Toyota will embrace a more flexible and merit-based approach to rewarding and promoting employees, incoming Chief Executive Officer Koji Sato said.

As Toyota shifts to become more of a mobility company that offers a wide range of products and services to transport people and goods, rather than just a manufacturer, the goal is to become more innovative with its labor force, rather than just efficient, Sato said at a briefing Wednesday.

Sato, the former chief of Toyota’s Lexus brand, will become CEO of the world’s largest carmaker next month. While Toyota and other companies have stressed the need to more fully embrace merit-based pay, the decision to hike salaries during Japan’s annual wage negotiation period is also being driven by higher inflation due to higher energy and raw material prices, as well as a weaker yen last year that boosted the cost of imported goods.