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White Paper

The Cycle of Excellence


Compensation administration in Pay-for-
Performance organizations
By Johanna Schlegel, CCP, MBA

Where compensation meets inspiration SM


White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

The Cycle of Excellence


The compensation administration life cycle
The annual cycle of managing an organizations expenditure on human capital is parceled into business processes that
take place at annual intervals. Salary.com looks at each of these processes and the potential to provide value through
automation as part of working within a pay-for-performance framework.

Although practices vary, approximately 75 percent of organizations administer performance and compensation
management on a calendar-year cycle. Employers that review employee performance and compensation on a common
date typically are interested in linking rewards to the performance outcomes of the organization, while those that
review employees on their anniversary typically are focused on the individuals traits. Figure 1 illustrates the pay-for-
performance life cycle.

Fig. 1. Salary Administration Life Cycle in Pay-for-Performance Organizations

Compensation Analytics Salary Administration Performance Management

Pay Guidelines Organizational


Pay Program Communicated Hierarchy
Design to Managers Confirmed

Performance
Salary Structure Review Process
Management

Goal Setting &


Market Pricing Monitoring

Raise & Bonus


Reporting, Decision Making Training &
Analysis & Auditing Development

Winter
Goal setting and monitoring
The performance period, which is typically one year in duration, begins with goal setting. Employee goals may be
rendered from the top-down, whereby the process begins with goals at the overall corporate level with company
executives communicating performance expectations for the year to subordinate managers. Once corporate goals
have been established, then each business unit, division, or department, may create its own goals from those that are
cascaded downward through the organization. In some organizations, goals are cascaded to the extent of teams or
individuals, who may shape these objectives in conjunction with their managers. The process may tolerate flexibility
such that goals and targets are sometimes adjusted during the performance period.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Many organizations struggle with the challenge of setting reasonable goals using the appropriate performance
measures. Consider that when the goal setting process is extended deep into the organization, managers
understanding of business drivers and employees visibility into organizational performance are less clear.

Training and development


Professional development initiatives are composed during the goal-setting process to focus individuals on improving
competencies that relate to high performance of the job, function, or leadership. An employee might be assigned
development activities such as completing training programs, project management roles, and other initiatives aimed at
professional growth and career paths.

Spring
Market research
As the rewards for the previous years performance are delivered subsequent to the review process, the compensation
team begins a new annual compensation cycle. The first order of business is to participate in surveys that provide
coverage of the companys jobs and recruiting markets. Survey participation affords a lower cost of the survey report.
Three months is a typical turnaround time from participant data submission to receipt of the survey report.

Market pricing
The corporate compensation function typically participates in multiple survey products that are used to develop a
consensus of competitive pay practices for a given job in a particular recruiting market. Recruiting markets may be
defined by industry, company size, and geography. Recruiting markets may differ from the companys profile. For
example, an insurance company in Boston, Massachusetts that recruits claims analysts may define its recruiting market
as the healthcare industry because that is the top employer in the area.

The corporate compensation function uses its survey reports to conclude the market range of pay for the majority of
the companys jobs (i.e., benchmark jobs). Non-benchmark jobs may be slotted between benchmark jobs that have
comparable elements such as years of experience, education requirements, and reporting relationships. The result is a
job worth hierarchy and an assessment of the extent to which the employer is realizing its pay philosophy.

Compensation analysis
This paper is primarily concerned with the administration of salary increase programs and incentive payments in a
pay-for-performance context. However, its much easier to administer rewards if there is an articulated pay philosophy
and an updated pay structure. Moreover, to hold up under scrutiny, pay practices need to stem from an articulated pay
philosophy that is defensible and consistently applied. Although many organizations of various sizes administer pay
programs without formal salary structures or market analysis, such employers often cite challenges with undocumented
compensation practices. Those challenges include a difficulty in responding to auditors requests and a perception of
unfairness among employees.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Figure 2 demonstrates the relationship between internal and external equity. The red curve represents the midpoint-to-
midpoint progressions along the salary structure. The green curve overlays the composite market reference points for
each salary grade. The boxes show the min, mid, and max of each grade; and the dots represent incumbents actual
base salaries.

