Human Resource Management in Jordan

Abstract

Human resource management (HRM) forms a fundamental component in a country’s quest to achieve sustainable economic growth. However, the application of HRM practices varies across countries due to national cultural differences. Thus, it is imperative for multinational companies’ HR managers to develop a comprehensive understanding of the national culture. Gaining such intelligence is vital in the process of formulating optimal HR practices. Different economies have developed diverse HRM models in an effort to foster their economic growth. However, the available literature indicates the existence of scanty information on the adoption of HRM in the Middle East. As one of the Middle East countries, Jordan is characterised with poorly developed HRM models. One of the factors that have led to the poor development of the HRM relates to the existence of strict cultural values and norms and influence by the political system. In a bid to improve its competitiveness, it is imperative for Jordan to improve its HRM practices by seeking best the HRM practices from the developed economies.

Introduction

Human Resource Management (HRM) practices are subject to diverse cross-national settings. Several human resource management scholars affirm that national HRM practices are influenced by two main factors, which include the ‘culture-free’ factors and the ‘culture-bound’ factors. The ‘culture-free’ factors “relate to elements such as the nature of the organisation, size, and age” (Budhwar & Mellahi, 2001, p. 102). Conversely, the ‘culture-bound’ factors entail the institutional and national culture. Therefore, it now acknowledged conventionally that HRM practices different from one place to another based on socio-cultural models in a given society. Budhwar and Mellahi (2006) further assert that until “the 1970s, the view that management theories are universally applicable was quite pervasive” (p. 37). However, the emergence of the contingency view has proved otherwise. Despite the view that organisations are progressively becoming similar at the macro-level, but a significant difference is evident at the micro-level, which is explained by their culturally based dissimilarities.

In a bid to succeed in formulating optimal management theory and practice especially in the developed countries, it is vital for practitioners and researchers to gain sufficient understanding on how human resources are managed coupled with the core factors that influence human resource management in the developing economies. Budhwar and Mellahi corroborate that existing literature “suggests that the concept of HRM is relatively new and possibly non-existent in some regions of the developing world” (p. 5).

HRM in the Middle East

The Middle East countries rank amongst the economies that do not have a well-developed literature on HRM. Few studies on HRM in the Middle East have emerged over the past decades. The limited available scholarly information on HRM in the Middle East majors on training and development of employees. However, the available studies highlight limited effort to understand the management styles in the Arab region and their efficacy in organisational development and cross-cultural negotiations.

Some scholars affirm that most Middle East countries are characterised by social-cultural similarities, as evidenced by a low degree on future orientation, masculine societies, hierarchy, and group-orientations. Additionally, some Middle East countries such as Saudi Arabia are characterised by numerous barriers at the micro and macro level that hinder the transfer of Western-based skills. Budhwar and Mellahi (2001) emphasise that HRM in the Middle East is influenced by Islamic principles, Islamic work ethics, and Islamic values. This aspect explains the low level of development and the adoption of sound HRM practices in the Middle East. Therefore, in a bid to succeed in the Middle East, most foreign companies are forced to integrate a high degree of acculturation (Budhwar & Mellahi, 2001).

The lack of a common HRM framework in the Middle East underscores the importance of developing country-specific understanding on its HRM practices. Additionally, the existence of cross-national differences may limit the application of a common HRM framework amongst different countries.

Jordan

Despite its small size, Jordan is strategically located and it plays a fundamental role in the Middle East region. The country borders a number of states, which include Iraq to the east, the Gulf of Aqaba and Saudi Arabia to the south, Syria to the north, ad West Bank in Israel to the west. The country’s size is estimated to be 92,300 square kilometres and it has a coastline of only 26 kilometres [Red Sea]. According to a report released by the World Bank (2004), Jordan’s population is estimated to be 5,611,202 of which 35.2% is comprised of children under the age of 15 years.

