#52 - Level up with a Reward philosophy, with Jodi Slomp (VP People at Mollie) and Lucas Sondelski (Director Reward at Personio)

Essentially the way I look at that reward philosophy is it's the core document where if you're ever writing something about reward you should go back to that and ripple out the language that you're using. You've articulated something very well around the word. Use that language. This is the People Masterminds podcast with leading voices on people, culture and organizational challenges in skill-ups. Welcome to the People Masterminds podcast. Today we delve into the ins and outs of a reward philosophy. What is it and why do you need it? We have not just one but two guests at our table, Jody Slump, Phoebe Peaple at Molly and Lukas Sondelski, director of Reward at Personio. Lukas, we can say Luke today. You can say Luke. Good to know. Welcome both. Great to be here. Welcome. Today we would like to pick your brains about this philosophical topic and it's great word but is it really philosophical? Let's discover this together. We noticed that many companies invest a great deal of effort in crafting their compensation and total reward strategy. They dedicate ample time to benchmarking, defining salary, and outlining benefits and perks. They are using great tools for these tools that are on the market like Raviot nowadays. But still sometimes they overlook the crucial starting point. What's the story behind it all? What's there why and what message do they want to bring across? We are Avley's and Crystal and I'm really looking forward to our conversation. One of my favorite topics. We work with many clients on their total rewards and the philosophy is still, yeah, I think I can say quite unexplored territory for many companies. So looking forward to this conversation. But before we dive in, we have a few household announcements. Are you already subscribed to this podcast or not? If not, go to Spotify or Apple Podcasts or any other podcast app. Look for the People Masterminds podcast and click on follow or the plus symbol in the right upper corner. And now you stay up to date with our latest episode. Second, we would be extremely happy if you also leave a review so more people can find us. Please. And last but not least, we have a Beyond cohort starting in September. Registration is open now. Beyond is our program for hats of people or fee people to become more strategic in their role. What do you get? You get four live days, eight online master classes and three individual coaching sessions with multiple industry experts and speakers. If you want to know more, go to peoplemasterminds.com/beyond-program and go check it out. The program is amazing. So welcome, Luke and Jodie. Great having you here. If Lisa prepared a very fancy introduction for you both. Yes. So sit tight. Now you want to uncover everything we found out about you, right? So here we go. Luke has a strong analytical brain and started his career as an actuary. Really, Luke? That's right. OMG. Very mad. After years in corporate life, he decided to dive into the deep and joined the scale of worlds. He was responsible for compensation and benefits at among others, booking.com and Facebook. And almost two years ago, he joined our friends at the Personio. Luke is a big Star Wars fan and we heard that he even rented a theater for a Star Wars special so all his colleagues could join him too. And he's a total book nerd. Read over 50 books this year. Is that really true? That's correct. Over 50. Wow. Almost a book a week. Wow. Jodie, she worked in the hotel business in Canada before. Then she joined booking. She was responsible for global talent management. She's one of the brave kind of people. In Canada, for example, she trained new employees to always carry their beer bell when walking outside to ring and frighten Grizzly beers. Should they come across them? Have you ever met a Grizzly beer? I have indeed. Yes. In the Canadian wild. It was pretty common where we worked. I worked in a place just outside of BAMF in Canada. It's the very pretty photos that you see on the screen sabres of your computers. And it was bear country. Wow. That's impressive. And in 2022, Jodie got married three times. Once in Canada, once in Tascanie and once in the Netherlands. Luckily, this was all with the same person. And she's also a real bookworm reading anything from science fiction and horror to business books and biographies. And nowadays, she steers the people in culture range at Mali where she's having a blast. Welcome again, Lucas and Jodie. Thanks for having us. Thank you. So did you already start your own book club together? We did. Yeah. So we started a book club. We were both at booking.com. And I think when I was leaving, we realized, oh, we won't run into each other to talk about books anymore. And so we started a book club in 2018. Yeah. And it's had some pretty consistent members. We've met on a monthly basis. So in the beginning, we were really good about tracking our books and scoring the books and reviewing them. I think lately, that hasn't been the case so much, but we'll read anything from business books, horror books. Yeah. We once even read a comic book. Yeah, we read a comic. I love reading as well. What books should I definitely read? I think Jodie and I met when we first realized we both liked books. It was over a little life, which is one of the, it's very tragic. It's very, it's the opposite of a fairy tale. Yes. I think that one was very impactful. There was a before and after reading that book. Yeah. Yeah. I kind of met. We really like fiction. So yeah, fiction, fiction, fiction, nonfiction, fiction, fiction, fiction. So definitely do this spread there. Good. I'll read it. It's been a while. Okay. I think we're ready. Let's dive into the topic. Yeah. Shall we start with some basics first? Because for us, maybe reward philosophies are pretty common, but of course not for everyone. So let's start with what is a reward philosophy and why do you need it as a company? Yeah. So a reward philosophy is in principle, it's the ideas of what your company believes on how it wants to reward people. More