It’s odd that the most numbers focused area of HR, compensation, is also the area with the least buzz in terms of technology. Yes, there is lots of useful technology, but there’s not the same excitement we’ve seen in learning, performance management or (especially) talent acquisition.
There are three things holding back comp software:
- The inherent complexity of the topic
- The power of spreadsheets (and the skill of power users)
- The temptation to over complicate compensation
Problem 1, the inherent complexity, is unavoidable. Different categories of workers have quite different packages (sales, hourly, C-suite, salaried) and practices differ by legal jurisdiction. We need to consider these as a number of separate problems for technology to address, not one big problem that will have one big software solution.
Problem 2, the prevalence of spreadsheets, is more interesting. Compensation professionals are so good at using spreadsheets that they make do even when it’s a suboptimal tool. This expertise, ironically, holds things back and disguises the opportunity provided by specialized compensation software. In this case, it is really up to compensation software vendors to make such a compelling case for their products that spreadsheet lovers are willing to forego their favorite tool.
Problem 3, overcomplication, is what lies at the root of the problem with compensation software. It is just too hard to automate processes when there are so many quirks. Unfortunately, leaders are eager to continually tweak compensation in any numbers of ways. If you think today’s leaders don’t’ have good imaginations just look at all the ideas that they have for a unique twist to some compensation scheme. Here it is up the head of rewards or the CHRO to bring to bear their professional know-how and show that tweaking the compensation scheme is not the best or only way to achieve the behavior change leaders seek. Overcomplicated compensation is a bad habit and it’s up to the leadership in HR to break that habit.
- We are likely on the verge of some very interesting compensation software that builds a lot more intelligence into the system. For example, software can look at current labor market rates for specific jobs and advise, case by case, on a competitive salary to offer a given applicant. If intelligent compensation software can do more of the thinking for us, then it may break the hold of spreadsheets.
What’s really important
- HR leaders must push back on ill-informed quirks in the compensation program. Organizations should aim for simple and standard unless there is a compelling reason to deviate from that. Simple, standard compensation plans can lead to fewer errors, less risk, and more automation.
- The most important outcome of adopting simpler plans and better software will be to transform the role of the compensation professional. The big questions in compensation are ones such as “What are the pivotal roles?”, “Where would an investment in compensation dollars have the biggest impact?”, “How do we measure performance?”, and “What is it that we most need various jobs to accomplish?” Addressing these questions is quite different from managing a compensation plan.