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3 Initial Questions to Get Your Company to Embrace Human Resources Software Changes – A Study in Compensation Software

human resources software - onboarding tips

Remember the last time someone told you, “time to change the software you’re using”?

That’s not the question you want to ask if you seriously want people to change software.

Likely the first reaction is negative – from irritation to anger – even though that software might make you more efficient, save money, and in the long run, make your job easier.

It’s human nature to fight change and no where is that fight seen better than in the software business.

We provide compensation management software and know from experience that getting people to accept a change in software isn’t easy.

Otherwise, why would more than 50% (by many estimates) of companies still use Excel to manage their compensation?

One reason is because it’s easier not to change, than to change. Before you jump into software features, understand that the solution is about more than business, it’s about people.

Begin with the Facts – Human Resources Software Means Change

Getting people to embrace software and the change it creates within companies is often like herding cats – for each part of the company who supports the change, another doesn’t.

Plus management may see things differently, and often at the end of the process, when knowing their objections before hand makes adoption easier.

Fleshing out a strategic view of the company, the proposed software, and the metrics to prove that the software is impacting change, are critical for getting software approved and adopted.

  • Yet the answer is rarely simple. A diversity of interests must be served in the company by the software.
  • Listening to those who don’t support the change, engaging those who support you, and evaluating the responses to adapt are key skills you’ll need to succeed.
  • If your software can fit the needs of the company and the people using it, you stand a chance to get it accepted.

Compensation management software involves executing and automating a compensation plan which touches many different parts of the company (salary, bonuses, long and short term incentives which get complex), so employees are paid accurately.

Regardless of the type of software you are choosing, these initial questions apply:

Question 1. Is this software a good fit for your company?

While a simple and broad question, the specific answers you find will help you frame your business case. What does a good fit really mean to your company is the question, and don’t assume anyone knows (or is as excited as you about) the answer.

To get that answer for compensation management, ask the following:

  • What HRIS software (including Excel and Access) are you currently using to manage compensation?
  • Will software solve the problem, and if so, how much training and support time is needed before the software is fully operational?

(Yes, that’s 3 questions in 1! Software questions always have dependencies with various people, departments, and budgets. If you have a software question, make sure to ask the right set of sub-questions to get the answer).

Typical Compensation Scenario

A healthcare company’s compensation budget is the big piece of operating expenses. But their compensation management system (currently many Excel spreadsheets run by many people hopefully communicating it all accurately) is not keeping up.

  • Errors happen, maybe raises don’t happen, and the system is plagued with inefficiencies in the software, and in the data being entered.
  • Perhaps they lose a nurse a year because compensation is that important, and to replace that nurse costs a year’s salary – let’s say $90,000.

While changing from Excel is going to take time – after all, we’re changing a long time productive habit – it may take 3-6 months to transition away to the new software. Old habits are hard to replace, and expect customization costs as well because it is a big transition.

Now if the healthcare company already uses compensation management software and has a good compensation plan and practice, that change could take around 90 days.

In this scenario, if we’re losing 2 nurses a year, replacing them costs more than upgrading the software, and it should prevent losing more in the upcoming years.

Question 2. What data and metrics will show the impact of the software to improve performance? How will you measure success?

  • How will this new software improve compensation spending and employee retention?
  • What specific business results, and metrics, will measure that improvement?

Evaluating Compensation Results Scenario

Compensation software streamlines the complex pay processes of company. So improving the efficiency of the compensation spend – for example, through actual cost savings of processing compensation plans and streamlining performance reviews – by even a few percentage points can be a tremendous benefit to a company.

  •  Measure success by compensation spending savings, as well as improving retention of key employees. A good compensation plan should also help acquisition, though it’s harder to make that business case than for retention in terms of compensation spending.
  • One of the true rewards is retention. It is expensive to replace employees.
  • Done correctly, compensation software enables the company to understand how to reward the right people the right pay for the right performance accurately.

Question 3. Will people use the software consistently?

Software adoptions include 2 points of view; avid users excited to embrace the change, and stoic users who would rather keep on doing what they know how to do.

Before training, get buy-in from various parts of your company, allies who’ll support the software, and focus your energy on helping those who will be difficult, or have technical difficulty. Plan for this!

It takes a consistent and friendly style to shift these people, and you will have to shift some people resisting along the way.

Because in the end, what a user does with the software is what matters; getting them to use it is the first challenge. Making them productive is next.

But in the beginning, the answer usually is no. We see it all the time in the compensation management software business. People don’t want to change; they will change over time, yet an initial “no” shouldn’t be a surprise.