tactically though, it's usually a document where you've drafted out these ideas. You've articulated what the company believes on things like base salary, any type of bonus or commission payments. Maybe you have company equity, different benefits, employee benefits, maybe time off. Sometimes you include other things like work life balance and a bit more broad outside, let's say the traditional compensation and benefits of reward. But essentially it's this document then that you get sign off from, let's say an exact team, maybe your board. And that's going to be your north star to make decisions on how you'll lead reward and how you're going to reward people and how you're going to make decisions around reward. Maybe just to add or build on what Luke said, it's basically like the investment that you're willing to make into your employees. So as Luke called out, it's your base, it's your variable pay, it's your benefits. But I think that that is just a little bit more of the paper exercise. It's much more what is the value proposition that you're offering to your employees. And it helps you to identify who are the employees that you want to hire. So you want to craft based on that and how do you want to retain your employees? So you really start to get to that contract of, okay, I'm hiring my employees. What is it that I'm going to offer on the back of that? So I run these onboarding sessions for the people of the team at Molly. And one of the things that we cover is here's your base, here's your variable pay, and here are your benefits. And benefits are typically things like pension and your bike lease plan. But I like to take a step back and look at the benefits as you're working at a great culture or you have great career opportunities here. So I think it's really important to look at that quite holistically as well. It's broader than the monetary. Yeah, absolutely. It can even be the office environment and the people that you work with. Because if you work with some of the greatest in the market, then that's a huge perk. And people really love their lunches. That's the only way to do that. What's the difference then between a reward philosophy and your EVP, your employee value proposition? Yeah, I think it's a bit semantics, but I think traditionally compensation and benefits is kind of where, I don't know, maybe that term came about in 50s, 60s, 70s, 70s. And then that got run out to reward to include maybe more than just like compensation and benefits. Maybe it's a bit more broad. And I think EVP employee value proposition is even broader than that. So I think it's more of a almost a spectrum versus a black and white definition where you start with compensation salary, variable pay. You add in benefits. Okay, then you add in time off. You add in maybe flexible work policies. You add in learning and development, office environment, culture. people you get to work with, employee events, and it starts broadening that into the full EVP. Yeah. Yeah. For the listener in podcast episode 50, we talk to Dave Haselhurst and you can learn everything you want to know about the EVP. And it's important to define that, well, of course, how you reward people that's, I think it's one of the most important and expensive strategic decisions that you have to make as a company. It's truly a strategic topic. And not just like benchmarking, although Ravio is amazing. I mean, it's everything you could have ever wished for as a, as a people leader, but it's such a, it's such a broad topic as well. Yeah. Many, many people start with the end. And sometimes that's good, like Simon Sinek says, huh? But for a project like this, you need to start with the message. What's the message I want to bring across? Yeah. For sure. And you already mentioned culture. So how does culture and values and your reward philosophy? How is it connected? Yeah. So I mean, the culture, the culture of your company is speaking to every aspect of how you do business and how your people experience working for your company in a similar way. If you have a culture of, let's say, innovation or collaboration, you probably want to incentivize those things. If you have a culture of ownership, maybe you want to consider things like giving them equity to employees so that they own a piece of the company. So you really want to read the reward essentially is a tool that will reinforce your culture. If there's a mismatch there, you can say, hey, this is our culture. But if they don't feel it's in what they're receiving from the company in the reward, ultimately, you're, it's, it's not going to your culture. What you say it is is not actually going to be felt in reality. Maybe just to add on to that, I think culture is also a lot of norms and language and you need to reflect that language and those norms back into your reward kind of strategy, but also your value proposition. So it needs to reflect the, the, the language of your organization. So tapping that back into your mission, your vision, your values is incredibly key. So building on what Luke said, if you have a value of being open or you have a value of honesty or integrity, it's really important that you're linking that narrative back into your reward strategy and making sure it's, it's the most fundamental way for your employees to understand that and connect the dots for them. Because what you run the risk of is it just becomes a separate document kind of or separate piece that sits over here. And it needs to be so embedded within your organization. So having those discussions, spending time talking about that, it's easy to craft a one page document or a five page document, but it's bringing it to life that's so incredibly like. Words are just words, but what are the actions and what's the feeling we give the employees and the people who want to join us. Now you were already stating something about a document. We often get the question, what should a reward philosophy look like? Is it a written document? Is it a slide? Is it five pages or one? What do you think? I think format isn't so important as the content. So I think if you have an easier time or within your