Employer’s reputation is the key to success

Every British company with a stock market quotation is suffering an acute
tension between two conflicting aims. There is the demand from the stock market
to deliver ever higher financial returns to shareholders with all that implies
in terms of cost minimisation, flexible working patterns and multi-tasking. And
there is the recognition that successful trading requires a satisfied
workforce, a reputation for being a decent employer and delivering in terms of
quality.

The argument has been that no such tension should exist, what is good for
the business must be good for the share price, and attempts to require
companies to be good corporate citizens is a contradiction in terms if it might
endanger short-term profitability. Capitalism is essentially win/win, and if
there are hard edges, so be it. But the tension does exist. Companies need to
sustain their reputation, but consumers and workers are tougher in their
judgements about businesses as employers and producers than they used to be.

The growth of litigation over employment rights going to Acas is one
indication of the new mood. Others are the growth of the NGO movement, the
ability of consumer groups to mount successful campaigns such as that over car
pricing, and the various committees over the 1990s – Hampel, Cadbury,
Greenbury, Turnbull – that have wrestled with corporate governance. Another is
the growth of the ethical investment movement, with university and local
authority superannuation funds indicating they will be much tougher over
whether the companies in which they invest behave ethically and socially
responsibly.

From a myriad of quarters the same message is being sent. Companies need to
be just and decent if they are to win loyal workers and consumers.

Yet the pressures on boards to behave differently are no less intense. There
is the ever-present threat of takeover. There is the need to demonstrate to an
investment community fixated by hi-tech companies that your business can
deliver rapid profits growth. The question should be how the organisation and
employee can construct a relationship in which they serve each other. Instead
too frequently it is how work can be organised to serve the task of immediate
profit maximisation.

Those in human resources and personnel are in the front line of this tension.
They live it daily. One of the difficulties is too few HR directors are part of
board room and director-level decision-making, so decisions get skewed towards
short-term profit maximisation rather than reputation building and husbanding
human resources. Yet the argument has to be made, and the best way of making it
is pointing to the growing external pressure for better and more just business
conduct.

Will Hutton’s views are expanded in his essay, Society Bites Back, available
from the Industrial Society for £10 or from the society web site,

www.indsoc.co.uk

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