Prepare a 3-9 Month Marathon and Don’t Sprint

One of the biggest mistakes people make in trying to get a company to embrace software is to realize it is a long road.   In compensation management software for example, many companies miss the big picture impact, making decisions solely on saving the initial money. What they get is inflexible and unscalable.

When the software arrives, they find it can’t adapt to what they need. Costs go up, and suddenly that cheap solution costs more than the best software. Cost savings are good, but long term cost savings are key.

Often people come in with a list of features (many which they don’t understand), without understanding that it’s these 3 questions above you must begin with, before you get to the features of the software. Maybe it’s not logical, but it is the way the process often goes. Software is often as much about motivation initially, as functionality.

Be sure you focus on the business results, and the measures to validate those results, before you start jumping into the features of software. Because now you’ll know what you want the software to do, not trying to see if the features fit into your business scenario.

Most of all, make sure all the people in your company who will have to use this software, use it actively.

One of the key measures to a successful software adoption is usage, plain and simple. Make sure whatever you choose, that your people can use it effectively.

Avoid The Hidden Costs of Compensation: the Proven Compensation Management Checklist

 

Imagine your company is moving forward with the compensation software you recommend, and in the beginning it’s smooth sailing.

Your company recently invested in new software for handling payroll or compensation, and your department has just completed the months-long process of configuration, testing, and training.


Excerpt from:

How To Get the Right Compensation Management Solution by asking the Right 10 Questions


A month into deployment, the company’s business rules change in a way that will require major changes to your specifications document. That’s when you discover that the vendor can’t accommodate your changes.

One of the first questions you need to ask before engaging your company, and the vendor is, how much configuration will be needed?

To help you avoid being trapped by these and more questions, the experienced Kinixsys team has collaborated on the following checklist of questions, based on a number of common workflow situations that a good software system should be able to address.

Follow this checklist as you prepare to choose your compensation management software.

The Mini Compensation Management Checklist

 

  1. How often do your processes, business rules or work-flows change, and can you or the vendor reconfigure parts of the system to change with them?

This is probably the most critical question to ask up front. If you have situations  unique  to  your  organization,  you  want  a  product  that  can accommodate those special cases. The best systems will have the built-in flexibility to allow you as the application administrator to update things like eligibility requirements, guidelines, recommendation stages, and other critical settings. But at the very least, you will want to know if this is a “one size fits all” application that can’t be changed by either you or the vendor.

Avoid the “one size fits all” myth.

Compensation software is often customized; what will it cost, and how long?

 

  1. Is the vendor HR focused, or are they an IT company?

There are a lot of common errors that occur during the typical procedures that use spreadsheets and homegrown systems.  Many of the calculations are tricky and highly interdependent, so that a small error can have rippling effects on an entire employee group.  

  • Does the vendor understand the politics and nuances of compensation planning or are they focused only on the IT impact?
  • What  are their core competencies?
  • Which company(s) are good at communicating effectively with you from the start?

 

  1. Are you looking at a suite of products, or a point solution?

There’s something to be said for integration, but find out what they started with, and where their core competencies lie. Were they, for example, a Performance Management vendor who added a Compensation module after the  fact?  Did  they  build  the  suite  themselves,  or  acquire  other companies to build out their offerings? Even if all the capabilities appear to be there, there may still be lots of issues with how well the applications really fit together.

 

  1. What  happens when you hit a bump in the road?

What is the customer support process and turnaround time?

 

  • Is there a project manager assigned to your account who’s available by phone any time there’s a problem?
  • Or will you have to log a ticket and wait for a response?
  • Smaller vendors tend to be more available and responsive; the larger the vendor, the longer the queue for technical assistance.

 

    5. Will  it mine the data for executive reporting?

If management doesn’t get timely, accurate reports the system will not succeed.

Can it plug in to your payroll and benefits systems too?

 

Remember to:

> Ask good  questions up front,  so you don’t get any crashes or bumps along  the way.

Compensation is only one example of a software “solution” that creates a problem. Delays can happen in many situations, and that’s why it is always a good idea to know the potential areas of shortfall before you commit your company to a new automated compensation system.

> Make sure this system accommodates any changes you may need in the foreseeable  future?

First you have to know, from a solid compensation plan, what your future might look like including your current HR Tools and software, the data and performance. If you’re not sure about the answer to this question, plan on extra costs, which are common because few “off the rack” compensation management software solutions exist, and only a few adapt.

 

Download the complete White Paper here:

How To Get the Right Compensation Management Solution by asking the Right 10 Questions

compensation management checklist

 

 

Compensation management systems – How to Avoid the 3 Frequent Questions

What people least like about compensation management systems echoes the usual objections to software changes; that the new software doesn’t integrate with existing systems, is complex, and difficult to use.

