I recently came across this transcript of a speech by Phillip Lowe, the Governor of the Reserve Bank of Australia (our central bank, and the equivalent to the US Federal Reserve). In it he discusses the stagnating wage growth in Australia and other western countries, and what’s behind it. Of course my mind immediately sprang to mentoring being the solution to all of the world’s problems.
First, why is wage growth such an oft discussed topic?
In short, if wage growth doesn’t keep up with inflation (which it isn’t) the relative cost of living increases and households are forced to tighten their belts. This leads to less spending and an overall slow down in the economy, which leads to slower wage growth…
In Australia the rate of wage growth is a little over half the historical average, and in the US wage growth is now tracking in the negative. There are a number of reasons that wage growth has slowed in recent years. In Australia, we’ve experienced the loss of many high-paying jobs as our mining boom ends, among countless other macro factors.
But what caught my attention is a phenomenon much more institutionalised within organisations. Over recent years, an underperforming economy has led many firms to implement strict cost controls (at least those firms who haven’t innovated, which let’s face it, is most.) And in these situations the first cost to go is usually investment in the training of people. Now as firms emerge on the other side, they’re looking to hire workers skilled for the jobs of the future. But thanks to a lack of investment, there are none.
In summary, wage growth slows in an economy short on skilled workers who can add value in the jobs of the future. And business suffers as a result.
Basically, in an economy experiencing a future-focussed skill shortage, wage-growth contracts and business suffers.
So while the economist in me would love to analyse this phenomenon further, I’d prefer to discuss the increasingly obvious elephant in the room.
Second, why invest in your people?
Investing in the development of your people is key for your business growth, and of course, not investing is a sure fire way to damage your future potential for growth.
Countless studies are proving this fact over and over again. For example, in one study companies in the top quartile (based on growth) unlocked 40% more productivity by investing in their people’s time, energy and talent. Another study showed that an inspired employee is twice as productive as an uninspired employee, and investing in the development of an individual is a key means to achieve inspiration.
This is where mentoring comes in. It’s a cost-effective, scalable solution that reaches any employee who wants to be involved.
For employee engagement and talent development, classroom training just doesn’t cut it. It’s not scalable, and it’s usually out of date before it’s even been delivered (not to mention sitting in a classroom is really boring).
Done well, mentoring is an always-on solution that gives your employees access to their own personal advisory board, who not only offer career coaching, but also create the sense of belonging and trust essential to an engaged team.
So while your organisation may still be cutting costs across the board, mentoring could be the (efficient!) solution. It’s time to break this vicious cycle and genuinely invest in your people and the future growth of your business.
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