Comptryx Insights on Workforce Analytics

8 Big Priorities for Compensation Managers in 2018

Ezra Schneier, Corp Development Officer, HRsoft - Dec 3, 2017

The Compensation Manager role is red hot. 
To be sure, the compensation discipline has always been an important one.   But it is now evolving - even going through a makeover.  The new identity taking shape for Compensation Managers is more strategic, data-driven, compliance-minded, technology-based and a contributor to a strong bottom line. 
More than ever before, senior executives are relying on Compensation Managers to develop, implement and execute compensation plans to drive business results and get all employees rowing in the same direction.
Without question, the stakes have never been higher for compensation management.  This article looks at eight major themes Compensation Managers are making their priority for 2018.
These are secular issues that are taking hold and will be with us for the next five to ten years.  In fact, many business leaders feel that compensation as a practice is one of the most critical human resource and finance items to be addressed in the next few years.   And it is the one area that can be used by employers to significantly improve business results.  Compensation Managers are at the controls, flying the plane.
What is also interesting, is this cuts across almost all business sectors and sizes.   Small, mid-sized and large enterprises; non-profits, for-profits, public and private companies all have employees - and they all receive compensation.  The impact of having the right compensation plans and processes in place can be meaningful for a wide swath of our economy.    
Here is a quick look at the 8 Big Themes on the minds of executives and Compensation Managers for 2018:
1.      More strategic thinking about compensation to attract, retain, reward and engage employees. Senior Executives want to know how compensation plans are constructed to achieve results in the form of recruiting and motivating great employees and achieving measurable goals.
2.      Variable Pay.  Pay and awards linked to measurements and achievements that matter are on the rise. Variable Pay is being used for more employees throughout the organization. The Variable Pay plans are being tailored to be relevant for specific job functions and business units. The key factor is to reward people based on what they can control to produce outsized results.
3.      Frequency of pay adjustments is increasing.  In the past, it was acceptable for an annual review of salaries and rewards. Today, and in the near future, this frequency will be quarterly or monthly.   Employees who achieve results today, don’t want to wait six or nine months to be rewarded for their work.   They want it now. 
4.      Controls and compliance relating to pay are emerging issues for employers. Compliance with pay equity and gender equity regulations are serious matters and getting attention at the highest levels of every organization.  Having fair pay practices that are consistently carried out is essential.  What’s more, compliance with data privacy issues and how they relate to sensitive compensation information are also top of mind.
5.      Employers are looking to automate compensation processes and get rid of spreadsheets. Off-line processes to plan and manage compensation are inefficient, prone to error and not suitable for employers today.   As a result, technology is being deployed to bring the compensation planning and management process online.  Cloud-based, centralized and secure software is replacing manual processes. Noted author Thomas H. Davenport has written about how leading employers have “transformed technology from a supporting tool into a strategic weapon.” That is certainly the case with compensation management and planning.
6.      Data analytics relating to compensation can be a competitive advantage for employers.  At a basic level, managers use data to understand the compensation spend.  This is done by routinely collecting and analyzing data against expected metrics.  But the advanced view – and the expectation in today’s environment – is to use compensation data to help with decision-making about how to be more profitable and how to enhance operations.  Managers use data to look at ways to generate meaningful insight about what will happen in the future and to prepare for those developments.   Data crunching is not only for retrospectively measuring and correlating activities.  Now data is to be used to identify trends and create solutions. Plus, Compensation Managers must be prepared to act on that data to optimize results. Make sure the distribution of compensation is appropriate, budgets are being maintained and problems are identified.  For example, using data, the Compensation Manager can determine how salary levels relate to (and enhance) individual performance and relevant business results.
7.      Openness.  There is a desire for pay practices to be more transparent. Companies are lifting the veil on how compensation levels are determined.  In doing this, the objective is for all employees to have a clear understanding of why they are being paid at their current level and what they can do to earn more. And have an understanding of how compensation supports and is aligned with organizational goals.   It is becoming the normal practice for managers and employees to fully understand how compensation decisions are made. To achieve this, metrics and calculations used to determine salary adjustments and bonus awards are clearly communicated throughout the organization. In addition, key managers should have a say in the decision making process about compensation and rewards for associates on her team. The Compensation Manager works to ensure proper communication is carried out.
8.      Globalization.  Compensation Managers are expected to be responsible for the administration of pay plans in multiple currencies and to be compliant with local practices, regulatory frameworks and data privacy requirements.
Taken together, these big themes suggest that the Compensation Manager’s role is evolving in a meaningful way.  
Looking ahead, the role will continue to become more prominent - and in many ways more challenging.  After all, compensation is complicated. 
Just as the Compensation Manager’s role is changing, these managers are profoundly transforming organizations.  Thankfully, smart executives recognize their contributions.