Abstract
Tatweer played a major role in the economic development of the United Arab Emirates. All principalities and local governments under the emirates control and influence cannot afford Tatweer’s demise. Tatweer brought in a great deal of economic activity to the UAE through the construction of theme parks, high-end residential building, and corporate offices. Aside from its effective and cutting-edge business strategies, Tatweer’s secret to its success was Saeed al Muntafiq, the firm’s charismatic CEO.
In the first quarter of 2016 when projected income did not come into fruition, there were talks about authorizing a massive layoff eliminating various positions from office workers to high-level sales agents. The CEO threatened to resign if Tatweer’s Board of Directors authorised the said move. Be that as it may, the failure to act decisively in order to reduce the firm’s overhead cost caused the filing of bankruptcies for other rival firms. On the other hand, it was during Muntafiq’s leadership that brought in billions of dollars in revenue for Tatweer. His resignation surely affected the performance of the company and its ability to attract investors.
Termination Point: Tatweer on the Verge of a Massive Layoff
The Organization: Overview of Tatweer
Tatweer was one of the largest real estate companies within the United Arab Emirates. In order to understand the importance of the company in the region’s economic development, it was important to point out that the firm earned the right to build the world’s tallest tower, and was charged to construct it in the middle of Dubai. In addition, Tatweer scored a major victory 4 years ago when it was awarded the right to build a project worth USD$90 billion.
The said project was dubbed Dubai Oasis. In the said project, Tatweer spearheaded a group of construction firms that worked together in the creation of Dubai’s Healthcare City. In addition, numerous residential towers, residential dwellings, and corporate towers emerged out of the desert sands due to the technical and management expertise of the engineers and planners under the employ of Tatweer.
The company was viewed as a critical player in the government’s desire to transform the UAE. The firm’s capability to work alongside government representatives and allies made it easier for local leaders to work with Tatweer. Thus, this perception of reliability and high-quality service ensured the steady flow of projects for the company. In fact, Tatweer was entrusted to build theme parks in partnership with multinational firms that brought into fruition projects like Lego Land and Universal Studios. It has been made clear that Tatweer was instrumental not only in bringing in millions of tourist into Dubai but also the creation of a real estate development phenomenon that attracted ex-pats to live and work within the UAE.
Aside from tapping into the vast capabilities of the professionals working under the Tatweer banner, the firm initiated its own projects as corporate leaders view long term development. One of the important assets under the control of Tatweer was the 350 hectares of prime real estate lands within Dubai. If the company had access to build corporate towers, residential condominiums, and theme parks for tourism projects, the future looked bright for the firm. On the other hand, the impact of socio-economic factors within the UAE and outside the borders of the country also affected the firm’s capability to snare lucrative deals down the road.
Case Characters
Saeed al Muntafiq
He was the CEO of the said firm and had a hands-on approach with regards to the investment processes that affected the organization. He started his career in the petroleum industry wherein he learned critical management skills that proved useful in dealing with a great number of people. As a result, he was able to bring together different groups of people, professionals and consultants from different parts of the globe. He has the capability to inspire a disparate group of workers and professionals to accomplish complicated goals and business milestones.
Although Muntafiq was an excellent manager, he brought a unique set of skills to Tatweer that was unrivalled by other professionals under the employ of the said enterprise. He was a charismatic leader and communicated complicated ideas to investors so that they were assured that their money will not go to waste. He developed this skill when he served as the CEO for Dubai Media City at the turn of the 21st century.
Thus, when he was recruited to work for Tatweer he brought with him not only a wealth of knowledge on how to run a business operation, because he also added value through insights regarding business relations within the UAE, such as contacts with high-ranking government officials.
Khalid Usman
He was the head of Tatweer’s Human Resource Department. He earned his stripes when he worked as the firm’s HR Project Manager several years ago. He learned valuable lessons regarding the human resource context of the firm’s operations when he focused on performance management, and when he provided support for other HR managers during his first few years in the company. As a result, he was able to internalize the company’s corporate values.
At the same time, he had a deep understanding of the inner-workings of the company. His skills and knowledge about the business model grew in leaps and bounds when he became the head of the recruitment arm of the company for two years. He used to oversee recruitment processes in Lebanon and in Dubai. His Lebanese connection allowed him to tap into the international job market, and this enabled him to acquire top talent for the company.
