The Effect of the Performance Related Pay System on the Performance of the Employees in Saudi National Firms: Three Case Studies

Abstract

Performance related pay (PRP) has been widely adopted across public and private organisations. However, the evidence for its impact on performance and other possible objectives remains contested, and further questions are raised where the concept is imported to contexts which are culturally different to those in which PRP was originally developed. The aim of this research was to investigate and analyse the impact of performance related pay schemes in the Kingdom of Saudi Arabia on performance in Saudi national firms, through a case study of three indigenous Saudi organisations, namely: The Saudi Industrial Development Fund (SIDF; The Saudi Electricity Company (SEC) and; the Saudi Telecoms Company (STC). This was based upon an extensive review of the related literature, exploring the theories which underpin PRP such as agency theory and expectancy theory, and studies in various contexts worldwide. The study was mixed methods and cross-sectional, and used survey questionnaire with employees and face to face interviews with managers. The findings reveal widespread dissatisfaction with the PRP schemes in place in two of the companies, and concerns among some management that the assessment processes and allocation of bonuses do not allow genuine assessment and reward for the best performing employees. There are also concerns about the underlying wisdom of differentiating between workers and providing different pay, in that it may go against the norms of working culture in Saudi Arabia. There was also evidence of moves to adapt what was being implemented in line with these norms. Further, in two of the case study organisations, it was felt that the proportion of pay related to performance assessment was insufficient to motivate, raising issues regarding how best to implement PRP. At the same time, there are also voices in support of the schemes at each company, and in SEC, overall satisfaction was expressed.