Any change in software will cause these objections, out of habit and out of efficiency. Learning something new means stopping what you did and adapting systems. Plus, maybe the software is complex and inflexible, how do you identify what to look out for?

Complex Compensation

In a recent survey with HR.com, we  found what businesses like most and here, what they like least about compensation software.  These 3 issues continually arise throughout the survey:

  1. Why does my compensation management system not integrate with other HR systems?

This is a comment repeated again and again about compensation software in the survey, that it was not integrating with other HR systems. In an HR world driven by data, compensation software most of all must integrate with other systems. Maybe Legacy software driven from an industry that began over 10 years ago is to blame for the inability to adapt to new standards.

Sometimes a company updates its compensation plan, and resulting tech requirements, and the compensation software can’t adapt. When this happens, the company makes a request. But if not enough people make that request, the change won’t be made. Most often you can’t buy the change, because the end result will only benefit your company. Maybe what you ask for is not out of the ordinary, but if the software is not going to adapt, you’re stuck.

Which is why this complaint frequently arises, because when you’re stuck you are also in a long term, software commitment, wishing you knew this before you started. Yet integration with other systems is the foundation of software development in general; the flow and delivering of data to key stakeholders, while retaining security and privacy, are critical.

The challenge here, unlike with other tech decisions, is not necessarily driven by the other HR systems. Compensation software must be flexible to work with the variety of Suites and HR solutions available. While having it all under one roof sounds like a good idea, some compensation software in the Suite is not flexible enough for your needs.

Takeaway: Doing your diligence and asking the right questions about your HR systems and integration is key. Don’t assume and wait until later.

  1. Too Complex?  Ease of Use Rules

This word has become a code concept in compensation management systems; virtually every vendor discusses complex compensation, and how they simplify it. Yet the true power of simplicity lies in the compensation plan, and the software interface.

Is the compensation plan too complex, or is the software too complex? Some are not going to be happy with learning new software (see #3 below). Here’s 2 comments that show the problem:

  • Complexity and Too Complicated

“You never learn how to use all the tools, or you can’t tweak them to fit your needs.”

  • Over engineered for small companies

Small companies usually are moving from Excel or Access, or sometimes their own unique software that solved their problems. Compensation software with all the bells and whistles is too much for many small companies to digest.

Takeaway: Ease of use rules, which means researching the software and your compensation plan to make sure they fit together.

  1. Slow Implementation and Training?

  • Implementation process can be difficult
  • Processing Time for changes
  • Training and Change Management (in the beginning)

Onboarding software is a challenge we’ve written about before, and at the core of slow implementation. If your compensation management systems are not configurable, and requiresIT’s extensive time, prepare for a super slow process. Combine the resistance of change for people to learn new software, with overloading IT requests, and suddenly it all becomes more complex.

  • Training can be done in a few ways. The usual way is to do a focused intensive, with everyone in a room, then following up individually to help people progress. Instead of studying what the software can do, others set up situational training, where employees solve a problem while learning a specific function of the tool.
  • People learn more by doing than memorizing, which is why most training is weak (and it’s not just compensation software). Keep your employees focused on specific tasks they can achieve, instead of learning the many extras that may or may not be relevant.

Takeaway: Evaluate your compensation software on its ability to be configured and implemented quickly, within at least 90 days if possible. Understand that your comp plan, and company, will impact this if you do not manage the training and onboarding well.

Depending on your level of HR experience, choosing a compensation management system may seem simple at first glance. After all salary admin, bonus, plus long and short term incentives are built into most compensation software.

While the answers may not change, why do the same questions remain about compensation software?

Because as one of the 13 pieces of the HR Stack, compensation software is used to “validate and administer the pricing of job categories.” That means it touches many parts of the business that are changing much faster than they previously did. The way data is integrated, validated, and administered is what creates pay, based on a solid compensation plan. If any part of the preceding sentence is done lightly, errors and inefficiencies arise.

Compensation software can take this challenge to a new level; many companies rely on Excel, an old and once efficient habit that is waning in the face of new data standards concerning privacy and security of documents. Many employees, managers, and senior executives will interact with compensation software at some point, concerning what people are paid. They will have differing levels of tolerance for learning the new software, so be sure to not just encourage, but validate why compensation software makes their job easier when it’s running.

The best compensation software experience comes from a strong compensation plan; fitting the needs of that plan to the capabilities of compensation software is the best way to avoid the 3 questions.

3 Insights from the Compensation Games – How to stop a 21 percent net income loss from turning into a $1.6M Bonus

“Despite 20 years of trying, we have still failed to come up with an objective performance metric that can’t be gamed.”

Lynn Stout, Professor, Cornell Law School from this article that sparked a connection to compensation.

UPDATE: Part 2 of this Article Here, What they don’t like about compensation software.

