Case Study: Al Rajhi Banking & Investment Corporation

Case Study: Al Rajhi Banking & Investment Corporation

Introduction

The use of efficient strategies for advancing, rewarding, attracting, as well as retaining employees is at the core of human resource management. In essence, efficient human resource management is beneficial for employees themselves and organization sustainability. This report focuses on the banking and financial industry, with a discussion on employee motivation.

Al Rajhi Banking & Investment Corporation Brief Description

Al Rajhi Bank ranks as one of the major Islamic banking institutions, operating in the Kingdom of Saudi Arabia, and other middle east nations, starting operations in 1957 (Al Rajhi Bank, 2020). As of May 2019, the organization had a $ 49.7 B market capitalization, making $ 4.8 billion in sales and relied on a workforce of 13,532 employees to maintain its operations (Stoller, 2018). Forbes Magazine ranked the company #487, among its “World’s Best Employers 2019”, a measure helpful to gauge its employee policies. Currently, the company has grown its network, with branches reaching over 500, over 118 specialized branches for ladies.

Procedure/Policy Description

Motivation is an essential aspect of human resource management. Here, Al Rajhi Bank’s operation and description of its motivation procedures are based on anecdotal evidence [i.e., friend’s account, working at the bank for 8 years], and not facts, hence a basis of the next critique.

The organization exhibits a bad salary structure, and over the years, one can rank its pay scale as unsatisfactory. When compared to other organizations, within and outside the financial industry, it is relatively low pay, except for its senior executives. Employees are the foundation of organizations (Nguyen, 2017), making it irrational, having relatively little compensation for their roles. On a good side, the company offers an excellent opportunity for work-life-balance, and quarterly bonus measures, which are a vital aspect of morale. However, the organization lacks a definitive, well-outlined reward system for its hardworking employees. Over the years, minimal measures exist for successfully identifying, valuing and, rewarding the good and very productive employees.

One of the common measures includes only random annual increments, which sometimes are unsatisfactory for the employees. Nguyen (2017), says employee motivation must be consistent; hence randomness in annual salary increments at the bank is not satisfying. On promotions, the bank has a two-year policy for the reviewing and after that offering promotions. However, growth opportunities are only better for juniors, not for already grown employees. Compensation, based on current status, could be improved to higher levels. Finally, the bank lacks a well-defined career path for some job roles and departments, creating uncertainties on positions one holds as they rise.

Procedure/Policy Critique

Even if motivation cannot be directly ranked as equaling performance (Rothmann, Cooper & Rothmann, 2015), it has major effects on performance. Some authors agree to some extent motivating employees influences organization success, competitiveness, and sustainability (e.g., Al Doghan & Albar, 2015; Almahdi, 2017; Zámečník, 2014). The anecdotal account depicts weakness in Al Rajhi Bank’s employee motivation measures, likely to affect its future operations. The evidence that Forbes Magazine ranks Al Rajhi Bank #487 globally among best employers (Stoller, 2018), depicts a need to improve its human resource operations. Despite its success, recording revenues of $ 4.8 billion in 2018 (Al Rajhi Bank, 2020; Stroller, 2019), better employee motivation strategies are needed, at the bank’s local, as well as national and international branches.

Security/safety ranks as one vital aspect in Maslow’s Hierarchy of needs theory (Rothmann, Cooper & Rothmann, 2015), which makes wages a good depiction of deficiency needs, and good pay forms a good indicator of security. From the anecdotal account, Al Rajhi Bank’s pay is relatively low. Adequate compensation is linked to employee motivation (Almahdi, 2017; Dobre, 2013; ). For Al Rajhi Bank, inconsistencies and evident pay complaints show some dissatisfaction among employees, raising a red flag on its motivation measures. In a study by Almahdi (2017), findings showed that there is a direct positive impact between the various financial incentives in organizations and moral incentives. This means that for an employee getting better salaries/compensations, the outcome is attaining a higher level of moral and psychological enthusiasm, thus performing better in their work (Almahdi, 2017). Hence, for Al Rajhi Bank, the inadequate pay lowers motivation. In the future, there is a need to reevaluate the compensation structure, towards aligning with minimum desired rates. As seen in the description [above], comparatively, the organization’s salary scale is relatively low, risking likely turnover.

Work environment, physical or role-related is key for motivation efforts. As learned from McGregor’s Theory X & Y, how employees are treated by management somehow affects their behaviors (Rothmann, Cooper & Rothmann, 2015). Hence, issues that management has control over, making work environment unbearable are risky. From the procedure description [above], despite a reasonable work-life-balance, cases of stress arise, attributed to the bank’s massive size and client influx. Stress is an employee personality issue (Almahdi, 2017); hence, the bank making workplaces comfortable vital, e.g., supportive supervisors, suitable temperatures, and lighting.

