Could a Labour man from Scotland agree with George Osborne?

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In the recent budget George Osborne pulled something of a surprise when he announced the Government plan to increase the minimum wage in the current parliament. While this is clearly linked to his simultaneously lowering the tax credit regime to lower that welfare bill it got me thinking about how organisations will respond to the transfers of costs from the state to the employer.
But let me get my disclaimer in up front. Firstly, I’m not an economist, and secondly as a Labour voter from Scotland and an unlikely supporter of George Osborne, my views reflect my instinct for practicality rather than political prowess – and being part of Ember, pragmatism and practicality is part of our DNA.

So is it right or wrong?

Whether you feel this move is right or wrong, good or bad, there is no doubt that this will have an impact on the costs of a substantial proportion of the UK’s contact centres, where many staff will be on the minimum wage.
How organisations react to this imposed cost increase from raising the minimum wage will be interesting. Inevitably, it is likely we will see some organisations passing these costs on to customers directly through price increases, or indirectly through reductions in service. Either action will be short-sighted as most organisations’ long term success will ultimately rely on how easy they are to deal with and how well they represent value in the mind of the customer.
In a bid to retain competitiveness some organisations may also consider options such as lower cost locations in their operating model. There are obvious and less obvious risks associated with this course of action that need careful consideration.

So, what should we do?

There are alternative options that should be considered.
Most organisations still carry substantial ‘hidden’ costs in their operating model that erode the potential for productivity and profitability. For example:-

  • business siloes that are driven more by empire-building than customer service, resulting in a duplication of effort, and reductions in quality of the experience for customers;
  • the burden of legacy costs resulting from errors of the past or rushed investment decisions – energy providers and banks are often in the media for such issues;
  • quality and compliance organisations that only scratch the surface of issues rather than really helping to improve businesses and avoid the costs related to the impact of issues;
  • recruitment, training, support and administration infrastructures that exist, in part, due to a failure to attract and retain the right people;
  • misaligned or poor supplier contracts that are at best failing to deliver value, and at worst creating conflict in goals.

…and the list goes on.
So, before grumbling about George Osborne’s decision, there is a case for organisations to look more closely at themselves before passing costs on to customers. At Ember, we help organisations balance costs by offering innovative ways to operate that do not deteriorate service or compromise customer engagement. On the contrary – significant advantage can be gained by those organisations that are willing to rise to George’s challenge and improve their operational practises before compromising their relationship with their customers.
Whatever your political or ethical stance on the minimum wage might be, do contact me, Chris McIlduff, client director for Scotland, for a chat about it and how we might work together.