Fig. 2. Internal vs. External Equity: Salary Structure, Market Reference Line, and Employee Pay

* Source: CompAnalyst, Salary.com, Inc.

Pay structure management


Pay structures are a system for defining the relative levels and values of different roles. The compensation team
evaluates jobs in terms of their relative worth to build pay structures using the market survey data plus internal data. An
emerging practice is to develop total cash structures that reflect the market ranges of pay that include the cumulative
value of base salary plus other annual cash payments such as a bonus or incentive. Benchmark and non-benchmark
jobs are assigned to the structure based on their relative worth in the external marketplace and then adjusted to reflect
the internal value that the company places on key jobs. Organizational elements within the pay structures, such as
grades, are often used as the basis for eligibility requirements for other human resources programs such as incentive
plan eligibility. Therefore, it is essential to keep structures current and accurate.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Summer
Pay program design
Compensation budgets are often due shortly after the market pricing initiative. Companies will examine the variance
between their actual employee pay practices and the market. Analysis of the variance may be used to establish
compensation adjustment budgets such as merit increase percentages and incentive plan funds. Equity adjustment
programs may be budgeted separately, so that managers dont have to use money intended to reward merit for
purposes of keeping pace with the external employment markets. Merit budgets are developed by accounting for the
survey respondents expectations about salary increase trends.

Developing a merit program


After the merit budget has been set, the compensation team develops merit programs that provide guidance to
managers for allocating their budgets.

In decentralized, entrepreneurial environments, managers are often given considerable latitude in allocating the merit
budget, and there may be fewer levels of approval than in organizations with more structured programs. The challenge
in such organizations is to ensure that managers distribute increases fairly and without adverse impact on one or more
protected groups. Strong data analysis and reporting capabilities are paramount.

A more typical approach is to develop one or a series of programs with eligibility requirements depending on location,
organizational unit, level, job, FLSA status, and other factors. Someone might be required to have been hired on or
before a certain date in order to be eligible for an increase, or there could be a minimum number of hours worked in the
year. The budget for the executive program might be different from the budget for the broader employee population.
Similarly, there might be different budgets for each country, business unit, etc. The number of merit plans also varies by
industry, business strategy, and other considerations.

Unions often have their own separate salary increase plans based on criteria other than merit (cost-of-living adjustment,
step increases, time in job, etc.). Equity adjustment programs often seek to keep employees at or above the salary
range minimum or above some minimum market index. Many employers also create separate budgets and guidelines
for promotional increases. For example, depending on the employees demonstrated proficiency, he or she might be
brought to the minimum of the new grades salary range; or promotional increase guidelines might be expressed as a
percentage of the incumbents current base salary.

The merit matrix (see Figure 3) is a tool that can help communicate program guidelines to managers. On one axis
might be the overall performance review score, or a subset of the score. Some employers use guidelines based only
on performance, without taking into consideration internal or external equity. Others add a second axis to the merit
matrix to represent comparatio (the ratio of incumbents base salary to the salary range midpoint), position-in-range
(the percent penetration into the salary range), or market index (the ratio of the incumbents base salary to a market
reference point, such as the median).

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Fig. 3. Merit Matrix

* Source: TalentManager, Salary.com, Inc.

Separate merit matrices are often developed for each of the merit programs, taking into account the overall matrix that
was used to model the merit budget. The merit matrix, however, usually models minimum and maximum guidelines for
each combination of performance and pay, while the merit budget matrix uses a middle value for modeling purposes.

In addition to determining the ranges for the different awards, it is also necessary to set guidelines for managers to use
in creating their recommendations. For example, the program should address questions such as:

Can a manager exceed guidelines? Under what conditions?


Does the manager need approval to increase recommendations beyond guidelines?
Is there room in the managers budget to give everyone the maximum of the range of recommended increase?

