Retention of knowledge within the private sector organizations in the Kingdom of Saudi Arabia






Alshanbri, N.
Khalfan, M.
Maqsood, T.


RMIT University,
Melbourne,
Australia

Correspondence:
Malik Khalfan
RMIT University,
Melbourne,
Australia
Email: malik.khalfan@rmit.edu.au

Abstract

This paper presents a brief literature review of knowledge and explores the role of Knowledge Management (KM) and Human Resources Management (HRM) both in sustaining Intellectual Capital (IC) within an organisation, particularly in the context of Nitaqat Program in Kingdom of Saudi Arabia (KSA). Based on the literature review, it argues that a new worker could be transformed to a knowledge-worker if appropriate transition processes were in place for knowledge retention and capture from an out-going employee. This paper presents the findings from the interviews undertaken with both local and non-local employees in the private sector in KSA and reviews the impact of Nitaqat Program resulting in knowledge sharing and management of sticky knowledge between non-local employees leaving the companies and local employees taking their positions.

Key words: Knowledge Management, Knowledge Sharing, Human Resources Management, Employees, Nitaqat, Kingdom of Saudi Arabia

Introduction
Knowledge has two widely known formats which are explicit and tacit as defined by Polanyi (1964). Explicit knowledge can be expressed in words and numbers. This format can be easily shared and transferred between people in many forms like data, specifications, manuals, etc. On the other hand; tacit knowledge which is often difficult to share or transfer comes in forms such as insights, intuition, and hunches. In order to transfer tacit knowledge; it needs to be converted into an explicit form. Nonaka (1994) identified four possible ways for Knowledge transformation from one form to another; these ways are Socialization (from tacit to tacit); Externalization (from tacit to explicit); Internalization (from explicit to tacit) and Combination (from explicit to explicit). Nonaka (1994) also defined the Externalization as the way of converting tacit knowledge into words or visual concepts to make it easier to be understood. The previous methods can transform knowledge forms from one to another but sometimes it is hard. When Knowledge is hard to transfer then it is called sticky knowledge.

Eric von Hippel (1994) defined stickiness of information as the "incremental cost of transferring a given unit of information in a form usable by the recipient". Sticky Knowledge is also defined as the knowledge that is hard to move or costly to transfer. Knowledge transfer has been defined as an activity that facilitates knowledge movement in any organization (Bou-Llusar and Segarra-Cipres, 2006).

Knowledge stickiness has negative effects on an organization's performance; while the ease of knowledge transfer can assist in: Facilitating better organization decision-making capabilities; Improving administrative services; Preserving organization memory; Combating staff turnover by facilitating knowledge capture and transfer; Improving quality of services, products and innovation; Reducing 'product' development cycle time; Reducing costs; competitive capacity and position in the market; increasing customer satisfaction; employee satisfaction; communication and knowledge sharing; and Knowledge transparency and retention.(Kidwell et al., 2000, Jennex et al., 2009, Maqsood, 2006).

Szulanski studied more than 120 "best practices" within 8 firms and he found that the three largest contributors to the knowledge stickiness are: The lack of absorptive capacity by the recipient; Causal ambiguity and the arduous relationship between the information source and recipient. Here is a brief description on these factors:

Lack of absorptive capacity: There are many matters that can increase the capacity of the recipient in absorbing new knowledge such as the related prior knowledge such as the gained educational knowledge in a selected field and the recipient's ability to recognize and seek sources of support for implementing a new practice. The lack of absorptive capacity for the recipient is linked to knowledge stickiness and it also can paralyse the transferring and the applying of new knowledge. This factor will increase costs, delay completion and may compromise the success of the transfer event. Therefore, if a recipient lacks absorptive capacity, Szulanski (1996) hypothesized stickiness would be increased.

Casual ambiguity: the unknown reasons or the uncertainty for knowledge transfer's success or failure is the main cause of causal ambiguity. Szulanski hypothesized that the greater the causal ambiguity the more difficult knowledge can be transferred. Casual ambiguity is linked to many factors and it is mainly linked to the human factor.

