Oil prices surged to $130 a barrel when President Biden stopped Russian oil imports this week, then eased on hopeful news about Ukraine. No matter the day-to-day fluctuations, prices will not drop back to $60 a barrel anytime soon.
Many companies have raised prices preemptively, some as much as 20%, to deal with higher costs.
But are they preparing for higher wages? We are seeing increases in salaries, bonuses, and retention moving to 6-10% depending on the skills segment.
Inflation is here to stay for a minimum of three years, and HR needs to make it their number one priority to work with the CFO and CEO. They have to plan and estimate the total cost increase regarding their people.
The CEO and CFO need to understand how the increased cost of talent will change their money-making model, and what it might mean for pricing, cost reduction, automation, and removal of wastage.
Timing and speed matter. There will be resistance to price increases in the future, and there is the possibility of a recession. Right now, the urgency is to put together a plan to estimate the cost increases and consider potential difficulties in price changes moving forward.
Long-term planning is imperative. Looking forward for only one quarter or one year will be insufficient.