Cross-cultural management case

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Dana McDaniel Sumpter Mona Zanhour

Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

Published by WDI Publishing, a division of the William Davidson Institute (WDI) at the University of Michigan.

© 2020 Dana McDaniel Sumpter and Mona Zanhour. This case was written by Dana McDaniel Sumpter, Associate Professor of Management and HRM, and Mona Zanhour, Assistant Professor of Management and HRM, both of California State University Long Beach. The case was prepared as the basis for class discussion rather than to illustrate either effective or ineffective handling of a situation. The case should not be considered criticism or endorsement and should not be used as a source of primary data. A representative of the Port of Salalah in Oman reviewed and approved the case before publication.

“The ocean is first and foremost our place of business, which we look upon as the lifeline and the future. Our people are the heartbeat that drive operations and the power to grow.” – Port of Salalah website, 2020

Margaret Huebner sat on a Salalah Public Park bench in late 2002, enjoying the warm breeze in her face. Several women in long dark hijabs and abayas reached up and pulled aside their veils, revealing smiles. Huebner loved visiting the park for the Wednesday “Ladies Only Nights,” which allowed veil removal and free-flowing conversation.1 As she watched women stroll the park, she reflected on her last two years as an American working in the Sultanate of Oman.

Huebner had arrived in Oman for a one-week intensive consulting project in 2000. She had been tasked with assessing human resources needs for the Port of Salalah, a promising new port located on the deep waters of the Arabian Sea. The Port had the potential to be world-class, but it first needed to address its nearly non-existent human resources (HR) procedures. The firm’s rapid growth was outpacing its administrative structure, and key new employees were needed.

Huebner’s one-week project soon grew into a two-year expatriate assignment. An American woman with three decades of HR experience, she had been recruited by the Port to establish a professional HR function from the ground up. She quickly discovered she had a lot to learn about applying her experience to an organization in Oman.

Huebner made countless critical strategic decisions during her two years working for the Port, continuously employing creative ways to work with local cultural norms. As she neared the end of her expatriate assignment, she hoped opportunities for local nationals and Omani women would continue to increase and the Port’s heavy dependence on expatriates would continue to decline. Given all she had accomplished and how she had done so, she needed to determine how to ensure the organizational culture she helped foster would endure.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

Oman and the Port of Salalah

An absolute monarchy, Oman sits in the southeastern corner of the Arabian Peninsula at the mouth of the Persian Gulf (see Figure 1). Huebner had never been to the Middle East before she arrived in Salalah, which would become her home for the next two years.

Figure 1 The Sultanate of Oman

Source: maps.com.

Huebner identified a series of structural goals for the Port’s new HR function—a need for general policies, a new compensation program encompassing job analysis and evaluation, identifying and developing a local HR director, and selecting and training employees on a new HR information system platform. Additionally, she needed to determine how to translate her experience to an Omani organization like the Port, as well as to a primarily Arab, Muslim culture more generally.

The Port’s organizational culture, including the role of local nationals and integrating expatriate employees, needed to be addressed. But Huebner believed it could also be an opportunity to set an example for other local organizations, highlighting the benefits of fostering an inclusive culture amongst these different employee groups.

The Port’s growth occurred at a time when Oman was evolving as a nation. The Sultan of Oman, Qaboos bin Said (see Figure 2), had introduced a Five Year Plan as part of a “renaissance” as the country emerged from self-imposed isolation by the previous sultan.2 Prior to 1970, Oman had been closed off to the outside world and had no paved roads, hospitals, or power plants. Omanis had to leave the country for higher education. The country also suffered from a shortage in skilled labor.3 Much had changed by the time Huebner arrived in 2000, but Oman’s workforce was still catching up.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

Figure 2 Former Oman Sultan Qaboos bin Said al Said, 1940– 2020

Source: General Census of Populations, Housing, and Establishment, 2010, Sultanate of Oman.

