What could reward look like in 2025?

With huge changes predicted to how and where we work over the next 10 years, what does this mean for how we incentivise and pay staff? Deborah Rees considers the future of reward.

The first thing I have come to realise about reward is that we really have no idea what might shape the future.

Ten years ago we did not predict the impact of social media, tablets or phones and smart watches.

The reality of disruption comes from all angles; Uber transforming the way taxi services are delivered and Airbnb allowing you to access millions of spare rooms worldwide.

Who could have predicted these small but significant disruptions to markets by sharing technology? If something as small as an app can transform the way we use services in such a short time, how might the employment relationship change over the next decade?

So-called “megatrends” are long-term processes of transformation on a global scale with broad scope and dramatic impact.

They affect governments, businesses and individuals. This means there could be big changes on the horizon for businesses and their leaders, and consequently how they reward their staff.

Managing in matrix organisations

Hierarchy and traditional reporting lines will become redundant, and leaders will manage through influence, not authority.

Moreover, the ‘”task” in global businesses has become so large that it is beyond the power of a single individual; the days of one or two “heroes” at the top of an organisation dictating strategy are over.

Brain drain turns to brain cycle

Increasingly, migrants will return home to use their skills and knowledge to accelerate development in their native countries.

Businesses will need to think about how to replace this talent, which has become a significant proportion of the workforce in recent years.

Social working

We always focus on retention in HR, but with fierce global markets and the balance of power shifting to Asia, it is likely businesses will start to re-think the traditional model of fixed hours in a fixed place.

If we look at sharing models and informal communities like Uber and Airbnb, this notion of employment will be diluted by hiring virtual teams to deliver agreed outcomes.

Leadership skills

The potential pool of talent becomes larger, but our skills in managing international migrants, older people and those with caring responsibilities becomes increasingly complex.

Fostering inter-cultural and inter-generational teamwork is essential. Leaders’ skillsets will need to shift and migrate.

There are likely to be a number of other key differences:

• Real global diversity in our people: our old model of middle-aged, white European or US-led business (think Jack Welch) will become a memory.
• Hiring and sharing talent: getting an exclusive arrangement with employees will become more difficult, with sharing the talent becoming the norm.
• Sharing the work out: with roughly the same output, France works fewer hours producing more per worker than the UK. This does mean a higher unemployment rate for France (partly explained by their stricter employment regulations such as no zero hours contracts). In the future, with productivity gains, should we be aiming for more UK employees to work a 30-hour week to distribute work across more people?
• Work becomes more voluntary: for example, work-related blogging in your own time – it is not paid work as we might have previously recognised it.
• Free access to knowledge and information: employees’ first port of call to answer their questions is the internet, rather than asking colleagues or searching a database.

Impact on reward

So, what does this all mean for our businesses and in turn, how reward works? First let’s look at what’s likely to stay the same:

• The basic exchange of labour for pay: although how and in what way that labour contributes may well change.
• Engaging people in your business: whatever the contract of employment, people working for your business will need to be engaged and driven to succeed.
• The need to attract talent: making your proposition more compelling than others through your total reward.

Managers will also, however, be grappling with a number of challenges when it comes to rewarding employees as the work environment changes:

• The rise of social working: informal social teams and projects, informal learning (no structured courses, share-based training and development).
• Transparency: around base, variable and equal pay.
• Gender equality: men, as well as women, will be driving how organisations reward an increasingly flexible workforce, as employers learn to recognise the needs of those with caring responsibilities.
• Paying for contribution and value: no base pay, staff remunerated for the contribution they make and the value they add to the business.
• Gen Y: gen X and Y making the decisions as baby boomers retire.