HR Sketch Book: New Work, New Pay?

Compensation, Leadership, Culture: 5 observations on New Pay and New Work

New Work is not new; however, our companies are embracing increasingly concrete instances. New approaches are even being pursued in compensation, as discussed at the 7th German Compensation Forum in Berlin. Does this mean that time has come to talk about ‘New Pay’? Regarding this topic, I would like to share five observations with you that I presented in my keynote to the German Compensation Forum – and invite you to join the discussion.

Let me say right away that neither New Work nor New Pay require us to discard all tried and tested approaches. However, they will require some companies to change perspectives. Within HR, digital tools allow for a personalisation of our offerings for our employees which does not exclude any specific topic – from further training all the way to performance management. However, in my view, we will only be able to realise the full potential of these tools if we also set the right course in corporate culture and put people at the centre. This will require continuous dialogue reconciling the needs of the individual with the interests of the organisation.

New Pay: Highly emotional, relentlessly concrete

Looking at Comp&Ben as New Pay is exciting, as this is an area that tends to be avoided in discussions about New Work – and, of course, is less easily accessible than FlexWork and redesigned, stylish office worlds. However, ultimately, compensation is above all one thing: highly emotional and relentlessly concrete. After all, it reflects recognition and appreciation! And in the end, everything culminates in a concrete number. How should this topic thus be handled? In this respect, let me share five observations:

Observation 1: Compensation is becoming increasingly visible

In the past, people would avoid discussing pay. Today, people post their salaries on portals such as Glassdoor, are able to compare their salaries, and regularly come across reports about top managers’ compensation in the news. Compensation transparency has never been greater, and this trend will not reverse again. In the past, I would have considered this trend to be a risk. Today, I see it as an opportunity for dialogue, transparency and fairness – even though we should not get trapped in an endless upward spiral in the light of all that transparency.

 Observation 2: Pulling together

In Germany, New Pay will only succeed if employee representatives and employers act in concert. Regarding New Work, we have developed the  ?newWork@TUI“ policy paper at TUI and started to implement it. Although this topic had already been on the HR community’s agenda for some time, the decisive initiative was taken by our Works Council. Now, the employer and employees are pulling together in implementing the goals defined in the paper, whether they relate to workplace design, confidence-building or new compensation models. We team up in shaping matters. In my view, this is the only way to ensure things will work. Incidentally, it was interesting to see that the policy paper was deliberately not designed as a legally binding agreement. Being a policy paper, it formulates our joint understanding of the challenges associated with the digital transformation of work. From the very start, the process used to develop the paper differed significantly from traditional company agreements: instead of committee meetings and long-winded coordination phases, all parties worked on the paper based on agile processes, in sprints.

 Observation 3: Turning employees into shareholders!

This hypothesis is the logical continuation of the previous one. Why do we keep talking about dichotomies – employees versus employers? It this still appropriate in an era characterised by discussions about innovation, self-organisation, agile corporations, entrepreneurship and intrapreneurship? In the past, all key decisions were taken at a certain level in the hierarchy – where executives would also be offered share packages so as to enable them to directly participate in the company’s success. However, now that decisions are being decentralised, hierarchies are disappearing and employees are being encouraged to increasingly adopt entrepreneurial ways of thinking, why should shares be reserved to certain levels in the hierarchy? I think we are currently experiencing a boom in employee stock option plans because they fit so well into this New Work era and turn employees into shareholders. They reinforce cultural change within organisations. At TUI, we launched our oneShare employee share programme last year. Meanwhile, one in five eligible employees have become TUI shareholders. This is a great success that fills us with pride. Our approach of offering a low-threshold plan allowing employees to take part from as little as 25 euros per month is paying off.

 Observation 4: Ultimately, what matters is the team

Today, the team is being put in the centre. In essence, success has always been a team effort: The example of the Bosch company (which has abolished individual bonuses) has shown that this realisation is now also being reflected in compensation. Whether companies choose to abolish individual bonuses, base individual bonuses on the team performance, or increase the weighting of team targets in performance management: Each company will have to find its own approach. As HR managers, we will be called upon time and again to define what we understand by good performance, how we measure it, what an appropriate compensation system looks like, and what other general parameters and conditions we have to shape.

Observation 5: Compensation is important, leadership/ culture are more important!

Last but not least, we have to be honest with one another and do a reality check: Why is it we go to work every day? Because of the perfect compensation we get paid? Because of the great benefit package? Because of the shares we own in the company? Most probably not!

I am firmly convinced that an organisation’s corporate culture, the way teams are managed and the support for employees’ development provided by managers make a big difference. At the end of each month, your payslip shows you why you are going to work. Ideally, your team, your colleagues in the canteen, your line manager or top management are role models showing you day after day why it is worthwhile going to work. For four years, we have carried out our TUIgether employee survey at TUI Group. We have deliberately decided to devote an extensive part of the survey to the topic of leadership, asking our employees whether managers succeed in conveying joint visions and objectives; we have also included special complexes of questions on learning and development opportunities and appreciation.

The era of heroic leaders taking decisions and managing the company from the top down is over for good. Today, good leadership means being a good coach, being at eye level, empowering others to grow and thrive and kick-starting them. We have to consistently deliver that attitude. This requires organisations to be courageous, venture to tread new paths, and also challenge their own fundamental attitudes.

 My conclusion

No doubt, compensation is important. However, a good compensation system will only be effective if it goes hand in hand with a strong leadership and corporate culture. New Work has to become established in all dimensions of work in order to make a difference. Please do not hesitate to promote transparency, create models for joint, participatory cooperation, turn employees into stakeholders, put the team at the centre, and take care to ensure that compensation reflects the leadership and culture features you want to be lived out within the organisation. After all, compensation does not constitute the key component on the path towards New Work – however, in the worst case, it might thwart your efforts.

I leave it to you to decide what label to use - whether we should call this approach ‘New Pay’ or simply a coherent compensation philosophy, embedded in both corporate strategy and corporate culture. 

The German version of this article was first published on the Future of HR blog.

"My HR Sketch Book" is a place where I share thoughts and ideas at irregular intervals. Articles might not be as "polished" as an op-ed which is published at a newspaper. They are sketches and should be seen as a "work in progress" - and as an invitation to comment.