We are all talking about the immediate impact of the cost-of-living crisis on household finances, and rightly so.
But leaders of charities face a real challenge about how to respond in their own organisations, because the model we have traditionally relied on to make decisions about how to use our resources no longer works.
Our model assumed a world in which inflation was low and steady – which it has been for 20 years.
In that world, we set staff pay by looking at labour market information – what was a rough “going rate for the job” and then trying, within the resources available to us, to match that as best we could.
Each year we looked at some inflation data that was usually a few months out of date, checked what others in the sector were doing and awarded a “cost-of-living increase” that we reckoned we could afford.
In another part of the forest, we tried to do our bit for staff welfare by providing employee assistance programmes, flexing hours in response to challenges people were having and so on. Broadly, it worked.
This will not work now. We never noticed how imprecise our approach to pay was: the data was backward-looking and out of date, and the resulting pay increase was forward-looking and permanent.
But as long as inflation was low and stable this didn’t matter too much.
Now organisations are taking pay settlements through their governance processes only to find that inflation is higher than when they agreed the pay settlements.
Next year the reverse may happen, if the energy price increases start to drop out of the figures – or they may not.
But that uncertainty is only part of the problem. The bigger issue is that leaders now face a much starker choice between beneficiaries and staff.
Lower-paid staff will be very hard-hit this year, even if their employers have given them a cost-of-living increase that is in line with the general market.
Leaders will wonder whether “charity should begin at home”, to misuse an already misused phrase, and will be looking at what they can do to help their staff.
Unfortunately EAPs and reasonable adjustments are unlikely to be what staff need. They need extra cash in their bank accounts.
But every pound extra that charities pay to staff is one less pound that goes into helping their beneficiaries. How should leaders respond?
Of course each leadership team faces a different resource constraint, different staffing mix and different beneficiaries. Some will be in the fortunate position to do something for both.
But in the end, I believe we must weight our efforts and our resources towards our mission.
People trust us with their money because they believe in our mission, and because they trust us to put those resources to use to deliver that mission as best we can.
Our staff are hugely important to us. But if we put them ahead of our beneficiaries, we are not living up to that trust.
Daniel Oppenheimer is director of finance and commercial at the Royal British Legion