The Dubai leg of the recruitment process gave him ample opportunity to hire the best workers that manifested deep understanding about the Emirate culture. As the head of the HRM department, Usman was the unrivalled authority when it came to Tatweer’s workforce. He knew by heart the concentration of workers within a particular project or office.
Abdul Zain
He was known within Tatweer as a top-notch professional and an uncompromising gentleman with a sharp with and kind heart. He brought with his high level of expertise when it comes to corporate budgeting, planning, and analysis. He had the capability to create a simplified and easy to digest business report that was gleaned from a complicated and highly technical document submitted by department heads. His capacity to synthesize and integrate information into an easy to understand package made him a valuable consultant for the company.
Zain honed his skills while serving under different professional undertakings, such as bank executive, educator, and media consultant. The Board of Directors looked forward to reading Zain’s reports because he knew how to revamp the same in order for top corporate leaders to understand the impact in terms of cash and revenue. His reports not only provide valuable insights with regards to the company’s bottom line, but he also included an in-depth analysis of how department heads spent the allocated budget. As a result, he was able to suggest strategies that enhanced the company’s cost-efficiency in the long run.
In addition, Zain had the capability to see the overall picture and how the business model affects the operation of the company. Zain understood the ebb and flow of workers so that he had insights with regards to the optimal number of workers and sales agents that must populate a certain project in order to assure the company’s profitability down the line. He was not afraid to suggest the need to lay off workers in order to save money and to ensure the survival of the company.
The External Environment
There were two major global economic incidents that rocked Tatweer to its core and played a major role in the decision to lay off workers. The first one was the global financial crisis that destroyed one-hundred-year-old companies in 2008. The case regarding the filing of bankruptcies of reputed firms like Lehman Brothers was just one of the offshoots of the said economic phenomenon. Due to the financial crisis, bankers were forced to go into a conservative mode.
They were well aware of the fact that the economic slowdown that resulted from the said debacle made it extremely difficult for corporations to make money. Thus, bankers made it more difficult for investors and business leaders to borrow money from established financial systems. As a consequence, a chain reaction of problems became inevitable, and these forced firms to close down. This action also caused a great deal of panic among investors.
The second major economic factor that negatively affected the financial standing of Tatweer was the phenomenon that described the free-falling prices of crude oil. It does not require a brilliant economist to understand that the UAE was dependent on the income that comes via the drilling and exportation of crude oil to the United States, Europe and China. The economic slowdown caused by the financial crisis created ripple effects so that there was low demand for crude oil. This problem was exacerbated by the discovery of overproduction.
The separate issue of the overproduction of crude oil prompted the Organization of Petroleum Exporting Countries to consider the reduction of the production of the said valuable product. However, they learned a bitter lesson from the past, that if the OPEC decided to cut the flow of oil, its loyal customers simply shifted their orders. They, in turn, received supplies from countries like Venezuela, Panama, Russia, and Canada. Thus, the OPEC made a firm decision to continue the production of oil. As a result, the free fall of prices continued unabated. The lowered income capability of the UAE and the Dubai government made it more difficult to jumpstart projects within the country. It was not difficult to see the ramifications of cheap crude oil. When the income of the UAE was slashed in half, there was no longer enough disposable income that was redirected to real estate projects. In addition, investors were wary of projects with questionable capabilities to recoup invested funds.
Problems and Decision-Making Needs
The Board of Directors decided to meet with the aforementioned three case characters in order to understand the current financial situation of the company. The first to speak out was Zain, the head of Tatweer’s Planning and Analysis department.
Zain: The global financial crisis of 2008 and the struggles of OPEC had negatively affected the financial standing and future profitability of Tatweer. The financial crisis made it harder for our clients to borrow money from international financial institutions; therefore they were afraid to finance new ventures. They were also afraid that the financial crisis and the glut in oil production lead to deeper and more dangerous economic recessions. In order to ensure the survival of the company, it is best to consider the reduction of overhead costs across the board. More importantly, the firm must seriously consider the option that calls for a massive layoff of workers and sales agents.