Pay guidelines communicated to managers


After the pay budgets have been approved, they need to be parsed out and given to managers along with guidelines
about the types and amounts of increases that are permitted at different levels of performance and internal/external
equity. For example, managers might be given a 4 percent merit budget, meaning they can allocate up to 4 percent of
subordinates basic payroll. Usually there is no merit budget associated with open positions.

Organizational hierarchy confirmed


Most employers use their HRIS or ERP to track reporting relationships between employees and managers. As individuals
move from one position to another, this reporting relationship must be updated. Before performance and compensation
planning can begin, it is critical to confirm that the system of record accurately reflects employee reporting relationships.
Reasons include the need for managers to have full and accurate budget information; and the desire to prevent people
from inadvertently seeing sensitive information for which they are not authorized.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Fall
Performance review process
Throughout the performance period, managers and employees may be tracking progress toward the goals set at
the beginning of the period. In addition, employees may have completed various training and development activities
considered critical to enhancing competencies and preparing for more responsibility. Results of those goal programs
and training and development programs might form components of the performance review. Many organizations
initiate the annual review process by requesting employees to complete a performance self-assessment. Subsequently
managers add their observations and ratings to the review. The completion of reviews may be facilitated by self-
service technology; however, technology must not replace the dialogue that is necessary between managers and their
employees regarding performance.

Relating pay and performance


The concept of pay-for-performance may begin at the executive level, and be extended to the broader employee
population via inclusive incentive plans, merit plans based on performance, and other rewards programs. Many
organizations have found that linking reward programs to performance enables them to achieve better differentiation
between the best performers and everyone else. In such organizations it is typical to place a greater emphasis on
variable compensation, often using incentives that are based on achievement of goals. Such employers typically find
that there is greater alignment between organizational objectives and the efforts of employees, including individual
contributors.

Different groups within HR may administer the pay and performance programs. Their work overlaps in several ways.
For example, organizational development is concerned with ensuring sufficient availability of talent by determining what
competencies and talents are required to support the organizations strategy, identifying people within the organization
who have or are developing those competencies, and measuring and developing those competencies as part of
leadership development and succession planning.

Compensation professionals identify the relationships among jobs in the organization, group those jobs into comparable
grades, and set salary ranges for those grades commensurate with the proficiency and performance levels people
exhibit as they progress through the career path.

Business managers, of course, are concerned with the application of peoples talent to the achievement of business
results; and with administering appropriate rewards to recognize those achievements.

The crux of effective pay-for-performance programs is in bringing these three disciplines into synchronization.
Performance reviews, salary reviews, and incentive reviews are the occasions for bringing the cycle of excellence to its
annual conclusion.

The performance review or performance appraisal is a snapshot in time whose purpose is to measure an employees
level of proficiency and results achieved, typically once per year but sometimes more frequently. Performance reviews
often include forward-looking development plans and goal programs that set objectives for the following year.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Salary reviews determine the level of someones base pay for the coming year, taking into account the employees
current base salary in relation to others in the job, others in the grade, and the amounts comparable employees are paid
to do the same job in comparable organizations.

Rewards
Rewards programs may be linked to performance review outcomes. In pay-for-performance environments, base salary
increase recommendations and incentive payments may be contingent upon the overall performance review score, or
the rating the employee received on certain sections of the review, or even the rating from a special program such as
a training or development program. Managers allocate their budgets by reviewing the program guidelines and using
their discretion. Managers recommendations are approved by various levels of management, set as final by the human
resources team before being communicated to and acknowledged by employees, and recorded in the payroll system.
The payroll effective date might be in the March timeframe. (A tax deadline of March 15 applies to certain incentive
programs.)

Types of compensation awards


Not all rewards are increases to base salary. Even some base salary adjustments are delivered in the form of a bonus
and not based on a dimension of performance. The following are some of the common types of rewards.