Arduous relationship: (lack of empathy, trust or commitment to collaborate in the task of sharing knowledge). Transferring knowledge depends on the interactions of two parties and usually human factors play a major role in these interactions directly or indirectly. As long as there is an intimacy and an ease of access of communication between the source and the recipient; transferring knowledge wouldn't be an issue. Szulanski (1996) mentioned that the arduous relationship between the source and the recipient (such as laborious and distant) is considered a factor that might cause the stickiness of transferring knowledge.

Nitaqat Program
Nitaqat is a program that aims to stimulate employment of locals in the Kingdom of Saudi Arabia. It determines the new rates of Saudisation and applies them to all private sector enterprises. Furthermore, it has linked these rates with a matrix of incentives and facilities that qualify them according to the rates of Saudisation. The program divides the private sector enterprises into four zones as shown in Figure 1 (excellent, green, yellow and red). Most of them are now situated in the green zone, which includes firms that have achieved reasonable and acceptable rates of employing Saudis. The enterprises that are located in the yellow and red zones do not employ Saudis or their rate of Saudisation is less than acceptable (see an example in Figure 2). These enterprises have been given sufficient time by the Ministry of Labour to correct this and move to the green and excellent-rated zones.

Figure 1: Four categories for Nitaqat (Source: Saudi Ministry of Labour)


Figure 2: Saudisation requirement within four categories for Nitaqat (Source: Saudi Ministry of Labour)


The firms that accepted Nitaqat and entered the excellent and green zones will be provided with an array of facilities and motivations, making it easier for them to deal with their employees and workers' unions, besides giving them sufficient flexibility to achieve the desired levels of growth.

Furthermore, the program aims to create a much-needed balance between the advantages of hiring a foreign worker and a Saudi worker by raising the cost of maintaining foreign workers in the red and yellow zones. Also, Nitaqat is a monitoring tool for the Saudi labour market, one which aims for more localisation of jobs in the private sector and reducing the country's unemployment rate. In this study 45 companies located in the green, yellow, and red zones were contacted with an official letter from the University. Twenty companies agreed to participate in the study from three categories - green, yellow and red zones. Finally, just 13 companies were interviewed during the given timeframe. Their classifications are as follows: four companies in the green zone; five companies in the yellow zone; and four companies in the red zone. This paper presents the analysis and discussion from the interviews undertaken with local and non-local employees regarding the implementation of Nitaqat Program in their companies.

Research Methodology
The overall aim of the study was to review the literature of both Knowledge Management and Human Resources Management in order to find the links between both of them and using these links to support the employee replacement process in Saudi Arabia, specifically with the context of the Nitaqat program. One of the main objectives of this research was to investigate and document the problems or barriers that Saudi organisations may face while enforcing Nitaqat. This study is considered to be a Social Constructivism Approach (case study, descriptive study, and exploratory research) because it seeks to document a particular interest. For the purpose of obtaining necessary data, the researcher employed qualitative research techniques. This decision was based on the rationale and objectives of the study, the required depth of the investigation and dominance of "how" and "what" questions. The above mentioned objective was addressed by the in-depth case studies. Tools to collect data included semi-structured interviews, as well as documentation and archival analysis. Conducted case studies consists of interviews with HR managers and KM experts, local employees and non-local employees in 5 large, 5 medium-sized and 5 small companies in order to collect the primary data. The five economic sectors that were explored are: construction; wholesale and retail trade; manufacturing; agriculture, forests, hunting and fishing; and transport, storage and telecommunications. These five sectors were considered worthy as they include the majorities of foreign labour in the private sector in Saudi Arabia.

In this study 45 companies located in the green, yellow, and red zones were contacted with an official letter from the University. Twenty companies agreed to participate in the study from three categories - green, yellow and red zones. Finally, just 13 companies were interviewed during the given timeframe. Their classifications are as follows: four companies in the green zone; five companies in the yellow zone; and four companies in the red zone. The qualitative data for this research were obtained from individual face-to-face semi-structured interviews with Nitaqat's manager from the Saudi's Ministry Of Labour, 13 Saudi Human Resources managers in the Saudi's private sector, 13 local Saudi employees, and 13 non-local employees. Secondary sources were Ministry of Labour documents and announcements about Nitaqat program, and articles in Saudi Arabian major newspapers and specialist journals or magazines.