Oman was a largely peaceful and safe society, lacking the conflict and strife of its regional neighbors. The country had beautiful seasons due to the Khareef monsoons in the summer months, which made areas burst with luscious green views. Huebner resided in a villa on an oceanside cliff with a spectacular view, and she quickly grew to love the people and local culture, which expanded her expectations for and stereotypes of the region.4 Two aspects of the national context significantly influenced Huebner’s experience. First, part of the sultan’s Five Year Plan was an “Omanization” program to further integrate local nationals into the workforce. Omani companies, including the Port, were required to submit plans showing how they would increase their native numbers. Second, while Oman was legally moving toward equal rights and opportunities for men and women, a persistent cultural paradigm reinforced inequality. Women were expected to stay home. If they worked, they were expected to perform stereotypical jobs like teaching and entry-level clerical positions.5 The roles and expectations were internalized as traditional and religious mandates.6 Huebner saw the national shift toward equal rights as an opportunity to advance women at the Port. She believed the efforts could widen the company’s pool of talented workers and set an example for other organizations.

At the time, workforce and labor market difficulties pervaded the Middle East region. According to the United Nation’s Arab Human Development Report 2002:7

• No previous generation of young Arabs had been as large.

• Job creation had not matched workforce growth.

• Growth had been hampered by low and declining labor productivity.

• Problems of quality and relevance had led to a mismatch between the labor market and development needs and education system output.

• Women remained marginalized in Arab political systems and broadly discriminated against in both law and custom.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

The Port’s leaders knew that these trends would shape their developing HR structure. They also saw great opportunity to train and develop locals and make the Port an employer of choice in the region.

Salalah had served as an important conduit for trade due to its optimal location (see Figure 3) for hundreds of years. 8 The city connected trade between the Ancient Roman, Egyptian, Persian, Indian, and African empires from the 4th Century BC to 2nd Century AD. The city’s location offered a near direct route from the major trade avenues of Asia to Europe, and it was central for the growing markets of East Africa, India, and the Arabian Gulf. In the late 20th century, Oman’s leaders viewed Salalah as an opportunity to bolster economic growth via international maritime transportation.

Figure 3 Major Shipping Lanes Around Salalah

Source: The Economist, 9 May 2015. https://www.economist.com/middle-east-and-africa/2015/05/09/oil-on- troubled-waters.

Before 1970, goods were shipped to and from Salalah, located in Oman’s Dhofar region, in large vessels and unloaded via offshore launches and feeders. The strategy proved ineffective during monsoon season, however, and the government of Oman began developing the Port of Salalah (Raysut Port at the time). Structural improvements later in the 1970s allowed the port to receive larger vessels, yielding an annual shipping capacity of one million metric tons.

In the late 1990s, investments through an agreement between the Omani government and American shipping company Sealand, which later merged with Danish giant Maersk, transformed Raysut Port into a world-class container terminal. It was the first port launched through a government-private partnership in Oman. The Port of Salalah Container Terminal was inaugurated in 1998; operation began in 1999. A decade later, the Port would be recognized as an economic engine for the underdeveloped Dhofar region, providing 1,000 jobs initially and growing to 3,000 jobs a decade later. As of 2020, the port connected a network of the world’s biggest shipping lines, linking more than 3,200 vessels per year to more than 50 ports.

From its inception, the Port aimed to be a world-class choice offering efficient and reliable customer service and a safe and inspiring work environment, contributing to local and national society, and delivering shareholder growth (see Exhibit 1). But in 2000, when Huebner arrived, the organization struggled with an

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

underdeveloped administrative infrastructure and had difficulty with recruitment, retention, and training. Indeed, across the Middle East, companies devalued and even ignored the HR function.9

Workforce Overview

Port employees came from many countries, as only 55% were local Omanis.10 At the national level, the workforce was comprised of 50% Omanis and 49% expatriates (see Exhibit 2).11 Huebner learned that maintaining cohesiveness and inclusion among the Port’s culturally diverse workforce was difficult. Communication challenges persisted, as workers varied in their comfort with English, the adopted business language. Foreign guest workers often withheld knowledge from local Omanis to ensure their job security. Omanis sometimes resented the expats, despite some being with the company for more than 20 years. Native Omanis, previously part of an agrarian society, had to adapt to novel operations standards, yet they resisted heavy labor.

Huebner was concerned some low wage foreign workers were being exploited. Many lower level employees would work for two years, send all their earnings abroad to their families, and visit their home country for only a month or two every several years. When Huebner began her assignment, the Port paid employees based on their nation of origin, rather than job title or performance. Huebner worked hard to convince others the workers were not commodities, but human resources.

