Our HR work based on the HR priorities

1. TALENT STRATEGY AND PLANNING

Our talent management team is getting ready for the digital future. We want to make work even more global, digital and efficient in future and, to achieve this, attract and recruit the best talents to our Company. This is key if we are to drive digitization forward and safeguard our future success. Throughout the world, our Group is always on the lookout for creative minds and technology-minded people who can help us create the digital future.

The digital future needs networking. Our talent management approach encourages young talent to take responsibility for their own careers, using modern (IT) tools and processes. To foster networking, we offer face-to-face networking events and a shared online platform. We support and encourage job rotation, particularly across departments, functions, and countries.

As employers, it is our mission to become ever more attractive and raise our brand profile. In recent years, our attractiveness as an employer has grown thanks to a creative, target group-specific presence in social media and a raft of attention-grabbing initiatives in the talent market. The 2016 Online Talent Communication Study confirmed this by naming our career pages the best employer website in Germany. We want to build on this success internationally, consolidating our leading position as a top employer of choice in mature job markets, while also boosting our reputation in growing markets.

2. PERFORMANCE MANAGEMENT AND LEADERSHIP

Lead to win. Based on our new leadership principles “Collaborate,” “Innovate,” and “Empower to Perform,” coupled with our Guiding Principles, we rolled out our leadership model “Lead to win” in 2014. By 2016, all executives had been practicing “Lead to win” for two years. The key features of this model are a continuous dialog between executives and their superiors on performance and development issues, a direct link between performance assessment and incentives, and personal development paths. In particular, executives are urged to identify and leverage innovation potential. It is also important to establish a working culture in which everyone continually challenges the status quo and reflects on his or her own conduct, and where no-one is afraid to make mistakes. We foster and demand a culture of personal responsibility, thereby creating lasting value for the Group.

Embracing diversity. For over a decade now, we have sustainably and comprehensively supported diversity throughout the Group. We integrate all aspects of diversity, and reinforce them with a host of flagship projects, such as our initiatives for the advancement of women. Additionally, in 2015 we launched a campaign on unconscious bias which gave new impetus to greater diversity within the Company. This campaign continued in the reporting year, with measures designed to raise employees’ awareness, as well as practical workshops on unconscious bias and stereotypes. On June 7, 2016, we hosted the Rhine-Ruhr Diversity Network’s 4th German Diversity Day under the motto “Diversity makes the difference – cultural skills for business success” at our company headquarters in Bonn, another example of our commitment to diversity issues. 10

Gender equality remains a particular concern of ours, having campaigned relentlessly on this issue for many years. Back in 2010, we introduced a quota of 30 percent of leadership roles worldwide to be filled with women. Our highly successful pilot scheme in 2015 trained women to take on national and international supervisory board mandates, and met with widespread acceptance. The follow-up program, launched in fall 2015, was also open to men, and ended in June of the reporting year. In total, these two programs trained 60 women for a demanding supervisory board role. Tried-and-trusted measures, such as managing the advancement of women throughout the entire talent acquisition strategy, and specifically targeting women, for example with a website exploring opportunities for women, advertisements, and trade fairs designed for women as the target group, remain pivotal to our strategy for advancing women. The percentage of female members of our supervisory boards in Germany also rose from 17.7 percent in 2010 to 34.8 percent in December 2016. The proportion of women representing the shareholders in our international supervisory boards likewise increased from 7.4 percent in 2010 to 23.4 percent at the end of 2016. 5

Work-life balance. We offer a range of attractive opportunities to help our employees strike a better balance between their work and home lives. Our place in the finals of the German Erfolgsfaktor Familie 2016 company competition, which underlines the importance of the family as a success factor, is indicative of our Company’s commitment to a sustainable, family-friendly HR policy. The one-year Family Manager pilot project in Germany ended as planned in mid-2016 and was very positively received by the press and in-house. We will be using the findings from this project to improve our range of offerings to help balance work and home life. The focus in 2016 was on “caring for relatives.” By further enhancing our flexible working conditions, we create additional freedom and scope for our employees. In 2016, the sector-specific collective agreement on mobile working laid the foundations for establishing mobile working as a new format within the company. In early 2016, we also began offering our employees lifetime work accounts from which they can fund a leave of absence or top up a part-time salary.

Employee satisfaction. Our image as an attractive employer continues to grow, and our employees are scoring us ever more highly (see table below). In the most recent Group-wide employee survey of 2015 (excluding T-Mobile US), our commitment index score, already at a high level, increased to 4.1 (on a scale of 1.0 to 5.0). We also conduct regular pulse surveys to obtain feedback from our employees. The November 2016 pulse survey saw an extraordinarily high level of participation: 73 percent of employees took this opportunity to give us their feedback. And this feedback was positive, with 73 percent of respondents saying they were satisfied with the company. Not content to rest on our laurels, we are continuing with a raft of initiatives to further improve our corporate culture and increase employee satisfaction. We expect the high approval rates to remain stable in the next employee survey in 2017.

