The moral obligation to increase pay
People or profits? How about benevolence, argues Jan Gooding.
I have found myself increasingly reflecting on the concept of moral obligation with respect to the commercial relationships between organisations and the people they employ.
A moral obligation is defined as “the standards of good or bad behaviour, fairness, honesty, etc. that each person believes in, rather than to laws. They are the prevailing standards that allow communities to live cooperatively in groups.”
There is no doubt that, in a post-pandemic world, our common understanding of those standards has shifted.
The traditional boundaries of mutual dependency between organisations and their workers have been redefined, with people expecting companies to protect them from unexpected external shocks more than they used to.
Many companies already have in place internal values that imply they aim to treat their staff well, and beyond the requirements of the law.
I quote from the NHS employers’ website: “We build respectful relationships based on trust, empathy, and equality…. We do what’s right not easy.’
Amazon’s leadership principles include the following statement ‘Leaders work every day to create a safer, more productive, higher performing, more diverse, and more just work environment.”
And yet in spite of these guiding moral principles both the NHS and Amazon find themselves facing strikes over pay and conditions from highly dissatisfied employees.
So, I ask myself: is there a moral obligation to offer financial assistance if you discover that people in your organisation are having to go to food banks to get by?
Or if a manager tells you that people in their team are not putting their heating on when they work from home all day.
How did “doing what’s right”, or the concept of “justice”, play into the decision-making on reward at the NHS and Amazon, against the background of a cost-of-living crisis?
It is increasingly hard to know where to draw the line. Particularly given organisations are themselves facing increased operational costs, which limits the room for manoeuvre.
Going above and beyond to protect incomes
There is no doubt that the Covid pandemic caused a shift in the relationship and expectations of the government and its citizens (and companies and their employees) to protect people.
That change can be summed up by Rishi Sunak’s famous pledge, “to do whatever it takes” to protect the UK economy and its people.
Business leaders also stepped up, and embraced the change required to enable people to work from home, including attending to their mental health during this global emergency.
On the whole we can look back and say that leaders and managers went far beyond any legal or contractual requirements. They were operating with a sense of moral obligation.
We have yet to settle into a new equilibrium. We are still groping towards a shared understanding of what is affordable, and a straightforward discussion about the trade-offs that present themselves in any commercial decision.
During the pandemic choices on how staff were treated were presented against the backdrop of ‘life or death’.
We experienced a solemn daily roll call of mortality figures, and there was the potential to face a similar list of failed businesses.
The emergency was extreme and the choices available were highly limited. Everyone was vulnerable to the virus. The majority of companies faced potential closure without substantial government support.
The uneven impact of the squeeze on spending power
The current cost-of-living crisis differs because it doesn’t impact either people or businesses in an equivalent way.
Those on lower incomes who spend a greater share of their income on energy, rent/mortgages, food, and other essentials are hit disproportionately hard. They are also likely to have lower savings to fall back on.
We also know that labour costs are only a proportion of any company’s operating costs. They sit alongside the company’s exposure to other inflationary forces in the supply chain and interest rate rises.
So, the ability to absorb the shock will vary considerably at both an organisation and individual level.
As the cost-of-living pressures bite across the economy, affecting both suppliers and employees, our personal views on what is right and wrong are being tested.
On the one hand, I have heard some leaders say that it is not their responsibility to step in if people are not coping financially. Their view is that people should learn to budget more effectively and adjust their spending behaviour so they can make ends meet.
These are the organisations that would prefer to offer training courses on financial management and provide resources for access further advice than increase their overall labour costs.
On the other hand, particularly in the private sector, which is less subject to political considerations, it is clear that many employers have already intervened, and used a range of tactics to respond to the everyday reality of their employees.
But it has to be admitted that interventions such as, one-off extraordinary bonus payments, to significant pay increases for the lowest paid, have not been universally adopted even in the private sector.
Often due to either existing customer contracts restraining the ability to pass on increased costs with higher prices or a reluctance to jeopardise profitability.
The ethics of those who lead are in the spotlight
Leaders who have resisted adjusting their remuneration plans are faced with the reality that, whether they like it or not, there is a moral obligation in place.
It is why Government spokespeople talking about having followed ‘due process’ using ‘an independent pay review body’ can sound so tin-eared.
Once you enter the territory of moral obligation, asserting you are ‘following the rules’ doesn’t wash as a satisfactory response.
Refusing to re-evaluate obligations enshrined in what is seen to be moral, as opposed to contractual, then you risk being perceived as unethical and lacking in goodwill.
And we all know the wheels of every organisation are oiled with the lubricant of goodwill and reciprocity. It is what provides flexibility in the system. It fuels the ability to respond to the unexpected, not captured in employment contracts, such as changes in working patterns at short notice.
Key to goodwill is trust in working relationships. Academic research has confirmed that one of the four principal drivers which builds trust in an organisation and its leaders is benevolence.
In the current economic circumstances, a benevolent attitude is what is being called for. Leaders will find, wherever they decide to draw the line, that there will be consequences in future levels of trust and goodwill if they misjudge it.
People will remember if profits were prioritised over people in such tough times.
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.
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