Performance in business is like performance in any profession; people seek an edge. Today performance and compensation are deeply connected; how you measure performance and reward it is at the core of the new, Compensation Games, where competition meets employee rewards.

compensation game

 

Performance management and compensation software are intricately intertwined, what you do in one affects the other. Take the case of a CEO who earned a bonus while the company was experiencing a large quarterly income loss.

The stock price went down, and influenced by the stock repurchase, moved up enough to trigger the bonus.

If you set up a plan that rewards a performance increase in EPS (earnings per share), but allows a decrease in income at the same time, you likely have a flawed compensation plan. Performance in this case isn’t a review, it’s a measure that was overlooked.

In the compensation game that is being played today, a flawed plan often leads to much more than a momentary loss of revenue.

The game is not just played at billion dollar CEO levels, compensation gaming goes on in traditional companies, even smaller ones.

What a CEO  does is based on the plan; the important lesson here is how the gaming was set up by the company’s compensation plan that affects much more than executives.

While we aren’t here to recommend your EPS strategy, here’s a few insights from a compensation management perspective on how executive, and all employee levels, are involved in a new game linking compensation and performance:

 

  1. Wisely Set, and Regularly Evaluate, the Rules of Your Compensation Game

The compensation plan sets the ground rules; executives, managers, and even employees may game the system by focusing on outcomes that create short term, and long term, rewards.   What scenarios will arise from this plan – not just financial goals but all productivity measures?

In the CEO example above, where a 21 percent loss in income reduced the stock price, while a stock repurchase increased the price enough to trigger a CEO bonus, it’s not actually hard to understand why CEOs do it.

It’s in the rules, and it benefits the CEO and arguably the company, in terms of the value of its stock. Yet to reward a CEO for a poor performing year is the result of a compensation plan, not some negative CEO stereotype. Because the measure is based on stock price, not on income.

The solution here is usually a longer term, 5 or more years, for EPS share bonuses, and avoidance of short term perks that aren’t aligned with company income. Or at least weigh the value of the increased EPS to the reduction (long and short term) for income.

Compensation is just one part of the game; performance and its measures are the other.

  1. Blend compensation reviews with  performance reviews, which are also a source of gaming.

In some companies, performance reviews carry more influence. In others, merit pay influences reviews. Either way, these mutual influences create behaviors which become habits that should bring an individual, and long term company, reward.

Communication is a key factor in all reviews; poorly communicated compensation, and performance, reviews are lethal on morale. This is often an unknown part of the game for companies, who don’t know how this information is shared, and received.

Performance reviews are known for bias; compensation plans are often known for being rigid. Together these help paint a more accurate picture of where a company is going now and in the upcoming years, then simply looking backward to validate old activity.

While this shift will take time, the move from reactive compensation plans to real time compensation plans, with software that adapts, is already happening.

This is done by measuring whether the current employee actions, and the incentives driving those actions deliver the desired results. Checking to see if those measures stay valid is key; like a garden, a good business grows when it’s watched, and watered regularly.

The real question is, will your plan adapt in the face of

changing economic, executive activity, and/or market conditions?

  1. Compensation games happen in a competitive business environment. Build around them.

    Good gaming is ultimately good execution, where the rewards, and competitiveness within a company helps more benefit than poor gaming, which rewards a few and possibly de-incentivizes many employees along the way.

Good compensation is also good execution.

In a way, it’s the new HR Compensation Game – where social, performance, and compensation layers mesh, each one affects the other. These dependencies are key to understanding the long term success of your compensation plan.

It’s no longer about writing a plan down and do it, it’s about communicating this continually in a way that generates individual and business growth.

How to Get Everyone to Win Your Compensation Game

We’re not here to judge a business’s executive pay, or compensation games; management should create an atmosphere where every day, there is focus on the game at hand.

Today this combines more frequent performance reviews with compensation plans that balance short term recognition with the long term growth of the company, and its employees.

Finding the right compensation plan and software helps you play the game as well, because even if you don’t consider it, the compensation game is played every day in, and around, your company.

Because compensation is not only  about what you pay and reward people for, it’s about creating a business which is driven by compensation games, and people. The best companies are ones where people enjoy the game, and play it daily.

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What do you like best about the compensation software you use?

Compensation Management Software Survey with HR.com
Kinixsys and HR.com Survey

Choosing compensation software usually begins with a series of demos.  Yet too often this becomes note taking and months of follow up questions, and possible issues, that will undermine your business use case.  We want to help you prepare for that demo.

It’s not easy to know the right questions to ask, and compensation management software has come a long way since it’s early days more than a decade ago. What’s most important today depends on your company and your compensation plan.

