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ACCESS TO TALENT FOR MENA'S ENTREPRENEURS

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A2T In collaboration with ACCESS TO TALENT FOR MENA'S ENTREPRENEURS July, 2016 In partnership with Authors: Teeb Assaf, Habib Haddad, Jamil Wyne, and Katerina d. Contributors: Elias Boustani, Evan Bulman,
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A2T In collaboration with ACCESS TO TALENT FOR MENA'S ENTREPRENEURS July, 2016 In partnership with Authors: Teeb Assaf, Habib Haddad, Jamil Wyne, and Katerina d. Contributors: Elias Boustani, Evan Bulman, Kevin Guh, Estee Ward, Rachel Burns, Chris Godshall, and Allison Kammert. Acknowledgements: A large thanks is due to Maya Rahal, Reine Farhat, Lucy Knight, Aline Mayard, and Jeremy Paduano for their support in editing this publication and for their support in translating the surveys. The WRL team would like to thank the following people for their time and support in developing and implementing the study. Their contribution was critical to ensuring that the survey was designed and carried out effectively and we are grateful for their involvement. Specifically, we would like to thank Roba Al Assi (Bayt.com) for her support and guidance, Sara Kadoui (NUMA) for her expertise in surveying Moroccan entrepreneurs and Pankaj Paul Wharton) for his assistance and generosity in accessing the network for the survey. Additionally, our team would like to thank the many entrepreneurs, investors, incubators, academics, lawyers and other experts who donated time to this study, your contributions were invaluable and we thank you all in the acknowledgments section of this report. Partners: The Wamda Research Lab (WRL) is Wamda s research program that produces studies on entrepreneurship in the Middle East and North Africa (MENA) and seeks to foster thought leadership in this field. Its agenda is to inform investors, policymakers and other stakeholders on the challenges faced by entrepreneurs in the MENA region and the potential solutions for over-coming them. Bayt.com is the number one job site in the Middle East, offering a complete range of end-to-end employment solutions and career planning tools. Founded in 2000, Bayt.com is fully functional in English, Arabic and French, and offers the fastest, easiest, most effective and cost-efficient methods for employers to find quality candidates, and for job seekers to find top jobs, in the Middle East and North Africa. Beirut Digital District (BDD) is a hub for the digital and creative industries in. BDD provides a state of the art business environment, value-added services and infrastructure so that companies can increase their productivity and grow. International Finance Corporation (IFC) is a member of the World Bank Group and is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, the IFC uses its capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. d d d 2 TABLE OF CONTENTS EXECUTIVE SUMMARY 04 INTRODUCTION 07 HIRING METHODS AND TRENDS 09 Recruitment channels 14 Geography of hiring 18 Satisfaction with talent 23 Incentives and compensation 26 Cultural mindset 36 CHALLENGES TO HIRING AND RETAINING TALENT 39 Challenges to identifying candidates 41 Demand for soft and hard skills 45 Challenges to recruiting and retaining employees 50 Explaining the gaps 59 CONCLUSION AND RECOMMENDATIONS 61 APPENDIX 65 EXECUTIVE SUMMARY In 2015, unemployment in the Middle East and North Africa (MENA) stood at 1, the highest regional unemployment rate in the world. 1 Estimates suggest that the region must create 85 million jobs by 2023 to be on par with global average unemployment rates. 2 Governments and private sector institutions are pointing to entrepreneurship as a way to create jobs, spur innovation and diversify economies regionally. Investing in entrepreneurship could have a substantial impact on job creation if ecosystem provided conditions for startups to scale and therefore recruit more talent. in these efforts. To have a long-term impact on MENA s entrepreneurship ecosystem, stakeholders must ensure that entrepreneurs can find the necessary skills and mindsets needed to grow their companies. In this report, based on a survey of 963 entrepreneurs and 1,697 workforce participants, the Wamda Research Lab (WRL) aims to shed light on the trends and challenges of talent acquisition within MENA s startup ecosystem as well as offer recommendations addressed to ecosystem stakeholders on how to overcome these challenges. mproving access to and retention of talent must 1. Middle East and North Africa Overview, the World Bank, Addressing the 100 Million Youth Challenge Perspectives on Youth Employment in the Arab World in 2012, World Economic Forum, Hiring methods and trends: Startups are hiring, yet few workforce respondents consider a career at a startup: 90% of surveyed entrepreneurs plan to hire in the next year; 6 of workforce respondents think that working for a startup is a good career move, though only 1 of the workforce would like to work for a startup The workforce