There is a saying in athletic training, "No Pain, No Gain," that has recently been ratified by science. Grueling workouts do produce fitter athletes, according to a number of recent studies examining the effect of high intensity training. In short, if you want to lose weight or get stronger, you have to suffer while exercising to see significant results. The same maxim can be extended to the private sector in Saudi Arabia. Before oil prices fell and delivered real pain to budgets, change was impossible. Now it is a necessity. The Business Year conducts well over 100 interviews with key leaders in business and public policy in the Kingdom each year, so we are attuned to the private sector. While some have complained, there have been far more positive messages from others. What separates these two groups is preparation. For companies that have grown used to sitting back and profiting from large government contracts, these are painful times. For companies who have always been chasing efficiency and have worked to diversify while times were good, 2017 may still be a difficult year—but it will not be a debilitating one. I recently interviewed the CEO of one of the Kingdom's top power and water firms. When I told him that some of our interviewees were negative, he was shocked. "The private sector needs to grow up," he told me. "The government is doing everything right. People are just whining because they are used to making money without taking any risks." Similarly, at the recent SWEF conference in Riyadh, an executive at a water company told me: "We have been doing our homework, we have been running our business in a responsible fashion, and this year is looking amazing for us. Our competition, who have been careless, is fading away, and we are just getting stronger." Both of these are executives well-versed in best practices, and the contrast with local firms who may not have formal management could not be more apparent. I recently spoke with the newly appointed CEO of one of the Kingdom's largest family groups. He has been tasked with professionalizing the group from the top down. His outlook was much less rosy. "There is a culture of entitlement," he told me "everyone expects something. The changes we have to make are significant, and this year will be a painful one. We will need to treat our companies dispassionately, from a business perspective only." In short, in 2017 companies have to compete to survive in the Kingdom. They have to look at costs, they have to cut unproductive staff and pay the ones they keep based on performance. These changes are painful, but they are the only way forward. Now we can see who was prepared and who was resting on easy contracts during the boom years. No pain, no gain.