Social-economic and political background

Jordan’s core natural resources include fertilisers, phosphate, and potash, which constitute approximately 4% of the country’s Gross Domestic Product [GDP]. Due to its limited natural resources, Jordan’s economy is mainly dependent on tax revenues and foreign aids, especially from other Gulf economies. Furthermore, Jordan is characterised by diverse environmental challenges, for example, a high rate of deforestation, limited natural fresh-water resources, desertification, and overgrazing and soil erosion

In its quest to deal with these challenges, the Jordanian government has entered diverse international environmental agreements such as the Kyoto Protocol, which advocates environmental conversation; for example, by protecting biodiversity and eliminating climate change (Budhwar & Mellahi, 2006). On the political front, Jordan is comprised of a liberal monarchy, which means that it is governed through a democratically elected parliament. A king heads the country and he appoints the prime minister, the senate, the cabinet, and the judges. Over the years, the country has experienced political stability. Moreover, Jordan has maintained good political, economic, and social relationship with the international community (Budhwar & Mellahi, 2006). Despite the government’s effort in sustaining political stability, the country currently faces major political challenges arising from the escalating spill over effects especially from the Iraqi and Syrian conflicts. These conflicts increase the country’s trade deficit and reduce the level of confidence amongst investors.

Jordan has transformed its economy from a rural economy to a moderately modern and urbanised one. The country is dependent on a number of economic sectors such as the agriculture coupled with the industrial and the services sectors. The agricultural sector contributes approximately 3.6% to the country’s GDP. The core agricultural products include citrus fruits, olives, tomatoes, barley, wheat, and melons while livestock includes poultry, goats, and sheep. The services sector accounts for the largest proportion of the country’s economy and it constitutes 67.4% of the country’s GDP. The country’s dependence on oil imports poses a major threat to the economy due to the fluctuation of global oil prices.

Over the past decade, Jordan has been focusing on implementing a number of structural reforms in diverse sectors such as the health and education sectors. Other structural reforms that the country has prioritised relate to liberalisation and privatisation. For example, the country joined the World Trade Organisation (WTO) in 2000, hence opening up its economy to the international community. Furthermore, Jordan has also entered free trade agreements with other WTO member states. Other trade agreements that the country has joined include the Jordanian-European Partnership Agreement [JEPA] and the Arab Free Trade Zone [AFTZ] (Budhwar & Mellahi, 2006).

The Jordanian government has also improved its commitment to reforming the subsidies and improving the country’s social protection systems. The country is also committed to improving its attractiveness to local and foreign investors. One of the strategies that the government has adopted entails the establishment of an enabling environment for investment. For example, the government has prioritised public-private partnership coupled with investing in tax reforms such as tax management and administration (World Bank, 2014). The prevailing political environment in the Gulf region requires Jordan to adopt sound growth-oriented reforms and economic policies in order to mitigate the country’s exposure to external shocks.

The role and importance of HRM to Jordan’s economic reforms

According Zanko (2002), any reforms process is characterised by the implementation of diverse changes, some of which might be unprecedented. Furthermore, the reforms being implemented might have a profound effect on a country’s economy. For example, the transformation of a country from being a rural economy to an urban economy might lead to an increase in the number of white-collar jobs. Moreover, technological changes coupled with the emergence of the information age might lead to new demands amongst the workers such as flexible working conditions. In a bid to deal with these changes, it is imperative for governments to integrate effective HRM practices (Zanko, 2002).

The Jordanian government has recognised the importance of adopting effective HRM practices in order to succeed in implementing economic reforms, hence attaining and sustaining a high level of global competitiveness. In a bid to achieve this goal, the Jordanian government has appreciated the importance of fostering a high level of collaboration between the private and public sectors. Thus, the government has formed a Council for Economic Consultancy [CEC], which is comprised of representatives from the private and the public sectors. The role of the CEC is to predict the various aspects that the government should consider in its economic reform strategy.

Development of a knowledge-based economy

The emergence of the information age due to the development in information communication technology [ICT] has considerably increased the need for countries to transform themselves into knowledge-based economies. In its pursuit for a knowledge-based economy, Jordan is focused on implementing a number of reforms. First, the country intends to position itself as an IT hub in the Middle East. Thus, the country is committed to developing an IT services and software industry, which will transform it into a technology exporter.

In a bid to achieve this goal, the Jordanian government in collaboration with the Jordan Computer Society has launched a program dubbed REACH Initiative. The government has also established the Ministry for Information Communication Technology, which is charged with the responsibility of strengthening the governments’ effort to transform Jordan into a knowledge-based economy (Budhwar & Mellahi, 2006). Furthermore, the government has formulated a comprehensive legal framework, viz. the Intellectual Property Rights [copyrights], in an effort to enhance innovation. Additionally, the government has enacted custom duties and censorship laws on the importation of ICT technologies.

