The World Economic Forum’s Annual Meeting in Davos always generates major headlines – and with good reason. The annual summit is the only yearly gathering on the planet in which the heads and members of more than 100 governments, executives from 1000 of the world’s most influential firms and leaders of NGOs and international organisations collide with an eclectic group of cultural, societal and tech pioneers in order to collaborate and make some tangible progress in achieving the WEF’s key objective: to improve the state of the world.
That objective was certainly raised by Mercer’s and Salary Finance’s Change Challenge breakfast event on 23 January 2019, at which a panel of executives and thought leaders attempted to disseminate and dissect the ways in which the so-called Fourth Industrial Revolution has caused immense financial disruption for existing and future workforces.
According to researchers by the Brookings Institution, middle-class spending is expected to increase by $29 trillion to reach an annual $64 trillion by 2030. Yet while spending is anticipated to increase, it seems somewhat contradictory that wages in many developed countries actually appear to be stagnating. More important still, it raises a valid question concerning the future financial security of today’s workforce – which is why Mercer’s event aimed to explore how global leaders think companies should be responding to the way workers are now saving and spending, how those behaviours are at odds with traditional income, savings and retirement systems, and what they as employers can do to help.
Mercer’s Asia CEO, Renee McGowan, kicked off the breakfast event by painting a relatively vivid image of the challenges global businesses are currently scrambling to overcome – namely, rapidly ageing workforces and disruptive technologies like artificial intelligence (AI) and machine learning – and the ways in which they’re negatively shifting our longstanding, traditional concept of the world of work.
“There’s a lot going on, and what interests me is that we talk about these things independently,” she said.
“I think that the key thing is how do we actually manage through the transition knowing that people will thrive, and we will find new ways to live and work on the other side. But there’s a transition period that we’re going through at the moment.”
While many have been left wondering how to overcome these new obstacles, Mercer’s global CEO and President Julio Portalatin pointed out there are actually some agile organisations already working to facilitate and progress that apparent transition period by piloting policies and workplace programmes capable of creating new relationships with employees that redefine how they can work together to create mutual financial longevity.
“Now we see organisations using this agility to actually pivot, to identify where future value will come from and ultimately aligning work and redesigning jobs to that future value according to executives,” he said.
“Organisations aren’t waiting to react there. They are driving innovation through employee connectivity and recognition, and they’re flipping the performance review script from a backward-facing to a more forward-facing element of assessment; they’re filling critical talent that goes through internal gig platforms and they’re instituting permanent flexible work environments.”
How are organisations creating these new and innovative environments? According to the Davos event’s leadership panel, that journey ultimately begins by establishing a new type of relationship between employee and employer that both empowers workers, as well as creates flexible and sustainable opportunities for organisations.
A new social contract
Before delving into the ways in which firms are already working to tackle issues like changing demographics and technological disruption, Renee McGowan was quick to point out it was first necessary to recognise that the traditional working dynamic as many of us know it is rapidly eroding.
“The notion of working, and then studying, and then having 40 years of work and then having a period of retirement, it’s obsolete today – and 10 years from now, it will be gone altogether,” she said.
As a result of the evolving nature of that employee journey, McGowan proposed employers must subsequently work to ensure security for individuals both in terms of circumstances as well as long-term finances. Unfortunately, helping to achieve that security under what’s being hailed as a major economic transition period is often somewhat difficult for an organisation to achieve because of a somewhat cynical and often inherent lack of trust between employee and employer.
“People don’t come to work to make a profit to their organisation,” she said.
“They come to work to do meaningful work – and so people are coming to work with different expectations today than what we might’ve had in the past. And I think that there have been periods there where our employers were very patriarchal and trust was high – and then we’ve been through periods, often linked to economics, where trust isn’t there necessarily.”
Yet McGowan went on to explain she believed we were indeed returning to a period in which trust was prevalent, and that return of trust was being generated largely through what panellist Philip Ullman, chief energiser for the Cordant Group, described as a new trend among employers in which they’re better facilitating the trending desire of workers to find genuine meaning in their daily tasks.
“People are not happy at work or they’re not happy in their lives, because fundamentally it’s mechanical and they feel disengaged,” he said.
“I think you get various statistics, but roughly only about 10-to-15% are actually loving the work they do or engage in the workplace. That’s sad when we’ve got so many people at work, because the majority of them are living life not actually loving the work that they do.”
According to Ullman, concern over this lack of engagement was a major driver behind the Cordant Group’s landmark decision to transform into a social enterprise and move to establish with employees what he described in Davos as a ‘covenant’ rather than a contract.
“What we need to move towards is a new model, which is about covenant,” he said.
“It’s about collaboration. It’s fundamentally different from a contract. They sound very similar, but they’re fundamentally different.”
In what way are they different? According to Daniel Shakhani, co-founder of Salary Finance, this shifting social dynamic between employee and employer, and the establishment of a more holistic approach to social contracts and financial wellbeing for workers centres on trust.
“If you want people to feel trusted, you’ve got to trust them,” he said.
“And we do know certainly that if you’ve got that built into the culture, into the management and the employees feel it, the consumers will pay more for your product because they genuinely believe in the mission of the company.”