In a government-mandated national trend toward workforce Omanization (i.e., hiring and promoting more native workers), companies were expected to reach at least 60% Omanis and no more than 40% foreign workers. The phenomenon occurred across many Gulf countries.12 The Oman government’s goal was to provide meaningful job opportunities for a growing generation of young workers and to drive economic growth.13 For the Port, the effort also meant carefully tracking HR programs to ensure the company made progress.

All Huebner’s consulting on hiring and promotions had to adhere to the government’s mandated local/ foreigner employee ratio. At the time, technical, skilled labor was predominantly done by foreign guest workers, as local Omanis lacked such skills and knowledge. Proficiency in the English language was limited. The population was still emerging from its agrarian roots, and most working adults had been goat or camel herders or fishermen. However, they were simultaneously reluctant to perform unskilled labor, which was stigmatized in their society.

As part of the country’s Omanization efforts and sultan’s decree, the Port’s head of HR had to be an Omani. But few natives had any education, background, or training in the field.14 To address the challenges posed by Omanization requirements, the Port took the following steps: 15

• Set high standards for candidates during recruitment and selection.

• Set high standards for productivity and accountability, including providing instruction about the requirements for attendance, performance, and work ethic.

• Provide on-the-job training for technical and skilled jobs.

• Provide mentors for managers in key positions.

• Provide specialized training in technical areas.

• Provide English language classes.

• Identify specific positions for Omani-only incumbents.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

• Develop career plans for high potential Omanis to ensure development and retention.

Huebner found that another interesting aspect of working in a different country was learning labor and leave laws at the national level, as well as policies at the organizational level. Omani law required employers to give Muslim employees 15 days of paid leave at least once during their time with the company for their Haj, or pilgrimage to Mecca. The leave was granted in addition to annual leave, sick leave, and other time off. At the Port, married female employees were given 130 days paid time off for mourning in the case of a husband’s death. Three paid days off were given for marriage, but only one marriage per employment was allowed. (Males were nationally sanctioned for four marriages.) Per Omani law, sick leave was offered at 10 weeks, some fully and some partially paid, per calendar year. Women received six weeks of unpaid maternity leave after having been at the company for one year.16 By comparison, the United States did not mandate any paid sick or maternity leave through at least 2020.

Huebner discovered Omanis tended to work long hours for six days a week, sometimes with a shorter workday on Thursday. Friday served as a weekend day. Groups of employees often entered her office and spent long periods discussing and answering questions. The face-to-face time was critical for gaining respect and trust and building relationships. Conversations with male employees often became personal, with some asking Huebner why she was unmarried and not understanding why one would choose to be single, given the communal societal norms of the region. Not used to fellow employees inquiring about her personal or romantic life, she learned to patiently explain her own culture’s norms and engage in conversations that would feel intrusive in many other workplaces.

Employment and Cultural Practices

Oman had no equal employment laws while Huebner worked for the Port.17 Employers could discriminate freely, openly requesting job applicants be specific genders, nationalities, or ages. Older workers and those with medical conditions were often rejected or excluded. At the Port, rather than pay for performance or based on job title, compensation was based on country of origin. Most local Omanis were paid lower salaries than guest workers at the time.

Because Islam was the foundation of Omani culture and social norms, Huebner realized she must understand the religion to be successful. Islam influenced Omani laws pertaining to the workforce, as well as the way employees functioned on a daily basis. Omani businesses provided time for prayer during each work shift, with separate prayer rooms available for men and women. During Ramadhan, the Islamic month of fasting, Muslims worked six-hour shifts, rather than the typical nine. No food or liquids were consumed from sunrise to sunset, and none was made visible in offices. Employees working more than six hours were paid overtime. The hour restrictions and overtime benefits were not available to non-Muslim employees.

Huebner learned to adapt to other cultural differences. Men wore sandals to work and removed them often. Religious male Muslims would not look an unrelated woman directly in the eye. Women were not allowed to have unrelated men in their cars. Huebner learned she could not extend her hand to a Muslim male unless he extended his first. Many male Muslims refrained from touching unrelated women. In contrast, Omani men greeted each other with hugs, slaps on the back, and kisses on cheeks.