Equity or market adjustment An increase in base pay associated with creating equality with internal or external
labor markets. These increases are often awarded outside the annual review cycle, either as part of a bring-to-
minimum program (where employees pay is automatically brought to the salary range minimum) or as problems
arise (undesired turnover, etc.).
Merit increase An increase to base salary because of performance, otherwise known as a raise.
Lump-sum award A one-time award calculated as a percentage of base pay and typically used to reward
employees whose pay exceeds the salary range maximum for the job. Employers are only willing to pay up to a
certain amount for a job. So when someones pay approaches or exceeds the salary range maximum, the program
guidelines may call for giving a lump-sum award in lieu of an increase to base salary. So-called red-circle
employees may face up-or-out pressure, as witnessed in a recent high-profile case where a retailer fired everyone in
certain jobs who was paid more than a certain amount.
Promotional increase An award given to someone who has been promoted. Promotional increases may be
designed to bring the employees base salary to the salary range minimum of the new grade; or, program guidelines
may call for a specific promotional increase percentage. Some promotions are awarded without promotional
increases; and sometimes they are optional.
Across-the-board increases Some countries have government-mandated increases; collective bargaining
agreements may include across-the-board increases; cost-of-living adjustments are often across the board; step
rates are often based on time in job; etc.
Bonuses Awards paid after the completion of a performance period.
Short-term incentives Predetermined awards based on goals that are established at the beginning of the
performance period.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Long-term incentives Grants of company stock or other units, including cash, that vest over periods greater than
one year and are used as part of a retention program.

Reporting, analysis & auditing


At the conclusion of the cycle, organizations review various metrics to determine adherence to budget; average increase
sizes; performance review scores; internal versus external equity; and other measures. The new compensation data then
becomes the starting point for survey participation as the new cycle of excellence begins.

Other Considerations
Timing
One of the most important decisions in compensation administration is the timing of increases. We see a heavy
emphasis on an annual focal review that takes place at the end of the calendar year. We see declining use of
anniversary-based reviews, principally because of the difficulty in administering budgets. Proponents of anniversary-
based reviews report that they enable them to focus on performance year-round; but goal programs can be even more
effective at serving this purpose.

Decentralized organizations and those that have grown by acquisition often have both anniversary and focal reviews;
they may also have multiple focal periods if their divisions have different fiscal years. For ease of administration, some
organizations review different portions of their population at different times of year for example, nonexempt employees
at the midyear mark and exempt employees at year-end. In such organizations, different pay programs are active or
inactive at different times of year.

Recent hires may receive more than one increase in their first year. A 90-day or 180-day review might include a pay
increase. Similarly, employees who are at risk of leaving are sometimes given counteroffers or market adjustments to
prevent undesired turnover. These increases are often called off-cycle adjustments.

Some organizations in which employees performance is reviewed more than once per year also permit more than one
pay increase per year. This practice is more prevalent during market upswings.

Increases may be prorated for date of hire, transfers, leaves of absence, and other reasons.

International considerations
Multinational organizations face additional challenges in designing and administering pay-for-performance programs.
The following are among the considerations in international pay-for-performance.

Award types may be different. For example, some countries have government-mandated increases; and some have
reporting requirements related to expressing base salary as a percentage of different elements.
Pay mix/total rewards may differ, such as impact of taxation, government-sponsored healthcare, car allowances, etc.
Because of securities laws, international long-term incentives are typically based on stock appreciation rights (SARs)
and/or paid in cash.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

The currency in which the manager models rewards (the planning currency) may be different from the currency in
which the employee is paid; and yet many employers prefer to express increases in round numbers.
Base salaries are increasing at different rates in different countries, with dramatically higher increases in APAC
countries than in the United States, for example.
Performance reviews/salary reviews may not take place in person.

Compensation analysis
In many organizations, the most challenging phase of the annual review cycle is the reporting and analysis requirements
after the salary recommendations have been submitted. Almost every role in the organization, from the employee to
the compensation committee, is interested in reviewing relevant information about compensation planning. Before the
introduction of automated compensation planning systems, these budget rollups and ad-hoc reports were created using
spreadsheets. The process was error-prone and time-consuming.