Analysis and Discussion of interviews with Saudi (local) employees about the Nitaqat Program
Local employees are the Saudi national employees who are working in the country's private sector. Thirteen local employees from the private sector were interviewed: four from green zone companies, five from yellow zone companies, and four from red zone companies. The participants were asked a number of questions. The first question was about the Nitaqat program and whether the program affected the organisation during the implementation. The responses were as follows (see Table 1):

Table 1: Local employees and Nitaqat program 1 of 5


• Nine local employees (four from the green zone, three from the yellow zone, and two from the red zone) said that the program did not affect the work or the organisational performance.
• Four local employees (from yellow zone) said it indeed affected the organisation. One of them said that Nitaqat's impacts were felt in the company's workplace due to delays in some projects. Another yellow zone local employee, but from a different company, stated that the program affected the firm as it is located in the yellow zone and the current position of the company is not clear, which might affect his future career in his organisation.
• The case was the same with red zone companies. Two local employees said that the program affected the organisational culture and environment, and they were currently looking for other jobs in case their bosses could not find a way to move the business to the green zone.

The local employees working in the private sector were also asked about the benefits of the Nitaqat program to their companies. Nine local employees (four from the green zone, four from yellow zone and one from the red zone) asserted that there were some benefits of applying Nitaqat as follows (refer to Table 2):

Table 2: Local employees and Nitaqat program 2 of 5

• One local employee from the green zone said that the program helped define the Saudi private sector by classifying the sectors in more detail.
• Two local employees (one from the green zone and another from the yellow zone) said Nitaqat will create a competitive environment and help in securing jobs for locals in the private sector.
• Six local employees (one from the green zone, four employees from the yellow zone and one from the red zone) stated that Nitaqat will create job opportunities for locals and thus increase the number of Saudis in the private sector.
• Two green zone employees commented that Nitaqat will facilitate the MOL's services such as renewing non-locals' visas and issuing new ones.
• Four local employees (1 yellow zone employee and 3 red zone employees) stated that Nitaqat delivered no benefits to the company.
• All local employees in the 13 companies were asked if Nitaqat regulations were introduced to them, to which they replied in the affirmative.

The thirteen local employees were asked about problems in regard to localising jobs in Saudi Arabia and they responded with the following answers (see Table 3):

Table 3: Local employees and Nitaqat program 3 of 5

• Five locals (two green zone employees, two yellow zone employees and one red zone employee) believe that there are no barriers to localising all jobs in Saudi Arabia's private sector.
• According to four locals (one green zone employee, two yellow zone employees and one red zone employee), one challenge to localising jobs is the lack of trust between senior management and the locals; this needs to improve.
• Three locals (one local employee from each zone) said that the nature of the job itself was one such barrier. They said some jobs in Saudi Arabia will not be done by Saudis, such as drivers or cleaners, and it is difficult to recruit locals to carry out these jobs. Others mentioned the odd working hours of some jobs, such as call centre operators.
• Two local employees (one in the yellow zone and another one in the red zone) believed that the time frame that was specified by the MOL to implement the program was too short.
• Only one local employee from the yellow zone companies remarked that the main barrier for localising all jobs in the private sector was salaries. This is because the salaries of locals were much higher than that of non-locals.

The local employees were also asked about the barriers to localising jobs in their companies (refer to Table 3). The answers did not differ much from the previous question about the barriers to localising jobs in Saudi Arabia. Local employees in the participating companies were also asked whether there was an employee replacement process in their companies. The responses were varied (see Table 4):

Table 4: Local employees and Nitaqat program 4 of 5


• Nine local employees (one from the green zone, four from the yellow zone, and four employees from the red zone) said that there was no such process.
• Two local employees (one from the green zone and another one from the yellow zone) said that the employee replacement process did exist and was quite effective in their workplace.
• Two local employees in the green zone companies said the process existed but was not effective.

