Beware epidemic of unscrupulous management

The saying, "Never let a good crisis go to waste", will sadly be true of companies that take advantage of coronavirus fears to work staff harder or gouge consumers.

No business should underestimate the potential of COVID-19 to push the global and Australian economies into recession if supply chains remain cut and customers panic; or the need for employees to be flexible and help affected companies through the crisis.

Coronavirus deaths reach two in Australia. Credit: AAP

Large companies seem to be acting quickly and responsibly. The banks, with federal government jawboning, passed on this week’s interest rate cut in full. The big supermarkets are managing a crazy spike in consumption of essential items. Qantas commendably organised rescue flights for Australians from Wuhan.

But what happens if COVID-19 takes longer to contain than expected, the World Health Organisation declares a pandemic and the economic contagion of the outbreak – increasingly evident in service industries – spreads to more sectors?

Many companies will need to find fast cost savings and, in some cases, re-configure supply chains and their labour force until the threat passes. Overseas airlines, for example, have asked some staff to take leave without pay. Others are requiring staff to bring annual leave forward.

That is entirely reasonable for travel and other companies at the epicentre of the crisis, provided it is a short-term measure and employees receive some compensation when normal conditions resume and business bounces back, as it will when COVID-19 is contained.

However, I fear some companies not directly affected by the coronavirus will use the crisis to cut costs, boost staff productivity and renegotiate terms with suppliers or take longer to pay them. Then keep those terms in place – or take too long to restore them – when the crisis passes.

I saw this happen during the 2008-09 global financial crisis. Sadly, a small minority of companies milked the crisis for all it was worth. Pay rises were shelved, bonuses cut, and staff were forced to take holidays.

Too many unscrupulous managers are itching to get staff to take extra annual leave, use up long-service leave or do extra work for less. They are always looking to cut staff numbers, squeeze suppliers on price and take longer to pay bills – whatever it takes to get their bonus.

When conditions improve, they happily leave the lowered conditions in place as long as possible. I experienced this personally; a product was struggling so I took a pay cut to help out. When the product returned to full health, the lower pay remained. It’s wrong.

Again, this is a minority of managers, in my experience. Most try to do the right thing by staff and they work for honest companies. Some managers will ask staff in coming weeks to take more leave or make other concessions because there is no other choice.

My advice is: be careful what you agree to. It is easy during a crisis – when uncertainty is high and there are signs of panic overseas – to agree to sudden changes in work hours, pay or conditions. Or, if a supplier, to accept lower prices and other payment terms.

Calmness is needed. Staff who agree to bring leave forward or take leave without pay need to know what will happen when market conditions return to normal. How and when will they be compensated for concessions made to help their employer?

If suppliers agree to a pay cut, they need to know in writing that it is temporary and in response to deteriorating market conditions from COVID-19. They should not accept a blowout in payment terms or an aggressive renegotiation of terms from managers using the COVID-19 as the reason.

Nor should consumers accept price gouging from companies that life the cost of goods that have higher-than-usual demand. Or fall prey to marketing practices from sharp operators or cybercriminals looking to cash in on the coronavirus – a trend emerging overseas.

Let us hope there is greater clarity on COVID-19 by month’s end, the global health risk eases and business in more countries returns to normal. Second, that the vast majority of Australian companies, large and small, act responsibly during and after this crisis.

My hunch is that a sluggish Australian economy in 2019, then bushfires, floods and now the coronavirus, will hammer more companies this quarter and next. Many managers will be pressured to make aggressive changes to prop up tumbling profits.

That’s fine, provided it is responsible, ethical and within the law – and that companies and employees work together to find temporary solutions. The last thing we want is grubby companies using coronavirus as an excuse to push pay and conditions permanently lower for some workers, particularly casuals and contractors.

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