Growth forms one vital aspect in Alderfer’s ERG Theory, in addition to relatedness and existence (Rothmann, Cooper & Rothmann, 2015), making workplaces that support growth critical to satisfy and motivate employees. Based on ERG Theory, one can achieve growth through measures like gaining newer skills as well as earning promotions, all of which help raise their satisfaction (Rothmann, Cooper & Rothmann, 2015). From the anecdote, it seems Al Rajhi Bank is inadequate in adopting these measures. The promotion, praising of brilliant employees, and offering them specific rewards and appreciation certificates are essential in successfully boosting their work efficiencies and job performances (Almahdi, 2017). An issue arising [from the friend’s anecdote] is that it lacks a sound system for recognizing as well as rewarding some of its best employees. Evidence shows moral incentives help towards enhancement of employee’s productivity. The ordinary employee earns way less than executives. The higher employees feel praised and appreciated, the higher they feel satisfied and contented with their jobs (Jehanzeb, Rasheed & Rasheed, 2012; Zámečník, 2014), leading to better efforts.

Work motivation is essential in directing their efforts on critical objectives, energizing them, and sustaining their efforts into the long-term (Rothmann, Cooper & Rothmann, 2015). Hence, inadequate motivation measures and lack of a well-defined career path by the bank risks adversely affecting motivation. As a bank, defining a good career path for employees is needed. Jehanzeb, Rasheed, and Rasheed (2012) say motivated employees show a higher level of being satisfied. Hence, with a poor career path structure [for some jobs], it can demotivate employees. Since employees have goals, having a structure aligning with their desires can help ensure focus. Notably, the career path is a roadmap, primarily denotes an employee’s growth, within their respective organizations, as they shift across positions (Cao & Thomas, 2013). With no clear path in career growth, employees risk moving to departments that they have fewer skills in or lack enthusiasm working in, hence affecting their motivation. Matching expertise and values to one’s jobs help raise effectiveness (Al Doghan & Albar, 2015; Dobre, 2013).

Conclusion

Labor is one of the foundational factors of production, in addition to entrepreneurship, land, and capital, which makes having employees that are motivated to work vital. Al Rajhi Bank has varied supportive measures for employees and an aspect that has contributed to its success over the years. However, from the anecdotal evidence [my friend’s account], key issues exist, worth dealing with as a means of improving its operations. Better compensation, an improved reward system for quality employees, and defining a proper career path.

References

Al Doghan, M., & Albar, S. (2015). A Study on Influence of Motivation Factors on Employees Performance in Private Schools in Saudi Arabia. Journal of Human Resource and Sustainability Studies, 3, 179-187.

Almahdi, H. K. (2017). Moral incentives vehicle of job performance in Saudi Arabian banks. Journal of Management, 5(2), 17-23.

Al Rajhi Bank (2020). Al Rajhi Bank: About Us. Al Rajhi Banking & Investment Corporation. Retrieved from https://www.alrajhibank.com.my/page/about-us/corporate-info-92/overview

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Cao, J., & Thomas, D. (2013). When developing a career path, what are the key elements to include? Student works Cornell University ILR School. Retrieved from https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1042&context=student

Dobre, O. I. (2013). Employee motivation and organizational performance. Review of applied socio-economic research, 5(1).

Nguyen My, L. (2017). The impact of Employees motivation on organizational Effectiveness. Dissertation: Vaasan Ammattikorkeakoulu University of Applied Sciences.

Jehanzeb, K., Rasheed, M. F., & Rasheed, A. (2012). Impact of rewards and motivation on job satisfaction in banking sector of Saudi Arabia. International Journal of Business and Social Science, 3(21), 272-278.

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Rothmann, S., Cooper, C. L., & Rothmann, S. (2015). Work and organizational psychology. Boston: Houghton Mifflin Harcourt.

Bottom of Form

Stoller, K. (2018). The World’s Best Employers 2018: Alphabet Leads as U.S. Companies Dominate List. Forbes. Retrieved from https://www.forbes.com/sites/kristinstoller/2018/10/10/the-worlds-best-employers-2018-alphabet-leads-as-u-s-companies-dominate-list/#61844bfe3382

Zámečník, R. (2014). The measurement of employee motivation by using multi-factor statistical analysis. Procedia-Social and Behavioral Sciences, 109, 851-857.