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“The Spirit Level” published earlier this year claims to show why more equal societies almost always do better. There comes a point it claims when well being no longer increases in line with growth.
Its basic tenant is that at some point in the story of wealth creation, the more unequal a society is, the unhappier its people tend to be. What this prompts though is the question of whether this also applies to companies? Is there a link between the more unequal the corporate culture and more unhappy employees?
David McLeod’s recent report on engagement does not deal with issues of inequality but instead points out that happy employees tend to perform better than unhappy ones and so companies are ultimately more profitable.
Taking your own situation what makes you happy? It is hard to guess at this distance but if we turn the question around to what makes you unhappy the answer becomes rather more predictable.
For example, plenty of studies show that people maximise their psychological well being when engaged in meaningful work that provides positive emotional experiences.
So if you don’t have such work it’s a fair guess you are less happy than you could be, and perhaps positively unhappy.
The sources of human happiness now absorb a lot of psychologists’ research time but apart from not having meaningful work we can almost certainly add serious inequality as a factor influencing individual and company performance.
This means we need to look much more carefully at the size of the gap between the highest earners and lowest. For example, the Royal Bank of Scotland, which is 70%-owned by the taxpayer after its multi-billion-pound Government rescue, recently approved a £9.6 million pay package for new chief executive Stephen Hester. This pay was grotesquely many times over what the average person in the bank could expect.
While the result must have made the CEO pleased, you can be sure that it will have left many entirely competent people in the company, let alone the rest of us feeling distinctly unhappy.
An employee at RBS even on £30,000 a year would need to work 320 years to receive the same remuneration as Hester. Don’t even bother to work out what the multiple would be for someone on the minimum wage!
The unanswered question arising from the above is to what extent does meaningful work counter the adverse experience of high levels of inequality? For example, if employees on say £30k at RBS really do have exciting and meaningful work, would that cancel out the negative effects of the inequality existing in pay between them and their CEO?
Kingston Business School research has shown that a third of employees have no confidence in or trust their senior management team and only 40 per cent of employees are satisfied with relations between managers and employees in their organisation. It is unlikely that the search to change this situation can succeed without also tackling gross disparities in how people are treated, including levels of pay.
Demands for a high pay commission are now firmly in the public arena and HR practitioners would be wise to draw attention to the role inequality almost certainly plays in preventing engagement and causing unhappiness and therefore under performance.
www.maynardleigh.co.uk
