Dr Fermin Diez summarises the key takeaways from the insight discussions of TR2050 Think Tank in Zurich in April 2023, laying the groundwork for further meetings and development as we look toward the Future of Rewards.
The future of work is evolving at an unprecedented pace, driven by rapid technological advancements, shifting societal norms, and a transforming global economy. As we stand at this crossroads of change, we must recognise that the traditional rewards models and practices are no longer sufficient. The reward models and practices that have served us well in the past are proving to be insufficient as we look towards the future. We are entering a new phase that requires a profound shift in thinking and practice.
As we steer through this transition, we face a critical juncture in the field of rewards.
In April 2023, TR2050 – a groundbreaking community of top rewards executives, academics and thought leaders collectively exploring the future of reward – hosted its first face-to-face meeting in Zurich. As a veteran in the field of rewards, I found the insights and key takeaways from the meeting to be pivotal.
Here’s a comprehensive summary and interpretation of the session’s discussions, which serve as a starting point to address the imminent need to reconfigure and rejuvenate our current rewards models.
Navigating Workforce and Rewards
The one-size-fits-all approach to pay is fading, giving way to more tailored models that accommodate non-standard Full-Time Equivalents (FTEs), gig workers, and diverse talent profiles. Alternatives like flex pay, personalised pay, location-based rewards, and pay for skills are emerging as essentials.
Balancing cost and performance across various work environments necessitates a new perspective on rewards, aligning with the future structure of the workforce. Balancing the cost and performance across various work environments drives an entirely new perspective on rewards.
We need to be mindful of real-world responses to our reward strategies. For example, a recent study by one of the multinationals represented in TR2050 points to the underlying preferences of employees of RSUs (Restricted Stock Units) over PSUs (Performance Stock Units), which brings to light how staff increasingly favour security over volatility. Engaging focus groups and digital surveys across Diversity, Equity, and Inclusion (DEI) representatives further allows us to personalise rewards, catering to different needs.
Another example is that leveraging the inherent human motivation of loss aversion via compensation models that pay up front if results are met can drive better business and HR outcomes. Such insights remind us to be mindful of real-world responses to our reward strategies. By leveraging human motivation through innovative compensation models, we can drive better outcomes.
The Technology and Data Revolution
As we embrace the new era of hybrid work, the impact of AI, big data, and other technological advances on rewards cannot be underestimated. The adoption of HR analytics facilitates a more nuanced understanding of the impact of rewards, allowing us to be either reactive or proactive, depending on the situational needs. This data-driven approach helps us determine which pay scheme adds more value, fostering a more aligned and efficient rewards landscape. Tools such as the ‘Total Reward Optimiser Test’ are empowering us to balance perceived value with actual cost.
These technologies offer insights into performance and potential, enabling a more responsive and personalised strategy that captures employees’ true preferences and motivations. Engaging with employees to understand what they value, while also testing their actions, offers an insightful view of their real preferences and motivations.
Blue Sky Thinking and Beyond
As reward leaders, we must adopt blue sky thinking to reimagine the future of rewards. This approach promotes collaborative innovation, encouraging pilot projects and shared outcomes to drive continual growth and evolution. By breaking free from current assumptions, we can explore uncharted territories, build robust models adaptable to new and unforeseen dynamics, and maintain the core reward tenets of performance, equity, fairness, and competitiveness, aimed at achieving organisational and employee outcomes.
The future is an open book and the decisions we make today will shape the rewards landscape for decades to come. Thinking 25 years ahead allows us to explore the future of rewards, understanding that flexibility, adaptability, collaboration, and creativity will be what will get us there. The new world of work demands a shift from static models to dynamic systems. By aligning our rewards strategies with emerging needs and values, we can build a resilient and rewarding future for all.
Behavioral Science and Human Engagement
It is important to recognise how behavioral science influences reward choices. Understanding the dual nature of human cognition (automatic vs. deliberate) by using models like the ‘Elephant and Rider’ (an analogy introduced to us by Dr Ben Shenoy in his keynote session), we can explain human behavior and craft reward frameworks that appeal to both instinct and reason.
In addition, engaging with focus groups and conducting digital surveys across DEI representatives helps us slice and dice rewards, ensuring they suit different needs. The personalisation of rewards becomes not only a strategy for talent attraction but a commitment to inclusion and empathy.
A Call for Transformation
The future of work is not distant but immediate, demanding collaboration and innovative thinking, technological insight, and a collaborative spirit from practitioners, academics, and business leaders. The TR2050 global Think Tank’s insights underline the need to move beyond traditional approaches by undertaking a thorough review of what has worked in the past, while continually challenging our assumptions and testing new ideas.
The TR2050 Think Tank’s initial insights redefine rewards to support the evolving world of work. Our responsibility as rewards practitioners is not merely to adapt to change but to lead it, building a new, inclusive, responsive, and humane model that moves in line with, or even ahead of, the evolving future of work.
The future of reward is neither a mystery nor a foregone conclusion. It’s a challenge and an opportunity that we need to tackle together, and we have the tools and responsibility to craft a new standard that aligns with the transforming landscape.
Dr Fermin Diez is one of Asia’s leading HR and rewards experts. He has over 35 years of experience in this field, and through his writing, consultancy and lecturing, he explores the future of the workplace and what the changes will mean for HR and reward.
Find out more about Fermin and sign up to his new blog about ChatGPT for HR on his website.