In a recent survey conducted with HR.com (results available here), we included questions that help us understand what those using the software find most important, and most challenging, about compensation software today.

 

Let’s cover what companies like best about the compensation software they are using, with a few twists:

  • Flexibility – Big Data is influencing, even if it’s not fully understood or adopted by many companies yet. Data needs to flow to different parts of the company, with different views and responsibilities. Being flexible means the software must adapt to the requirements of the plan, but in practice many compensation management software companies are not flexible, and cannot customize – it’s a one size fits all scenario.

There are companies, like Kinixsys, who adapt and customize; being flexible is a key ingredient for compensation software. From all the responses, flexibility comes up again and again as a key “Like Best”.

Key Takeaway: Legacy software that is not updating to the new requirements may hinder your progress. Remember that compensation management software really began in the early part of this century; we’re in the midst of a shift in the way companies manage compensation, which drives customization requests.  What you expect may be a custom solution, so ask first.

  • Integration with market data – more and more salary data is being used to give companies, and employees, a better idea of what appropriate pay should be in the market. Then why do most companies feel they overpay, and many employees feel underpaid, when looking at what should be the same data?

Software that does integrate with market data easily, and accurately, is a big benefit for users.

Key Takeaway: Communication about compensation is becoming more and more important. If you don’t use market data, the employees can by using free services that don’t always give a true picture and will draw their own conclusions. We are all receiving more information than ever before about who gets paid what; it’s important that what shows up to all levels in the company communicates the right message.

That’s often best done in person, and more frequently (performance management and reviews are closely interlinked with the employee’s perception of the value of their compensation)

Key Takeaway:  The never ending rumors of Excel’s death are greatly exaggerated. Excel is more than a software, it’s familiar though not secure habit. It’s also the single word people chose to describe what they like best about compensation management software. Because it’s really a familiar world of Excel, compared to many, many varieties of compensation management software that everyone will need to learn.

Still at a certain point, even small companies will move beyond Excel. Or not. What it clearly shows is what we as an industry think the problem is, Excel, isn’t thought of as a problem by many in the industry. Yet change is inevitable here.

The Most Common, Compensation Software “Like Best”

  • Ease of Use

This is such a frequent, and general, description of what users like best. Software must be easy to use in the context of work, and often in comparison to Excel. Learning curves and frustration can undermine even the best compensation software.

Which is why it’s so important to understand the power of “ease of use”. That means software you can sit down to and learn without reading a book to do it.  Software that the company feels is easy to use; while no one loves a software change, in the end it’s the job of software to make your life easier.

That comes with interface, design, and integration to your business. Support teams who know what they are doing, and project managers who are HR Professionals, and adapt, instead of checklist driven integration with little flexibility.

Key Takeway: What does “ease of use” mean for your company? Ask a few key stakeholders and you’ll see the varying opinions of what’s easy and what’s not.

Beginning with that, you can make a choice by defining what’s best for your company, directly from the people who will use the software.

What we’re hearing are new questions driven partly by updating HR technology driven by Big Data – and the choice of how to adapt –  and partly by companies having to reconsider their old compensation plans in a world where salary data is freely distributed with varying levels of accuracy.

While the times are changing, so are the compensation plans, and the software needed to deliver the results. In the next article, we’re going to explore what companies don’t like about compensation software.

Let us know what you think on Twitter and LinkedIn.

 

3 Key Risks of Using Excel Spreadsheets Instead of Compensation Software

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.

The 8 Best Practices in Salary Surveys

Hate participating in Salary Surveys?

Here’s what survey companies hate about the responses they get.

  • Surveys are only as good as the quality of the data they compile.
  • We all dislike participating in them and, in some cases, that can affect the information reported, possibly skewing results.
  • We wondered if this is a problem, so we asked representatives from major survey companies what brings on their tension headaches.

    Here’s 8 Best Practices they shared with us:
  1. Know the landscape being surveyed.

Survey respondents should know their organization’s jobs well enough to do job matching. If you’re new to the organization, insist on getting last year’s input to the same survey so you have a starting point. If it wasn’t saved, the survey company can provide you a copy. Ask for help from a coworker who does know the organization and its jobs.

  1. Proof before sending.

This seems pretty basic, but always check the spreadsheet before transmitting. Survey companies report that they have had more than one situation where the spreadsheets have arrived empty or in crazy formats that anyone would have noticed if they had taken the time to look.

  1. Don’t match the jobs on titles alone.

An Accountant II in your organization may be a completely different job than the Accountant II described in the survey job description. If you’re responsible for matching the jobs, read the job description and only use the title as a guide. Be sure to match job levels as well (expert, intermediate, etc.).