Huebner was intrigued by the way Omani family, home, and tribal life intersected with work. Expatriate men were rarely invited to local homes. But as a woman, Huebner was regularly invited to the Omani men’s homes to meet their mothers, wives, and daughters. Even in a society where women faced many restrictions, Huebner had advantages. She could build trust and develop relationships in a way men could not.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

While Omani society was tribal, not all tribes were equal. The Port had to ensure certain jobs went to certain tribes. For example, the Port’s HR director once dismissed an employee. The employee’s tribal leaders negotiated the termination, saying the Port had to hire his brother to maintain agreed-upon tribal employment ratios.

Gender in the Workplace

During her early months as a Port consultant, Huebner learned the extent to which gender shaped the employee experience in Oman. Women were allowed to work only with permission from male family members. Most women married and stayed home to raise children. In 2000, 11 out of 850 (1.3%) Port employees were female.18 All female Omani employees held low-level clerical jobs. At the national level, female labor force participation was around 8.6%, compared to 42.9% for men. However, a growing number of educated women were beginning to change the trend. According to Oman’s 2000 National Health Survey, only 1% of women aged 60 and above had completed 12 or more years of education, compared to 47% of women aged 20 to 29.19 Some Omani laws, decreed by the sultan, made employing women less favorable to a company. Women sometimes had to remain away from work for long periods of time (e.g., 130 days for the death of a spouse) and were forcibly retired earlier than men.

Many societal norms impeded women’s career advancement. The Port’s Dhofar region, where most women wore black abayas and face veils in public and the workplace, was fairly conservative. According to Huebner, the veils obscured women’s identities, eliminated non-verbal facial communication, and muffled verbal expressions. This made it more difficult for coworkers to take them seriously during interdependent work, often inhibiting their careers. Women were typically not allowed to drive, making them dependent on others for transportation. Women were perceived as only appropriate for certain functions, such as clerical or administrative, leaving little or no hope for a woman to pursue a management or technical role. This limited the pool of jobs they could seek.

There was also a stark difference between national-level government regulations and regional-level cultural norms. Though the Omani government had provided a progressive framework with supportive labor laws for its women, the Port adhered to the Dhofar region’s culturally conservative norms. While female employees in the northern region by the capital Muscat benefited from progressive trends in attire and career opportunities, women in the southern Dhofar region tended to remain in the home, veiled, and without much choice in their career paths.

However, over time, Huebner developed a more balanced perspective on the region’s norms for women’s attire and restrictions on individual freedoms. She was able to establish good working relationships and close friendships with both male and female colleagues. When she first started, one woman would come to visit her every day, bringing her items such as a kaftan, scarf, or incense burner. She felt safe and protected walking the streets of Salalah, a contrast from daily life as a woman in some American cities. She acknowledged some benefits of the society’s modesty as she assimilated into it. Yet, she also understood how she held certain advantages as a Western woman, as compared to local women and their limited opportunities. She often contemplated the role of women in Omani society, which was more nuanced than she had originally thought. This motivated Huebner to champion their enhanced career opportunities at the Port.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

First Steps: Business Challenges and Opportunities

The Port’s general manager first tasked Huebner with developing general proposals to improve the organization’s HR function. He needed multiple key positions filled, including the HR director, which by law had to be an Omani. He wanted a better compensation system. Nearly all of the Port’s existing HR practices were inadequate for the company’s size. Finally, he asked Huebner to make recommendations for additional changes as she interviewed managers.

Policies and procedures. Huebner began developing and codifying organizational policies and procedures to provide a framework for the Port’s decision making. A concrete, agreed-upon set of policies was needed to ensure consistency and fairness across company functions. Huebner helped form a policy council, consisting of middle-level managers, both Omani and expatriate, to review existing practices, codify them, and identify opportunities for improvement. The policies would need to be written in English and Arabic, with a goal of completing a comprehensive policy manual (see sample in Exhibit 3). Huebner established a timeline to review the proposed policies with senior management. Her effective work with the council members also served as a mechanism for building key relationships with people of influence, which enhanced her reputation and facilitated her work on other goals.