In addition to the above efforts, the Jordanian government focuses on nurturing an e-government culture through the liberalisation of the telecommunication network. The government expects to achieve its goal of becoming a knowledge-based economy due to the high level of literacy amongst Jordanians. Approximately, 99% of Jordanians are educated. The government has also introduced a compulsory computer program in primary schools (Budhwar & Mellahi, 2006).

The country has also improved the ICT infrastructure, as evidenced by the establishment of Internet cafes in the country. The entry of major ICT companies such as One World Software Solutions and Cisco Systems has led to an improvement of the country’s ICT infrastructure. The country’s ICT infrastructure has also been enhanced due to the establishment of the United Nations’ ICT regional headquarters in the country. The entry of foreign-owned companies into Jordan has increased the intensity of competition for highly qualified workforce (Budhwar & Mellahi, 2006).

Promotion of export-oriented growth

In its quest to spur the country’s economic growth, Jordan is committed to diversifying its economy. One of the aspects that the government has focused on entails the promotion of export-oriented production. In a bid to achieve this goal, Jordan has established special economic zones [SEZs] in different regions of the country such as the Karak Industrial Estate and another located at the Gulf of Aqaba. The objective of the SEZs is to enhance industrial production. Jordan has also established Qualifying Industrial Zones [QIZs] through its partnership with the United States. The industries located at the QIZs specialise in the production of goods meant for export into the US market. The goods produced in these zones are exempted from excise tax and custom duty (Budhwar & Mellahi, 2006). The QIZs has attracted a significant number of Israeli and American entrepreneurs. The free zones have played a fundamental role in creating employment especially amongst women.

In addition to employment creation, the free zones have led to a remarkable improvement in the quality of country’s products. For example, Jordan has improved its ability to meet the international quality standards, hence improving its competitiveness in the global market. Its commitment on development of export-oriented products has also improved the country’s commitment towards fighting counterfeit products (Budhwar & Mellahi, 2006).

Factors that determine HRM policies and practices

The prevailing national culture has a significant impact on the adopted HRM practices. A country’s national culture can “be explained based on the degree of individualism, uncertainty avoidance, power distance and masculinity” (Budhwar & Mellahi, 2006, p. 86). HRM practices in Jordan are highly subject to the prevailing national cultural values. The core values include a high level of bureaucracy and tribalism. The HR managers of either public or private companies established in Jordan have limited decision-making capacity on strategic aspects. Despite the view that most companies have adopted effective organisational structures that reflect the chain of command [local level, regional level, and the national level], the HR managers’ decisions are limited to employee administration aspects such as recruitment. Therefore, decisions regarding the terms of employment are controlled by well-stipulated rules, which the King must approve. This aspect highlights the extent to which HRM policies and practices in Jordan are influenced by the government (Budhwar & Mellahi, 2006).

Recruitment and selection

Similar to most Arab countries, Jordan companies do not have a systematic employee recruitment and selection strategies. Job vacancies are never filled based on merit and ability. On the contrary, nepotism and connections characterise the country’s employee recruitment and selection process. Therefore, most job positions are offered to friends, relatives, and family members, and this practice is commonly referred to as ‘wasta’. Furthermore, Budhwar and Mellahi (2006) affirm that intermediaries and interpersonal relations have a remarkable influence on the companies’ recruitment and selection processes.

The prevalence of nepotism and favouritism has adverse effects on the company’s ability to implement organisational objectives. Despite the effect that countries’ job analysis and job description are critical elements in the recruitment and selection process, most employees have not appreciated their value, and thus they are only designed in order to comply with the bureaucratic requirements for a personnel administration process. Additionally, formal employee recruitment and selection processes are not observed. For example, most job positions in Jordan are not formally advertised and they are filled without following the due process (Budhwar & Mellahi, 2006).

Education, training and development

Approximately 75% of the country’s population is comprised of students. The Jordanian government intends to improve the quality of its human capital through the public-private sector partnership in the education sector. The country has 6 public universities and 12 private universities. The country’s education sector is experiencing remarkable improvement due to the establishment of tertiary learning institutions such as colleges. Additionally, the government has also increased its funding on higher education through the National Centre for Human Resource Development, which ensures that public institutions of higher learning receive adequate funding.

