A recent HR Dive article asked, “Can data solve employers’ compensation headache?” The crux of the piece is that because more and more states are passing pay equity laws here in the U.S., more and more organizations are scrambling to get their compensation ducks in a row. Naturally, they’re turning to data, an ultra-objective tool for decision-making, and antidote to potential biases and subjective pay practices lurking in unscrutinized compensation records.
This is great and smart — we’re all for data around here. But it’s important to realize: Data alone will not magically whip your comp into place. There are a few things you’ll need to prepare or account for as you transition to data-based pay practices; otherwise, bringing in data will be ineffective at best and non-compliant at worst.
Here are some pointers.
You Need a Compensation Plan
Paying based on data is not as simple as looking up what “the market” says is the right salary and going with it. Of course not. Every organization will value and reward what a role or individual employee brings to the table a bit differently, not to mention variances in how competitive (or not) different companies want to be with their compensation.
To be able to riff on market data to make a pay decision — but do it fairly and in a standardized way across the organization — you need a compensation plan. A modern comp plan includes your pay philosophy and strategy, data methodology, guidelines or ranges and policies and processes. It accounts for as many scenarios as possible and makes clear how and why you make pay decisions like you do. Need help creating a comp plan? We’ve got a free ecourse for ya.
Data alone will not magically whip your comp into place. You need the right kind of data and strategy.
Data Source Matters
What makes a good data source for your organization? In short, it’s a source with data that are comprehensive enough, precise enough, fresh enough and easy enough to use for your purposes. There’s a wide variety of data sources out there, all with their own pros and cons. Check out this blog for the rundown on each, and this one for how to choose.
Data Analysis Is Difficult
What do you do with all the data you need, once you’ve gathered it? Where do you put it? How do you organize it? How do you make sense of it? How do you act on it? Even comp whizzes can struggle to glean insights and make recommendations from data without the right tools. Get yourself some software to lighten the load and check (or just do) your math.
You’ll Probably Need to Be More Transparent
Moving toward pay equity means making compensation (more) transparent. Now don’t freak out — you don’t necessarily need to be sharing every detail of your comp practices and posting everyone’s salaries on your intranet. Transparency is a spectrum, and you can decide what makes sense for your organization’s goals and culture. You can even move around on the spectrum as things change. The key takeaway here is that giving employees insight into how pay decisions are made — by, say, documenting and sharing a high-level version of your comp plan — is a critical step in making compensation at your organization fair. And after all, isn’t that the whole point?
Tell Us What You Think
What’s your biggest compensation challenge? We want to hear from you. Tell us your story in the comments.