Mountain: It is good to respect the opinion of the esteemed colleague that worked for Tatweer’s corporate planning and analysis department. However, it was not the right time to panic and make unfounded pronouncements on account of the company financial difficulties. In fact, it was the time or people to show great resolve. They must demonstrate that they have the fortitude to handle adversity. It is important to point out that people armed with a commitment to fight to the end will be rewarded. History testified to the truthfulness of this statement. It must give encouragement to everyone to take a stand.
There were two reasons for voicing out the opinion regarding this subject matter. First of all, the company spent a great deal of money training the support staff and sales agents. Tatweer designed software that made it easier for potential customers to view the project. All of these positive attributes were thrown out when the company decided to let these workers go. In addition, the company was supposed to spend millions of dollars in expenses to re-train the new workers to replenish the number of workers booted out during the crisis years. The second major reason for raising the objection was due to the acknowledgement of the fact that it was extremely difficult to hire top-calibre talent. The UAE had to hire ex-pats in order to fill in critical positions within a particular business environment.
The Board of Directors Mulls the Issue
The Board of Directors considered the words that Muntafiq promulgated in their presence. They realized that Muntafiq had a clear understanding of the negative consequences of giving the go signal to cut-off jobs and position in order to save funds. They turned their attention to the HR department and they were eager to hear inputs.
Usman: There were other ways to find out if the company was no longer operating within efficient levels. Managers studied the performance of each worker. In the past several months there were many instances of absenteeism and other signs that supported the allegation of laziness and the lack of desire to work. It is possible that there were no projects to work on and the eager and energetic workers in each department were frustrated and angry that they had no work to do. It was to hold them if they had the opportunity to find work in other companies.
Mountain: He made it clear that an irrevocable letter of resignation was prepared in advance.
Problems and Decision-making
The Board of Directors was accountable to the shareholders. Their primary role was to protect the interest of the company and its shareholders. They need to find the correct balance between investing and shielding the company from irreversible damage. All indicators told them that it was a good idea to lay off workers. By doing so they had the capability to save a great deal of money and this ensured the survival of Tatweer for decades to come.
On the other hand, they were torn between a rock and a hard place, because they needed the expertise and charisma of Muntafiq to draw in investors. It is through the personal and professional connections of Muntafiq that brought in a lot of great players willing to carry the burden and risk of constructing a new UAE or a new Dubai. For example, Muntafiq was responsible for persuading Tiger Woods and Floyd Mayweather to plunk in a great share of their personal wealth to finance major projects within the country. However, the failure to act decisively caused great problems for the company in the long run.
Ending the Case
Analysts must study carefully the important information and insights with regards to the problems faced by Tatweer’s Board of Directors. Was it prudent to risk the ire of Muntafiq? The CEO was comfortable in running the show with his current team. He did not want to change the roster in the same way that a winning coach adamantly held to the lineup that he had chosen. He did not want to mess with the composition of the workers in every department. It was also true that it was difficult to hire them back or to train new recruits to become as skilled as the former employees. It takes time and great deal of money in order to recreate the same winning team.
Do you think it was the best idea to retain the services of Muntafiq? You have to consider the kind of contribution he brought to the table. It was relatively easy to hire and train consultants like Usman and Zain, because their skills set and personality were not difficult to find in the job market. However, there was only one Muntafiq. In other words, Muntafiq brought in a great deal of non-quantifiable attributes.
On the other hand, the decision not to fire workers may not be the best option considering the fact that the company was bleeding funds while there was no money coming in from investors and new projects. Do you think the Board of Directors and Muntafiq was able reach a certain level of compromise? Do you think there was a way to go around the problem in order to keep everyone happy? If these solutions fail what do you recommend?
You have to consider the long-term impact of your decisions. If the company filed for bankruptcy, the investors will pull out their money. As a result, expect a great deal of unfinished projects. These unfinished projects were expected to cause a major international embarrassment for the Emirate people.
It was important to continue the successful projects of the firm. It was important to find a viable solution to this dilemma. Was it possible to find a replacement for Muntafiq? Was there other ways to make him stay? What kind of incentive package was made available to appease Muntafiq that compelled him to go along with the plan to initiate the massive layoff of the workers? Was there a way to predict the end of the current economic recession as manifested by the glut in the production of oil? These were important questions and the answers paved the way for the creation of the best strategy in dealing with the dilemma of Muntafiq’s desire to leave the company and the need to reduce the number of workers.