company, you have an easier time sharing information in a Google Doc, then do that. If your company is more slide based, do that, but it's the content itself, that's the most important. So and part of it too is drafting the content, spitting something out. There's a lot of work that can go into it. Sometimes it's just taking that first step of drafting something else that something out that's a bit of a minimum viable product. Right? It's just the basics. And then you can begin to share it and test it with others. Yeah. And I can imagine you also include, I don't know, very practical things. So how do you want to pay your employees compared to the market around what percentile, for example, or one topic that we always discuss as well is, okay, do you see pay as a as a motivator or is more a hygiene factor in in your organization that really influences the pay? We talked about culture. The way you reward people, it can strengthen or break your culture, right? If you're all about, I don't know, teamwork and you offer lots of individual bonuses, then that's not aligned. And I think there's not really a good or a bad, but you need to make a choice. Yeah, you need to be super clear about it. Yeah. Precisely. Like if you're setting up team objectives, you might want to reward on a team level. Right? So if your culture is all about collaboration and you want to drive that collaboration, you might want to build your variable pay around driving those behaviors and actions within your organization. And it's a way that you can strengthen that. But going down the individual bonus route, that could lead to everyone out for themselves. Exactly. So it's, it's really important that you're having those discussions with your leaders in terms of how they want to manage their business and kind of manage the talent within their organization and reward certain behaviors. Yeah. Yeah. What do you actually want to pay for? Yeah. And it is a him book. So what I mean by that is you are articulating what you believe as a company and you're trying to get all of your leaders, all of your managers, your execs singing from that same him book, going back to Jody's point about building consistency so that your employees have a feeling of consistency in terms of, oh, you're telling me this is what my values are. And I can see that because all of our leaders are saying something similar about salary or about benefits. And it's building that overall going back to experience. It's building on that consistent experience to make it feel very authentic. Yeah. This podcast is powered by Personio, helping you to remove complexities from four HR processes so you can focus on what really matters, your people. Visit Personio.nl/peoplemasterminds for more information. Yeah. So ideally you want to work towards document or slide deck or whatever makes sense for your company. Well, what steps do you actually take to end up with such a document? I think the number one step so I was reflecting on this in my own head yesterday. And I think the number one step to take is first understanding yourself. If you're the one who's going to be, let's say, building the philosophy is understanding what it actually is. So doing things like listening to this podcast or going online and looking for examples so that you understand really what what a philosophy is and start thinking about what that can mean and what that could look like for your company and get a small vision of where you're going. I think that's kind of a great first step. Do you have a preferred source? I think, I mean, I think listening, like even looking for podcasts like this, like looking for philosophy. So subscribe people. So subscribe and leave comments. And but also just searching around on like HR business websites, talking to peers, seeing what they're doing. More and more, I think companies, especially tech companies are quite open to share. Yeah. So I think getting looking for inspiration and seeing what other other companies have done and seeking out that information, whether it be online or through people in your network. So first got a bit more information about how it could look like and then I think strategy and where your company is going is really important. So are you going to be remaining in a single market? Do you have a single product? Do you plan on expanding, you know, within Europe or into multiple sort of continents or regions because all of those things will influence how you decide to craft this? If you are staying in a single market, I think the narrative there is much easier. One of the things that I see and I've worked in companies where this happens is you start, you start very strong with your total rewards approach and sort of philosophy because yeah, maybe it was one year out, but you need to be thinking three years out, where are you going to be in three years? And how are you crafting that? And if you know you're going to be expanding into multiple markets, how are you going to ensure that your strategy can scale at that level? So just an example, the bike lease program is very, very popular in the Netherlands. In the Netherlands. But is that going to work in the UK? Is that going to, and I think typically one thing that I see a lot of companies do is they just kind of scale out the same benefits or the same sort of total rewards to these other markets. So you need to be really, really clear on where you're going and what you want to scale as you go. So having that discussion with your leaders in terms of, okay, where are we going to be in the next three years? What is our product or service strategy? What does that look like? What do our employees need? So I think it is kind of crafting a little bit of understanding with your leaders in terms of what the next three to five years looks like. I once worked for a company and when I joined, I got a lot of questions from the people in the US. Yeah, we get a holiday allowance and a travel allowance. I really don't know what to do with that. Can you just like add it on my base salary? What makes way more sense for me? Yeah, so that's the holiday allowance thing is for experts in the Netherlands