The following are some of the analytical requirements we typically see for compensation planning.

Metrics. Many employers look at employee rewards by performance review score; increases out of guidelines and
other exception reports; exempt versus nonexempt average increases; expected versus actual distribution of review
scores/rewards; and average increase by performance rating (see Figure 4).

Fig. 4. Example: Reporting and Analytical Requirements for Salary Administration

8.0%
7.0%

5.5%
6.0%

3.9%
4.0%
2.5%
2.0%
1.0%

0.0%

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pta atio atio tat atio
ce ct ct ec ct
ac pe pe Ex
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Average Increase

* Source: TalentManager, Salary.com, Inc.

Internal and external equity. As the cycle comes to a close, the compensation team analyzes where the new pay
rates fall within the salary structure (internal equity) and the market reference points (external equity).
Fairness. In the United States, pay philosophies need to be defensible and consistently applied. Special rules
aimed at avoiding adverse impact apply to employers. Regulatory considerations vary by country. As a result, many
employers analyze the distribution of rewards by race, gender, and other parameters. Additional statistical analysis
may be warranted to determine that differences in increases between protected groups are not significantly different.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Budget rollups. Various levels of the organization down to the supervisor level typically want to see budget
versus actual for their group. The human resources function is responsible for creating organizational rollups such as
the one shown in Figure 5.

Fig. 5. Example: Budget Rollup by Organizational Entity

* Source: TalentManager, Salary.com, Inc.

Approvals. Although the auditing requirements of Sarbanes-Oxley are still subject to interpretation, many employers,
on the advice of their audit firms, are erring on the side of caution in the methods they use to administer pay and
performance programs. So in many organizations it has become almost as important to document the approvals
of increases at various stages in the organizational hierarchy as it is to ensure that the payroll system pays out the
correct rewards on the correct dates.
Cross-checks with payroll. After the final level of approval (executive team or compensation committee), the
increases take effect. The data from the compensation planning cycle needs to be synchronized with the payroll
system with the correct effective date, including retroactive payments as applicable, along with adjustments to
withholding, benefits, etc.

Implementing a Pay-for-Performance plan


Compensation plan design and administration involves a careful balance of art and science. A program might be very
well engineered: the model might accurately reward the desired behavior to drive organizational results. Yet if the plan is
overly complex and difficult to communicate or administer, it is unlikely to succeed in motivating that behavior.

Therefore, to ensure the success of a pay-for-performance plan, it is as important to think through the required training,
communication, and administration as it is to develop a sound, well-balanced plan.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Training for Managers. Within organizations that are unaccustomed to differentiating levels of performance or rewards,
the introduction of pay-for-performance plans can involve a cultural shift. Managers may initially be reluctant to
distinguish top performers from everyone else, or they may be concerned that there is enough of a merit budget to go
around.

Yet one compensation executive recently described a measurable, statistically significant change in the distribution of
review scores and rewards a few years into a pay-for-performance program. The average increase for the average
performer actually went up, not down as some had feared, as the distribution of scores shifted toward the middle.
Mathematically, the merit model could be reworked to anticipate fewer of the top scores, fewer of the next-highest
scores, and many more scores in the middle. The merit guidelines in turn could be moderated for employees in the
middle of the curve while preserving or even increasing guidelines at the upper end of the performance scale.

We see companies providing more training in compensation basics. In an era in which compensation market data has
become prevalent, it has become more customary to share not just salary structure control points, but also market
reference points, with line managers. More managers (and employees, for that matter) now understand compensation
market pricing selecting data sources; selecting a benchmark job; selecting the appropriate comparable industry,
size, and geographic scopes; selecting a reference point that fits the pay philosophy; and then determining how an
incumbents pay should compare to the market given his or her level of proficiency, performance, and potential.

Training in pay-for-performance should emphasize the principles and the content of the program, not the mechanics, to
the extent possible. Simple, intuitive automated systems that manage pay-for-performance can separate the signal from
the noise and thereby help reduce the amount of administrative training required to roll out a new program.