Job analysis and compensation system. To overhaul the Port’s compensation system, Huebner used her growing influence to convince the general manager that they needed to first develop an organization- wide job analysis, creating formal position descriptions and job evaluations. Huebner used a point factor methodology to complete the evaluations, with descriptions made available in both English and Arabic. Huebner helped create a job evaluation committee, which employed the Hay Method.20 Huebner attended a workshop on “Pay and Benefits in the Gulf region” in Dubai to collect comparative compensation data from the Dubai Port Authority. She hired a consultant from United Arab Emirates with experience using the Hay Method to train the Port’s job evaluation committee. She then partnered with the consultant to design new salary schedules and assist in defending pay adjustments, anticipating board resistance to increased salary costs.

The effort marked the first time the Port had used a formal compensation system, which was a difficult organizational culture change for some Omani managers to accept. Each job was to be slotted into a “band” based on content, rather than individualized by employee home country (see Exhibit 4). As she rolled out the new compensation design, Huebner explained several justifications for the change. The Port’s pay structure had not been updated since the organization launched in 1995 and did not reflect the current market, putting the company at a disadvantage for attracting and retaining the best workers. The organization had created many new jobs in the previous several years, and the new hires were not paid comparably to existing employees. Because the compensation process was informal, it included inconsistencies, favoritism, and a two-tier wage structure for locals and foreigners.

To foster an inclusive company culture, Huebner proposed a single-tier pay plan with an equitable process for all employees. The Port had a reputation for requiring hard work and long hours while offering low pay. For example, stevedores lashed containers on ships and handled cargo under extreme heat and dusty conditions for 48 hours per week. They earned about $200 per month and frequently left as soon as they completed their contracts. The Port could no longer afford to lose skilled workers, such as the harbor pilots needed to escort large vessels into the harbor.

To build the new compensation program, Huebner followed a six-step process:

1. Job analysis.

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Margaret Huebner: Building the Human Resources Function at Oman’s Port of Salalah

2. Job evaluation.

3. Market study and analysis.

4. Design of pay structure.

5. Managerial approval.

6. Implementation for all employees.

The program introduced new discipline to the Port, as the system was fairer and based on sound compensation principles. It also established regular performance reviews, which provided a timeline and process for pay raises and promotions. This helped discourage monthly pleading for promotions, which had become the norm without a formal process in place. With a streamlined and effective rewards system, senior leaders were excited at the prospect of attracting, rewarding, and training high-quality employees.

HRIS. As employee data was previously stored in a simple spreadsheet, the Port’s rudimentary payroll system became increasingly unable to serve its growth needs. Errors were rampant, and required information was often unavailable. Huebner needed to select an HR information system (HRIS) capable of managing the Port’s growth. She began reviewing the HRIS available in the Gulf region and used in Oman, especially by government entities. This approach helped her find a system capable of generating the bilingual government reports the Port required. The HRIS would drive integrated payroll and, later, an attendance and time- keeping system. Most of the HR staff at the time had limited English fluency, so they would require training in Arabic. The expenditure needed to be justified to senior management and the Port’s board of directors. Finally, Huebner needed to sensitively engage in the tremendous effort of rolling out the system and implementing it throughout the organization.

Internal talent development. Huebner used her early projects to train internal HR employees. Executing the projects helped provide background knowledge for the incoming HR manager, who was eventually promoted to director. No formal HR training was available in Oman—Sultan Qaboos University offered no courses in the subject. However, Huebner found one book, written by an Omani in Arabic and English, outlining HR policies in line with Omani labor laws. She used the book to help design various HR training courses, adapting Western best practices to the Omani culture and the Port operations environment. In her third month at the Port, she launched a “Basics in HR” course for prospective HR employees and “Performance Management” workshops for people managers.

Huebner facilitated management classes in which supervisors were instructed on new HR policies as they were adopted. The strategy helped to smooth policy rollouts, as managers learned firsthand how new policies fit with the Port’s business goals, operational needs, and culture. With the need to integrate a diverse workforce into strong teams, Huebner believed it was important to establish fair and consistent practices. Omanis tended to use wasta, or influence, to secure jobs, promotions, and other favors. A strong and formalized merit system helped to promote equity. At the same time, Omani society was more communal than individualistic, and adaptation was necessary. For example, rewarding teams proved more successful than rewarding individuals.

To help advance the Port’s Omanization of internal employees, Huebner implemented an incentive program that encouraged non-Omani employees to transfer …