prefers corporate or government jobs: 6 and 41% of the workforce finds working for a corporation and the government, respectively, more appealing than working for a startup Hiring channels are not diversified: 3 of surveyed entrepreneurs rely on their professional network to recruit employees while only 7% indicated that they used universities to find recruits Entrepreneurs tend to hire locally but recognize that talented employees are available in other countries: with the exception of the UAE, 9 of entrepreneurs hire locally though they are aware there is talent in other countries; the most qualified regional workforce is thought to be located in Jordan, and 60% of entrepreneurs are satisfied with the quality of the local hires: the highest level of satisfaction is found in Levant and North Africa, while entrepreneurs in the Gulf countries are the least satisfied and tend to hire candidates from abroad There is a gap between salary expectations and salaries offered: 5 of entrepreneurs across MENA offer salaries ranging from USD 250 to USD 1000 per month, while only 1 % of the workforce is willing to work for less than D per month Entrepreneurs are willing to exchange salary for equity: 5 of the surveyed workforce is willing to work for a lower salary if their employer provides the opportunity to learn new skills, and 5 if their employer provides equity Challenges to hiring and retaining talent: Top challenges to hiring are skills and commitment-related: 4 of entrepreneurs say that identifying the right skills or expertise is the top challenge they face in the hiring process followed by 3 who expressed difficulties finding committed employees Top soft skills: surveyed entrepreneurs have difficulty finding employees that are motivated (4), independent (3), and with a high aptitude (37%) 5 Top hard skills: entrepreneurs have difficulty finding sales (2), business development (27%), and management (2) skills Corporate competition: 50% of entrepreneurs said they face competition for talent from corporations. Moreover, 6 of the workforce said they prefer to work at large corporations The workforce cites several risks to working for a startup: 31% of the workforce associate a career at a startup with lack of job stability, 27% think a job at a startup lacks professional development prospects, and 2 believe startups offer low salary Competitive market salaries are a hurdle to attracting talent: 4 of entrepreneurs state that the main reason why employees left their company was because they wanted higher salaries; 2 of the workforce named salary as the main reason for leaving a job at a startup Conclusion and recommendations: The report reveals that although entrepreneurs are creating jobs in the region, their access to talent remains limited. The surveyed workforce in our sample deems working for established corporations as more attractive than working for a startup. Access to specific skills, a better aligned academic and private sector, and a culture more interested in working for a startup are needed for MENA s entrepreneurs. Recommendations: The issue of talent acquisition and development is of critical importance in MENA s entrepreneurship ecosystem. Cultural trends, hiring methods, educational challenges and the allure of stable work at large, established corporations all complicate the team building process for MENA s entrepreneurs. We recommend that multiple players in the ecosystem need to play a role in improving access to talent conditions, including entrepreneurs themselves. Universities, media, government and incubators and accelerators all have a role to play in this process. Specific efforts include promoting the concept of work ng at a startup to t e general o ulat on, creating a legal framework that is supportive of employee stock options, helping entrepreneurs access new recruitment channels and enabling more engagement between universities and entrepreneurs. These measures are not a prescription for success, but can help ecosystem stakeholders and entrepreneurs identify good practices for tackling the talent access equation in the region. 6 INTRODUCTION Unemployment in MENA is a longstanding obstacle for the region s economic and social development. In 2015, unemployment in the Middle East and North Africa (MENA) stood at a 1, the highest regional unemployment rate in the world. 3 According to the World Bank, the region s youth unemployment rates are also the highest in the world, with over 2 of the youth currently unemployed. In Saudi Arabia and Jordan, youth unemployment rates reached 30% in 2012, and this figure was over 40% in Palestine and Tunisia. Estimates suggest that the region must create 85 million jobs by 2023 to be on par with global average unemployment rates. 