance management, especially the function of compensation and benefits for all the employees of the company. The company has crafted human resource practices that encourage the participation of the employees in the key human resource decisions.
The employees of the company are allowed to develop groups in which they discuss their affairs. These groups send their representatives to the board meeting of the company where they air the needs and demands of the employees. This is a kind of a vertical structure of management that enhances the level at which the employees of the company directly contribute to their well being (“The Human Resource Planning at ADNOC” 1).
Best practices of employee compensation in the Abu Dhabi National Oil Company
Perspectives of employee compensation in the company
According to Pantin (para. 1), ADNOC raised the salary of its employees by 20 percent in the year 2008. A 20 percent increment of salary at this period depicts an amount that was far much higher than the high rate of inflation that was being experienced during that time. The move to increase the salary was also seen as a means of positioning the company both at the local level and at the regional level (Pantin par. 1).
Performance appraisals are done by the company at the end of every financial year. The results of these appraisals act as the basis on which the company makes key decisions related to incentives, promotions, and rewards, adjustment of salaries, succession planning, and career development. Performance appraisal is a key parameter of measuring the level of commitment of organizational employees and the best framework for implementing compensation (FERTIL Employee Handbook 48).
According to the 2009 sustainability report of the company, the entry level package of compensation is quite high and more competitive. The total manpower costs for the company in 2009 stood at 10 billion AED, a figure that denotes competitive rates of compensation for the company’s employees.
The standard benefits that are offered to the company’s employees include healthcare, life insurance, maternity leave, and disability coverage. The company provides housing for its workers through the direct provision of the housing facilities or a stipend.
Also, all employees of the company, both local and expatriates, are entitled to pensions from the company. The pensions for the local employees are offered based on the rules that have been laid down in the statutory pension scheme. For the local employees belonging to all pay grades, ADNOC contributes to the pension scheme that is overseen by the government. For the expatriates, they receive what is referred to as end of service benefits.
This is an amount that is equivalent to one month of salary for every year the employee renders his or her services to the company for up to three years. For expatriates who work for the company for more than three years, the end of service benefit is equivalent to one and a half months of salary for each year that the employee renders services to the company (ADNOC 43).
Benefits and allowances IN ADNOC
As observed earlier, the term and the meaning of compensation when applied to human resource management has the same meaning with benefits and it is mostly viewed in terms of monetary benefits to the employees.
Taking an example from one of the subsidiaries of the Abu Dhabi National Oil Company to reflect the entire practices of compensation in the company, it can be noted that the company offers a wide range of benefits and allowances to their employees, a factor that promotes that high rate of employee retention compared to other companies in the United Arab Emirates.
Beginning with allowances, it can be observed that the company offers a wide range of allowances to their employees. The wider the range of allowances in a company, the higher the chances of the company to meet most of the financial needs of the employees.
Borrowing from this statement, it can be argued that the Abu Dhabi National Oil Company fulfills most of the financial needs of their employees by virtue of providing a wide range of allowances, which go deeper into meeting the expenditure of the employees. This acts as a motivating factor for the employees. It is important to enlist the benefits to understand the depth that these allowances go in meeting the costs and expenditures of the employees.
The allowances in ADNOC include housing allowance, which is offered to both the expatriates and the local employees. There is also the general allowance. This allowance was introduced by the company to help its employees to offset the electricity and water costs, as well as coverage for annual leave and annual vacation for local employees and expatriates respectively. Also, there is the supplemental allowance, which is dependent on the grade of individual employees and their nationality.
Depending on the nature of work schedules, the company offers a disturbance allowance to the employees. This is closely related to the shift allowance that is paid to the employees who work on 24-hours per day operation owing to personal disruptions that force them to work at irregular work intervals. There is the car allowance. Employees who are entitled to this allowance are those who often use their cars to discharge the organization’s work.
Depending on the nature of work, some employees are forced to travel in their personal cars when conducting the work of the company. Such employees are entitled to a monthly allowance of AED 500. Apart from the car allowance, the employees of ADNOC are as well entitled to duty travel allowance. This allowance is offered to employees who travel to attend the company’s business both within the United Arab Emirates and outside the UAE (FERTIL Employee Handbook 49-54).
Other allowances that are given to ADNOC employees include leisure allowance, remote area allowance, child allowance, social allowance, transportation allowance, meal and laundry allowances, furniture purchase and furniture maintenance allowances, hardship allowance, car maintenance allowance, and mobile phone purchase and mobile phone charges allowances. A look at these allowances shows that they cover almost all the basic areas of expenditure for employees (FERTIL Employee Handbook 54-60).
Apart from the allowances, the employees of the company are additionally entitled to a number of benefits, which also go deeper into covering their expenditure. These include educational assistance and support, medical benefits where the employees and their families are covered, housing, car purchase loan, and travel arrangements, especially for the expatriates.
The expatriates are also entitled to resident visas, where all the visa costs are offset by the company. There are also other extended forms of compensation that are stipulated in the human resource manual of the company (FERTIL Employee Handbook 61-84).
