A winter like no other
This is a moment for some quite radical rethinking from businesses as to what their employees and customers want most from them this winter, or next winter will be worse.
I remember as a small child growing up in The Bahamas asking my mother: “What does cold feel like in England?”
She suggested that I opened the freezer door and stood in front of it for a bit to get a sense of it.
When I eventually came to school in this country in January 1972, I understood the difference between imagination and reality.
No matter how much you are warned, nothing can prepare you for the sensation of freezing feet and hands, getting into an icy cold bed, and the relief of a hot bath or drink.
Economic shocks are coming
There is no doubt we have a cold hard winter ahead and in spite of all the information we are getting I find it just as hard to imagine.
The problems have been well trailered and are forecast to take their toll physically, financially, and emotionally in ways we are yet to experience.
On 6 September our new Prime Minister and their cabinet will have the unenviable task of addressing soaring energy prices, and rapidly rising inflation with corresponding interest rate hikes.
It is predicted that there will be ongoing industrial unrest as people understandably push for significant wage increases over and above what is offered.
The scale of the problem is so enormous there will not be a person or business in the UK who won’t have to adjust their behaviour and plans.
Possible power cuts, disruption to everyday services, and real term devaluation of incomes and savings affects not only our personal circumstances, but the health of the businesses that we work in.
Enterprises and people already stretched to the limits and barely recovered from the pandemic will be vulnerable to hardship on a major scale.
Once more, those sectors regarded as “essential” will fare better than those which can be foregone.
Those on fixed incomes (like pensioners and the unemployed) or the people unable to work longer hours (like carers and parents) are caught in a frightening vice and facing impossible trade-offs in their way of life.
Unprecedented duality of economic and climate change
There are two things we can be sure of: whatever instruments the government seeks to deploy, they will be slow to have any impact and will be insufficient to address the tsunami of economic setbacks heading our way.
We have enjoyed such a long period of low inflation and interest rates that current forecasts of 18% inflation are quite difficult to take on board.
But what is really different this time is that all this is taking place at a time when we need to be making significant investment in the changes required to get to net zero.
The scale of structural adjustments required would be difficult to manage at the best of times. And we find ourselves in the worst of times.
Huddling together and using savings
The last couple of winters had their own pandemic-related hardships. I am anticipating that, transport permitting, many more people are going to be travelling to their place of work to save on their domestic energy bills.
Even people who now prefer not to commute may be planning to buddy up with neighbours so one home is heated, rather than two.
People will tighten their belts in other ways we are familiar with, reducing discretionary spend and budgeting carefully.
Those fortunate enough to have accumulated savings during the lockdown will find themselves dipping into them to get through.
Staying in employment will be crucial, but so will perceived fairness in remuneration policies.
Pricing and profit restraint
Brands have got some difficult decisions to make on their pricing strategy. It is inevitable that significant costs are going to be passed onto the consumer.
Producers are going to find it impossible to lean on their supply chain as they have grown accustomed to in recent years. Unreasonable demands risk driving their suppliers to the wall.
The Governor of the Bank of England has famously asked for “pay restraint” to avoid an inflationary spiral.
However, given inflation is being driven by an unpredictable war, drought, and shortages, and not pay, that request is likely to fall on deaf ears.
Doubtless some corresponding “profit restraint” must come into play to help absorb the shock or businesses will find they have no customers. Great scrutiny is already being placed on company profits and a beady eye kept on executive pay and bonuses.
There is going to be a communication challenge for organisations as they try to demonstrate how they are sharing the pain across all stakeholder groups, and not prioritising margin at the expense of hard-pressed staff, suppliers, and consumers. Much has been written about the importance of purpose over profit. Now the rubber really hits the road.
Many employees have already complained of mental health challenges and burnout in the last few years.
Vividly described by McKinsey in their Wellbeing in the Workplace report in January 2022 as “the great exhaustion”.
Worryingly their study showed women more likely to suffer from burnout, with 42% of women saying they were consistently burnt out at work compared to 35% of men.
But our attention needs to focus on our middle managers, as the highest rate of burnout was reported at 44% in mid income staff (£35,000 to £50,000 bracket).
They identified workload as the main cause of workplace burnout. If we add to that this winter’s financial concerns and possibly not being able to afford to put the heating on at home, companies could find their workforce increasingly unwell and underperforming.
Addressing the workload strain
In times of volatility and uncertainty the obvious opportunity for leaders is to focus on what is within their control.
They can start by addressing the issue of workload and getting a realistic handle on resourcing.
Most people have contracts with described “working hours” which are unceasingly not respected.
The goodwill of many employees has been squandered too many times with the ‘exceptional’ weekend working or extended day becoming the expected norm.
In professional services sectors productivity has been gained by disguising the true time it takes to deliver company output. This must be addressed.
In the end it will be more cost-effective for companies to manage workloads than deal with unexpected and more frequent sick leave.
Pay inequality and the redistribution of the typical labour budget in favour of senior management has been a pattern of at least the last ten years. This will be a time for resetting.
Leadership will be expected in Remuneration Committees and HR departments to recalibrate their formulas to deliver a progressive distribution of pay and bonus awards in favour of the lower paid. Senior managers need to demonstrate leadership not just through pay restraint but also addressing excessive bonus awards.
Imaginative approaches I have already identified range from a series of one-off “cost of living” awards (e.g., Virgin Money offering £1,000 to employees earning £50,000 or less), earlier than usual salary increases (e.g., Barclays has increased the pay of 35,000 members of staff by £1,200 from 1 August), and lifting the floor on the lowest paid (e.g., Santander entry level salary increasing to £19,500) to help people cope.
Of course, inflation means high earners will experience a decline in their wealth in real terms, but they are still better cushioned for what lies ahead.
Innovation fit for the times
This is a moment for some quite radical rethinking from brands as to what their customers want most from them this winter.
It an opportunity to demonstrate that they are in tune with everyone trying to control what they can, and not trying to carry on as usual.
For example, Lidl intending to sell misshapen vegetables affected by England’s recent drought in support of British farmers was an eye-catching announcement.
We know the appetite for ugly fruit and vegetables has been growing, but this winter everything we do to stop waste will be appreciated.
Every brand owner should be asking themselves what else customers might want or accept now that would have been unthinkable before? To waste energy, money or resources when so many will be suffering is unforgiveable.
This winter will pass. The extent to which brands with purpose can be a force for good is about to be truly tested, or the next winter will be even worse.
Jan Gooding is one of the UK’s best-known brand marketers, having worked with Aviva, BT, British Gas, Diageo and Unilever. She is now an executive coach, chair of PAMCo and Given. She writes for The Media Leader each month.