Compound interests
Even in markets where money seems to be in endless supply, there is always competitive pressure, as Alan Swaby learns from a Middle East service provider.
If youÔÇÖre living or working in Saudi Arabia and need to change a light bulb, what do you do? Many Western companies trading there or private individuals too busy to take care of the little inconveniences themselves call in Electro Saudi Services, an operations and maintenance service provider that keeps the wheels of this oil-rich kingdom turning smoothly.
Electro Saudi Services, as its name suggests, began life as a joint Electrolux/Saudi partnership, formed over 30 years ago as an operations and maintenance company. Eventually the scope of work widened and the company became an entirely Saudi-owned organisation, though manned largely by senior managers from the West. Swedish managing director Rolf Thornqvist has led the company through these changes since 1986, while operations manager David Pringle is British.
The work undertaken varies from the mundane to the exotic, from taking the trash out to maintaining waste disposal plants and complex integrated security systems. The work falls into one of four categories: operations & maintenance, facilities management, general domestic services and cleaning services. Consequently, the work force has a wide range of skills, from engineers through all the conceivable trades down to the non-skilled.
The company is in the business of responding. Although Pringle was taken aback when asked to manage a play school operating to an English curriculum and officially regulated by Ofsted, in reality it was just one more string to the companyÔÇÖs extensive bow.
ÔÇ£All of us are constantly looking where we can take over more of the clientÔÇÖs responsibilities,ÔÇØ says Pringle. ÔÇ£One of my biggest roles is to change one-off customers into long-term clients.ÔÇØ
Servicing luxury accommodation compounds is ElectroÔÇÖs strongest market segment. ÔÇ£For a compound,ÔÇØ explains Pringle, ÔÇ£think of a village of anything from 100 to 1,000 residential units. Whatever a village needsÔÇöwater, energy, postal services, cleaning and maintenanceÔÇöso does a compound, and itÔÇÖs our responsibility to provide and manage it. We are certainly one of the largest suppliers in this sector and, to my knowledge, one of only two companies in the Kingdom with ISO 9001:2000 accreditation in this specific field. It is of vital importance to Electro that the personnel and their dependants of our clients feel comfortable and secure in their ÔÇ£home away from homeÔÇØ and it is ElectroÔÇÖs responsibility to remove this burden from our clients.ÔÇØ
Maintaining standards is one of ElectroÔÇÖs biggest challenges. The acceptance of a lower bid often leads to lower standards. Staff members are less well trained or motivated, and the temptation to cut corners is ever present. The market in which they work is highly competitive, and the Saudis have mastered the art of driving a hard bargain. ISO accreditation provides reassurance that what has been offered in the contract will be what is delivered.
ÔÇ£ThereÔÇÖs a great deal of work for which we donÔÇÖt bid,ÔÇØ says Pringle. ÔÇ£In the main, our clients tend to be Western businesses, Saudi banks and foreign embassies, to whom the quality of the service provided has greater importance than going with the lowest price.ÔÇØ
There is only so far that reducing costs by working more efficiently can go, especially in a labour-intensive business such as O&M. Pringle is critical of his competitors who bid low at the expense of reduced benefits provided for the migrant labour force and is justifiably proud of the high standards of care extended by Electro.
ÔÇ£None of our 1,100 migrant staff should have to spend a riyal on their accommodation or welfare,ÔÇØ he says. ÔÇ£We cover all their costsÔÇöflights, permits, licenses, accommodation, food, transport and healthcare. These expenses form part of our package and demonstrate why we canÔÇÖt compete with less ethical operators.ÔÇØ It seems that there is no shortage of such enterprises as many companies use the reduction of workersÔÇÖ benefits as a way of becoming more competitive in the open market.
Electro operates its own staff compound. No one shares a room with more than two others, and more senior staff have their own privacy. Three nutritious meals a day are provided, cooked by nationals for nationals. When itÔÇÖs time to work, staff members are moved around the city in a civilised fashion rather than being herded into the back of an open-top truck.
As well as making clients comfortable, there is also a good commercial reason for treating employees well. Clients value continuity, and it makes sense for Electro to hold onto staff rather than subjecting clients to a continual stream of new faces.
The last eight years have been a period of change and adjustment for Electro. As many of the French and US clients it had at that time came to the end of their contracts, the amount of corporate work decreased, and with it the need to take on hundreds of smaller, private contracts, despite that sector only contributing 10 per cent of revenue. This period of consolidation allowed the company to retain its workforce whilst bidding for the larger corporate projects and contracts.
ÔÇ£ItÔÇÖs not easy getting work visas for labour,ÔÇØ explains Pringle, ÔÇ£as the Saudi Labour authorities require proof in the form of a signed contract that work is actually available for any labour that we may wish to recruit.ÔÇØ The Saudi governmentÔÇÖs Saudi-isation Programme also requires that 10 per cent of the workforce must be Saudi Nationals and Electro has received official certification that they are fully compliant in this regard.
The worldwide recession has not impacted upon Saudi Arabia to the same degree as in the West. There is real asset value behind current large Saudi construction projects and so opportunities for new business are continually arising.
Nevertheless, that period of consolidation seems to be behind Electro, and it is expecting to double turnover from its current $25 million within two years. In fact, Electro is currently bidding for the biggest contract in its history, which, if successful, will open up the east of the country for new business and many more light bulbs to be changed.
