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Business Case For Compensation Technology Essay

2971 words - 12 pages

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THE BUSINESS CASE FOR
COMPENSATION TECHNOLOGY

C

ompensation accounts for nearly 70 percent
of operating expenses for most organizations,1
and is one of the main reasons employees join
and leave organizations. Yet despite the foundational
role compensation plays in any talent strategy, most
organizations continue to manage compensation market
analysis, strategy development and program administration
using spreadsheets.
The perils and pitfalls of handling complex compensation
tasks in spreadsheets are well known:2 spreadsheets are
prone to human error, require a high-level of skill and
expertise to move beyond simple analysis, and are not
a scalable solution ...view middle of the document...

Keep People Engaged and Motivated
While we know that compensation alone does not drive
engagement scores up, we do know that it is an important
part of maintaining an engaged workforce. Employees who
believe they are paid fairly are nearly twice as engaged as
those who don’t.4 And how employees perceive the fairness of
their pay is even more important than their actual pay level.5
Drive the Behaviors that Drive Value
Rewards drive employee behaviors, and the organization’s
compensation philosophy must align with the end goals of
the business. For example, short- and long-term incentives will
drive short- and long-term behavior.
Retain
Compensation is among the top reasons people leave
organizations. Understanding the external market is just as
important in the context of existing employees it is in the
context of new hires.
Invest Wisely
Compensation is an investment, not merely a spend, and the
balance is not as simple as “overpaying” versus “underpaying.”
The term “overpaying” itself assumes that there is no legitimate
case for generous compensation, which there certainly is. The
key is to ensure every investment in every pay component,
whether it is above or below market, aligns with the company’s
business strategy.

Enterprise Compensation Solutions: The Next Wave in Integrated Talent Management, Bersin & Associates, January 2009.
Compensation Requires Commitment: Managing Compensation in Spreadsheets is Risky Business. © Ventana Research, 2013.
3,4,5
Kenexa WorkTrends Survey. 2012.
1
2

To us, business is personal • www.kenexa.com

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COMPENSATION TECHNOLOGY DEFINED

FIGURE 2: COMPENSATION LIFECYCLE

Compensation technology solutions can generally be broken
into two segments: compensation analysis and design tools, and
compensation administration tools.
Compensation administration tools, which are often referred
to as “compensation planning,” are focused on the execution
and communication of compensation programs to employees.
Included in this group are tools that enable managers to allocate
merit budgets and incentives, generate employee compensation
statements, and enable HR to administer and manage the annual
salary review process. Adoption of manager self-service tools for
administering compensation programs has increased in the past
several years as organizations seek to empower managers and
streamline cumbersome processes that “touch” large employee and
manager populations.
Before HR and managers can administer compensation, however,
the organization must have a plan on which to execute.
Compensation analysis and design tools facilitate compensation
survey management, market pricing, salary structure development
and merit distribution scenarios, all of which are key components
of building the organization’s overall approach to compensation.
While many organizations leverage technology for compensation
administration, adoption of...

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