  1. Read the part about what’s changed.

If the survey company has added or changed the jobs covered, you may find that you now have a better match than you had in the past, so don’t miss an opportunity to get better results.

  1. Make sure your data is usable.

The survey companies also want you to provide a unique identifier for each incumbent you report…and maintain that same identifier from year to year. Most of their clients will use the employee ID (not the Social Security Number!). Some don’t want the survey companies to hold even that information…so they make one up. Without that, the survey company can’t as easily audit your input or give you good information on year over year changes.

  1. Be consistent about FTE’s, even when reporting part time jobs.

Especially where salaries are part time but bonuses or incentives are not, provide a full time salary or an FTE factor so the survey company can correctly interpret your data.

  1. Don’t do a disappearing act.

When you leave your current job, remember to tell the survey company who’s taking over for you. This frequently overlooked task can wreak havoc on your replacement. When the survey company can’t find the right contact for reminders, everything will become a last minute rush.

  1. Don’t play hard to get.

You may get follow-up telephone queries from the survey companies. If they are any good at what they do, they’re not going to give up until they get what they need.

Common red flags that might prompt follow up calls include:

  • Job Match doesn’t make sense. For example, a “CEO” title matching an Accountant’s job description.
  • Salaries that exceed the maximum or are less than the minimum for their usual range.
  • Vast differences between the salaries in your organization vs. other respondents.
  • Wrong currencies reported for salaries.
  • Added or deleted columns on the spreadsheet. (Don’t do this; it really fouls up the processing).

 

TAKEAWAY LESSON

  • Be methodical. Check your figures. Make sure titles match descriptions.
  • Plan your time so you can complete the survey questionnaire with all the right data in the right places.
  • Your best measure of success is not receiving a single follow-up question from the survey vendor!

 

A Few Survey Firms to Start

Culpepper Surveys across a wide range of job categories in multiple industries, but with particular attention to technology, life sciences and healthcare.

Towers Watson Compensation, benefits and employment practices information for the US and many other global locations.

PayScale.com
Real-time salary reports based on job title, location, education, skills and experience.

Compensation.BLR.com Reliable compensation data. Up-to-date salary survey data – both nation-wide and state specific figures.

NACEWeb Salary Survey  National Association of Colleges and Employers

Compensation and Big Data – The Targeted Merit Budget

Big Data Merit Pay BudgetBig Data is delivering a more intelligent approach to merit budgets, but with a caveat.

Big Data is just that, Big and general, and far from perfect.

At one time or another, we’ve all been victims of computer algorithms that judge us unworthy of credit, or direct marketing to us based on algorithms that really don’t apply.

The same can happen if we set our merit budgets—using analytics– at the granular level. That’s why it’s important, once you’re using more Big Data, to leave some room for manager judgment.

 

Compensation and Big Data – Bringing Science to Pay

It’s a common belief in HR that compensation is both art and science. With the introduction of Big Data and data visualization, the art portion is becoming a much smaller part of the equation. This trend will profoundly impact the comp analyst’s job.

Say Goodbye to One Size Fits All

Here’s how merit budget presentations used to go:

“OK, after all of this beautiful data we’ve shown you, we recommend a merit budget of 3.25% across the board.”

Umm, no. You can no longer spread merit budgets evenly with a “peanut butter” tactic. The emerging focus on analytics and big data, along with more sophisticated technology, means that multiple solutions for merit budgets and other compensation elements will become the norm.

Technology is making it progressively easier to use analytics to evaluate relationships in your external and internal data. You’ll finally be able to confirm or disprove long held beliefs about the interaction of pay with other factors. One of the inevitable results of all of this will be merit budgets that vary significantly across the organization.

Takeaway: Don’t stop at a beautiful, intuitive presentation of data and conclusions. Follow up with targeted recommendations that make use of those conclusions.

Be Smart in How You Use Your Compensation Research

Most compensation plans do not give a manager a higher merit budget just because s/he has a performance distribution skewed toward higher ratings. In fact, you’re probably chuckling at the very idea. We don’t trust the managers not to manipulate the system.

But, what if you had other measures of performance that could not be so easily manipulated and you knew they positively influenced performance?

Would you use them in the creation of merit budgets? With the advent of big data analysis, that situation is very likely to arise.

If you found, for example, that merit increase size influences turnover among high-performing employees with five to ten years of experience, would you be willing to give managers of those employees a higher merit budget?

And, just as important, give less to the managers whose people were not in that category?

 

A Simple Compensation Example

Take the simple example of displaying the position to market of different job families. If you present the data in a bar chart, before and after the “all for one” merit budget, the chart will actually change very little.

The jobs significantly below market will stay significantly below market. Internal relationships among jobs will remain the same.