Employee satisfaction (commitment index) a    
  2015 2012
Group (excluding T-Mobile US) 4.1 4.0
Of which: Germany 4.1 4.0
Of which: international 4.0 3.9
  
a Commitment index according to the most recent employee surveys in 2015 and 2012.

Health. Our health management strategy is designed to maintain our employees’ health and performance. We view occupational health and safety legislation as minimum requirements and encourage our employees to take responsibility for their own health. Our managers play an important role in fostering an appropriate corporate culture. 3

3. WORK IN THE DIGITAL AGE

The world of work is changing: Demographic change, individual life and career models, together with the digitization of society and industry pose fresh challenges for companies – as well as offering new opportunities. This inspires 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 digitization. Transformation is not an end in itself, but an expression of the relentless demand for adapted, more flexible work forms and operating structures. The robotization of transactional and repetitive activities creates new options for “human” value creation, which in turn brings with it fresh challenges for HR work. The result is a growing proportion of knowledge-based work that can be performed at any time and from any location. The way that solutions are devised and services are delivered is also changing. The escalating complexity of products and business processes demands new problem-solving techniques and approaches. Our Design Thinking – a systematic approach to complex problems – is setting new standards as a technique for innovation and transformation. Our new HR unit Digital & Innovation has held more than 60 workshops, attended by over 2,250 employees, familiarizing them with new techniques such as Design Thinking. Digital & Innovation and Telekom Design also brought together their Design Thinking activities within the Telekom Design Academy in the year under review, to accommodate the growing Group-wide demand for these types of new working techniques and collaborative formats.

In 2016, more Magenta MOOC (Massive Open Online Courses) were made available to all our employees worldwide. Under the motto “Go Digital,” participants were invited to tackle ten real-life digitization challenges, and deepen their understanding of digitization and design thinking. 4

Places: We realize how important it is to adapt our employees’ working environment to accommodate the changes posed by digitization. Our Future Work program is designed to establish flexible working methods, a leadership culture based on trust, and opportunities for mobile working. This is complemented by modern, open office environments and shared work zones. We are committed to the ongoing transformation of our corporate culture from one based on face time to one based on results. In 2016, we forged ahead with the expansion of our Future Work workspaces. By the end of the reporting year, some 9,000 employees in Germany were already working under Future Work principles, and this figure is expected to rise to around 18,000 by the end of 2018.

Technologies: Standardizing and simplifying our HR processes, and making them more customer-centric, is a pivotal concern for us and another milestone in our efforts to automate HR work. The roll-out of our HR Suite IT system across the Group is a key element of this plan, enabling us to provide standardized Group-wide HR processes such as recruitment, professional development, and performance management on a single platform.

We are aware that we must promote virtual collaboration if we are to maximize performance. Our in-house social network, which replaced our intranet and the Telekom Social Network, provides the basis for this. In 2016, our multiple award-winning social network, You and Me (YAM), boasted more than 120,000 users across the Group, heralding a new era in internal communications. As a central, dialog-based communications platform, YAM is the company’s nervous system. We have also upgraded the direct communications channel with Board of Management level via YAM, with many of our Board members and executives using blogs, vlogs, chats and discussion forums to communicate. In addition, most employees worldwide now have access to various options for collaboration between departments and across national borders in the form of video and web conferencing services, live broadcasts and chat/messaging services, and knowledge-sharing via secure data rooms.

In May 2016 we set up the HR Digital & Innovation HR unit, a Group-wide competency and consulting team focusing on the targeted digital transformation of our organization, people and culture. HR Digital & Innovation has developed the digital@work model for our Group’s digital transformation, combining the key cornerstones of leadership, learning, workspaces, methodologies, culture, workplace equipment and organization, together with a raft of dedicated measures. The unit introduced the Digital Guide, an innovative assistant designed to optimize virtual collaboration, into our YAM ecosystem. The digital format Leadership App (LEAP) focuses on topical management development issues such as innovation and ambidexterity (the ability of an organization to be both efficient and flexible), offering quick, innovative guides to a range of topics in the form of inspirational videos and short digital teaching modules, all with an appealing design.

4. SKILLS MANAGEMENT AND QUALIFICATION TO MEET FUTURE NEEDS

Skills management is an increasingly important topic for our Company. In 2016, we agreed with our employee representatives to conduct a strategic Skills Management pilot project at four of our business units in Germany. Alongside retraining, inter-departmental exchange and new hires, it is also important to promptly identify any skills gaps in the workforce, and take action to ensure long-term upskilling, such as university courses, if we are to secure competitiveness and employment.

The right training measures are vital in closing the skills gaps. We are extending our use of digital learning formats, which can be accessed at any time and from any location. Modern formats such as simulation exercises, video-based training modules, and learning games have significantly increased the acceptance of digital learning formats. 4

Awards

In 2016, we again received multiple awards for our HR work. The following graphic shows a selection of awards and prizes.

Chart: Employee awards