exactly the same. What is why I often decided to pay it monthly? Because it did not make any sense. I always went back on for it when I first arrived in the Netherlands. So I'm not from the Netherlands. When I first arrived here, I had the same question that Chris said. still is stating, "Why are you giving me this chunk of money in May?" And that was in reward. And then we got rid of it. But then I do have to say, I kind of missed it where you. Oh, she will miss it, for sure. I mean, if you're a smart person, numbers wise, you know it's the same amount over year over year. And it's nice to get the money sooner than later. However, the psychological impact of just getting a chunk of money that's supposed to be used for your summer vacation. It really feels good, huh? It really feels good. Yeah, absolutely. I agree with that. Yeah, so you really need to deep dive into the company strategy and how will that influence how you reward people? Yeah, and I think just to build on that, looking at your demographic, like we work in tech, that demographic is typically a young, eager, ambitious, hungry group of people. You know, this isn't likely going to be a group that cares about their pension. They like the funner benefits of, "Hey, do I come into the office and do I get a nice hot meal or lunch?" You know, we talked about lunch. So really understanding what is the type of talent you want to attract and retain is going to be really key in terms of crafting your total rewards, philosophy, and deciding on what you're offering or what your mix is going to be. So. And if I think about it as well, I think, you know, for startups, they're not cash heavy. So it's going to be base. It's going to be likely options. And maybe that's all you can do. But there's a strong narrative behind that. "Hey, come join us. We're a team of 10. We're a team of 20. We get to work on one of the coolest products with the founder." And so it's really also thinking about what stage your company is at as well in terms of what your mix should be. Yeah. And then you should also include in your reward philosophy, what kind of people do we want to attract that? Precisely. Yeah, talent strategy. So Jody mentioned business strategy, but then talent strategy. Like what exactly that? What type of people are we looking for? Where are we looking to get them from? What type of jobs are there? Who do we want to grow and develop within the company? Working on success strategy also means that you need to involve a lot of stakeholders because we were talking about leadership. Now we're talking about talent acquisition. That's probably a leader on talent acquisition, dependent on the face of the scale up. So who else should we involve? I think talk to your employees. They're going to have a viewpoints on this as well. And I think if you want to get buy-in for something like this, understanding your base and having conversations, it takes them along on the journey and can also create that buy-in. So talking to your employees, talking to your leaders to craft that. So, and by leaders, I don't just mean leaders at the top. Talk to your managers as well. Yeah. It's kind of truly, truly different. We created a reward philosophy for our company a while ago and the leaders were very clear about this is what's most important to us, this is what employees expect. But then we asked the employees and the results completely different. Do you remember? They were off. Yeah. Basically, no idea what was really going on and what was requested and needed and what was important for them. Yeah. So talk to your employees. Yes. Yeah. I think also the exact team, I mean they're steering. You need their buy-in. They're going to have to sing from this him book. So making sure that they're bought into it and giving feedback. You may need to involve your board. And if you don't have a compensation committee or talent and comp committee, as you're building your first policy or philosophy, that might be a good moment to consider, hey, do we need a group on the board to be really bought into this and helping us stir it, which is probably another podcast. But I feel another podcast coming up. And once you have that philosophy and you involved the board, leaders, employees and you have that document, what do you do with it then? How do you communicate it? How do you use it in talent acquisition, in your salary increases, budget? Yeah. So I think you have the belief of what you want to do as a company in terms of reward. You need to translate that into a strategy. So let's say that your philosophy is to pay the upper markets and the upper market, let's say, of SaaS tech companies. You need to do that and say, okay, this is how we're going to develop salary ranges. As a, let's say, reward team or as the HR person maybe doing that, this is how we're going to determine someone's pay. This is how we're going to determine someone's bonus and equity. So you put that into action. So your strategy ties back to your philosophy, your philosophy is then the foundation and based on that, you draft the strategy. Exactly. And once you're, let's say, practicing what you preach, then you start preaching it. So essentially the way I look at that reward philosophy is it's the core document where if you're ever writing something about reward, you should go back to that and ripple out the language that you're using. You've articulated something very well around reward. Use that language. Use it in the power points you're creating, the slide decks you're creating. Use it on the employee platforms. Use it in messaging that you're writing. So you make sure that you're reinforcing the philosophy that you've built. And is the philosophy in your opinion and a transparent document? I think generally I would say, yes, go for transparency. If you have a separate, maybe let's say, exact policy or something that shouldn't necessarily be open to all employees, that could be. There could be something sensitive. So look at it from all angles. But I would definitely err on being as transparent as you can be. Yeah, agree. Sometimes you need to repair a couple of things before you