Our HR work based on the HR priorities

1. TALENT STRATEGY AND PLANNING

When it comes to transforming the Group, our workforce plays a crucial role. It is hugely important to us to have the right people in the right jobs and to further develop their individual skills.

Recruitment. We want to make our work even more global, digital, and efficient in the future, which is why we aim to attract the biggest talents to our Company worldwide. Conventional recruitment channels, such as employee recommendations, job advertisements, campaigns, trade fair presences, and active recruitment on social networks, are enhanced by the opportunities provided by digitalization. New channels, such as our Global Online Challenge Platform or Roberta the Robot – our virtual assistant at job fairs – connect us with candidates who have the future skills we need. Gamification is another attractive approach to this target group, as is our open workspace project, CMD+O. We have extended our Women’s STEM Award to an international audience and now take applications from female students of STEM subjects not only in Germany, but from across all of Europe. 5

Employer brand. We are already an attractive employer, but we want to get even better. In 2017, our global HR team created a new worldwide employer brand for the Group, known as the Employer Value Proposition (EVP): “We shape the digital world to bring people closer together.” The new EVP is accompanied by a provocative campaign with the slogan: “If you can’t think big – don’t apply.” This new employer brand gives us a consistent look and feel across all labor markets worldwide, yet is flexible enough for our different national companies to contribute their individual strengths.

Succession and talent management. We know that good employees are not only recruited from outside the Company. Many people with key skills and huge potential already work within our Group. In 2017, we imbued our succession planning activities with the necessary structure by taking a global approach. The new digital process allows us to plan and develop candidates on an ongoing basis, and we always have an overview of potential successors to management positions. Additionally, our Global Talent Pool is a platform and database that gives us complete transparency over our global talents and their respective profiles. Talents can use the Global Talent Pool group on YAM, our social network, to plan the next steps of their career, identify strategic project assignments, and find interesting job vacancies. We also exclusively offer a portfolio of digital development opportunities, including CV consulting, career meetings, e-training modules, and mentoring, to prepare our global talents for new positions. This system makes it easier to fill vacancies, improves the visibility of talented employees, and promotes rotation. We also organized two simultaneous Talent Summit conferences in Bonn and Athens to foster international networking, which were attended by over 300 talents.

2. PERFORMANCE MANAGEMENT AND LEADERSHIP

“Lead to win” leadership model. The working world is becoming increasingly dynamic, agile, and innovative. In order to keep pace with these changes, we updated our “Lead to win” leadership model in the reporting year. Essentially, “Lead to win” focuses on a continuous exchange about performance and development issues in line with the principles “Collaborate,” “Innovate,” and “Empower to perform,” along with our Guiding Principles. The main changes in 2017 included uncoupling individual bonus payments, personal development using ongoing feedback, and a stronger focus on Group-wide collaboration.

levelUP! In the age of digitalization, managers must possess skills and methods that differ greatly from those needed by the analog world. That’s why we launched a new professional development program for executives, levelUP! – an innovative digital further-training service for successful leadership in the digital age. levelUP! has a flexible modular structure that uses mainly interactive learning formats.

Practicing diversity. For over a decade now, we have sustainably and comprehensively practiced and promoted diversity throughout the Group. 10 In 2015, we launched a campaign on unconscious bias, which is now running at international level. The goal is to raise employee awareness of this issue and bring fresh stimulus for greater diversity within the Company. We once again took part in the German Diversity Day featuring the motto “Diversity makes the difference – cultural skills for business success.” Gender equality remains a particular concern of ours. Back in 2010, Deutsche Telekom AG set itself the target of filling 30 percent of management positions across the Group with females. We aim to meet this target by 2020. Across the globe, the proportion of women in middle and upper management stood at 25.4 percent at the end of 2017. Following the introduction of the Act on Equal Participation of Women and Men in Executive Positions in the Private and the Public Sector (Gesetz für die gleichberechtigte Teilhabe von Frauen und Männern an Führungspositionen in der Privatwirtschaft und im öffentlichen Dienst), we extended the target to include the Board, the two levels directly beneath the Board, and our internal supervisory boards in Germany. Since 2015, via our Supervisory Board Readiness Program, we have trained almost 60 women to take on national and international supervisory board mandates. The percentage of female members on our supervisory boards in Germany rose from 17.7 percent in 2010 to 37.3 percent in December 2017. In 2017 we also hosted the annual Chefsache Conference; a network of managers from industry, academia, the public sector, and the media dedicated to equal opportunities and patronized by Federal Chancellor Angela Merkel. 5

Achieving a good work-life balance. Alongside offering traditional support in the form of childcare facilities and family care options, we are also moving increasingly to an HR policy oriented to different life phases that offers flexible working conditions for greater self-determination, and, in doing so, exploits the opportunities provided by digitalization. After concluding the general collective agreement with ver.di in 2017, we rolled out mobile working across the Group as a new way of working. This allows our employees to work from home or on the move, provided the nature of the task lends itself to this. In addition, flexible working hours, the opportunity to go part-time with a guaranteed option to return to full-time work, and the lifetime work accounts all give employees greater freedom to structure their day flexibly and achieve a better work-life balance. 8

Employee satisfaction. In the most recent Group-wide employee survey of 2017 (excluding T-Mobile US), our commitment index score – our measure of employee satisfaction – already at a high level, remained at 4.1 (on a scale of 1.0 to 5.0). We also conduct regular pulse surveys to obtain feedback from our employees. 71 percent of employees took part in the pulse survey in November 2017, of which 72 percent stated they were satisfied with our Company; for comparison, this figure stood at 73 percent in the pulse survey of November 2016. Even though the feedback is already very positive, we have several initiatives in place to further improve the corporate culture and employee satisfaction. We expect to see employee satisfaction remain consistently high in the next employee survey due in 2019.