 

Current Position to Market

(PTM) By Job Family


PTM After “All For One” Merit Budget


PTM After Targeted Merit Budget
(Targeted by Job Family)

 

 

Merit based on performance ratings will help move salaries faster for the top performers, but the difference is often so small that it really doesn’t affect the outcome.

Takeaway: Let the data tell you the differences and use that information to develop a targeted merit budget to better align your PTM.

Why San Francisco Salaries are Higher than Other Cities (and it’s not just the Cost of Living) – The Power of Geographic Differentials

What are Geographic Differentials?

Geographic differentials are market-driven pay variations between locations.

Companies use these differences when pricing the same job in different geographic markets. The objective is to control costs where it is not necessary to pay at national levels, or to ensure adequate pay in areas where the market is much higher than the national average.

Now you might think that living in San Francisco, one of the more expensive cities in the U.S., would naturally have higher salaries because of the cost of living alone.

In spite of what many think, it is not an adjustment based on cost of living.

Salary Geographic Differentials

Geographic differentials are usually expressed as a

percentage that’s applied to a national market rate.

For example, a job with a median national salary of $60,000 might pay twenty percent (120%) more, or $72,000, in San Francisco, but ten percent less, or $54,000, in Jackson, Mississippi.

How are Geographic Differentials  calculated?

Geographic differentials are expressed as a percent of the base-line data point.

Example:  

If research shows that a geographic location pays, on average, 90% of the national average, or in other words 10 percent less than the national average:

  • Plus/Minus Geo Diff: -10%\
  • Geo Diff Ratio:    90%

Note:  You will find compensation professionals use the same term for both calculations, depending on their original training.

Ensure that your group is consistent in using this term. For purposes of example, we are going to use the Geographic Differential ratio.

Calculation of Market Rates

Some companies adjust their market data for geographic differences before reporting it to management or using it to develop their compensation program.

(Of course, this would not be appropriate for market data that is already adjusted for geographic differences, such as “by region” cuts of the data).

Example:

National Salary Range Example

Salary structure differences

This is one of the most commonly used methods to address geographic differentials.

  • Compensation professionals create a “core” range, based on their headquarters location or a national average, and then create structures for each geographic region starting with the core range points.
  • This recognizes differences in average pay levels for each location, allowing you to manage different control points, or slot jobs up or down through salary grades on the basis of local market data.
  • Usually, the different geographic locations are grouped into salary areas or plans and ranges created for each grouping.

Example:

Salary Range Geographic Differnetials

 

Individual pay adjustments and differentials

Companies typically increase the pay for individuals when they move to a location that demands higher rates of pay. It is rare to go the other direction adjusting pay downward when someone goes to a lower pay location.

Example:

Mary H. is transferred from her job in Buffalo, New York to the same job in New York City.

The company has only one salary range for this job, which is closer to Buffalo pay rates than those in New York City. In order to make up for the difference in pay levels between the two locations, Mary is given a 10% raise to go to New York City.

(Typically, Mary is not asked to take a salary reduction if she returns to Buffalo, unless it’s made clear in the original move).

 

Temporary pay adjustments or re-assignment bonuses

These are typically used when an employee is on assignment in a higher wage area. If the change is made to the employee’s salary, the wage adjustment will continue until the employee is re-assigned, returns to the prior job or transfers to another location.

Example:

Mary H. from the above example receives a 10% increase in pay while she is on assignment in New York City. When she returns to  Buffalo, her pay is reduced.

Supplemental payments

Supplemental payments are often used when an employee is on temporary assignment in a higher paying geographic area.

Supplemental payments differ from temporary pay adjustments in that supplemental payments are usually used in very short assignments (A few days to a few weeks) and provided in one or two payments rather than a temporary salary increase.

What should you consider when choosing a geographic differential methodology?

  • Are you recruiting nationally or locally for each job or job grouping? National averages may still work for you in the former case.
  • If you’re creating your own geographic differentials, are there industry differences that may account for some of the differences you’re seeing in your data?  The industry difference may have originated from a survey whose participants are from one or two key industries only.
  • Do they apply to non-exempt, lower paid jobs?
  • Or are there actual differences for higher paid positions from different cities?

How are differentials  used? For creating ranges?  Or applying to market data?

They’re used both ways, based on a variety of different circumstances. Much depends on your company’s compensation philosophy, history, politics or, sometimes, whim.

Where can you obtain Geographic Differential market data?

There are two ways to obtain the differential from external resources. You can calculate the differentials based on the survey data you have for various geographic regions…or you can use formulas provided by one of the big consulting firms such as ERI, Towers Watson or Mercer.

It’s better not to rely on government created tables (Bureau of Labor Statistics, etc) because they have other factors built in that can exaggerate the differences, and the data is often too old by the time it’s published.

