Turning Compensation Woes into Wows

A surprising number of small and mid-sized businesses continue to manage their compensation programs with rudimentary tools such as Excel spreadsheets. Some believe that modern compensation software is for large enterprises only. Others worry about the complexities and costs of shifting to software.

These misconceptions actually prevent companies from streamlining their compensation process…and from saving time, effort and dollars.

Compensation represents the single largest cost of doing business for most organizations. For small and mid-sized companies, in particular, compensation is more than a major cost. It’s one of the most burdensome administrative chores—time consuming, labor intensive and fraught with talent retention and litigation risks when oversights or mistakes occur.

Given all of this, you might think that legions of small and mid-sized companies are taking advantage of today’s powerful compensation software solutions. But the reality is many of these companies are still using spreadsheets and other rudimentary tools to manage their compensation needs.

To be fair, this problem isn’t reserved to smaller companies alone. A recent Aberdeen study found that roughly one-third of all the organizations it surveyed still use “ad-hoc processes, gut feel, or guesswork” to manage compensation.

The obvious question is … why?

Why do so many companies—especially small and mid-sized organizations—continue to use inferior tools rather than modern compensation software? They do it because of three key misconceptions:

1. They believe spreadsheets are easier to use and more cost-effective than software solutions.

2. They believe software solutions are difficult to integrate into their current systems and to customize.

3. They believe software will present a difficult learning curve.

Let’s examine these misconceptions one by one.

Misconception #1: Employers believe spreadsheets are easier to use and more cost-effective than software solutions.

The reality: Spreadsheets are not easier to use than software. Like today’s best mobile apps, well-designed compensation software is highly intuitive, designed specifically to appeal to even the least experienced software/technology end user.

Most software solutions even resemble a basic spreadsheet design so they are immediately familiar. However, they’re also built upon powerful programming that connects data, automates certain functions and provides user-friendly data manipulation capabilities that simply can’t be built into a spreadsheet.

In addition, spreadsheets give rise to a whole host of problems that cause time, money and even talent to fly out the door. These problems include:

• Consolidation time and effort—In most small and mid-sized companies, individuals who manage the compensation process actually work from more than one spreadsheet at a time. Eventually, these multiple spreadsheets have to be consolidated into a single file or database, which can take considerable time and effort. Compensation software eliminates this problem entirely, blending and updating everyone’s input automatically.

• Version control issues—With multiple people working on one or more spreadsheets at the same time, there can be plenty of confusion about who has the most-up-to-date information. It’s far too easy for individuals to be working with old, inaccurate data or editing the wrong version of a file. The deeper these version control mistakes penetrate the compensation process, the more trouble they can cause and the longer they can take to correct. Compensation software provides everyone with a centralized database in which changes and updates are automatically reflected for all users at the same time. This centralized control is one of software’s greatest advantages over spreadsheets.

• Macro control issues—Macros are created in spreadsheets to help automate repetitive processes and save time. Unfortunately, these macros are easily (and sometimes unknowingly) “broken” when spreadsheets are shared between various managers. One accidentally changed macro—especially after reviews have been completed—can mean hours of extra work by managers to fix the resulting problems. Compensation software, on the other hand, doesn’t use macros; it uses formulas that are built directly into the software itself—formulas that can be changed only by authorized individuals (as few or as many as desired). Plus, all changes to these formulas include an audit trail. If problems arise, you can easily identify the cause and fix it quickly.

• Lack of security—There’s simply no way to keep managers from emailing copies of spreadsheets or copying them to flash drives and other devices—all of which puts your company’s confidential compensation information at risk. Compensation software has built-in role-based security and requires user-based authorization to prevent unauthorized individuals from seeing or accessing your data.

Your compensation practices have a deep impact on your current employees and their overall engagement and satisfaction levels. They also affect your ability to engage new talent and remain competitive.

1. No matter how small or large your organization is, modern compensation software can give you significant advantages, especially if you’ve experienced issues with paying people accurately or on time … or failing to plan effectively for future compensation challenges … or not being able to give your managers the tools and data they need to make sound compensation decisions.

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$90,000 Healthcare Case Study

“We use a rather cumbersome Excel Spreadsheet for compensation management within our 1,200+ employee organization.

Requiring excessive man-hours to maintain, this approach is error prone while constraining our ability to make appropriate salary/wage adjustments in a timely manner.

Because of these deficiencies, we perpetually run the risks of losing key employees to competitors. An example would be the loss of a higher-end employee for whom we were remiss in maintaining their salary at a competitive level.

The ultimate cost to us was the equivalent of their annual $90K+ salary when taking into account the recruitment of a replacement, training and the lag time for the new employee to get to full productivity”. CFO, California Hospital