Zero hours mean zero skills and value erosion

This week it was reported that there are now c 700,000 people on zero hours contracts. There are some big brand names responsible for this unfair treatment of workers including JD Wetherspoons, Burger King, Domino Pizzas, Sports Direct and McDonalds. Big chunks of the hotel, catering,education and care sectors use zero hours contracts which is said to have helped create the flexible workplace which has in turn helped the UK improve its economy and get out of recession.

However, this short-termism has an impact on the UK's long-term ability to compete.  Workers on zero hours contracts are less likely to build up useful skills and employers are less likely to invest in their training-creating workers with low skills, lower productivity, lower morale and less loyalty.

The key reason for treating employees fairly ie ethically, is because it is good for business eg through the "value creation cycle" where if employees believe they have a good deal from a firm (compared to alternatives) they are more likely to put more effort and loyalty into their roles than otherwise would be the case, their behaviour results in better performance, allowing the firm to improve the value proposition to customers, who then buy more, leading to growth in sales and profits etc etc. It's called "positive reciprocity" and benefits the economy long-term. We need highly skilled, highly motivated and highly productive workers to compete in today's and tomorrow's global economy.With many of the young on zero hours contracts, instead we are creating cultures of "negative reciprocity" fuelling the erosion of trust and growth in cynicism from our future generations.

The cost of conflicts-of-interest

Yesterday the FCA fined Aviva Investors £17.6 bn for systems and controls failings that meant it failed to manage conflicts-of-interest fairly.  This is a new topic for this blog and it is perhaps worthwhile just to quote directly from the FCA's spokeswoman to explain why conflicts-of-interest is important.

" Ensuring that conflicts-of-interest are properly managed is central to the relationship of trust that exist between asset management and their customers. It is also a fundamental regulatory requirement.....not doing so risks customers' interests being overlooked in favour of commercial of personal interests".

This is another example of the legacy issue where today's leaders are sorting out and paying for the unethical behaviours of predecessors when they should really be freed up to focus on rebuilding reputation and regaining the trust of stakeholders.

It’s not so bright treating rent-to-buy customers unfairly

Is there a responsibility to protect vulnerable customers from potentially misleading terms and conditions?  There certainly was in the pay day loan market where regulation was introduced to stop companies exploiting the poorest members of society.  Now the All-Party Parliamentary Group on Debt and Personal Finance has written to the Financial Conduct Authority about rent-to-own (RTO) retailers such as BrightHouse ‘cashing in’ on consumers’ difficulties.  The Group make 20 recommendations to be used as a new blueprint for the sector.  Key proposals include: 

• a ban on warranties and insurance
• an investigation into the mis-selling of insurance
• safeguards to prevent customers losing essential items for which they have already made substantial payments
• transparency about the total cost of RTO agreements

One of the business benefits of ethical conduct is it reduces the risk/cost of regulatory action. Yet again it really isn't too bright in the long-term to treat customers unfairly.

How can consumers trust relentless innovation?

Brand and product managers have always liked launching new products, it's what they do and this is particularly prevalent now in the technology sector.This potential confusion is often dressed up as enhanced choice for consumers.  The reality of this “enhancement”  may however be somewhat different with the plethora of products, services and pricing packages from financial services, energy and technology companies to name a few, creating confusion, unease and pressure on consumers. 

Findings from the 2015 Edelman Trust Barometer shows that 51% of the “informed public” consulted believe that innovation in business is now too fast, with just 19% saying it is about right and 28% saying it is too slow.  When asked "what they believe to be the key drivers of change", enhanced consumer choice did not predominate as can be seen below:

• 70% technology
•  66% business growth targets
•  54% greed/money
•  35% personal ambition
• 30% improving people’s lives 
• 24% making the world a better place. 

As has been demonstrated in this blog, business needs to build trust with its stakeholders.  Constant innovation may not help in this task as it is in danger of generating more confusion, uncertainty, and unease and because people do not believe it is actually for their benefit. However, to build up the aspect of "trust in innovation" the Edelman survey also revealed that transparency and third party validation were vital. So if business wants to continue to innovate and build trust they need to develop their credentials by having the results of their developments publicly reviewed and partner with more respected third parties such as universities.

Integrity and engagement are key trust-building opportunities

This year's Edelman Trust monitor once again looks at key areas in building trust.  The 5 areas relate to organisational integrity, enagagement, products and services, purpose and operations. The Trust monitor summary however emphasises the first two as the major trust-building opportunities for business and it is useful to summarise their key attributes:

Integrity

• has ethical business practices
• takes responsible actions to address an issues or crisis
• has transparent and open business practices

Engagement

• listens to customers' needs and feedback
• treats employees well
• places customers ahead of profits
• communicates frequently and honestly about the state of business

 The difficulty with maximising these trust-building opportunities is that they probably mean changing organisational culture which is long-term and it's clearly tempting to take the easy option and just tinker with products, services and operations. However, if leaders are in it for the long -game (see yesterday's blog on stewardship) then there are more chances of these trust building opportunities being realised, but possibly without them getting the direct, attributable credit -quite a personal leadership conundrum.

Everyday business ethics: building trust, boosting value

Is stewardship the answer to the poor conduct of big business?

Trust depends on the perception of fairness i.e. the equity of social exchange, so it is inevitable that trust in big business will have been further eroded by the continuing negative media coverage on tax avoidance this month.  It culminated last week with the Public Accounts Committee castigating the big accountancy firm (PwC) for its role in advising clients on tax avoidance; recommending that ministers should consider banning PwC from big government contracts as a way of influencing its behaviour. This week the “unethical news” is about the big bank HSBC on the same theme of helping clients with tax avoidance (evasion?)

The problem for current leadership is that a lot of what’s damaging reputations now goes back to their predecessors’ decision making.  Perhaps today’s leaders need some training in the ethos of stewardship, putting much more emphasis on the ethical legacy of their businesses in the longer term.  The 2015 Edelman Trust monitor shows that family businesses are the most trusted type of business (where passing on a viable firm to the next generation is stressed).  Our current leaders need to consider their successors, putting in place the business model which will best support the ongoing improvement in organisational reputations and trust for future generations.