Furthermore, the local employees were asked about the benefits of the Nitaqat program to the Kingdom of Saudi Arabia:
• All 13 local employees across different zones said the main benefit of applying Nitaqat was reducing the local unemployment rate. Again, this was not surprising as it was the main benefit that was linked to the program when the MOL announced it.
• Five local employees (two from the green zone and three from the yellow zone) said that Nitaqat will assist in defining and organising the Saudi private sector.
• Three locals (one from the yellow zone and two from the red zone) said that the program helped in limiting and controlling the number of non-local employees.
• Three local employees (two from the green zone and one from the yellow zone) said that the program will benefit the country by limiting the problems associated with the non-locals, which can result from social, cultural and religious differences.
• One local employee in a green zone company said Nitaqat will assist in transferring knowledge and experiences to the new-generation local employees in Saudi Arabia.

Local employees were asked if the knowledge they had acquired during their time with their company belonged to them or to the company:
• Nine employees (three green zone employees, five yellow zone employees, and one red zone employee) said that the knowledge belongs to both the company and the employee.
• Three employees from the red zone said that the knowledge belongs to the company.
• Only one employee from the green zone said the knowledge belonged to him.

Furthermore, all the Saudi (local) employees were asked about the best way to transfer knowledge:
• Eleven Saudi employees (four green zone employees, five yellow zone employees, and two red zone employees) said that the best way to transfer knowledge was training courses that involved the "leaving employee" as an instructor.
• Seven Saudi employees (two green zone employees, three yellow zone employees, and two red zone employees) believed the best way was to offer financial rewards.
• One employee from the yellow zone said that the best way to transfer knowledge was to implement new communication tools that could help retain essential knowledge in one accessible place for all employees.

Table 5: Local employees and Nitaqat program 5 of 5


Analysis and Discussion of interviews with Non-local employees about the Nitaqat Program
The non-local employees who participated in this study were foreign employees working in the Saudi private sector. They held an "employment visa" enabling them to work in their specific sector. Thirteen non-local employees from the private sector were interviewed: four from green zone companies, five from yellow zone, and four from red zone companies. The participants were asked a number of questions. The first question was about the Nitaqat program and whether the program affected the organisation during the implementation (refer to Table 6). Five non-local employees (four from the green zone and one from the red zone) said that Nitaqat did not affect the work or the organisation's performance. Non-local employees in the green zone companies were not affected by Nitaqat policies. However, employees in the yellow and red zone companies who have worked in the Kingdom for six years have the right to work for another employer in the excellent or green zone companies as a reward for their commitment to localisation. This action has to be taken within three months of the expiry of the employment visa "Iqama" or they will be deported. This rule puts many non-local employees under pressure and has led to an increase in employee turnover in both red and yellow zone companies.
Nine non-local employees (five from the yellow zone and three from the red zone) said Nitaqat affected their business in the following ways:

• Three non-local employees (two from the yellow zone and one from the red zone) said that Nitaqat affected their organisation's workplace environment. This issue is linked with the next point.
• Three non-local employees (two from the yellow zone and one from the red zone) said that Nitaqat affected life at work by increasing the level of stress, which led to a number of problems for employees.

Cox and Britain (1993) define stress as an interactive psychological state between the individual (internal) and the situation (external), which can affect the individual's ability to cope with the external situation. Too much stress has many negative outcomes and this issue has been discussed by many scholars such as Cox and Britain (1993), Cooper et al. (1996), Lazarus (1995), Soylu (2007), and Rechter et al. (2013). Nieuwenhuijsen et al. (2010) and Mosadeghrad et al. (2011) discovered evidence for a strong link between stress, work environment, and a number of factors including high job demands, low job control, low co-worker support, low supervisor support, low procedural justice, and low relational justice, as well as external uncontrollable factors such as governmental laws (for example, the localisation program). They also linked stress with many effects such as turnover, absenteeism, aggression, and hostility.

Three non-local employees (two from the yellow zone and one from the red zone) said Nitaqat affected the organisation's future and made it appear uncertain. In a recent Arab News (2014) article, it was noted that 200,118 private sector companies in the red zone (out of 1.8 million companies in the private sector) had closed down by 2013. The MOL has confirmed this figure (MOL, 2013a). Notably, around 59% of those firms were small and micro enterprises that need to employ at least one Saudi national. According to the MOL, the number of medium-sized and large firms that closed due to Nitaqat requirements stood at around 200. The uncertain future of red zone companies under the new Nitaqat program was cited by the non-local employees surveyed in this study as a problematic outcome.