4 Entrepreneurs can play a critical role in creating jobs in MENA. In seeking solutions to this challenge, governments and private sector institutions are pointing to entrepreneurship as a way to create jobs, spur innovation and diversify resource dependency. Recently, the region has witnessed an upswing in the establishment of institutions supporting entrepreneurship. In the past years alone, Jordan established more entrepreneurship supporting institutions than it has in the past decade. In the period between , the number of entities created to support entrepreneurs in Jordan was 10, and between , this figure was 14. Similarly, in the UAE, the number of institutions created post 2010 is more than double those established between 2000 and Scaling enterprises in particular can have a significant impact on this process. Scalable companies can have a substantial impact on job creation. Globally, a small percentage of scale-up companies contribute the majority of new jobs created. For instance, Endeavor Insight has found that while of the businesses in Columbia were scale-ups, they account for nearly 4 of the country s new jobs. 6 In Southeast Asia, scale-ups represent 1 of total companies but create 77% net new jobs. 7 Similar trends can be found in MENA. In Jordan, of the country s total firms accounted for over 50% of net new jobs in past three years. 8 Talent and access to it is critical within the scaling process. The transition from a group of founders and early-stage employees to scaling a team across borders with a widening range of skill sets requires both qualified and invested employees. Finding talent is critical to the enterprise scaling process. In a Wamda Research Lab (WRL) survey, in partnership with Endeavor Insight, of over 700 entrepreneurs in the region, building a team was one of the top challenges faced by entrepreneurs when scaling into new markets. More specifically, over 60% of entrepreneurs cited finding talent as a barrier to building their team and pointed to challenges with retaining talent and paying salaries. 9 Without a strong team, entrepreneurs chances of successfully scaling are diminished. 3. Middle East and North Africa Overview, the World Bank, Addressing the 100 Million Youth Challenge Perspectives on Youth Employment in the Arab World in 2012, World Economic Forum, Four-country report, Wamda Research Lab, The 8-45 Report, Endeavor Insight, The Impact of Entrepreneurs at Scaleup Companies in Southeast Asia, The Critical 9 Percent, Endeavor Insight, The Next Step: Breaking barriers to scale for MENA s entrepreneurs, Wamda Research Lab, About this report: If MENA s entrepreneurship ecosystem wants to improve conditions for finding talent and scaling companies in the region as a method to solve unemployment, there must be increased focus on and understanding of skills and processes that affect talent acquisition and retention. To date, quantitative research regarding the challenges MENA entrepreneurs face when building and retaining their team is limited while insights on MENA s workforce opinions regarding working for entrepreneurial enterprises is minimal as well. Through this report, WRL aims to shed light on the processes, strategies and barriers to talent recruitment and retention facing MENA s entrepreneurs. The study examines the workforces interest and willingness to work for a startup, and the incentives they seek in professional opportunities. This report consolidates data and insights collected from MENA s entrepreneurs and the workforce to gain a better understanding of the main trend and challenges shaping the team building process for MENA s entrepreneurs. It is based on a survey of over 900 entrepreneurs, most of which plan to hire in the near future, and over 1600 members of the region s workforce. It is also supported by over 100 individual interviews with entrepreneurs, investors, incubators and other entrepreneurship experts in MENA. 8 HIRING METHODS AND TRENDS KEY TAKEAWAYS Startups are hiring: 90% of entrepreneurs are planning to hire in the next two years Startup jobs are not deemed attractive by the workforce: only 1 of said that they themselves would like to work for a startup Corporate and government positions are preferred over startups: 6 d 41 d Entrepreneurs are hiring locally, but they also acknowledge that talented employees could lie elsewhere in MENA: d from the UAE, 9 of entrepreneurs hire locally ajority of entrepreneurs are satisfied with their local talent pool: 60% of entrepreneurs are satisfied with the quality of the local employees, the highest dissatisfaction levels are observed in the Gulf countries 10 Hiring channels are not diversified: more than one third (3) of entrepreneurs rely on their professional networks to hire, 1 use online recruiting sites, 1 use online networking resources or friends, and 7% use universities There is a gap between salary expectations of the workforce and salaries offered by startups: 5 of entrepreneurs across MENA offer ranges between USD 250 to USD 1000, while only 1 of the workforce is willing to work for less than D per month Entrepreneurs are willing to trade-off salary for equity: 41% of employees value non-wage benefits; 5 is willing to work for a lower salary if their employer offers equity and 5 if their employer provides the opportunity to learn new skills There is a