Duncan Brown: Pulling the HR lever

”We haven’t got some magic lever (to pull) in the Treasury that says ’increase wages’.” That was how Treasury minister Sajid Jarvid expressed civil servants’ frustration with the debate following the Chancellor’s Autumn Statement.

Rather than welcoming the significant upward revision to national economic growth forecasts for 2013 (1.4%) and 2014 (2.4%), much of the post-statement debate focused on the cost-of-living issue and who shares in that growth, with the Institute of Fiscal Studies showing that the average employee earns £1,600 less in real terms than they did at the last election.

The week before, US President Obama had labelled rising pay inequality ”the defining issue of our time” and cited a much higher minimum wage as a lever he wanted to pull. A report that week from the Organisation for Economic Co-operation and Development (OECD), Divided we stand, showed that the richest 10% earn nine times the income of the lowest decile of earners across the major economies, with a ratio of 12 times in the UK, where inequality has risen more quickly than in any other country since 1985.

The jobs economist John Philpott pointed to a key driver of this, and our lamentable productivity performance, at a Civil Service Employment Policy seminar on reward strategies, the so-called ‘hollowing out’ of UK employment. Most jobs growth is occurring in the elementary, low-skilled service and high-skilled management and professional jobs, while the middle-skilled (and class) jobs are suffering the most significant reductions.

Yet, as he pointed out, these trends are not just caused by arbitrary market forces.

Skills-based pay

When I started in HR in the motor industry, practices such as skills-based pay and job enrichment were the norm: developing people’s skills, growing their jobs and promoting from within improved their performance and productivity far beyond the additional pay costs that resulted.

I worked on the Agenda for Change pay reforms and creating a ‘skills escalator’ in the NHS. Yet many employers seem to have forgotten how to use these tools, with their productivity and employees’ living standards suffering as a result.

Fifty years ago, in one of the defining texts on organisation development, Organisational development: strategies and models, Richard Beckhardt defined the managerial role as ”fully mobilising the energy of the organisation’s human resources towards achieving the organisation’s performance objectives” and ”organising the structures of work and jobs, systems and relationships”.

HR functions spend a lot of time on the first of these, which we now call engagement, yet seem to have abandoned the latter to IT and project management professionals. The results are evident in narrow, low-paid and frustrating jobs and de-humanised work processes, which consumers often find just as horrendous as the employees involved do.

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Reward and benefits professionals need to rediscover and regain control of job and organisation design and reinstitute essential levers, such as skills-based pay, to help to improve employee productivity and, thereby, also address widening inequality and declining social mobility.

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