Making Geographically Differentiated Pay Equal – Begin with a Sound Methodology

The basic principle you need to work from is that employees expect equal pay for equal work. Geographically differentiated pay can still be equal, but you need a sound methodology to back it up. Meantime, subjective arguments can be thrown at you from managers with their own agendas.

Compensation professionals have heard managers argue it both ways:

“I must pay more in rural locations to attract the good people from the metro areas”

vs.

“I must pay more in large metro areas because the competition is stiffer for talent”

This latter argument usually wins the day in a contest of wills. However, the better handle you have on your geographic differential statistics, the more you can keep your organization’s policies on track with the real world, based on real numbers.

Watch Your Words with Geographic Differentials

Be careful when naming the different geographic groupings — use non-offensive language. Remember that status and ego are easily affected by categorizations in the compensation world, and you don’t want to go around slapping on labels that make some people feel their jobs are somehow less valuable than those at other locations.

This actually applies to all labels you use in the compensation arena – and business in general today. In a socially driven world, communication about compensation is of critical importance.

How to Get the Right Payouts to the Right People – A Simple Checklist – Incentive Plan Design

 

Incentive Plan Design – Success is in the Execution 

notes

Sure you’ve got your incentive plan in place, getting it executed on time and by the right people is the real key to success.It comes down to making sure all the key actions and deadlines are achieved in an orderly fashion. If any of those are missed, the payouts can get delayed or lost…and you’ll be caught up short.

The compensation professional’s role is to ensure that recommendations for individual payments are made and approved, then actually land in your employees’ pockets.

Whether you have software applications to support the process or you’re still using Excel, there remain a number of items on the checklist to cover.

The Checklist

1. Go over your plan document in detail. All of the “special” circumstances mentioned in the document have administrative consequences for you.

2. Make sure you have a knowledgeable contact in your Finance group who is set to provide you with the financial results of the incentive plan’s objectives.

3. In many cases, incentive plan payouts must be made by a certain date. Paste that date on all of your calendars and walls, and work back from there. If incentive payments require a management or compensation committee approval, ensure that you know that date as well.

4. If the incentive payments must be approved by a management or Compensation board committee, find out what summary and individual employee information they will require. Ensure that you are set up to provide that information right away, and keep it in retrievable form for when management inevitably makes changes to their original requests.

5. Have a contact in the Payroll department who knows what’s happening and can shepherd this special process through payroll. That individual should be familiar with all of the key dates and be able to tell you what Payroll needs, and when they need it.

6. If you have plan objectives with results determined outside of the Finance group, identify who is going to give you that information, and when.

7. If your incentive payments are based on target percentages of salary, which salary will you use?

There are rules and regulations that contribute to the determination of this field, especially for non-exempt employees.

  • Do you include overtime?
  • All W-2 income?

(We have a special field set aside in our applications for this salary figure because it is so commonly NOT the current annual salary for each employee.)

Remember the “Line of Sight”

This is a principle of incentive plan design saying that each individual employee in the plan should have a clear view of how his/her performance affects the incentive plan payout. It normally implies that the goals set for individuals in an incentive plan should be directly related to the organization’s objectives.

Communicating with Employees About the Plan

If your company has determined that they want their employees to fully understand their incentive payments, prepare a report format in advance that will aid in this communication.

  • Some companies lay out each incentive plan objective in these communications, with each result and how that result contributed to the employee’s payment.
  • This may include company finance results, sub-organization results and individual employee modifiers.
  • Know in advance how you are going to get those results into the report quickly (and prepare for last minute changes, as management is sometimes very sensitive about publishing this information!).Better yet, get management’s approval in advance on what you will tell the employees through this incentive communication.

If you are careful about following the checklist outlined above, those incentive payments will flow smoothly into employees’ paychecks on schedule. And when the results are communicated out to everyone, they will understand and appreciate how the payments were determined.


Note: This is easy to do in areas of the organization that have a direct effect on revenues. It is very difficult in “softer” areas, such as corporate staff departments. In the first case, it is critical that the organization’s goals be set judiciously, as everyone in these departments will throw themselves into meeting them. In the second case, where the line of sight is “fuzzy”, there is a big danger that management will create specific “measurable” goals that do not make sense to the plan participants.


INCENTIVE PLAN DESIGN QUIZ

If a department’s incentive budget amount is the sum of the incentive targets for its employees, how much is the overall budget for the department with the four employees shown below?

Employee Incentive Target Percent Incentive Salary
1 5.0% $50,000
2 10.0% $105,000
3 7.5% $76,000
4 3.0% $42,000
A. 6.375%B. $273,000

C. $19,960

D. 10.2%

 

 

 

Answer: (C) $19,960