A passenger was booking his bags in at an airport and gave the person checking in his bags, a lot of unnecessary abuse. The baggage handler did not seem at all concerned. When the next person in line said to the baggage handler you seemed very calm about the abuse, he said he may be going to France but his bags are going to Brazil.
How often do we in our own small way “try and even up the score” or “justify our actions” if we believe we have been treated unfairly or unjustly either as individuals or as a collective? How often is the response to inequity often actioned by individuals and sanctioned by the collective yet never named?
In corporate Australia inequities are no more stark; on one hand, many employees’ jobs disappear with the never ending rounds of restructures; those left behind often have increasingly large workloads, reduced work space and often smaller salary increases for expected increased efforts. Australian salaries are stagnating up only 1.3{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} in two years and the combined unemployment and underemployment rate in Australia is now approximately 18{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52}, a combined figure that is rarely highlighted.
On the other hand while this is happening to the rank and file in the work place, employees observe the increase in remuneration packages and payouts for Executives and CEO’s. The inequity is highlighted by research by the Australian Council of Superannuation Investors which states “that bosses of Australia’s leading companies are taking home almost 70 times the national average salary and the 10-year trend, for executive fixed pay has increased almost three times as fast as inflation since 2002, and nearly 70 per cent faster than average wages growth”.
Interestingly these numbers may not be anywhere near the truth, according again to the Australian Council of Superannuation investors who state “the collective pay packet of the ASX100’s 10 highest paid chief executives was more than 70{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} larger than the pay declared in their companies’ 2014 financial reports”. In addition to this ACSI said “the average cash bonus in the ASX100 in 2014 was up more than 10{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} to $1.35m, and average realised pay of $5.63m was up from $5.01m a year earlier”.
Average Australians clearly understand that while executives are cutting their jobs the very same executives salaries are escalating. One of the most recent examples of a current CEO remuneration package that was in the limelight is Qantas CEO Mr Joyce’s mega pay packet, which represents a pay increase of 490 per cent or close to $10 million more than last year for this one individual. He cut 5,000 jobs and ensured the union members had an 18-month pay freeze as well as delaying the purchase of new airlines. Mr Joyce may well deserve credit however is it a 490 per cent increase in salary appropriate credit? How can so many loose while such a few gain?
Employees are also observing while their jobs are being outsourced overseas, that about 50{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} of CEO’s in Australia have been recruited from overseas. They often have significant sign on bonuses and demand significant increases in remuneration from the previous incumbent. Many CEO’s often recruit other executives, whom they have worked with before and pay out contracts for existing executives, adding significant cost to the business. If employees are being recruited from overseas as well the costs continue to escalate. Other additional costs often include the consultants that often follow executives from business to business and like the executives are very well paid as well. How often does the cost to fix a problem cost more than the problem itself and how would we know?
Yet are Australians just accepting “their lot” or are many small actions, by employees in their own way, evening the scorecard, just like the bag checker did at the airport?
If this is so and sanctioned by the collective, could sick leave be a good example of this? According to research more than 70 per cent of working Australians today believe it’s their right to take sickies. Why might that be? How many have had a sick day but have not declared it and as a result have more paid sick days up their sleeve? Why do they think that this behaviour might be OK? How many have said they are sick when they are not? Is it possible sick leave may be used as a rationale to even the scorecard? If it is, it is an effective one. All up, sick leave costs Australia a record $33 billion in lost productivity and payroll costs. For each worker, it comes to an average of about $340 a day.
Could another opportunity to even the scorecard is being less productive at work and completing as much of one’s own private business during work hours? For example updating Facebook, texting family and friends, managing finances and looking up the web for key purchases. I had a friend visiting and for about 20 minutes she was texting back and forward to her son at work, about his new girlfriend and such things. This was not an uncommon occurrence during her visit. I finally asked her, wasn’t her son who was a white-collar worker, in a large Australian firm busy at work? Her response was everyone did it and besides for the money he made it was only fair. A good example of being the actions of an individual but sanctioned by the collective.
One measure available to measure productivity is employee engagement, which refers to the extent to which employees believe in the values and mission of the organisation, are committed to their work and will act in ways that further the organisation’s interests. In a recent Gallup pole 80{01332a80e2e652688e18927fa9a6162580960d47bc08263a3993439d666dcd52} of Australian employees stated they felt disengaged with work, and it estimated that disengagement costs Australian organisations at least $33.5 Billion a year in lost productivity.
If we accept employees may be attempting to even the score card; If we accept that that perceived inequities are contributing to this; If we accept that the consequence is it cost billions of dollars; What can be done about it and by whom? I believe that the answer lies initially with boards and as a part of their decision-making processes they need to ask themselves the multi million-dollar question:
How do Boards when deciding on CEO’s and executive salaries and subsequent payouts and additional costs, consider what levels of inequity can the organisation tolerate before employees take the attitude of the baggage handler in some form or another?
I believe that the board has a huge responsibility to the whole organisation not just to executives, to help achieve reasonable equity within the organisation. Boards need to spend more time looking at the bigger picture and completing scenarios on the consequences of their decisions. They too need to do scenario planning.
For example what are the potential consequences when a board brings in a CEO from overseas who demands a larger salary than the current incumbent and has a substantial sign on bonus and other benefits? What are potential additional costs when the new CEO comes in and pays out some current executive contracts, and then brings in new executives, which he has likely worked with before, at higher salaries? Then of course there is the potential cost of the preferred new consultants that will be employed as a part of potential restructure options. What are the additional costs and consequences of the inevitable restructure and redundancy costs? What impact will these changes have on the people left behind particularly as they see executive’s terms and conditions escalate as their ’s deteriorated? Will the motivational and work harder speech for the good of the company, with the subtext you are the lucky ones to have a job, be effective under these circumstances? When does the cost of these activities outweigh the risk of employing an internal candidate and when does it not? These are some of the questions that need to be considered by boards.
As well as scenario planning, I believe that boards also must demand data that helps identify the “true ongoing costs” of their decisions and the “true health” of the organisation and not just rely on out-dated and easily manipulated employee survey data and pulse surveys. Contrary to popular teachings Boards need to have a greater understanding for themselves about the financial and social health of an organisation and need to identify ways to enable them to do this. This is supported by McKinsey research which highlighted the importance of public listed boards spending more time on strategy, selecting and developing talent management and that most board members felt starved of operational and strategic information. Can you imagine what decisions may change if they had such information at hand?
Inequities in organisations, like in any society breed discontent. Ever increasing inequities breed more discontent. People, through history will only suffer so much inequity and will move to balance the scorecard at some stage, just like the baggage handler did. It is time for Boards to incorporate into their thinking the real costs and consequences of their decisions and spend more time on that multi million-dollar question:
How do Boards when deciding on CEO’s and executive salaries and subsequent payouts and additional costs, consider what levels of inequity can the organisation tolerate before employees take the attitude of the baggage handler in some form or another?
