Three Ways to Streamline and Simplify Your Comp Plan

April 2, 2019

In a recent TLNT article, David Creelman, CEO of Creelman Research, laid out the three things holding back adoption of compensation software.

Complexity. Spreadsheets. Over-complication.

If you follow our blog regularly, it won’t surprise you to learn that we were eager to take a look at this list and advise on how organizations can resolve the challenges laid out.

A Variability Complex

If the complexity of a compensation program feels too difficult to manage in a software program, then how much time is it costing you and your organization to manage it outside of software?

If your variable pay program, for example, includes multi-variate payouts at different points of the year for different items like stock and bonus, it’s time to ask the questions: who that is costing and who that is benefitting?

Odds are, it’s an extreme administrative burden to calculate, measure, manage and execute variable pay plans with multiple complexities. Before you spend another year going through the motions, take a step back and ask yourself:

How much time is it taking to do this each quarter?
Are employees motivated by this plan?
Is it worth the cost?

Do a quick analysis and gut check the return on investment on your complex variable pay plan.

Powered by Spreadsheets

Spreadsheets are like pieces of art. Formulas, pivot tables and tabs upon tabs of data organized just the way your brain likes.

But here’s the ugly truth about compensation spreadsheets — they exist to serve comp teams, not employees. Relying heavily on spreadsheets and those who’ve mastered them is a surefire way to find yourself up a creek when the spreadsheet maven in your organization has moved in to a new role.

So how do you get motivated to wean yourself off of spreadsheets?

Think of your future self. Feed information into a software that will “live on” long after you’ve been promoted, win the lottery, or simply have better things to do with your time.
Scale for those around you. Creating a system that others can use is a recipe for success and scalability. Help others help themselves.
Do it for your employees. Investing in compensation software that houses compensation plans in a more accessible format is the best way to empower more leaders and managers with simple, understandable information about your compensation plan, enabling them to communicate more confidently with employees about their pay.

It’s Not That Complicated

Complication and complexity are two sides of the same coin. Complexity refers to something that has multiple components. Complicated signifies that a thing is difficult.

While complexity is often resolvable through reducing variations or components of a challenge, over-complication is a harder thing to solve because it is…well…harder to solve.

So how do we make compensation easier?

Standardize

Even a simple approach to compensation will feel unwieldy if you don’t have all of the managers in the organization operating with the same plan in mind.

A key example of this is new-hire offer threshold. Simplify one piece of your compensation practices by standardizing and expecting adherence to a rate of variance for new hire offers. For instance, all new hire offers will be within 15 percent of the market benchmark at the 50th percentile of the market.

Remove Waste

Another way to uncomplicate compensation plans is to get rid of old compensation practices that aren’t serving your business.

Stale proration rules, performance rating processes and promotion eligibility stipulations should be set aside if they are making things harder and not having a positive impact on the desired outcome of a strong compensation plan: attracting, retaining and motivating employees.

Lose Control

Sometimes, in order to remove complications, we have to get out of our own way. Allowing leaders and managers to have more involvement in compensation decision making – within a designed and communicated framework – will remove the complications of HR and Comp teams needing to over-explain complex spreadsheets in order for a manager to submit an employee’s pay increase for the year.

At the end of the day, a compensation plan should help you attract, motivate and retain the talent you need to grow your business. It’s time to let go of any practices that don’t have a positive impact on the desired outcomes of a strong compensation plan.

Banner photo by Jesus Kiteque on Unsplash