3 Key Risks of Using Excel Spreadsheets Instead of Compensation Software

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Why It’s Finally Time To Leave Excel Behind

One of the most time consuming and challenging aspects of compensation software is  managing the salary, bonus and stock recommendation processes.

Considering the potentially disastrous or embarrassing consequences of human error in building the spreadsheets, let’s look at some of the common risks and traps.  

This article is excerpted from a white paper (full version available here) which examines those Risks, their potential costs and consequences, and how they can most easily be avoided.

Risks of Excel Spredsheets

 

Risk # 1: Beware the Ripple Effect of Key Compensation Decisions

Compensation decision-making is a multi-faceted proposition,  with far-reaching impact on budgets and employee morale.

You can’t always predict the ripple effect of compensation decisions from a simple spreadsheet.

Managers and the analysts in the compensation department need summaries and audits to truly understand the consequences of these decisions, where hundreds of thousands (if not millions) of dollars are involved.

Managers may not know how to extract timely or relevant data from the spreadsheets because the tools they’re using don’t provide this information in an easy-to-understand format.

Confused or intimidated by not having a handle on the big picture, they either put off the task until the last minute, or rush through an ill-informed decision process.

The effect of these decisions ripples upwards as executives are left exposed to approving recommendations based on incomplete, misleading or outdated information.

Compensation planning software allows managers to see the immediate effect of their decisions on overall budget and performance distribution with instant, readable graphics.

 

Risk # 2:  Ever Changing, Always Confusing Templates

At a typical large company, compensation review time means everyone’s productivity slows down, with HR team members answering the same questions seemingly a hundred times over. Every change from last year, every new policy implementation, and every little tweak to the spreadsheet makes the template more confusing to everyone.

Never mind having to figure out salary changes; it’s hard enough for most managers just to figure out the review template without the Comp department’s help.

The better compensation software tools provide all participants with their own dashboard to enter and retrieve only the information they need, reducing confusion and repetitive or inappropriate queries. Instead of asking questions, they’re answering them. It’s like the difference between preparing your tax return with forms, versus answering interview questions on the latest edition of your tax prep software.

 

This simplified, need-to-know process allows compensation review to be completed with everyone singing from the same songbook, with no need for hand-holding by the HR team.

 

Risk # 3: Hurry Up & Wait (And Hope it’s Right When it Arrives)

Comp software helps keep salary review tasks from “inbox purgatory.”

The approval process for pay recommendations on spreadsheets can be cumbersome. As noted above, oftentimes managers will simply put off their pay recommendations because it’s a confusing task that falls in priority to their other management duties.

But that’s not the only reason why spreadsheet-based compensation planning can be such a slow proposition.

  • Compensation administration touches every part of the enterprise.
  • Changes to employees’ compensation must be transmitted not only to HR but to budgeting and other financial units; reports in various forms move in both directions through the chain of responsibility.
  • While a necessary evil, it extends the time needed to reach final decisions
  • Proper documentation of salary decisions prevents all sorts of problems, from equal pay challenges to budgetary controls and for HR to implement them.
  • Also, data integrity and process controls are at risk with spreadsheet-based planning because of the multiple touch points and possible stalls caused by “inbox purgatory.”

Compensation software allows timely data to speed it’s way faster through all the various company units, because it’s much easier for managers, executives and HR staff to enter and obtain information from its centralized data system.

The better software systems offer instant reports with flexible formatting capability to display data exactly the way it’s needed, for each department’s individual purposes.

 

This is part of the full white paper,  The 6 Key Risks of Using Excel Spreadsheets to Manage Compensation, available here.