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Now widely known for his insights on incentive compensation, executive pay, and talent management, Peter Newhouse has helped shape the reward consulting landscape in the UK. He has a reputation for clarity on these subjects. Simon Patterson spoke to Peter to learn more about his ideas and where they might lead us.

From 2010 to 2021, Peter served as Global Head of Reward at Unilever, leading transformative initiatives across one of the world’s most iconic multinational companies. Before that, he held senior roles at Ford in North America and was Group Head of Remuneration at Standard Chartered Bank in London. Peter began working in reward in 1980 when he joined the US consulting firm Organization Resources Counselors, Inc. (ORC). He founded and led his consultancy, Peter Newhouse & Co., for a decade before joining Unilever.

Today, Peter is the influence behind Neovation, the global reward community, combining his expertise and experience with hands-on transformation experience to create fairer, more effective pay systems.

 

Simon: You and I have been working in incentive compensation design and implementation for many years. What’s your opinion of how best to incentivise people?

Peter: Incentives can work but must be as simple and clear as possible. Companies use incentive compensation for lots of different reasons. One is to be competitive, and another is to be very clear about what is to be achieved collectively or individually. In my view, when companies use incentive compensation as a communication tool to reinforce what is important or to say what we want to achieve, such incentive programmes are far more likely to succeed because they clarify roles.

 

Simon: Which is most likely to be implemented, and will it work?

Peter: The most likely to succeed is top-down incentivisation based on collective results rather than bottom-up. What’s the difference? The difference is that top down, you’re more likely to build a coherent, cohesive culture for your organisation where you have a shared sense of what’s good, what’s bad, what’s right, what’s wrong, what works, what doesn’t. If you implement incentives bottom-up, you probably get a clearer line of sight between individual performance, delivery, and pay. But you don’t get the cultural benefit of people being aligned with each other. If I’m interested in getting something done because there’s something in it for me, I’m less likely to help you get what you want. I’m much more likely to concentrate entirely on what’s good for me; therefore, it’s not as coherent from an organisational point of view.

 

Simon: Increasing levels of executive pay are often scrutinised by shareholders. Is incentivising executives a good use of shareholder money?

Peter: The Achilles heel of incentive pay is setting targets correctly. If we could predict the difficulty of any task, then incentive compensation would be far more effective. But we can’t. The art of incentive compensation is to set the correct targets. If a Remuneration Committee Chair or manager doesn’t set the correct targets, you risk your people not seeing the linkage between what’s being paid out and what’s being delivered.

Simon: What do you think motivates people?

Peter: Not everybody works just for money. I recently had an inspiring encounter at an industry event with medical types. I foolishly remarked to one: ‘It’s a shame nurses and doctors aren’t paid more’. I received a fine rebuke for that; ‘No, no, you’re wrong. If nurses were paid more money, it would attract the wrong kind of people’. And I thought, ‘Wow, that makes sense’. You don’t want to attract the wrong kind of people — those who are only motivated by money — into a profession that isn’t simply driven by profit or money. Ghastly, I know, that in a business driven by transactions, people are still motivated by more altruistic purposes!

 

Simon: What are the best ideas on remuneration and performance management that you’ve heard recently? How should today’s companies and boards design their pay programmes?

Peter: I’m driven by a relentless urge to improve how we deal with rewards because they don’t work that well. They cause problems that upset people and – more broadly – separate and perpetuate social division. My unyielding belief is that simplicity is better. That’s the single most significant innovation in remuneration programs.

We could then go one step further and say people frequently expect pay to achieve things it simply cannot.

Let me give you an analogy. A lot of the time, we want to use performance-based pay as a kind of carbon pricing. We might say, ‘Okay, you don’t deliver very much compared to somebody who delivers more, so we’ll penalise you by paying you less’. That’s ridiculous. Instead, we should establish a minimum level of individual performance, and anything below that is unacceptable. We must remove those people from the organisation, not carbon price them. We’re expecting a reward for doing something that talent management is reluctant to confront. We should focus on whether people should stay in the organisation rather than how much we pay them — that would be radically simpler.

 

Simon: The consulting world is simple: promotion is fundamental to success, and failure isn’t tolerated for long. Does such a straightforward model apply in non-consulting environments?

Peter: In the consulting context, greater revenue from an individual results in a higher share. It’s a freedom-loving model, but the consequence is that you don’t get much coherence or teamwork amongst people. There’s nothing in it for me to help you. Contrast that with an organisation where money isn’t the only denominator. Take a company with a developed supply chain that relies on marketing and sales, where who fulfils the sale is different from who markets or sells it. You must cross-subsidise to pay the people in the backroom who deliver and achieve the promise of the salespeople. Take that one step further. If you’ve got an organisation developing new businesses, you must cross-subsidise from the successful companies into the latest initiatives to make the new businesses successful. Amazon might be a good example because it has successfully developed a constant stream of new business models, ensuring the company’s overall long-term success. One of the most prominent features of Amazon’s compensation structure is its focus on stock awards and the stock price. If we are all successful, we’re all successful together.

 

Simon: What about non-financial aspects of pay programmes?

Peter: I think they’re massively important. People don’t just work for money. Most people prefer to work in a supportive environment where they learn, grow, are given opportunities, and are managed sensitively and insightfully. In these organisations, recognition is essential because it helps to communicate and consolidate culture and values. It doesn’t need to be costly or have high and practical value.

 

Simon: Farient has researched stakeholder incentives in its 2025 Global Trends in Stakeholder Incentives: Climate Strategies and Incentives for Corporate Sustainability. We’ve found a significant increase in the use of non-financial measures in executive compensation. Do they work? What’s your view?

Peter: If we use incentives as communication tools to tell people what’s important, that makes sense. Attaching an incentive to a message shows that we take the issue seriously and will measure progress against goals. The biggest challenge for sustainability initiatives in the next few years is likely to be a potential US-led backlash where there is a diminishment of the value of these objectives and disenchantment with things viewed as irrelevant to financial measures of success. If there’s a choice, I’d go for incentivising ESG measures.

 

Simon: Do you think what happens in the United States will ultimately affect what happens elsewhere?

Peter: We’ve been through a terrific era of globalisation, and now we seem to be drawing back. These movements are tidal — once the tide starts shifting, moving back takes a long time. It could be that we will become more insular in our focus and that European companies will continue to do things differently than American companies. It won’t necessarily be good or bad, but it could be divisive.

 

Simon: Any final thoughts on the subject of remuneration?

Peter: The real driver of most organisational success is culture and values. Most behaviour is impossible to understand without understanding the values and culture that drive the behaviour. So, culture and values are business drivers that attract the right people. We should pay more attention to that.