SAP Best PracticeCompensation

Five Smart Moves for Compensation Managers

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© 2016 SAP SE or an SAP affiliate company. All rights reserved.

SAP Best Practice – Five Smart Moves for Compensation Managers2

3SAP Best Practice – Five Smart Moves for Compensation Managers© 2016 SAP SE or an SAP affiliate company. All rights reserved.

In the past years of tight budgets, the answers were simple for compensation managers. “No” was an effective all-purpose answer for department heads and line managers looking for extra budget to reward top performers. The money wasn’t there, and everybody knew it.

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SAP Best Practice – Five Smart Moves for Compensation Managers4

Five Smart Moves for Compensation Managers

FIVE SMART MOVES FOR COMPENSATION MANAGERS

Answers are getting harder to come by these days. Even though unemployment is still running high, top performers and in-demand skilled labor are unwilling to continue to wait for their rewards. Like never before, the pressure is on compensation managers to structure incentive plans that will reward the rainmakers in the organization. Differentiated compensation can build a true meritocracy where employees who get results are rewarded for their work, which can increase the organization’s performance by 15 to 20 percent.1 Both the employees and the company can benefit.

Compensation managers are positioned to be key contributors to the future of their organizations’ talent management by driving performance through effective rewards processes. Salary is not always the top driver of employee satisfaction, but it’s perennially among the top five.2 Building solid compensation processes makes it easier to explain to managers and employees how it is possible to make more money. The right tools and best practices can support your work. Consider these five tactics to get started:

1. Know where you standAlthough it sounds easy, benchmarking can be a difficult process … but it’s a necessary one. Employees will be looking at sites like Payscale.com, Glassdoor.com, or Salary.com to see where your company stands. Are you doing the same?3 You need to decide if you’re going to pay above, at, or below the market rate for specific positions. Establishing these positions will require collaboration with leadership, an understanding of business goals, and establishing how those goals translate into compensation policies. Identify what the picture would look like if money were no object. Then help leaders see the picture as it relates to the reality of your business.

2. Get your strategies up to dateCompensation should be aligned with business strategy and should incentivize actions that get results. All too often, though, an organization’s plans haven’t changed with the times. Has your strategy evolved, or is it still stuck in the 1990s?4 You can pay everyone the same increases across the board and hope to keep up with the competition, or you can make sure you retain your best employees. You need to know which employees make a difference.5 After benchmarking, it’s possible to map out this transition of “where we were” to “where we want to be” by creating incremental changes to compensation plans. You can tie performance and pay through variable rewards, such as bonuses or commissions.6

1. Harris, Stacey and Jones, Katherine. Total Rewards as a Strategic Talent Management Tool. Bersin & Associates. May 2011. To purchase the report, visit http://www.bersin.com/Practice/Detail.aspx?id=14033

2. SHRM. 2011 Employee Job Satisfaction and Engagement: Gratification and Commitment at Work in a Sluggish Economy. To download the report, visit http://www.shrm.org/research/surveyfindings/articles/documents/11-0618%20job_satisfaction_fnl.pdf

3. Payscale.com. Top Priority: Align Your Compensation Strategy with Business Goals. 2012. To download report, visit http://www.payscale.com/hr/how-to-create-a-strategic-compensation-plan

4. Ibid.

5. Ibid.

6. SHRM

5SAP Best Practice – Five Smart Moves for Compensation Managers© 2016 SAP SE or an SAP affiliate company. All rights reserved.

3. Step away from the spreadsheetJust because you can do magic in Excel doesn’t mean you should rely on spreadsheets for all compensation analysis — especially when you consider how complex the formulas can be. Errors in these spreadsheets can cause major blowups. Compensation management solutions not only reduce the inefficient use of your time and the potential for errors, but these systems also significantly reduce cycle times.7 Spreadsheets can still play a part, depending on your current system’s setup. However, the efficiency that comes along with dedicated compensation technology will give you the efficiency you need for more-strategic projects.

4. Paint a picture of the benefitsAlthough leadership appreciates the complex formulas you used to derive compensation data for the firm, you need to think like a marketer. Imagine how the messages you’re trying to convey will come across to leaders. Presenting data with illustrated reports using charts and graphs greatly increases the chances those leaders will understand the trends and findings you’re sharing with them.8 If other areas of the firm are shifting to more visual big data practices, tie your approach in with theirs. Trends and connections to ROI will be easier to see and convey. You can then visually link the compensation structure to the rest of the business.

Organizations with reward and talent management programs that support their business goals are more than twice as likely to report being high-performing companies (28 percent vs. 12 percent).Source: Towers Watson. The Talent Management and Rewards Imperative for 2012 — Leading Through Uncertain Times. The 2011/2012 Talent Management and Rewards Study, North America.

7. Harris, Stacey and Jones, Katherine. Getting Compensation Right: The Value of Compensation Analysis and Tools. Bersin & Associates. 2011. To purchase this report, visit http://www.bersin.com/Practice/Detail.aspx?id=13930

8. Ibid.

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SAP Best Practice – Five Smart Moves for Compensation Managers6

5. Grow with the businessWith compensation management tools, you can easily align your compensation plans with the goals of the firm.9 Not only does this help you build trust, it allows you to change as business conditions do. Stability of the firm’s finances can help lead to better performance, even if compensation hasn’t caught up yet.10 Consider Hilton Worldwide, a global hospitality company with more than 3,700 hotels and resorts in 84 countries.11 The company implemented SuccessFactors Compensation to aid in streamlining its compensation process to recognize employee performance. By integrating performance and compensation, managers could link merit increases, bonuses, and long-term incentives with the real-time needs of the company.

SummaryChanging compensation practices in your organization should be considered a living, breathing process. SAP SuccessFactors can help you shift your company’s mind-set toward evolutionary policies that give you the answers you need when you need them. If you’re ready to make the change, contact us today.

About SAP SuccessFactorsSAP SuccessFactors offers a comprehensive human capital management (HCM) suite including core HR, payroll, recruiting, onboarding, learning, performance & goals management, compensation management, succession and development, human capital analytics, and social collaboration to help enable a digital HR strategy and engage people across the organization. The company drives business alignment and execution for organizations of all sizes across more than 60 industries. As a market leader with approximately 40 million cloud subscribers globally, SAP SuccessFactors strives to delight its broad and diverse customer base by delivering innovative solutions, content and analytics, process expertise, and best practices insights to help optimize the workforce today and prepare it for tomorrow. Today, the company has more than 4,800 customers in more than 177 countries using its application suite in 41 languages.

9. Ibid.

10. SHRM

11. SuccessFactors: Hilton Worldwide Success Story

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