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Talent Management Employee Engagement Performance Management Recruiting & Hiring

Why Your Compensation Management is Failing to Attract and Retain

November 17, 2014
4 min read
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Performance Management, Supercharged


Compensation – it is so tightly connected with performance management, attraction and retention. Yet, all of these processes are incredibly disjointed. Ventana research revealed the top goals for compensation management among the companies they studied are to better align the workforce to strategy and goals while improving efficiency.

Human capital is your organization’s most important asset, and it is usually the largest operating expense. Therefore, your talent tends to have the most significant impact on profitability and success. Keeping employees productive and engaged requires the appropriate compensation practices – the balance between retention and eroding the bottom line.

“Compensation management is a collection of activities that establishes an internally equitable and externally competitive philosophy and practice for paying employees. Salaries and wages are often the largest cost to a firm and can be up to 70% of a company’s annual operating costs. Creating a comprehensive and impartial structure is key to attracting and retaining talent, and therefore fundamentally strategic to the organization.” - DB Squared, Compensation and Management Best Practices Analysis

Current Compensation Processes are Failing

The intrinsic segmentation and disjointed nature of all the related systems and processes surrounding traditional compensation programs are creating workforce issues left and right. CareerBuilder conducted a study and found that 36% of workers who felt overlooked for a promotion were more likely to change jobs.  CC-Click-ToTweetBird-01Additionally, 28% of workers who didn’t receive a pay increase last year were more likely to change jobs in the next year. While each of these workers might not have earned a promotion or a raise, we can only assume many of them did.

When employers get compensation wrong, it is a deal breaker for employees, as it should be. The biggest issue is when employer’s workforce data is as segmented as it currently is, they have no chance of getting the complete picture to appropriately promote and compensate their employees.

There is a Need for Integration

The same research from Ventana revealed that 72% of organizations said it is important to have a system that manages all the functions and processes related to the compensation of the workforce.  So what does that mean to HR professionals? They are fed up with silos.

Performance, succession, training, compensation - none of these talent management processes happen in a vacuum. 41% of research participants said they must use two or three systems to gain a complete view of compensation, and 24% have to consult four or more systems to achieve a complete view.  CC-Click-ToTweetBird-01How is it in today’s technologically advanced workplace, this is the case?

Big Data is Here to Stay

Big data and workforce analytics aren’t just a passing HR craze and they certainly aren’t just for the F500. Workforce analytics are the connecting of data points. Data tells you what is happening in your workforce, analytics tell us why, and guide important workforce decisions with objective information.

Sounds like pretty useful information right? It is. The problem is that with a separate ATS, LMS, onboarding system, interviewing platform, performance management system and compensation program (did I get them all?), the odds of those data points ever connecting to present employers with something meaningful is a long shot.

That objective decision-making information that I’m talking about – it’s exactly what an optimized compensation program needs. Traditional HR and leadership processes keep all of the data points that are relevant to every other process and function in their own yard, never to play nicely with other sets of data.

Fully integrated systems allow employers and leaders to turn their focus on leadership, vision and innovation. So much effort is currently going into making disjointed, archaic processes work (or not work), that there is little time to achieve much else. Beyond liberating employers and leaders through technology, full-integrated systems optimize every compensation dollar, attracting candidates and retaining employees.

Compensation management has forever been a continuously nagging issue in workforce management, but the ulcer of workforce management now has a cure. As the war for talent rages on, it is vital for employers to invest in a system that actually works.
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