Could global economic problems be a catalyst for change or will they bog businesses down and put more on their plates?
Necessity, so the saying goes, is the mother of invention. But while Covid-19 is rightly heralded as speeding up transformations to the workplace, such as hybrid working and automation, by decades rather than just a few years, the jury seems to be out over Covid’s other long-tail effect that is starting to play out: huge economic strife.
Instead of having a transformative impact, could parlous economic conditions instead be a barrier to further workplace transformation, often because the problems it is causing eat up so much leadership time?
It’s a question Argentinian Eduardo Juan Viñales, at the international labour and employment practice of Ius Laboris Argentina, answers with an air of resignation. As a primarily importing continent, Latin America is experiencing rampant inflation, the highest it’s been for more than two decades.
The Russia-Ukraine conflict means its inflation is different from the hyper-inflation of the 1980s. “How can we [employers] make long-term strategies, when inflation is 70% and we’re dealing with strikes and collective bargaining?” Viñales says.
Pernod Ricard HR director for Latin America, Dolores Castelli, adds: “Inflation is likely to close out this year at 80%.”
Uncertainty is part of daily administration of the business. We don’t know what will be in the near future Eduardo Juan Viñales, Ius Laboris Argentina
All around the world it seems the economy is forcing its hand. The cost of living is up 9% in the United States, similar to the increase in the EU, and inflation is now threatening to spread to the usually more contained Asia-Pacific region.
The Pew Research Center says US workers who stay at their organisation are experiencing a 1.7% drop in real wages, compared to those who leave and are getting an average 9.7% increase for jumping ship.
Across Europe the spectre of mass strikes has once again reared its head – Greece has already had a general strike – as individual countries face basic food item rises – of 30% in Spain – and increased union assertiveness – unions in the Czech Republic are demanding pay rises of at least 10%.
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“There is definitely a feeling that you are lurching from one thing to another,” says Rider Levett Bucknall’s head of people and culture, Sarah Draper.
And results from Ius Laboris’s research confirm 50% claim HR practitioners simply return to tried-and-tested emergency or crisis-mode policies.
In other words, rather than confront this challenge head-on, practised HR policies are reactively revisited. These include boosting wages, something that will only worsen inflation – selected by 66% of respondents as a solution for rising inflation – rather than taking more difficult offsetting steps, such as investing more in company cultures (30% globally) and in health and wellbeing (9% globally), things that might quell people’s immediate demands for more money.
But is there also an issue of lack of confidence? Castelli certainly thinks you can either view the current economic situation as a glass half full or glass half empty. “We’re all facing the same change, so we have a choice about seeing it as either paradigms being disrupted or deconstructed,” she says. “The challenge really is people’s mindsets.”
If you keep increasing salaries, we're just compounding the inflation problem Sarah Draper
For Castelli, economic problems have (more positively) been instrumental in creating flatter internal hierarchies and brought about changes to the way she is crafting employees’ jobs.
“Disruption has a way of accelerating change,” she says. “[Economic] change is enabling us to focus on purpose – it has seen us create a compensation and a self-service benefits app – and I think globally it creates new conversations about how we approach reward.” She even cites this as contributing to the speed of decision-making in the business, purely because it has had to.
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Considering employees the world over are threatening to exit in droves if their cost of living concerns are not met – Randstad finds 20% of workers worldwide expect to change jobs in 2022, up from the 12% who quit in 2021 – the fact businesses can still see economic gloom as creating opportunity should be a positive.
“In our own business, it has meant we’ve looked at pay rates, but we've also looked at travel rates and tools to help people budget, including providing debt advice,” says Draper. “We’ve also introduced rental deposit loans. But ultimately I think we all just have to be more thoughtful about what staff need.”
And moves like this do, argue some, have a transformative impact on business because they help inculcate a more supportive employee culture.
“In a crisis, human capital begins to get properly recognised,” says Kathryn Weaver, partner at Ius Laboris Hong Kong. “It then creates conversations about fair pay, which introduces the topic of gender pay gaps.”
“Pay gap reporting, something which in the current context can be uncomfortable, at least forces companies to think about these issues,” she says.
As even Viñales concedes: “The next key issue will be how companies think about recognising labour and the value of capital. Inflation will only be a momentary thing; next year it will be something different. The key is learning what the next global concern might be, especially as the world seems to be slightly more anti-globalisation in nature.”