An acknowledged authority on HR and reward management suggests that a new approach to the management of pay is required to meet 21st century business structures.
Dr Jonathan Trevor, Lecturer in Human Resources & Organisations at Cambridge Judge Business School, says the time has come to stop using pay to promote value, but to approach it as a risk and employ it to protect value.
In his paper ‘From New Pay to the New New Pay’ he says the traditional emphasis has been to limit potential risk of conflict around pay. More recently, under the ‘New Pay’ movement, the focus shifted to view pay as a strategic lever by which management might generate enhanced employee commitment, loyalty, motivation and positive behaviour for superior company performance.
New pay followed a system that suited the UK, with its background of manufacturing engineering and intensive industry, but was replaced between the ’80s and 2000 by a service-based economy similar to that of the United States.
In an interview for Cambridge Judge Business School’s website, Dr Trevor says that this attempted to create an ‘organisational alignment’ using pay mechanisms that allowed senior managers, at the corporate level, to effectively drive behaviours corporately.
The logic of new pay, he adds, requires power to be concentrated at the top with relatively predictable and known factors around which it is possible to plan and use pay as a lever.
“I think that’s been challenged progressively so we are a tipping point because our organisations are becoming flatter; not just flatter, but becoming more networks than they are hierarchies. More than ever before planning is giving way to some sense of emergent strategy within organisations that emphasises not just performance but also change as well. They are really struggling to manage the tricky trade-off between flexibility on one hand and efficiency on the other.
“The interesting thing is that we’ve seen this progression over the last 100 years and I think that we’re at another tipping point where we’re actually moving away from this idea of using pay as a strategic tool, as a lever for senior managers, to something that is better fit for purpose in the context of the network-based information age organisation.”
Dr Jonathan Trevor is Co-Director of the Centre for International Human Resource Management (CIHRM) at the School.