This week, we continue to examine 2 other factors that challenge organizations’ stability and growth today:

3. A Culture of Outrageous Materialism and Salary

We’re caught in this rat race because we want more than we have. It’s certainly true that prices are rising, and the cost of living in most countries will keep increasing. Inflation will grow faster than salary.

One of the most outrageous results of inflation is seen in the skyrocketing prices of branded products. But people are still buying and clamoring for them! One receptionist told me, “My ultimate dream is to own a $50,000 LV bag.” Another engineer I know worked overtime as much as he could, just to buy a $20,000 Patek Philippe watch.

There are wristwatches that cost an eye-watering $100,000, and people will pay thousands of dollars for an ordinary item with the right brand name. Business owners will splurge on a $40,000 bottle of wine for their most valued clients. Luxury cars can cost in the region of hundreds of thousands, some for a couple of million dollars.

Homes are another place to splurge, to show we have made it. For instance, a 3,015 square-foot townhouse in Hong Kong’s Redhill Peninsula is selling for $800 million!

The dictum seems to be: “The more expensive, the more prestigious, and the more exclusive, the greater the demand.”

Over the last five years, CEO salaries have also skyrocketed. Companies are eager to lure top-tier executives, and willing to provide millions of dollars in pay, bonuses and special perks to help themselves turn around or sustain a top position.

This has undeniably and inevitably widened the income gap between the super rich and the poor—so the rich get richer and the poor get poorer. The Davos Forum has political and business leaders confronting the widening income inequality, one of the greatest challenges of our time. The 85 richest people on Earth have the same amount of wealth as the poorest 3.5 billion, accounting for US $1.7 trillion.

“Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the table top,” writes Winnie Byanyima, Oxfam’s Executive Director. In a report, the World Economic Forum has said that widening income inequality is the risk most likely to cause serious damage in the next decade.[1]

4. People are Paid to Perform.

An English Premier League footballer is paid, on average, US$3.5 million a year; an NBA player, US$4.5 million.[2]

That’s before they become truly famous. Barcelona’s Lionel Messi is the most expensive sports player on earth, and is paid US$50 million a year. For comparison’s sake, the top pre-tax salaries in US Major League Baseball this year go to $25 million (Ryan Howard and Cliff Lee) and $30.5 million in the NBA (Kobe Bryant).[3]

Football clubs pay top dollar for key players, such as the US$70 million transfer fee for James Rodrigues of Colombia, the top scorer at the 2014 World Cup. Prices of their merchandise also go up; top-name football jerseys might cost $200 each. That’s big money from sports equipment manufacturers as well; as I write, Adidas has just signed a ten-year sponsorship deal with Manchester United for $350 million!

All of this reflects the money at stake, and the pressures that clubs face to perform well. In English football, club managers come and go; they rarely stay at a single club for longer than two years.[4]

What does this mean for players? It reduces their entire careers to a chase after more and more, and loyalty to any given team has been replaced by an addiction to performance—driving the sales of tickets, paraphernalia and global branding revenue. Nobody loves you for who you are, but what you can do for them!

Both managers and players are tools to be used. If you perform, you are in. If you don’t, you are out. This philosophy is not just seen in our corporate world.

In Singapore, the pressure is only set to grow as we go through economic restructuring. The Government is trying to increase productivity through innovation, paying higher wages and slowing down the inflow of foreign workers. The aim is to fundamentally change the way Singapore’s economy is growing, so that it is sustainable, competitive and meets the challenges of an ageing population.[5]

However, this does little to let up the stress that employees are under to produce more for less. Fundamentally, employees are measured by their productivity—but productivity has not matched up with wage increases. The average salary hike has risen by 4 percent, but productivity growth is averaging 1.3 percent a year!

The push to reduce access to lower-skilled foreign labor might be to make companies invest more in technology, thereby raising productivity in the process. But the reality is that not all business functions can be replaced by technology.[6] Technology isn’t magic; it needs to be maintained.

Take this for an example: Christian Eber, Director of CE Engineering, has had to roll up his sleeves to repair air-conditioners himself alongside his technicians because there are simply not enough people to do the work. For the business to run at optimal levels, he needs about 25 people on the team—far more than the seven he has. Needless to say, one of his key struggles is to find more.

Many SMEs are facing immense struggles, as if they were competing in a Formula One race with a saloon car. Many businesses across all sectors are being forced to close, with F&B outlets hardest hit. A shortage of labor brings additional difficulties, such as training new staff well.

John Ng

References:

[1] Jim Puzzangherra, “Oxfam report highlights widening income gap between rich, poor,” Los Angeles Times, January 21, 2014, at http://www.latimes.com/business/la-fi-mo-oxfam-world-economic-forum-income-inequality-20140120-story.html.

[2] Cork Gaines, “CHART: NBA Tops All Sports Leagues With Highest Average Salary For Players,” Business Insider, April 18, 2014, at http://www.businessinsider.sg/chart-nba-average-salary-2014-4/?r=US&IR=T.

[3] Salaries change throughout a player’s career—these are gathered from their Forbes profiles.

[4] “New statistics reveal average tenure of managers in England just 1.23 years,” Sky Sports, June 5, 2015, at http://www.skysports.com/football/news/11688/9875915/average-tenure-of-managers-in-england-just-1-23-years.

[5] Robin Chan and Aaron Low, “The New Economy: Too Fast, Too Furious.” The Straits Times. August 2, 2014. SPH Publishing. Singapore, pp. D2-3

[6] Ibid.