By demonstrating a genuine show of trust in your team, facilitating work with purpose and leveraging that purpose and trust in order to build a relationship with more meaning than one might find in a standard contract of employment, the Davos leadership panel agreed, organisations should be in a position to offer and deliver genuine financial opportunities for employees in terms of sustainable and flexible benefits that help to safeguard against this so-called change challenge.
‘You can’t have one-size-fits-all’
In recent decades, the sustainability and functionality of these sorts of financial benefits – and in particular, pensions – have been a key cause for concern across a variety of sectors. That’s why Daniel Shakhani asserted that the ‘winners’ of this latest industrial revolution and its shifting demographics will ultimately be the organisations willing to pilot new and more creative benefits aimed at promoting mental, emotional and physical wellbeing alongside financial stability.
One organisation recognised as being a pioneer in this holistic approach was multinational giant Unilever, which employs around 200,000 people in 190 countries.
Leena Nair, Unilever’s Chief Human Resources Officer, was representing the sprawling organisation at Davos, and she claimed the multinational’s immense HR success boiled largely down to a genuine desire to get to know employees, demonstrate trust, explain the societal challenges ahead and ask them what it is they actually want from their employer in terms of compensation.
“The first implication has been to understand who are the people that we truly lead, who are the people whose lives we impact, and whose livelihoods we impact,” she explained.
“The second piece has been to think about initiatives like what we are calling FlexCo, which is to create entities which can flexibly allow our employees and those in the outer core to work on projects, to work on flex things.”
While Nair admitted that Unilever’s journey to better understand its huge workforce and offer flexible and agile working programmes has been carried out in the “spirit of humility and experimentation”, she also highlighted it was only through this systemic experimentation that Unilever was able to witness the live implications of these innovations in terms of financial wellbeing.
“For example, we have put a whole lot of tools into place to give people the levers to plan their own money – and when we call it Flex Award, we’re literally sitting with people and saying, ‘here’s the totality of what you want. You decide what you want to take in fixed pay. You decide how much you want to put in a pension. You decide what you want in incentives and what do you want to put in shares’,” she said.
“So it’s working with every employee to understand that the needs, the lifestyle choices, the stage of life they are in is so different. You can’t have one-size-fits-all.”
BBC News correspondent James Landale, who was moderating the Mercer event, then raised a valid point: is Unilever’s undeniably flexible benefits structure patriarchal, or is it led by employees?
Bearing in mind 52% of the multinational’s employee base are millennials, Nair claimed that Unilever’s benefit offerings are a relatively healthy combination of the two.
Unilever aims to provide all of its employees with a range of educational tools, including a recent spate of 3000 one-on-one sessions with financial experts to help workers understand the implications of the financial choices they’re making. In turn, workers can rest easy knowing they’ve been given the right tools in order to mitigate these emerging societal changes – although they do not necessarily need to use those tools.
‘We’re all in this together’
Unilever’s ever-evolving strategy to forge a better and more flexible relationship with employees was without doubt the event’s most compelling case study.
Yet at the end of the day, each panellist brought their own unique take on the disruptive changes impacting on global workforces, insight concerning the ways in which their companies have reacted and views on how organisations can collaborate more widely to mitigate the financial impact of the Fourth Industrial Revolution and offer workers the sort of compensation and benefits they’re truly after.
After opening the floor to questions, Grant Robinson, New Zealand’s Minister of Finance, also highlighted a crucial aspect of the challenge regarding to what degree solutions should be business led, versus advanced “through a tripartite process with employers, employees and the government”.
As a point of reference, the Cordant Group’s Philip Ullman highlighted various UK-based initiatives like the Apprenticeship Levy in which the government has exercised its taxation powers to incentivise reskilling among employers – subsequently helping to keep redundant employees in work while also fostering that crucial trust between employers and their workers.
Likewise, Daniel Shakhani pointed out the introduction of another UK Government scheme in which employees are encouraged to save into a rainy-day pot, and any predefined additional amount beyond that contribution is then diverted to the individual’s pension.
As these initiatives require a heavy amount of buy-in from employers and their teams, they are definitely tripartite attempts to solve for societal issues that impact us all – but as Shakhani pointed out, they are not always particularly well promoted. Regardless, these collaborative efforts do exist, and more important still, it’s hoped they will make a serious impact.
“I don’t think that we’ve solved all of the answers today,” Mercer’s Renee McGowan said in closing.
“I think that the key thing for me that I take away is this concept of the social contract. We have the ability to change the social contract around employment, around the role of an employer and the employee, and how we can help ensure better security for employees and help them to manage through all of this change that’s there.
“And that’s in our control today, and action that we can take right now.”
Salary Finance surveyed 10,053 UK employees and 10,483 US employees to better understand the impact of poor financial wellbeing on them and their work performance. Their report ‘The Employer’s Guide to Financial Wellbeing‘ gives practical tips to employers as to how to develop a business case for their financial wellbeing strategy and how to choose which financial wellbeing benefits would be most suitable for their diverse workforce, based on this extensive market research. Click here to download your free copy.