mismatch between non-wage benefits offered by startups versus benefits valued by the workforce: 60% of entrepreneurs offer opportunities to innovate within the company yet only 1 of the workforce cited that opportunities to innovate are important in the job they seek 11 MENA S ENTREPRENEURS ARE LOOKING TO GROW THEIR TEAMS, BUT STARTUP CULTURE HAS NOT YET DIFFUSED INTO MENA S POPULATION MINDSET Of the 963 surveyed entrepreneurs, nearly 90% plan to hire employees in the near future, which indicates that the majority of startups in the region are creating job opportunities. Additionally, 6 of the workforce respondents perceive working for a startup is a good career move. However, when asked whether they themselves would like to work for a startup, only 1 said they would like to work for one. Figure 1 90% 6 1 of surveyed entrepreneurs plan to hire in the next year of workforce respondents think that working for a startup is a good career move of workforce respondents said that they themselves would like to work for a startup Entrepreneurs: BASE: N=963 Workforce: BASE: N=1658 Figure 2 Do you consider working for a startup as a good career choice? Yes No Undecided BASE: N= Figure 3 Workforce career preference Large corporation 3 No preference 2 Startup or SME 1 Government Other 7% Intergovernmental organization 7% Non-profit/NGO Don't know BASE: N=1697 While the region s ecosystem has developed over the past several years and public interest in entrepreneurship has grown in parallel, working for a startup is not yet considered a viable career choice. There is a mismatch between the workforces perception of working for a startup and their willingness to actually do so. 13 RECRUITMENT CHANNELS As companies scale in MENA and seek to move into new markets they will need to explore multiple channels for hiring and building their teams. Within our sample, more than one-third of entrepreneurs rely on their professional networks to find new hires as shown in Figure 4 below. The second most used hiring channel is online recruiting sites (1), friends (1), and social networking sites (1). Though the findings suggest that more entrepreneurs in Kuwait and (1 and 1, respectively) in our sample use universities sparingly to find new hires, very few in other countries pointed to universities as useful channels for hiring talent. While using professional network is one tool to find and hire talent, universities should not be underestimated as they have access to a large talent pool of educated candidates. The lack of intern culture stems from the fact that kids in many MENA countries remain dependent on their parents for a very long time, so there s very little incentive to start working until after graduation. To change this mentality, it s important to work with universities to express to students the profession/life advantages that interning before graduation can offer. - Ahmed Aduib, cofounder, Abaya Addict 14 3 OF ENTREPRENEURS IN THE SAMPLE RELY ON PROFESSIONAL NETWORKS TO HIRE, 1 USE ONLINE RECRUITING, AND 7% RELY ON UNIVERSITIES Figure 4 Preferred hiring channels % 11% Professional networks Online recruiting sites Friends Social networking sites Universities Career fairs t er BASE: N=853 There is very little guidance for university students during the process of transitioning from school to work, and many students wind up in positions that perhaps don t fit their interests, skill sets, or personalities. It would be helpful if there was more professional guidance offered at universities that supported startups, and that encouraged adventurous, unconventional students to look into working for people like us. - Tarek Bakkar, managing partner, IMS Medical 15 Diversifying the sources of a company's talent pool is essential. For years now, we have been working with start-ups in the Middle East to assist them with their sourcing strategies, designing various tools to help them tap into their own networks and specialist networks as well, like Bayt.com Specialties. - u a l asr, P em loyer solut ons, ayt com Interviews with entrepreneurs point to difficulties in developing relationships with regional universities. Entrepreneurs discussed how few universities re open to collaborating with startups or how most lacked commitment to forming long-term partnerships. These issues potentially explain why relatively fewer entrepreneurs have turned to universities to build their teams. Regarding specialized recruitment websites and social networks, entrepreneurs said that these resources re typically most useful when trying to fill entry-level positions, while professional network websites re better for filling positions that required more work experience. 16 CASE Study: BBerryPin.com Working with universities to source talent Bashir Osman founded BBerryPin, in 2011 and sold it to Blackberry for USD 300 in Osman credits the successful acquisition in part to building and scaling a strong team. He started BBerryPin with two friends, one programmer and the other a business de
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