Analyst Perspectives

Are you a human resources executive who’s still using spreadsheets and various database systems to track and manage compensation and incentives of your workforce? If you aren’t, then believe it or not, you’re in the minority.

 If you are, recall how that started. Maybe your payroll software or outsourced payroll provider helped you take care of tracking and managing base compensation beyond the simple spreadsheet, but as you became comfortable with using spreadsheets you began to manage merit, bonus and variable pay with them. Your workforce seemed to be a manageable size, but then your headcount grew and that spreadsheet ballooned into a behemoth of maze-like equations that even your CFO couldn’t figure out. This doesn’t even account for the increased contingency project-based compensation you now manage as well, again with spreadsheets.

 Maybe you are a master spreadsheet artisan and are used to working around the inadequacies of Excel, but remember that spreadsheets were designed for personal productivity, not for an enterprise process such as compensation management. At this level spreadsheets can (and do) hinder productivity and increase financial risk.

 But what alternatives do you have? It’s likely that there are legacy HR systems still in use as well as various information repositories in finance and operations that are updated rarely. The talent management software marketplace is filled with noisy vendors touting stand-alone or integrated compensation software systems. We at Ventana Research feel your pain, and trying to help alleviate it we have produced an assessment of vendors and applications with our Total Compensation Management Value Index for 2011. You can download an executive summary at no cost to inform yourself and your colleagues about the status of vendors and products in this market.

 In 2008 we completed benchmark research on Total Compensation Management. According to it, a significant barrier to better managing compensation is the various systems, files and buckets in which many companies have information scattered.

 That research revealed other striking facts such as these: 

• More than half (51%) of participants reported that they must use two or three systems to gain a complete view of compensation, and 30 percent have to consult four or more systems.
• More than one-third of organizations use only spreadsheets for tracking and managing compensation, and almost 40 percent use them extensively in conjunction with their compensation systems.
• Spreadsheets are commonly used in the management of merit and bonus pay (by 77%), variable pay (48%), base pay (47%) and sales compensation (42%).

Human Resources is of course central to compensation management. But responsibility for compensation is shared by operations and finance management as well; both must be involved to ensure the organization realizes the full potential of its workforce by rewarding everyone appropriately.

We don’t have to tell you twice that compensation management is a critical activity for supporting workforce performance and talent management processes. Determining and providing the right compensation for each person, whether it’s base or merit pay or variable pay and incentives, is vital to being able to attract and retain productive members of the workforce, employees and contractors alike.

We wonder whether organizations are doing this better than they were in 2008. That’s why we’re revisiting our Total Compensation Management benchmark. We’d like to know your thoughts and opinions on the business drivers, technical requirements and barriers to adoption of total compensation management and your timelines for implementation of total compensation management software.

Compensation continues to change dramatically, and the complexities make more difficult the core challenge faced by HR: keeping employees satisfied and motivated.

That’s always the trick, isn’t it?

So won’t you take our 2011 Total Compensation Management research survey and let us know where your organization is at today?

Your participation will provide valuable information about how organizations can align their compensation management applications with their people and processes to achieve goals and objectives related to talent management and overall workforce performance management. As thanks for your time and information we will share the results of this benchmark with all participants, providing data and analysis unavailable elsewhere.

Thank you very much for your participation. We look forward to sharing the results with you.

Regards,

Kevin W. Grossman – VP & Research Director