might want to make it fully transparent. And while working on the strategy, we go back to that philosophy all the time. Now, what's the lifespan of that philosophy? Is that a living document as well? Because market chains fast. There's a lot of innovation. So how do you think about that? I think it's something that you need to return to, at least on an annual basis, like, and check in and make sure does it still reflect our fundamental beliefs. Because I think shifts, like you said, in markets, even shifts in your leadership team. Or shifts in new people coming into the organization can have an impact on that. I think fundamentally a philosophy is your North Star. So it should be something that is lasting and something. So ideally, if you've crafted a good philosophy, it might require some light edits or updates throughout. But it should be pretty fundamental if you've built it right to your company and to where you're going. And part of that, yeah, the company identity, if you will. Yeah. I think considering a living document is you want to lock something down, let's say, at least once per year. And as Jody said, you don't want to be moving it back and forth, you know, year to year either. It is what you believe. Like your culture and your values, it shouldn't change that often. However, maybe the business strategy changed or maybe your talent strategy changed. Maybe the needs of your employees change. Something, you see something entering the market. Before you notice, you know, you can't hire like you used to be able to and there's a certain reason for it. So you'll get signals of of when you might need to review it. But I think as just in your, just kind of as the string around your finger to at least remind yourself, hey, at least on an annual basis to consider it. Yeah. Or maybe you scale up as a company and you don't have those, or only those junior employees who would love to have a free lunch instead of pension, but they have some other requirements. And we have a question from one of our listeners. We have one from Edvin from Harlem. He says in a landscape where remote work is becoming increasingly prevalent, how do you think reward philosophies should adapt to ensure they remain effective in motivating and retaining talent? It's a big one. I think I remember let's say five to ten years ago being with a group of reward people talking about remote workers. Back then we were like, well, it's the exception. So tie them into the overall philosophy and don't make exceptions for them. Then of course the pandemic came, everyone became much more remote, companies became much more remote. And it's a very big question now. Do you keep salary for someone let's say living in Amsterdam, the same as someone who's maybe in the south of the Netherlands in a much cheaper location? And it's a very big decision. I don't have the answer for you. But it's something that you need to consider. And I think my advice would be if you have a philosophy, it's your North Star as we're saying. It's the beliefs of how you're going to make decisions. Use that to inform how you're going to manage your reward for your remote workforce. Toleigh Rie, do you go for local or global pay? Again, there's no right or wrong, right? But you have to make a decision. Yeah, it's a process. It's a journey to go through. I think I remember a company a couple of years ago that we were competing for talent against. They were based out of London. And what we learned was they were paying, let's say, a talent in Egypt, a London level salary, which sounds insane because you don't need a London level salary to have a very good life in Egypt. But this company had basically said, look, we don't think it's going to matter where someone works. And so we're willing to hire someone here in London. But you know what, if they're not here as long as they're in the same time zone, we're willing to pay that same amount. And that was a philosophical decision that they made, meaning they probably attracted a lot of talent than that was remote. I don't know if they're still doing it, but at least at that moment, we couldn't compete against that. But it was an interesting, let's say, like thought experiment to go through and think about how would this play out for us? And it happens more and more. We already mentioned Ravio, but they also create a lot of interesting guides with information about, for example, these kind of topics. I mean, they have a lot of data and lots of practical information. What are the options you can choose from? What makes sense? Again, there's no right or wrong, but you need to make a conscious decision when it comes to pay. also when it comes to remote pay. - Also benefits. So I think what we're seeing is a shift more to this hybrid way of working, which is, I don't think has been reflected in benefits quite in the same way that it is today. So if I think about some of the benefits offering, are you offering a home office allowance? Are you paying for the internet for your employees to access? Are you offering maybe some lunch vouchers or sort of a compensation? And I think with the shift to hybrid ways of working, you're also needing to enable your employees to work well at home, as well as within the office. And we're having those discussions right now. I think it's one of the most contentious discussions out there right now, right? So what is the right mix of working within the office, working within home, and how are you enabling your employees to be successful? And I am seeing that much more crafted within the total rewards, kind of philosophy and approach as well, which is difficult for leaders to navigate right now, 'cause I think hybrid way of working is here to stay, and I think that absolutely needs to be reflected in your approach. - And we're all struggling with it, because we want to do the right thing, but what is the right thing? So we're experimenting, and I think that's fine. So if you don't know what you should do, then try something out and see if it works for you. There's not a one-size-fits-all in this matter. - Are you really? I think a very powerful word I've learned in my career