We need to let go of the idea that money is the most important thing an employer can offer. Intangible assets are increasingly becoming more vital, and more valued.
Money is what has always dominated the negotiated relationship between an employee and their employer. Employees work in order to secure money to provide for themselves, their families and their future. In light of this, money is unassailably one of the most valuable assets an employer can offer them. That’s why the HR functions of most companies spend so much time designing pay packages that include financial elements only.
However, I think it is time we let go of the notion that money is the only valuable asset an employer can offer, and widen the conversation to include other forms of compensation.
As part of the mindset of business, many of us have become used to putting a price on anything we see as valuable – and this is one of the primary reasons valuable employees are rewarded with more pay. Yet this does not have to be the case. Many companies have shown they have been aware of this for years by offering staff an increased leave allowance in recognition of long service – an incentive, but not a monetised one.
Although we may not be serving long careers within one company in the future, we will certainly work longer than we do now: we can expect a significant proportion of the population to work until around 80. Over the course of a long working life money is crucial – no-one wants to live out their old age in poverty. However, across a long life I believe intangible assets will be equally important. I predict that over the coming years, we’ll start seeing companies thinking more about how to balance tangible and intangible assets, and there are already some indications that this is happening:
Some of the world’s largest retailers, for example, are well aware that they cannot maintain their competitive market position if they continue to incentivise employees at the lower end of the salary scale on the basis of pay alone. To address this challenge they are exploring other options – offering a higher percentage of staff discount to lower-waged workers, building increased flexibility into retail roles, or offering more favourable leave packages – to make these jobs more attractive.
At the other end of the pay scale, large organisations are also finding that intangible assets play a key role in differentiating them from others when it comes to securing the best executive talent. These businesses are beginning to realise that another 10,000 or 20,000 dollars is less important to high quality candidates than the support they will get in building their own brand as a leader, or the opportunities they will be offered to be involved with mentoring and CSR.
But why should these principles only apply to workers at the top and bottom of the pay scale?
My view is that they shouldn’t. Years of research have shown that while pay is a valuable asset, it is not a great motivator when compared with intangible assets such as the type of work an employee is given to perform.
If intangible assets took centre stage, what would change? The first step would be to redesign jobs so they offer a greater proportion of intangible assets, and a second step would be to advertise them mentioning both their financial and intangible rewards.
These developments would naturally have an effect on the roles of employees and managers.
Managers would need to become skilled at designing – and redesigning – jobs to ensure they strike the right balance of tangible and intangible assets, and employees would experience the empowerment that comes from being able to decide on the balance of assets that works for them. For corporations that wish to reach that point, now is the time to start realigning the way they think about reward systems and their value.
Lynda Gratton is professor of management practice at London Business School