Beginning with the upsurge of the industrial revolution and the subsequent implementation of labor division practices in most production processes in the 19th century, the question of employee rewarding within the framework of industrial value added has been widely discussed. The resulting controversy of appropriate pay was first put forward on a political level, whereby the predominant liberal approaches could be characterized by the principle that labor had to be first and foremost regarded as a commodity being subject to the free market so that labor offer and demand would determine wages and salaries (Berger, 1998; Birnbaum, 2001).
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Beginning with the upsurge of the industrial revolution and the subsequent implementation of labor division practices in most production processes in the 19th century, the question of employee rewarding within the framework of industrial value added has been widely discussed. The resulting controversy of appropriate pay was first put forward on a political level, whereby the predominant liberal approaches could be characterized by the principle that labor had to be first and foremost regarded as a commodity being subject to the free market so that labor offer and demand would determine wages and salaries (Berger, 1998; Birnbaum, 2001).
Opposing this idea was the social aspect which came up with the notion that human labor could not be solely reduced to a commodity function. Rather, the value generating element of human labor was symbiotically connected to the employment of capital; hence, value added could be achieved through the employment of both capital and human labor. This pluralist approach was based (in theory) on a procedural partnership, whereby conflicts of interest between capital and labor were thought to arise from different values and objectives as well as competing loyalty structures and hence were, in principle, inevitable. However, it was widely accepted that these structural conflicts of interest could be (temporarily) resolved through the relation of rewards to the value generated throughout the production processes as well as to the social environment, including basic human rights as well as structural and working conditions (Berger, 1997; Gunnigle, McMahon, & Fitzgerald, 1999; Salamon, 1997).
Over time, this social and also functional-mutual approach to industrial relations therefore provoked over time, a substantial redefinition of the notion of labor in the sense of emphasizing its value generating as well as psychological component consequently broadening the concept of total rewards by supplementing financial rewards with non-financial elements such as social status, collective freedoms, and quality of working as well as everyday life (Armstrong, 2002). In addition, aspects of occupational health and safety on the one hand and the possibilities of personal development through work in the sense of self-actualization on the other reflected an essential component of this mutual approach (Berger, 1997).
Since the beginning of the new millennium, even more emphasis has been put on this broad and also integrative approach towards total rewarding outlined, as through the change processes triggered by globalization, highly differentiated approaches towards business strategy have evolved and innovation is now widely regarded as a key success factor through the importance of intellectual property on the world markets. In this context, the notion of regarding employees as a company’s predominant “capital” of the 1990’s (in the sense of a mechanistic economic production factor) could no longer be maintained from a strategic perspective as the notion of “labor” per se, involves employee loyalty and commitment, know-how, productivity, and innovative ideas as far as its individually-based value generating components are concerned (Rowley & Bae, 2002; Davenport, Prusak & Wilson, 2003; Rosalie, 2005).