Table 6: Non-local employees and Nitaqat program 1 of 4

Three non-local employees (one from the yellow zone and two from the red zone) said Nitaqat affected not only the company's future but also their job security. On this theme, a study by Kraimer et al. (2005) found that job security wielded an influence on the individual employee's performance. The study also linked employees with low job security, and cited a negative relationship between threat perceptions and supervisor's rating of a worker's job performance. Luechinger et al. (2010) noted that the significance of job security for the private sector employees was higher compared to public sector employees. The study also shows that the subjective well-being of private sector employees is much more sensitive to fluctuations in unemployment rates compared to public sector employees. Job security in Saudi Arabia's private sector and how the Nitaqat program affects it needs more investigation in the future.

Two non-local employees (one from the yellow zone and one from the red zone) said that Nitaqat affected the organisation as it led to employee turnover resulting in the loss of experienced and expert employees. Abbasi and Hollman (2000, p. 333) have defined employee turnover as "the rotation of workers around the Labor market; between firms, jobs, and occupations; and between the states of employment and unemployment". Employee turnover is always expensive and detrimental, and affects organisational performance (Mueller & Price, 1989). Replacing the leaving employees and selecting, recruiting and training new ones costs a lot of time, money, and effort (Mossholder et al., 2005).

Park and Shaw (2013) stated that the relationship between total turnover and organisational performance is significant and has negative impact. The reasons for employee turnover have been discussed and listed in many previous studies (Abbasi & Hollman, 2000; Firth et al., 2004; Mano-Negrin & Tzafrir, 2004; Ongori, 2007). These include job stress, lack of commitment to the organisation, extensive job pressures, job dissatisfaction, low wages, powerlessness, economic reasons, organisational instability, poor personnel, toxic workplace environment, poor HR policies and procedures, and lack of motivation. Ongori (2007) showed that employee turnover imposes many difficulties on the company's performance and can be considered expensive due to the hidden costs associated with paying the leaving employees and hiring new ones. The Nitaqat program has caused a huge employee turnover in red zone and yellow zone companies. Losing the leaving employee's knowledge is one of the most important issues that these companies have to consider. Two non-local employees (one from the yellow zone and one from the red zone) confirmed that Nitaqat affected their organisation's performance by causing project delays.

Non-local employees in the private sector were asked about the benefits of the Nitaqat program to their companies. These were as follows (see Table 7):

Click here for Table 7: Non-local employees and Nitaqat program 2 of 4ocal employees and Nitaqat program 2 of 4
• Nine non-local employees (five from the yellow zone and four from the red zone) said there was no noticeable benefit from Nitaqat to the company.
• Four from in the green zone said Nitaqat benefited the company by facilitating MOL processes, such as renewal of the employment visa.
• All non-local employees in the 13 companies were asked whether Nitaqat regulations were introduced to them, to which they replied in the affirmative.

Barriers to localisation from the non-local employees' point of view were evident. The 13 non-local employees were asked about these problems. Their responses were as follows:
• Six non-local employees (two green zone employees, two yellow zone employees and two red zone employees) believed that lack of expertise amongst Saudi nationals was one of the barriers to localising jobs.
• Five non-local employees (two green zone employees, two yellow zone employees, and one red zone employee) stated that the outcomes of the education system are not related to the requirements of the Saudi economy.
• Five non-local employees (one green zone employee, two yellow zone employees and two red zone employees) said the nature of the job itself was one of the barriers to localisation. They said some jobs in Saudi Arabia, such as drivers or cleaners, would not be done by the locals.
• One employee from the yellow zone cited the working hours of some jobs as a barrier as Saudis were not willing to work for longer hours or during night shifts.
• Five non-local employees (two green zone employees, one yellow zone employee and two red zone employees) said that the major barrier to localisation were Saudi national citizens' high salaries.
• Four non-local employees (two yellow zone employees and two red zone employees) said that the commitment of locals to private sector jobs was questionable. They had observed that more time and effort was required to trust young Saudi employees.

