Compensation as accelerator to improve HR maturity

    Rob de Jeu |

    One of the hottest topics in HR today is compensation. During these economic flourishing times employees in the Professional Services industry are very likely to be recruited by your competitors. The chances of losing high potential employees is huge. Compensation management can help prevent your employees to look for other jobs and in this blog I will describe how SAP SuccessFactors can help support this reward/compensation process.

    Within most companies the yearly performance review is used as a base for the merit increase of employees. However compensation planning is one of the most complex tasks for HR professionals, because many companies still rely on Excel spreadsheets for the compensation administration. The HR professional will spend a significant amount of time collecting data, continuously updating the Excel spreadsheet and operating within a great amount of pressure finalizing the salary increases and bonuses in time before the next payroll run.

    Handling of the Excel sheet becomes even more complex if it is shared within the HR organization or processed for review and by Management Team(s) or Board. At that moment other elements are introduced that complicate the process even more, for example how to deal with security/privacy and version control.

    SuccessFactors Compensation Management is a cloud solution which simplifies the compensation process. An integrated set of automated worksheet(s) and approval workflows support your entire compensation process. A full set of tools allows compensation administrators to configure and change compensation components without assistance from a consultant. These tools include eligibility rules, budgets, bonus plan calculations, guidelines and personal compensation statements.

    Worksheets can be auto-populated with recommendations based on multiple variables (like performance rating and paygrade), eligibility rules and guidelines. Adjustments can be made by managers and reviewed using approval workflows. Personal compensation statements can be generated and made available to employees.

    Performance & payments

    The vast majority of companies link performance to payments and the performance rating is often used as a key variable for the yearly compensation review. The downside of an annual compensation process is that there can be a lot of time between the actual achievements and payment of bonuses. There is a risk of losing these achievements out of sight and more recent achievements might be overrated.

    Therefore companies are increasingly reshaping their performance process and moving to performance models that emphasize more on a continuous connection between performance and recognition and reward. The payment of special achievements bonuses should use the same cadence.

    Compensation and recognition

    We conducted some interviews on the importance of compensation and recognition. Respondents indicated compensation is important, but most important is the recognition of their achievements. The most remarkable quote we received “I started my career at a small firm. After my first year my manager told me “I can give you a merit, which will you’ll have forgotten after two months”. I assume he was right as I can’t remember. However I still remember a cash award received on my next paycheck as a result of timely delivery of my project.” This exactly pinpoints the challenge for organizations: making sure every Euro spent on compensation is spent well.

    This raises the question how to spend your compensation budget to retain and attract talented employees to your organization. The monthly paycheck should not be the main driver to retain employees. Next to providing challenging work, leading clients, interesting prospects and a pleasant/professional work environment, experience tells us that recognition of achievements is the most important factor.

    SAP SuccessFactors facilitates recognition of achievements of employees in multiple ways such as the use of Badges, Reward and Recognition Programs and Feedback. Initiators for these could be employees, peers, managers and external relations.

    Badges

    Badges are used to recognize an employee’s good work and effort. Managers and employees can assign badges to each other outside the regular performance and compensation process. Badges help to provide frequent feedback so employees know how they are performing throughout the year. Badges are a great way to recognize people, however without financial compensation.

    Reward and Recognition

    Another way to recognize and reward employees outside the regular performance and compensation process is SuccessFactors Reward and Recognition. This allows to respond promptly on special achievements and initiate cash awards. This functionality includes approval workflows, country specific guidelines and budget features to assist nominators in more considered decision making.

    Feedback

    Feedback offers the employee as well as the manager the opportunity to ask and give feedback on achievements or projects. Feedback can also be given by external relations. 

    Optimize HR performance

    It’s time to think how intelligent tools can help you to retain your talent within the organization. A well-designed recognition and compensation plan not only keeps your own employees on board, they might even attract your competitors’ high potentials. Contact us to learn how SAP SuccessFactors can be implemented to facilitate you.

    Ask for a free demo