Over the years, Jordan has been focused on improving the quality of its workforce due to the formulation of the National Training Plan between 1993 and 1997 the Jordanian Institute of Public Administration. The plan aimed at assisting employees within the public sector to cope with work-related issues. The plan was implemented through seminars and workshops on diverse business and management aspects. The government also launched Similarly, JIPA formulated, and introduced the Career and Training Paths Project [CTPP] between 1997 and 2001. The CTPP intended to foster a culture of continuous employee training and development within the public sector (Budhwar & Mellahi, 2006).

The concept of employee training and development has also been adopted by the private sector. However, most companies experience a challenge in their employee training process due to resource shortage. Furthermore, companies in the private sector do not have a formal employee training and development program. The absence of job description is another factor that limits employee training and development. Therefore, despite the presence of a well-educated society, Jordan companies should develop a formal training program. Furthermore, a high level of commitment in training employees by utilising internal and external resources is fundamental in promoting knowledge creation and transfer (Budhwar & Mellahi, 2006).

Reward and employee relations

Jordan appreciates the importance of fostering strong employee relations. Thus, workers can come together to make trade or workplace unions. However, the trade union’s role is restricted to addressing basic employees’ needs and various social welfare aspects. Moreover, the government monitors the activities of the trade unions closely. Furthermore, the employer-employee relationship is based on strict guidelines both writing and unwritten some of which are dictated by the state and others by the Jordanian values and norms. The employer has a duty to ensure the employees’ safety while the employees must depict a high level of loyalty (Budhwar & Mellahi, 2006).

The employment relationship in Jordan can be defined as paternalistic due to the high level of nepotism in the workplace. The bureaucratic management style has reduced the employees’ bargaining power significantly. Thus, employees do not have a strong influence on the companies’ reward system. The government determines the compensation scheme of employees in different locations. Additionally, remuneration is mainly based on the employees’ experience, job position, and age. However, the entry of multinational companies has stimulated the need to reform the employee reward system by integrating international standards and norms (Budhwar & Mellahi, 2006).

Key challenges and future developments

One of the major challenges facing Jordan entails sustaining the country’s political, social, and economic stability considering the spillover effects of conflicts from the neighbouring Middle East countries such as Syria and Iraq. Additionally, the country faces a major challenge, as evidenced by resistance in establishing strong political and economic relationship with Israel. Despite the country’s effort to establish trade relationships with Israel, it experiences resistance especially from Palestinians, who constitute over 50% of its population (Budhwar & Mellahi, 2006).

Jordan has not fully succeeded in transforming the economy into a knowledge-based economy despite its efforts. Thus, it should focus on improving its ICT infrastructure in addition to collaborating with technologically developed countries in order to enhance the competitiveness of its ICT industry. The country should consider outsourcing ICT expertise from other countries such as European countries and the US. However, its success in sustaining expatriates will depend on its ability to offer attractive reward packages.

The country is characterised by a high rate of unemployment, which is estimated to be 14.3% (Trading Economics, 2014). This aspect poses a risk to the country’s social stability. The rate of unemployment is likely to increase due to the growth in the size of the population and the country’s economy.

Conclusion

The above analysis underscores the existence of significant differences with regard to HRM across countries. One of the major sources of differences in international HRM entails the existence of cultural differences amongst countries. However, some countries are characterised by similar cultural characteristics due to their geographical location. Most companies in Jordan and the UAE are characterised by a bureaucratic management system. Despite this similarity, “the two countries are characterised by significant cultural, political, economic, and social differences, hence the approaches to improve their HRM practices” (Zanko, 2002, p. 93). For example, the UAE has adopted a federal/state system of government and it has given companies discretion in managing their workforce including making decisions on employee compensation. However, the UAE government has set a minimum wage that employers are required to observe. On the contrary, Jordan has extensively dictated HRM practices including employee recruitment, selection, and the reward systems. Additionally, the majority of these economies have implemented remarkable reform efforts in their quest to improve their HRM practices. Some of the reforms being implemented relate to people management and talent management. Considering the existence of cultural differences between countries, it is imperative for multinational companies to develop a comprehensive understanding of the host country’s culture before formulating their HRM policies.

References

Budhwar, P., & Mellahi, Y. (2001). Human resource management in developing countries. New York: Routledge.

Budhwar, P., & Mellahi, Y. (2006). Managing human resources in the Middle East. NY, New York: Routledge.

Trading Economics: Jordan unemployment rate. (2014). Web.

World Bank: Jordan overview. (2014). Web.

Zanko, M. (2002). The handbook of human resource management policies and practices in Asia-Pacific economies. Northampton, MA. Edward Elgar.