Lessons Learned: Making Compensation Technology Work for You

By Bolton July 27th, 2022

Human resources and the compensation function are no different from other critical aspects of an organization when it comes to the technological enhancements being made to operational and management processes. Beyond the sophisticated integration of HR processes and modules into enterprise resource planning (ERP) systems that also support financial and business operation functions, specialized software now exists to allow more efficient processes for most major compensation processes. This is particularly true in the compensation function in which only a few PC and LAN-based software packages existed as few as ten years ago. Today, there are hundreds of special purpose and full-scale program management systems from which to choose. With that in mind, our experience has taught us several lessons that should help others get the most out of their technology. Today, there are hundreds of special purpose and full-scale program management systems from which to choose.

As we assist clients with their consulting and co-sourcing needs, we tend to see the misuse of a system’s intended design, unintended negative effects of implementation choices, and/or major functional holes in the system selected and implemented. This is not a statement to lay blame or give credit to any particular provider – even our own products and services can’t meet all clients’ needs completely. Rather, it is a simple statement of “procure with caution.” With that in mind, our experience has taught us several lessons that should help others get the most out of their technology.

Lesson 1: Think Through Your Immediate and Potential Needs

Even if you are only looking for the most task-specific types of system needs, such as the hosting of your survey data online or providing a market pricing mechanism, it is essential to take a holistic approach when selecting potential vendors. A compensation program is a system with transactions that may purposefully or accidentally affect future or previous transactions. If, for example, you use a market-based approach to job grading, then it would be helpful to ask the vendor product to allow you to not only market price a job but also recommend a grade assignment.

We have seen countless situations where our clients begin to search for automated tools for one specific purpose but are “wowed” by the possibilities of some systems available in the marketplace. Or we see situations where clients begin to search for tools with basic salary administration, only to find that there is great potential in also automating functions like sales compensation, variable pay administration, stock administration, etc. While organizations may be confined by resource and budget limitations, it is good to think through opportunities and needs broadly and to understand the potential that exists for your organization with new technology. As we have seen with several implementations where self-service and workflow tools are provided to managers and employees, the managers and employees may come back to you wanting more automation after seeing the power of more automation to the Human Resources function. It is good to be one step ahead of your customers in knowing the possibilities and the organization’s ability to support more technology before it is requested by your customers! The big question will be the cost-benefit of this additional functionality – how much more investment it would require to get that functionality and what benefits your organization would receive from it.

This may give the appearance of functionality or scope creep to some more seasoned in software and technology – if you give a mouse a cookie, he’ll want a glass of milk – but the technology should fit your budget and match your processes to the greatest extent possible. It certainly never hurts to ask and is much better than wishing you had implemented something slightly more robust.

Lesson 2: Even Automated Technology Doesn’t Run on Its Own

During and after the implementation of a new software system, the job duties and responsibilities, as well as the qualifications of the HR team, will begin to change. The challenges then arise to the competencies of the existing HR team around if and how the team will need to change to fit the shifting needs produced by process and technology changes.

We suggest that when any new technology in HR is implemented, HR leadership assesses what specific roles will change with the new or revised process. To the extent additional training or competency development is required, this should be included as part of the implementation. There may be even greater implications in terms of real job or role changes – some existing jobs may become obsolete while other new jobs may be created. The success of the system implementation will be very dependent on how well people and process changes are understood and planned for along with the technical implementation activities.

HR team re-tooling assumes that the organization will continue to administer all tasks in-house. A growing trend in the market and in our own client engagements is that of outsourcing or co-sourcing. Co-sourcing is becoming more common and creative within the HR and compensation function by providing an organization the ability to move select components of processes and technology to a service provider while still maintaining control of key components internally. One of the major benefits of these approaches is that, while HR re-tooling may still be needed, specific and hard-to-train technical skills can be found through a partner rather than hired into the organization. Many times, the move to a more co-sourced or outsourced approach to the compensation function will move administrative tasks outside the organization, allowing the HR team to focus and develop its competencies more around strategic work and partnership with customers.

Lesson 3: Microsoft Excel is Technology After All

It never ceases to amaze us what can be done with spreadsheets by those fully competent in their design and macro development. We find that, for our smaller clients, well-designed spreadsheets, Microsoft Access databases, or a combination of the two can cost-effectively reduce administrative time and increase service delivery to the organization.

The major drawback of continuing to rely on Excel and Access as tools is the missed opportunity for workflow and process redesign that is inherent in larger off-the-shelf systems. Developing technology solutions with tools like this in-house usually means mirroring processes that are currently in use, regardless of their effectiveness. Larger systems, however, force organizations to review their processes during implementation and may, unless an investment in custom development is made, change their processes to conform to those in the software.