The international economic debate about how best to emerge from this awful depression seemed to take on a new tone last week, despite continuing market falls, worries over Spanish banks and further fears of Greece’s exit from the Eurozone.
The world’s most powerful G8 leaders meeting at Camp David, buoyed up by new socialist French president Francois Hollande, emphasised “the imperative to promote growth and jobs”, rather than simply addressing still weak national balance sheets through continuing debt-reduction. Visiting London two days later, IMF head Christine Lagarde warned our government that economic growth is too slow and unemployment too high, while deputy prime minister, Nick Clegg, catching the mood in an interview with the Financial Times, “signalled a shift from lurid warnings about the debt crisis to a fresh emphasis on growth”, with measures including schemes to address youth unemployment.
Interestingly both Clegg and Hollande used a twin-sided coin analogy to explain, as the latter put it, that “we need to pursue these two goals simultaneously, budgetary solvency and maximum growth”. Clegg admitted that the Coalition’s heavy focus on austerity “can have a dampening effect on mood”, which is essential for growth, influencing our current ‘depression’ in both senses of the word.
Which set me thinking, as I scanned the week’s HR news, as to whether employers are similarly simultaneously pursuing these twin imperatives, or like the Coalition, over-emphasising the cost-cutting austerity?
The Government is, of course, itself a major employer and the continuing pay freezes and job cuts across the Civil Service undoubtedly help to explain the significant declines in employee engagement levels that we have seen nationally over the past two years. Employers may feel squeezed for cash, but what about their employees? Markit’s monthly Household Finances index reported the sharpest decline in family finances this year.
The leaked plans to introduce regional pay in the NHS have no basis in any research evidence that I can find that high public sector pay damages private sector employment outside London. Yet this threatens to depress our weaker regional economies even further and widen the gender pay gap, as has happened through the privatisation of social care.
Meanwhile, Mr Beecroft’s proposals to reduce employment protection and cut compliance costs hardly seem set to enhance employee security and morale. They are also remarkably short on evidence that small employers are calling for such de-regulation, or that it will have a beneficial effect on their growth.
Certainly, arguing for major investments in your human capital at the moment seems a tough call. Freezes in pay and cuts in training spend still seems the politically correct course of HR action in many employers.
Yet the fast-expanding Intercontinental Hotels Group, which also owns Holiday Inn, announced that it was adopting the London Living Wage of £8.30 an hour for its staff, providing more than 800 of them with a wage boost worth nearly £5,000 a year. Have they gone mad in forgetting the essential focus on pay cost austerity? Isn’t this commercial suicide?
Not according to IHG managing director Stephen McCall who recognises, as London Mayor Boris Johnson put it, that “not only does this foster a loyal and hardworking workforce, it can lift people out of poverty and give people a proper reward for their labour”. Growth in pay and jobs boosts the consumer confidence and spending which is so essential in our service-based economy.
But as the CIPD’s research led by Professor Michael West (Pride and Groom ) also found, an attractive total pay and benefits package drives higher employee engagement, which in turn is associated in a positive upward spiral with improved customer service and increased consumer spending/revenue.
And, perhaps, also in the IHG decision there is – and should be – that “mix of credibility on the economy and social fairness” that Nick Clegg referred to.
In UK manufacturing, the brilliant news of General Motors’ £125 million investment in Vauxhall’s Ellesmere Port plant to build the new Astra, creating 700 new jobs and safeguarding thousands more, was facilitated by excellent people management in the form of a new pay and flexible working deal. The necessary partnership of cost effectiveness and investment in growth is perfectly illustrated in this agreement between Vauxhall and Unite, with more flexible and 3-shift working supported by a pay pause, followed by RPI-linked increases.
Next year will be the CIPD’s centenary. Investing in workers 100 years ago wasn’t easy either, and even without the raft of employment legislation that Adrian Beecroft wants to strip away. One of the founding fathers of personnel management, Edward Cadbury, explained his firm’s insistence on high quality worker housing and benefits by describing profitability and employee welfare as different sides of the same coin. Touring the company’s Bourneville plant in the 1920s, the playwright JB Priestley was hugely impressed and felt that this investment produced “definite and enormous gain” both for employer and employees, financial profits and social good (‘An English Journey’).
Nick Clegg seemed to be clearly admitting that the Coalition has over-done the austerity. Far more employers need to be recognising the need to invest in their staff, their skills and rewards and engagement, as well as enhancing their cost efficiency, and the CIPD has a great opportunity now to lead in calling for such a management rebalancing, paralleling the political and economic one.