in terms of reward, because it's tough to launch something reward-wise, like let's say a benefit or a compensation change, and then take it back, right? It's very tough to experiment and reward, but a keyword that I would encourage you to use is a pilot. Hey, we're going to probably do this. - Yeah, pilot and experiment. That might be a favor. Yeah. - It sets an expectation of this may not be permanent, and it also maybe feels a bit exciting to be part of something. - Absolutely. Before we continue, there are three ways people masterminds can support you. We offer interim and fractional HR leaders with a ton of experience in the start of N-SK world. We're a mentoring coach for many people and culture leaders, and we can support you with challenging people, culture, and organizational development projects. We're used to working remote from all corners around the globe, but in-person works just as well for us. Find out more at peoplemasterminds.com. We have five statements for you, and the thing is you can only reply with agree or disagree. And we want an answer from both of you, and down to eight for the other. Impulsive, please. First one, fair pay is not the same as equal pay. - Agreed. - Many companies think they're special, but their reward philosophies are often just like everyone else's. - Agree. - Jody's doubting. - A little bit. - I'm gonna go with agree as well. It's a, yeah, agree, because the framework is the same. So yeah. - I think, and I, although I don't want to gloss over the point 'cause I said agree, so you can look at others. However, in my view, like all people were all the same. No, no, no, but we're all unique individuals too, right? So something like that. - It's the narrative you put behind it. Yeah, that's right. - That's right. - So we go back to the story. We go back to the story. - But now we do something that we're not allowed to have, but you know, you agree with me. - Let's continue. - The gender pay gap exists because companies don't have strong reward philosophies that ensure pay is based on what people do, not who they are. - Oh, can you repeat it? - Agree. - Oh, I disagree. I think they have it, but they're not. - You can't, you can't elaborate. - You can't elaborate. That's for later. - It's stuck to. - Okay, next one. Compensation is not logical. It's psychological. - Agree. - Agree. - Yeah. - The number of years of work experience is still overvalued when rewarding people. - Agree. - Agree. - Crystal, we have two guests. So shall we add another one? - Yeah, we have one. - Number six. - Okay, go for it. You should worry about what people do, not what they cost. - Agree. - Disagree. - That's interesting. Let's pick one to elaborate on maybe the last one because you are not aligned on this one. So we would like to learn a bit more. - Yeah, so the question was. - You should worry about what people do, not what they cost. - Can I go first? - Okay, so as I speak this out, I might actually argue my point to agree. Look, employee costs are gonna be your biggest cost within a company, right? So it's really important that you understand what is a cost to hire an employee in Berlin versus Amsterdam, maybe versus Lisbon. And having a view on those costs are going to inform sort of where you hire. And I think when it comes to total rewards as HR leaders, we need to be informed from that regard. But it is very hard to quantify impact. So if your employees are really delivering and having that impact, putting a number to that is gonna be a lot more difficult. So I said agree from a hygiene perspective, we should know what the cost, what it costs to employ employees in certain markets. But yeah, at the end of the day, I do care more about are they having impact, are they driving our business forward? So I would say agree from a hygiene factor. - Yeah, I think too, for me it's not either or, but I was thinking it, I think when I answered quickly, I was thinking more of what's the primary and then the secondary. And for me, primarily what a job does is this important for your business. And then of course the question is, is there is a cost attached to it? Is this worth the cost? You have a person and they're performing for you. So what they do for the company and the value they drive is super important. But then of course right after that is because it costs money and time for the company. So I think it was more, in my mind, more leading with the value they create and then following with the attached cost. - And fair pay is not equal pay? You both said agree. Can you elaborate a bit more on that one? - I think fair pay needs to be equitable, which is different than equal. So I think Luke was talking about the employee in Egypt who was being paid in a much cheaper market. So I think that those are things or considerations that you have to take into account. So this is such a grey zone to be able to explain it to people. There isn't a black and white way of looking at it because there's so many factors that come into it. How many years of experience we talked about that. How long have you been in the role? What markets have you worked in? What markets are you in? All of those factors you have to take into account into that story and narrative. And it's sometimes very hard to get that across the line. - Yeah, I think if you Google fair and equitable, there's often the first, let's say if you look in images, the first image that will pop up is three people of different heights trying to look over a fence. And one is equal. I think I'm doing it the right way. One is equal where everyone is given the same height of a box to stand on. But because the people are different heights, they can't necessarily see over the fence. And then with equitable, everyone is given the box that helps them see over the fence. So the shortest person has the tallest box, right? And I think there's something to this that needs to be-- - That picture is amazing. I'm always visualizing when I think, and I can imagine what it looks like. And this is a great picture. We should use it if we give the presentation because this picture will answer all those questions probably. I love