The non-local employees were asked about the barriers to localising jobs in the companies they were currently working in. The answers were as follows (see Table 8):

Table 8: Non-local employees and Nitaqat program 3 of 4

• Seven non-local employees (two green zone employees, three yellow zone employees and two red zone employees) said that the nature of the job itself was a barrier.
• Five non-local employees (two green zone employees, one yellow zone employee and two red zone employees) said that the high cost of Saudi national employees was a barrier.
• Six non-local employees (two green zone employees, three yellow zone employees and one red zone employee) commented that the inexperience of locals was a problem.
• Two non-local employees in the red zone companies believed that locals did not want to work in red zone companies.

The non-local employees in participating companies were also asked whether there was an employee replacement process where they worked:
• Nine non-local employees (one from the green zone, four from the yellow zone and four from the red zone) said that there was no such process in the company.
• Two non-local employees (one from the green zone and one from the yellow zone) said that the employee replacement process did exist and was effective in their workplace.
• Two non-local employees in the green zone companies said the process existed but was not effective.

The non-local employees were asked about the benefits of the Nitaqat program to the Kingdom of Saudi Arabia (see Table 9):

Table 9: Non-local employees and Nitaqat program 4 of 4

• All 13 non-local employees across different zones said that the main benefit from applying Nitaqat was less local unemployment. Again, this was not surprising as the same answer was given by the local employees. This benefit was always what the program intended to do when the MOL announced it.
• Three non-local employees (one from the yellow zone and two from the red zone) believed that Nitaqat helped in limiting the number of non-locals in Saudi Arabia.
• One non-local employee from a green zone business believed that Nitaqat will create a better future for Saudi youth. The employee linked it to the huge number of currently unemployed locals and the crimes that idle young Saudis were committing. The employee believed that Nitaqat will limit such problems associated with unemployment.

The non-local employees were also asked whether the knowledge they had acquired during the time they had spent with their respective companies belonged to them or to the company:
• Eight non-local employees (one green zone employee, four yellow zone employees and three red zone employees) said the knowledge belonged to them.
• 5 non-local employees (three green zone employees, one yellow zone employee and one red zone employee) said that the knowledge belonged to the company as well as the employee themselves.
• Remarkably, none of them considered that the knowledge belonged to the company.

The final question that was put forward to all non-local employees related to the best way to transfer the knowledge for outgoing foreign employees to incoming local employees. Firstly, all non-local employees (four green zone employees, five yellow zone employees and four red zone employees) commented that the best way was to offer financial rewards. Secondly, only one non-local employee from a yellow zone firm mentioned training courses besides financial rewards.

Conclusion
Recognizing that lost knowledge through replacing employees may be a threat to organizations and country's economy is a critical first step in addressing this phenomenon. Retaining the needed knowledge in organizations relies on people and the ability of HR departments in changing human behaviour. The success of this endeavour depends on the commitment of all HR managers in collaboration with the departing employees and the new ones. Human Resource Departments are playing a major role as a strategic partner for organizations and not as supporting administrative departments due to their role in facilitating knowledge between employees. This paper may only look at a very particular part of the problem with the current situation in Saudi Arabia and highlights the role of knowledge management in facilitating knowledge sharing. The final conclusion from the interviews undertaken with both local and non-local employees suggests that there were many common themes to which all of them agree or disagree. All the employees from the green zone companies responded that there was no great impact of Nitaqat program within their organisations. All the employees working with the red zone companies stated that Nitaqat brings no benefits to their organisations and all of them were worried about losing their jobs. Whereas, all the employees from yellow zone companies were unclear about the current situation and unsure about the future of their companies. They all stated that Nitaqat has resulted in project delays in their organisations. Barriers to implement the Nitaqat program includes; education system's outcomes that is not in line with industries' requirements; lack of expertise among local Saudi nationals; commitment of local employees to private sector; odd working hours; blue collar nature of the certain jobs; and private sector salaries which were much lower than salaries awarded by public sector for similar job description, qualification, and experience.

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