As global leaders in business and politics gathered for their annual skiing holiday in Davos, Oxfam released a report suggesting that the 26 richest people in the world have equivalent wealth to the bottom half of the world’s population (almost 4 billion people). There are some major questions about the veracity of the data in Oxfam’s study, but the principle is definitely true – we live in an unequal world.
Within developed countries, where even the poorest are better off than many in Africa or Asia, wealth and income inequality has been getting worse, and senior execs are paid hundreds of times what an average worker is paid.
Does that matter? I spend a lot of time discussing with business managers how they motivate their people, as well as maintain profit margins. I’m a business coach, not a priest, so it is not my role to moralise. My personal politics mean I instinctively rail against such inequality, but I’ve yet to find a definitive answer as to why I think it is wrong.
Ignoring morality, there is some evidence that income inequality is bad for everyone, not just those missing out (see the excellent Ted Talk by Richard Wilkinson), but that doesn’t make it wrong. Ignoring this political or social argument as well as the moral argument, is unequal distribution of profits between workers and managers good for business?
It seems logical that fair reward should follow fair contribution and that fairness doesn’t mean equality. I have a client where all their admin staff are paid the same, get the same pay rise and the same bonus – regardless of their effort or contribution. This is demotivating for hard workers and allows loafers to benefit from the industry of others.
Most companies seem to accept that pay rates differ according to contribution – market forces can mean corporate lawyers get paid more than employment lawyers, for example – and that more experienced people might get paid more than newly-qualified people. Yet sometimes the rewards for very senior managers seem to far exceed such meritocratic or market-based differences.
Owner-managers take greater risk than employees – they do face the reality of not being paid whilst finding the cash to meet payroll for others. They often also face the reality of having their family home at stake to support the business. Perhaps that level of risk deserves a greater share of the reward?
I am sometimes amused by board-level discussions which move from agenda items on staff retention problems or lack of buy-in from team members who are lowly paid onto a discussion of the management retreat in Paris or a dividend to owners far in excess of the pay of their employees.
Of course, money alone doesn’t produce a loyal or motivated workforce and in most people it doesn’t significantly change behaviour. As Dan Pink tells us in Drive, once people are paid enough to take money worries off the table, it ceases to be their primary motivator.
Personally, I am always curious that people work in Wetherspoons, Sports Direct or Topshop on minimum wage whilst the owners become enormously wealthy off the back of their labour. Yet I guess that for some of those workers a minimum wage is better than no wage at all. Would any of those businesses fare better if they shared the rewards more equally?
My aim in my musings in this blog is always to get you thinking. I rarely try to provide THE answer, because there is rarely one answer that suits each of you. Today I want you to think about how you share the rewards of your business, your team or your work.
- Are you fairly rewarded for the contribution you make?
- Do you reward those you work with fairly?
- What is fair? Is it fair to split reward equally, or to distribute according to contribution, rarity, value-creation or some other metric?
- Would changing how you share out the rewards change behaviour amongst your colleagues?
- What non-monetary rewards might be more relevant to you or your team?
- What will you change as a result of thinking through these issues?
- How will you know those changes have improved things in your business?
I hope I have stimulated your thoughts on fair reward, remuneration and motivation and your own value and contribution. At all times I guess we should remain aware that a third of the world’s population survive each day on less than the cost of a Starbucks. If we can afford the Starbucks, we’re one of the lucky ones.