it. - And you have certain companies. I think it's like Google, Netflix. They say, let's say we have a team of developers. And but there's one developer that has very specific knowledge and can do something very special that we need for the company to move forward. I don't mind if we pay him three times as much as all the other developers. Because that feels fair to them because that person has certain skills that will move the entire business forward. So that's also another example that they say, no, we don't think fair is equal. - And then there are companies that decide that everyone in the same role should have the same pay. Is that fair? So it's equal. - I think, yeah, I think we need to break this down into two sections, which is what is the base salary that you're offering? And I think if you want to reward people for having more impact or, yeah, you want to retain them. I think this is where variable pay comes in quite well. So you can sort of reward for that element. But base pay is going to be the thing that your employees talk to each other about. - Absolutely. (laughing) - They will. - And if you can't stand behind answering, why one engineer is making 30,000 more than another engineer. And you see this in some companies because they're rewarding also for performance or retention. It becomes very difficult to explain, yeah, your salary ranges are their positioning. So I think it's, you have to be very careful when moving in that direction. - And you should be able to explain it at all times. Even when your salaries are not like 100% transparent, so the employees don't know exactly what the other one is making, although they talk about it. But assume that everything is 100% transparent, you must be able to explain it now. - Absolutely. - And honestly, This is a topic that probably is the most difficult one to make sure that everyone's happy. Absolutely. That's an impossible mission. So, make sure that you have your story, that you can explain why you do what you do, and then accept that not everyone will be a happy camper. Yeah, I agree. I think people, let's say generally when they think about reward, they think that if you pay me more money, I'm going to be happier. But what you see on engagement surveys is it's not the top paying companies that have the best engagement scores around reward and around base salary. It's the companies that do the best at explaining what they set out to do philosophically, so what their rewards philosophy is. And then they follow suit and they inform people and people know why they're paid what they're paid. And it feels fair and it feels comfortable and they feel valued. Yeah. Because feelings of fairness are about the height of the salary. That's one element, but you always compare your own salary with someone who makes more, right? You don't compare with someone who makes less. But the second part is fairness is also about do I understand the process and do I feel that the process is fair? And this goes back to the question of psychological versus logical. Number one for me, these are humans we're dealing with. We're all people, right? We're bags of emotions. We're humans. And so psychological first, but of course, you need logic to determine what your salaries might be. However, for me, why I answer to agree with psychological is that's primary, right? You're trying to impact how people feel and how they feel valued by the company. Yeah. What are common pitfalls in creating a reward philosophy? What do you see in practice? And how can you avoid them? I know I keep coming back to this, but that narrative, right? Like if you're throwing the kitchen sink or you're not able to clearly explain it, it's going to be very hard for your employees to get on board. So I think putting in too much or not having that clear narrative is going to make it very hard to explain to others. So I think that is just so fundamental to being set up for success and getting that set up. So that's one pitfall I see. And I think the other one is, again, not being clear on what your total rewards mix is. So I worked at a company where they offered the gold standard in benefits. I'd never seen anything like this. Gold and cage. The gold and cage. They were paying for employees parking in a downtown court. I'd never seen a benefit. And our employees didn't even understand it or appreciate it. It was just, I think one of the pitfalls that people can fall into is that their employee base just come to expect it rather than appreciate it. And you want the little breaths. Yeah, exactly. And you want them to appreciate it. And you want them to understand the cost and the thinking that goes behind it without sharing the costs, right? But like, hey, here's your base. And here's your competency, like your equity or your bonus package. But the benefits piece is very hard to quantify in terms of kind of cash. So people just come to expect it. And I think it's really important that as part of your total rewards philosophy, you're able to explain how that comes into the mix as well. Anything to add there, Luke, about the pitfalls? Yeah, I think, you know, this is, it's a theoretical exercise, right? Like you're drafting a philosophy. And there's a lot of rabbit holes along the way. So you'll find yourself in them. You'll find when you're aligning stakeholders that this exec is going down this rabbit hole about something very important to them. Sometimes let it go for a bit. But at a certain moment, you need to zoom back out and get back to the bigger picture. And know that it doesn't have to be perfect. It's going to be a living document or you're going to review it periodically. You're going to go into rabbit holes and that's okay. Don't let yourself get too lost or spend too much time in those rabbit holes. And the other thing too is, you know, you might think, hey, I'm going to go away and draft the perfect thing. Like I've got a pulse on the culture. I see what's happening. But don't forget to take others along with you. So get out a minimum viable product. Start shopping it around with whoever is in charge of talent acquisition. Maybe your head of a product in