Employee satisfaction (commitment index) a
  2017 2015
Group (excluding T-Mobile US) b 4.1 4.1
Of which: Germany 4.1 4.1
Of which: international 4.1 4.0
  
a Commitment index according to the most recent employee surveys in 2017 and 2015.
b T-Mobile US conducts its own employee survey.

Employee health. Our health management strategy is designed to maintain our employees’ health and performance. We view occupational health and safety legislation as minimum requirements. For further information on occupational health and safety, please refer to the section "Corporate responsibility and non-financial statement." In addition, we practice a corporate culture that encourages employees to take personal responsibility for their health. Managers make an important contribution in this respect. Our commitment to this topic has won us numerous accolades. 3

3. WORKING IN THE DIGITAL AGE

What does the transformation of the working world mean for our employees? The innumerable opportunities inspire our HR work, culminating in a range of measures on “people,” “places,” and “technologies.”

People. The transformation of corporate organization and culture is accelerating, driven by the pace of digitalization. Transformation is not an end in itself, but an expression of the relentless demand for adapted, more flexible work forms and operating structures. The automation of transactional and repetitive activities creates new options for “human” value creation, while social media and digital platforms unlock new ways of working across hierarchical divides. The person and employee continues to be our focus. But who are our employees and how do they work in the digital age? To get to the bottom of these important questions, we asked our workforce about their experiences and wishes regarding the use of digital tools, and created “persona” from our findings. These allow us to develop tailor-made IT solutions and digital learning and further training offers. As in the previous year, in 2017 we once again set standards in the field of design thinking. We have now brought more than 10,000 employees into contact with this creative development method, thus establishing a broad basis on which this approach to innovation and transformation can be applied to daily work. Our Massive Open Online Course (MOOC) format has been up and running for several years now and is used to address current business challenges in global teams. The next Magenta MOOC initiative, with the slogan “Tap into design thinking,” will bring this method to an even larger user group. As of the 2017 year-end, 4,700 employees had already registered for this online course. 4

Places. The workplace of the future will also undergo transformation. Our Future Work program offers modern, open office environments and shared work zones to promote flexible working, a trust-based leadership culture, and mobile working. As of the end of the reporting year, just under 18,000 employees in Germany were already working in line with our Future Work principles. The Group Headquarters underwent complete restructuring, along with sites in Düsseldorf, Essen, and Berlin. Our goal is to continue to pursue the transformation of our corporate culture from one based on being at the office to one based on results.

Technologies. Because we want to make the most of the opportunities brought about by digital transformation, we are testing out new technologies in fields such as professional training and development. Using virtual reality, for example, we can teach and hone presentation skills in front of a virtual audience. The internal automation of our HR processes is also progressing apace thanks to the use of chatbot prototypes. Our staff app, launched in December 2017, established a basis for bringing further HR processes, like the “punch clock,” to the smartphone. Mobile solutions not only make everyday work easier, they also promote modern and flexible working. We will be upgrading the mobile phones of up to 50,000 employees with latest-generation smartphones to give more people access to the latest services. We are aware that we must promote virtual collaboration if we are to maximize performance. A key part of this is our YAM, which is attracting new users continually. YAM had more than 123,000 users as of the end of 2017 and continues to establish itself firmly as a dialog-based communications platform and the central nervous system of our Company. We have also upgraded the direct communications channel with the Board of Management level via YAM, with many of our Board members and managers using blogs, vlogs, chats and discussion forums to communicate. In addition, most employees worldwide now have access to the following options for collaboration between departments and across national borders: video and web conferencing services, live broadcasts and chat/messaging services, and knowledge-sharing via secure data rooms.

4. SKILLS MANAGEMENT AND INNOVATIVE TRAINING OPPORTUNITIES

Skills management. One of our most important resources is the skills of our employees. In order to secure competitiveness and employment, together with the employee representatives we agreed to implement a strategic skills management pilot project at four business units. Alongside retraining opportunities and inter-departmental exchanges, the focus is on identifying skills gaps at an early stage and deriving long-term training programs to redress the balance. To date, some 5,000 employees have gone through this process, thus allowing us to identify potential for improvement and implement training measures together with the participating Group units and our employee representatives. 4

The 80/20 model. The 80/20 model is yet another innovative program to improve employee motivation and collaboration across departments. It gives employees the freedom – on a voluntary basis and in agreement with the participating manager – to dedicate 20 percent of their working hours to internal Group projects. The model allows skills gaps to be closed, while giving employees the opportunity to apply their skills in other areas, irrespective of their department. Introducing this level of flexibility not only promotes the general success of the Company but also creates a new and innovative way of working in which employees’ skills are valued and managers receive targeted support.

Part-time training leave. The “German part-time training leave model” is another opportunity for employees to advance their skills and thus safeguard their employability. We presented this model together with Federal Minister of Labor Andrea Nahles in June 2017. The proposal is similar to the partial retirement model with the added bonus that the employee is given a job guarantee or protection against compulsory redundancy for a specific period of time. The part-time training leave model is an all-round win-win situation. Employees keep their jobs and social security, the costs for the state are substantially reduced compared to the costs of financing unemployment, and companies train up their employees for the future.