Peter Cheese, Chief Executive, CIPD.
The statement, ‘may you live in interesting times’, has often been attributed to an old Chinese curse. Whether accurate or not, the fact is that we are living in times of great turbulence and uncertainty, and this creates huge pressures on all of us in how we respond and adapt.
Emerging from the pandemic, we are now experiencing the most significant geopolitical crisis in a generation: a retreat of globalisation, the growing environmental crisis, and now what appears to be an ever-increasing economic and cost-of-living crisis. All are impacting how we think about our businesses and business models, and critically, our people.
The World Bank and IMF have both become increasingly pessimistic about the economic outlook for 2023. Many costs are rising, pushing up prices for basic commodities as well as luxury goods, and as inflation hits levels not seen for decades, interest rates are rising as Central Banks try to respond. The IMF notes that the world has moved from an era of predictability where interest rates and inflation were low, to one of instability – ‘shock upon shock upon shock’ – with not much end in sight.
Supporting people as the cost-of-living increases and household incomes drop in real terms is a political as well as business challenge. Governments are seeking various ways of capping specific cost increases, such as energy, or trying to define policies for growth. Organisations need to respond but closing this pay gap for most is unrealistic. There is wariness of overinflating payroll, as people-related costs typically account for the majority of costs. Many are considering other responses such as non-consolidated one-off hardship payments for staff, or providing access to good financial guidance to help people manage their finances in tougher times.
These issues are growing sources of tension nationally and across the business world. Unions are speaking up more strongly than they have for a long time, and trust, whether in our political, regulatory or business leaders is under threat.
At the same time, unemployment in many of the largest economies is at the lowest rate for decades, and businesses everywhere are bemoaning the shortages in skills. This constrains growth, as well as putting more pressure on workforces and their wellbeing. Productivity is again therefore a subject of much debate. As the US Nobel Prize-winning economist Paul Krugman said in 1994, “productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Being efficient and effective, not just trying to force more out of the same resources, and not mistaking activity for productivity.
This is a tough set of circumstances, and our profession is at the forefront and under pressure to come up with solutions or resolve the many conflicts. We have to be aware of the external context, as well as managing the pressures from the leadership of our organisations alongside the needs of our workforces. Not only do we need to be able to adapt, but we have to adapt responsibly even if that means restructuring our businesses and operating models. Managing change effectively and retaining the trust of our people has never been more important.
This is a time for us to connect, to learn from each other, and to support our professional community. But also, to invest in ourselves as a profession, so we can tackle a more uncertain future. We look forward to bringing this all together at our Annual Conference and Exhibition next month.