tech, your finance person. Start shopping it around and getting feedback. And you might get a lot of feedback. Don't let that overwhelm you. And you might get inconsistent feedback. Don't let that overwhelm you either. Just stay the course of where your vision is going. But get it out and shop it around and get that buy in. Because again, everyone's going to need to sing this song so you want them bought into it. Now we are discussing reward philosophies all the time. But can you give us a great example of it? Is there something that people should have a look at or something that you experienced during your career? You feel like this one was really, really good. And can you share it? I think so one that I will share that I think my leader is often references Netflix and Netflix is just incredibly clear, right? So they pay at the top of the market. They pay at people's personal best. I don't think they need a lot more mix into their reward strategy. That's kind of their value proposition. And I think it's really clearly reflected. I think the old days of Netflix, they had that Netflix culture book where they really identified, okay, this is how we're going to pay within the market. This is what we expect from you. If you're, I think they had a very clear statement around, you know, adequate performance gets sort of managed out. And there's something prickly, like there's something prickly about the way that it is set. So I think it's meant to attract the people that you want to be attracted to it and detract or kind of turn off a little bit the people that you don't want to attract. We pay a million, compel the few. Exactly. It's very clear. It's very clear. And I think, you know, it's an obvious one, but because it's so clear, it's obvious. Yeah. Do you have an example of a reward philosophy that you truly like? So, to be honest, Personio's reward philosophy has three principles. One is around transparency. And it doesn't mean that we share, you know, exactly what everyone makes. So there is a definition of what transparency means. But essentially what we want is that everyone can understand why Personio offers them what they offer, why they're getting paid, what they get paid. So transparency in terms of, this isn't a black box. We want you to know and engage with why you're rewarded what you are. Number two is on ownership. We want all employees to feel enabled to act and think as an owner of the company. And we reinforce that by giving all employees a bit of equity. And then the third one is differentiated. And I really like this because what we're saying is we differentiate reward for these factors. So things like the job you're doing, the location you're in, the value that you're creating and providing. But we don't differentiate for things like gender or other things that have no relevance to the job you're doing. And like it. So you also explain what you don't do. Exactly. So that differentiated thing, like we're not going to pay everyone the same amount, but we are going to pay you in a meaningful way that's differentiated for these types of factors. Like it a lot. Yeah. And lastly, what emerging trends do you see when it comes to compensation? The rise, so if I look at total rewards, the rise of flexibility and flex benefits is definitely something that's coming up. You're seeing a rise of these platforms that are coming up. It's this one stop shop for a lot of companies that they can use. I can't think of one off the top of my head. But it's a way for employees to have a menu to sort of pick what is relevant for them. And I think we're seeing a much larger shift. The pengelum swinging to kind of a standard benefits package offering for everyone to what is right for me. So that's definitely one of the trends that I'm seeing. Agree. And you know what's funny is I started in the benefits world as a consultant in, let's say a long time ago in the early 2000s. And flexible benefits back then was a hot topic. And I love that it still is because it means that I think with the internet and if you think of like Amazon where you go on and you find whatever you need to buy, imagine benefits where hey, you go on and you find the benefits that are most relevant to you. And it's still evolving. So I think that's fantastic. I think in the past couple of years, mental health, support with pregnancy and child bearing and things like this are, they were trending. But I would say that I wouldn't say they're trending now. I'd say they're very present now. So I wouldn't say that. But I would say is this, this thinking around flexibility and remote working. I mean, we were in COVID, remotes exploded and companies were trying to contain it. It exploded and you had no choice as a company, but to allow some type of remote working. Now there's a big question of what's remote, what's not. And further, the impact that that's having on compensation. So this whole example I gave previously of a company in London who's saying, hey, if we have someone in wherever and it happens to be a place where the cost of living is very low, we'll still pay them the same amount. You think, oh, this is breaking all traditional reward rules. We can't do that. But some companies are. So it causes you to rethink your philosophy in terms of, hey, what do we need to do if I need to attract talent from a very expensive location? How am I going to get away with maybe getting them in without paying them as much? Or how do I keep some level of fairness and equality in what I'm doing? So I think I think remotes in a sense of how is this a factor to differentiate on or not? Is a trending topic? Not that I have an answer. Not that I know exactly what's being done, but I see the reward world kind of going through this exercise of what do we do. Thank you. Yeah, thank you so much for being our guest. This was very insightful. It was great to be here. And it was a lot of fun. Thank you for that as well. I agree. Yeah. Did you also enjoy your conversation? Take a moment to evaluate this episode on Spotify or Apple or any other podcast app and hit that subscribe button. Thank you for listening until the next one. [Music]