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Author: 
Dr. Mohamed A. Ramady
Publication Date: 
Mon, 2008-05-19 03:00

Saudi Aramco will be celebrating its 75th Anniversary Jubilee this week, the highlight being the patronage of the Custodian of the Two Holy Mosques King Abdullah. It is a moment to be proud of for the world’s largest energy company, and the wider Arab private sector has many lessons to learn from Aramco’s remarkable experience. While the theme of the celebrations will be under the slogan “Energy for Generations”, to highlight Saudi Aramco’s role in contributing to the future of the Kingdom and the world economy, the success of Aramco should not be measured in terms of the number of barrels of oil it produces. Aramco’s success goes much further in terms of being a model for societal economic transformation and efficient corporate governance.

Any society’s economic and social well being stems from its economic strength and is a reflection of corporate success. How companies operate, are governed, manage internal employer-employee relations, and their external commercial relations can result in either a virtuous cycle of good governance or bad governance for society as a whole. The issue is one that affects countries that are either resource rich or resource poor, as countries in the latter category such as Finland, Singapore, Ireland and Dubai, in our own backyard, have demonstrated. What sets these countries apart in terms of general higher levels of economic well-being is that there is an advanced form of corporate good governance and visionary leadership. Corporations strive to be the best, constantly evolving and redefining their strengths. This imbues itself into society as a whole and best economic and management practices are transmitted, thus establishing new benchmarks for business participants.

Saudi Aramco has developed such best practices over its seventy-five years, learning to adapt and absorb from its foreign partners, and developing its own unique internal practices to take account of its evolving domestic and international role. Today, this giant energy company has established presences in all the continents of the world and has also learned to manage a diverse labor force and operations base. Aramco employees are taught to apply basic, yet necessary management tools, such as key performance indicators, quality benchmarking, project sponsor and ownership, employee accountability and timeline deliverables. Such concepts seem totally bizarre to many private sector companies of the Arab world, where decision-making is made on the basis of the whims of the owner and a lot of agreement by yes-men .

By contrast, Aramco employees are taught to be delivery orientated and this is reinforced by a rigorous system of performance appraisals and employee/manager feedback and mentoring. At the same time, Saudi Aramco realizes that it also needs employees that are able and willing to “think outside the box,” be mavericks in a positive manner, as no institution can reinvent itself and progress if all employees are identikit robots. The skills that Saudi Aramco employees retain are priceless and Saudi business society as a whole benefits when Aramco retirees pass on some of these experiences to the private sector, either through establishing their own companies after retirement or in acting as advisors to Saudi companies. After a lifetime of serving in a disciplined and productive manner, few senior Aramco retirees will feel at ease in a complete retirement setting, and we must strongly encourage them not to follow this route, if not for health reasons alone. Studies have indicated that the average life expectancy of previously active employees is reduced once they retire and do not engage in alternative pursuits to keep them busy.

The passing on of best practice corporate governance to a younger business generation, especially those in family-run businesses, will be an invaluable contribution to societal economic wellbeing and development. Too many stories abound about the failure of family-run organizations once the family patriarch dies, especially when corporate succession is solely based on age or other factors and not on technical or management skills. The slow pace of Saudi and Gulf public flotations of private family businesses indicates that some are still reluctant to relinquish management control. In reality few of the floated companies do, as the thirty percent share flotation seems to be the magical upper level, and not majority share sales, with all that it entails in transparency and corporate governance. Economic efficiency is diluted and society welfare is diminished, leading to wasted national assets, both human and economic.

The Saudi Aramco jubilee celebrations are also focusing on the human side of the corporation, for in the end, this is what sets Saudi Aramco aside from others in the Kingdom and the world at large. If such best business practices as Saudi Aramco can be adopted as a matter of fact by many other companies, then the national economies of the Arab world can increase and ensure that one celebrates such jubilees rather than “Nakbas”, for in the final analysis economic strength leads to political strength to avoid future catastrophes. Happy 75th Anniversary Saudi Aramco and long may you continue to lead the way ....

(Dr. Mohamed Ramady is visiting associate professor, finance and economics at King Fahd University of Petroleum and Minerals)

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