Negative attributes of performance management in ADNOC and how they impede employee motivation and retention
According to the, “The Human Resource Planning at ADNOC” (1), the Abu Dhabi National Oil Company has for a long time depended on cheap labor from India and of late cheap labor from the influx of people in the country from other developing regions of the world. This is an undesirable practice and a factor that portrays the company negatively in the eyes of the public.
Dependence on cheap labor by the company portrays a certain level of irresponsibility on the side of the company. In other words, the company is not willing to strike a balance between its input and output. Paying the employees less for a company that makes huge profits is an implication of the embrace of unsustainable practices.
Any company that does not embrace best practices in performance management often shows the unwillingness to fully compensate employees for the services that they render to the organization.
This aspect of management also denies the company a chance of being competitive in the global labor industry, which points to the search and competition for highly skilled employees. Highly skilled employees are only attracted to a company that has favorable structures of employee compensation, which is the key motivating factor for most employees.
However, it is important to observe that the company has been reducing the aspect of dependence on cheap labor. Instead, it has been developing improved structures of human resource management. Among the new structures is the revision of the compensation and benefits schemes in the company. It is vital for the company to keep embracing the best practices of compensation and benefits to attract a highly skilled workforce from the labor industry (The Human Resource Planning at ADNOC” 1).
The recent times have also seen the push by the government of UAE to enhance the enforcement of the policy of emiritization by companies in all the emirates. The pressure to enforce the policy of emiritization in the United Arab Emirates comes from the National Human Resource Development and Employment Authority.
The policy highly advocates for the prioritization of local employees in the companies than their expatriate counterparts (Budhwar and Mellahi 12). Amidst the pressure to enforce the policy or emiritization, ADNOC has come in the limelight for designing totally different structures of compensation for the local employees and for the expatriates (The Human Resource Planning at ADNOC” 1).
However, what is evident in the policy is that it does not put specific targets for companies when it comes to compensation and benefits for employees. As ADNOC seeks to fully enforce the policy of emiritization. It should pay attention to the issue of compensation in the company considering the fact that a considerable percentage of the employees of the company are expatriates.
Emiritization has seen the increase in the rate of employee turnover in the company because of the growth in the gap between the rates of compensation and benefits between the local employees and the expatriates (“Emiritization and Impact on Compensation in Abu Dhabi Private Sector” 1).
Instead of the company compromising the level of quality due to the enforcement of the policy, a number of experts in human resource management suggest that the company should seek to retain the best talent and skills from the expatriates through the bridging of the large gap in employee compensation between the local workers and the expatriates. This way, the company will be able to motivate the expatriates and enhance an inclusive working environment, which will promote employee delivery in the long run.
Conclusion
The research conducted in the paper presents a number of critical issues about the best practices of managing compensation in the Abu Dhabi National Oil Company. The first important point to note is that the company has an active human resource department.
According to the information presented in the paper, it can be concluded that the human resource department of the company has been up to task when it comes to the development and implementation of strategic practices of employee management. Notable is the structure of employee management that puts the employees at the center of the department. This is an important factor that enables the organization to identify and iron out issues of compensation for all the employees.
The compensation function is deeply entrenched in the human resource practices of the company. More often than not, compensation is linked to benefits and is often looked at in terms of the financial gains that are made by the employees for committing their time in discharging their services to an organization. The company offers an outstanding range of benefits to its employee more than most companies in the United Arab Emirates and across the globe.
Besides the benefits, the company offers its employees a wide range of benefits, apart from the fact that its salary scale is far much higher than the salary scales of most other companies in the industry and market. The company also remunerates its employees for the extra hours and time committed to the discharge of the organization’s work. This is seen in terms of the overtime compensation and the compensation of the employees for working during holidays.
An analysis of the benefits brings out a positive picture of the company in the labor industry by reiterating the commitment of the company in meeting most of the financial needs of its employees. Therefore, it can be confidently argued that the compensation function in the company is the reason why the company remains attractive to most people in the job market, besides playing a great role in motivating and retaining employees.
However, it is also important to note that there are a number of hitches in the company when it comes to the development and enforcement of best practices for meeting the needs and demands of employees.
Two main things came out in the paper: the policy of emiritization and the elongated dependence of the company on cheap labor from India and other developing countries around the globe. The continued dependence of the company on cheap labor has worked negatively on the company operations now that the company has to spend more on its employees as a way of embracing performance management.
Also, the policy of emiritization has worked negatively, especially for the expatriates. However, as observed in the recent times, the company is making efforts to maintain best practices of human resource management, including reducing the gap between the rates of compensation for the local employees and the rates of compensation for the expatriates.
Works Cited
ADNOC and its group of companies. Web.
ADNOC. Sustainability Report 2009, 2010. Web.
Budhwar, Pawan S., and Kamel Mellahi. Managing Human Resources in the Middle East. New York, NY: Routledge.
Emiritization and Impact on Compensation in Abu Dhabi Private Sector. Web.
FERTIL Employee Handbook. Web.
Pantin, Travis. ADNOC bumps employee wages 20%. Web.