5 Hidden Cost of Inaccurate Compensation

What’s Your Compensation Practice?

Teri Zipper
Jul 07, 2017

practice

They say it takes at least 10,000 hours of practice to become an expert at anything. I’ve been spending a lot of time with compensation managers these days  helping them build a comprehensive compensation strategy and a forward-thinking reward and bonus structure for all employees. There is a similar story across many mid to large-sized organizations and global companies. It tends to focus on “how” to get compensation planning done from using spreadsheets and mail merges, manually calculating prorated salaries, fixing errors, getting data to managers and back to HR professionals efficiently, reporting and analysis to all manner of process issues. For the record, yes, process is important – critical if you want to make sure you get it done quickly, efficiently and right! We practice this year over year when the time comes to perform employee appraisals, decide base pay, annual bonus, or long-term incentives and ultimately to make compensation decisions that allow your organization to reward and retain top talent.

Process is important but let’s not let it obscure the bigger picture. Spreadsheets are great for some things but they are not a long term solution for compensation administration. And if you are stuck in a blur of spreadsheets every day, concerned more about whether you copied the equation all the way down to the 10,000th row or not, you can start to lose perspective. Are you utilizing strategic processes to do your job, or just repeating ineffective habits?


habit

 

Compensation planning can be complex. It’s a competitive advantage for organizations wanting to attract and retain the best talent for their purposes. And the systems organizations have in place today (a lot of manual processes, lengthy spreadsheets and/or old compensation management systems) are not able to handle the next generation of pay practices. In my experience, compensation planning is always last to automate. Sometimes this is because the HR team can’t make a strong enough business justification, or simply because the company is comfortable with the process as is and are afraid to muck it up. Forget about whether “Joan,” the Global Senior Compensation Analyst (the only person who really knows how the spreadsheet works) wins the lottery and stops coming to work!

lay

Oftentimes Compensation managers will make the justification about how many employee hours will be saved and possibly include something about the massive number of hours (more tedium) they work during the focal planning process. Unfortunately, the CFO and the Chief Human Resources Officer don’t care about that. You’re a salaried employee and they are going to pay you the same regardless. What they do care about is overpayment/overspend, retention, and manager productivity, among other things. These compensation metrics have real value that can be calculated and will catch the attention of the CHRO and CFO.

Meanwhile, what is not getting a lot of attention is “why” we do this and ultimately the results set. If you aren’t spending enough time on “why,” then you are falling behind. Why are organizations still paying bonuses to poor performers? Why do so many organizations say their benefits and total rewards plans are not getting the results intended? Why is it important that employees understand their worth to the organization and vice versa? Why should we engage managers in the salary planning process? Why is it important that managers have the right data to make decisions? Why do our male engineers make more than our female engineers? What are we not focused on given the amount of time we spend on process? We need to spend more time “practicing” in these areas in order to have a successful compensation program.

So are you “Practicing Comp” or “practicing process?” If the former, that’s great. Then you should be building an understanding of the compensation programs and plans that work in the environment in which you are in, and be well on your way to a more successful program (not to mention honing your personal skills for your next gig). If the latter, then come on… you know what needs to be done from a process perspective. The tools to truly automate your Compensation practices are out there, and it’s time to start evaluating them. (This handy guide can help you navigate the evaluation process!) It’s time to focus on whether or not you are getting the results you need, and how you can support managers in making the best compensation decisions. Stop practicing the process and start practicing compensation!

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