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The 3 C’s of Modern Compensation Management

 (From a Former ‘Year End Comp’ Leader in the ‘Pre-3C’ Era)
 Steve Goldberg, HR Tech Industry Analyst, Advisor, Top 100 Influencer

It is no secret that the world of compensation management is changing in a big way. These changes are happening as part of a larger sea change across the HR/HCM landscape. It is now quite common to hear about culture and values-led organizations, the adjacent topic of transparency, skills-based HCM processes and decisions, personalized rewards, tech-enabling optimal comp structures, etc. Of course, the power of AI, and now the more powerful duo of GenAI and Large Learning Models, is driving HR technology use cases that frankly would have never been imagined by most HR professionals five years ago. These include examples of personalization – but across ALL HR processes and stakeholder experiences, prescriptive guidance based on vast amounts of highly contextual data points, curating all types of resources that can help us solve problems or be more productive at work, and the ability to truly understand what is behind workforce related trends, particularly when they are giving us reasons to be concerned.

Diving for a moment into just one of those ubiquitous topics, achieving greater transparency (e.g., in employee-related policies, practices, and decisions), this is obviously helped by having better and more reliable data. When transparency is a hallmark of how an organization operates, this brings about greater trust and the perception of fairness (equity is also about perception), and more objectivity, all of which contribute to a highly desirable and attractive employer brand. This means a higher percentage of top talent, elevated employee engagement and productivity, and basically the guarantee of better results. That said, we must also realize that the transparency theme and how it manifests in effective communications with all relevant stakeholders (communications is one of the 3 C’s in our title), especially in an area like compensation management, is limited in impact without two other C’s: Maximizing the extent to which HR/HCM data, processes, activities, systems and related staff are well connected, even across very different corporate roles and functions; and the recognition that all surrounding practices are optimal only when they occur on a continuous or year-round basis.

This ‘3C’ perspective can and should be applied in almost every area of HR/HCM, from Strategic Workforce Planning (where cross-functional collaboration and connectedness should ideally occur), to Recruiting (where sourcing should occur ahead of demand or be continuous), to Learning and Performance Management (should also be continuous or year-round in many respects). As far as the 3C framework and perspective is concerned, it is arguably more applicable and ideally be on display more in Compensation Management than in any other area of HR/HCM.

Communication and Transparency

Without question, the ‘C’ or communication aspects of the above framework are getting the most attention, likely coinciding with employees and job candidates desiring more transparency around compensation. This is evident in research findings such as:

  • A recent SHRM study revealed that 62% of employers are planning or considering disclosing pay information in the future, even if it’s not required by law.
  • New data shows workers overwhelmingly support pay transparency—98% said employers should disclose pay in job postings, and 53% would refuse to even apply for a job that doesn’t disclose the salary range.
  • TechTarget found that 1 in 5 Americans will soon live in states where companies are required to list the salary range in a job posting.
  • Other Research (from Bamboo HR) has shown more than one-third of employees didn’t know anything about their current company’s benefits until onboarding.
compensation management

One key takeaway or implication for HR leaders is that they should ensure employees know the value of their total rewards package and how various factors drive total compensation. Additionally, they should reflect in their strategic HR vision, business plan, and priorities the fact that pay transparency absolutely promotes employee cohesion, diversity, productivity, and target culture.

Other ‘3C’ Considerations and Use Cases (related to ‘Continuous’ and ‘Connected’)

Continuous: The market pricing of jobs (reflecting supply and demand factors) as well as the internal value and importance of jobs (based on business plans and priorities) is anything but static. This fact, coupled with business performance forecasts (the basis of salary increase budgets and bonus pool funding for example) not always being borne out, nets out to the notion of a few week or even few month compensation cycle basically becoming obsolete. Indeed, compensation management must be continuous or year-round.

Connected: Organizations are well advised to establish and communicate compensation policies, practices, and decisions on a cross-functional basis. Whether we’re referring to business area heads, line managers, project team leaders, or other relevant staff in HR and Finance, the more coordinated and connected these diverse stakeholders are in the comp process, the better chance all major considerations will be given appropriate attention. And “communication or decision surprises” will also be minimized. In this case, considerations might relate to budgetary constraints, compliance requirements, internal equity goals, having adequate staff coverage plus a talent pipeline across all operating centers – especially for critical roles, or simply responding to concerning trends around employee retention, productivity, market share, etc.

Compensation Technology Takes Center Stage

Given the range of dynamics and considerations if not business imperatives highlighted above, here are some opportunities to better leverage technology (e.g., enterprise software tools and platforms) in supporting compensation management objectives and demands:

  • Deploying an AI-driven workflow automation platform specifically designed for compensation benchmarking, related budgeting, offer management, and all surrounding approvals and employee communications.
  • Launching what might be viewed as a “salary range system of record” to not only house, inter-relate, and manage compensation survey data from all appropriate sources, but continuously maintain and update any other data needed to make optimal, appropriate, and timely comp and total rewards decisions. This might well include a comparison of pay practices across peers, both employee peers (from a job or skills perspective) as well as industry peers.
  • Leverage AI to analyze job descriptions and reduce the amount of manual effort to match jobs with salary surveys. Moreover, develop new job descriptions and job titles that better reflect the evolving needs of the industry.
  • In recruiting, actually encourage candidates to view and explore compensation packages by presenting them in a graphical way. This can also make it easier for offer modifications to be approved by stakeholders in real-time.
  • Finally, given the well-documented benefits of communicating effectively and openly in an area as sensitive and potentially problematic as compensation, consider creating personalized employee communications that show current pay components and future pay progression scenarios based on different assumptions.

The Author

Steve Goldberg’s 30+ year career on all sides of HR process & technology includes HR exec roles on 3 continents (where his teams also optimized compensation management), serving as HCM product strategy leader and spokesperson at PeopleSoft, and co-founding Recruiting Tech and Change Management firms. Steve’s expertise has been leveraged by both HCM Tech vendors and corporate HR teams, and in practice leader roles at Bersin and Ventana. He holds an MBA in HR, is widely published, and is a speaker around the globe. Payfederate is one of Steve’s advisory clients.