Why’d they have to go and make comp so complicated?

Why’d they have to go and make comp so complicated?

An overview of why compensation management is so daunting and a few tips to make it more manageable.

When I started working in compensation management software, I figured it would be more or less like any other B2B SaaS. But, six months later, I can tell you it’s a totally different ball game. For HR leaders to effectively and strategically manage pay, headcount, and total rewards for their organization, they often need the knowledge of an economist, a CPA, a CHRO, and the EQ of a guidance counselor. Honestly, I don’t know how they do it.

Since many HR teams have limited resources (headcount, budget for data and software, etc), I wanted to pull together some of my learnings about what makes comp so complicated and a couple ideas on how to make it more approachable.

Why is comp so complicated?

Compensation is an onion

Our CEO, Haris Ikram, often refers to compensation as an onion. There are so, so many layers to it: Compensation strategy, pay bands, employee total rewards, pay transparency, etc.. It’s all too easy to think you have to tackle the whole thing at once. Not to mention, for each of those layers, you have to think about it by team, by department, org-wide, and employee-by-employee.

It can feel personal

Compensation is tied to levels, performance, skills, and competencies. Talking about money is always uncomfortable, but when you’re tying payment directly to an individual—it can quickly become murky and feel like you’re defining someone’s worth. And that’s murky because technically, you are defining what someone is worth to the organization. This emotional connection makes it that much more important to be able to tie compensation back to org-level goals and strategy.

It’s not one-size-fits-all

Because there are so many layers (variables) to compensation, unfortunately, what works for one organization won’t necessarily work for another. From org to org (and even team to team and stage to stage within the same organization!), comp needs will vary. 

It’s ever-evolving

Just when you think you’ve nailed it, there’s a good chance things will change. Macroeconomics and the expectations of different generations as they join the workforce contribute greatly to the constant changes we see in compensation management. It’s not enough to *just* create a compensation strategy and move on, it’s also important to regularly reevaluate that strategy and adjust as needed. 

‍

If reading that list stressed you out as much as it stressed me out to write it, don’t worry! Yes, compensation management can be scary. But it doesn’t have to be. Below are a few tips I’ve learned that make it less daunting.

What can you do to make comp more manageable?

Keep it simple

I went to a journalism college and one of the biggest things my writing professors drilled into me was “Keep it simple!,” and the same goes for comp management. If you break it down and start small, you’re more likely to actually accomplish something and far less likely to make a mistake along the way. Try starting with just one department or job family. Try it out and go from there. Haris actually wrote a blog with some great tips to simplify comp planning, check it out here. 

Share the burden

Even if it feels like you should own comp management end-to-end, you’re actually better off bringing in others to support you. Whether it be by finding ways to collaborate more effectively with other stakeholders (i.e. your Finance and Executive teams), or by empowering your managers to better communicate with their direct reports about merit cycles, total rewards, etc, there are ways to distribute the work. And, more often than not, this also increases buy-in on your comp strategy. 

Educate your team on the “why”

Pay transparency is a very important and hot topic—we even wrote an entire playbook on it—but you don’t have to have full compensation transparency right away. But one of the many benefits to at least being more translucent is that you’ll have greater understanding within your organization. This will make communication around total rewards, pay bands, merit cycles, etc more productive and improve employee trust. Going back to my previous point, this is a great place to tap your managers for support!

‍

I’m still learning every day about compensation management and I have an insane amount of respect for the HR professionals who spend their careers tackling it. There’s no denying that it’s scary—especially for smaller People teams and first time HR leaders. If you’re looking for a solution that will truly help you tackle your compensation management needs, let us know.