Employee Communication. The goal of compensation management, according to WorldatWork, is to support an


organizations efforts to attract, motivate, and retain top talent. A critical requirement for success, therefore, is to
communicate the purpose and the intent of rewards programs to employees. Employees should understand when and
how their performance is being measured, what its being measured against, and how their base pay and incentives are
linked to that performance. They should understand what types of rewards theyre eligible for, as well as the criteria for
achieving awards of different sizes.

Without adequate communication, employees might have lingering questions about their increases. For example, one
employee recently asked an online networking group for help in putting his 3 percent raise into a context. To him, the
award seemed small, and he wondered whether he should be looking for another job.

At the other extreme, an employee who receives a 10 percent raise this year might expect another 10 percent raise next
year. However, an employee who receives a 3.5 percent merit increase and a 6.5 percent market adjustment this year
might have a more modest expectation about the size of next years increase.

Were seeing more widespread use of employee compensation statements, also called total cash compensation
statements or total rewards statements (see Figure 6). The contents of these statements vary. The example includes
some employee statistics such as date of hire and reporting relationships; current and proposed award amounts; and
a comparison of the employees pay to the salary range and to the market. Sometimes these statements include a
covering letter or memorandum from an executive; a total rewards statement including the value of employee benefits;
and a more extensive pay history.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Fig. 6. Employee Compensation Statement

* Source: TalentManager, Salary.com, Inc.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

Administration. The administrative burden of a pay-for-performance program can be mitigated to a great extent by
the use of automated compensation planning and performance management systems. The following are among the
administrative considerations involved in supporting a total rewards program.

Eligibility requirements: salary grade, job, date of hire/transfer, location, number of hours worked, FLSA status, etc.
These determine who will receive what types of awards at what levels.
Roles and reporting relationships. People are hired or transfer throughout the year, organizational units are
eliminated, merged, etc. Managers and administrators should only see the information they are authorized to see.
The preliminary phase of salary planning, where HR administrators send locked spreadsheets to managers asking for
corrections to reporting relationships, can be one of the most cumbersome processes in the salary planning lifecycle.
One organization found this to be the most compelling reason to automate rewards planning.
Data flows to and from an HRIS, ERP, payroll, financial, point-of-sale, spreadsheet, or other corporate systems. How
frequently does the data need to be synchronized? What are the security protocols? Does the system need to be
frozen during an active review cycle so as not to disrupt planning and modeling that is in progress? If so, is there a
way to add one or a few employee records without a complete refresh of the data?
Calculations: ratios, averages, weights, payout rules, prorations. What happens if a manager breaks a formula in a
spreadsheet? What happens if an incentive target is changed for an employee or a job?
Exceptions and off-cycle awards. Will they be budgeted or unbudgeted? How will they affect the rest of the data
flows and processes?
Controls to ensure managers stay within budgets and guidelines.
Controls to ensure overrides are authorized and approved correctly.
Audit and approval trails: number of levels and means of documentation; archiving procedures and media.
Data integrity, including any points in the process where data is reentered or transformed.
Practical considerations such as how the system can be gamed.
Experience and skills essential for management of employees.
Systems. One of the most important considerations in rolling out a new compensation plan is the means of
administration. Many organizations report that they intend to link pay and performance, but find administrative
challenges in creating that link because of the limits of word processing and spreadsheet software. Automated systems
can dramatically improve the ability to link performance and pay practically and conceptually. Our experience has been
that before automating compensation planning, clients expect the most dramatic return on investment to come from
business process automation; but after the implementation, they report that better reinforcement of pay-for-performance
objectives is the most valuable benefit of automation.

Some organizations introduce the new plans first, and the automation project follows in the second year. Others
introduce the plan and the system during the same cycle. The following are some of the considerations in determining
what type of system to use.

Homegrown systems built in more advanced programs such as database packages often meet or exceed business
requirements in their initial years. But without a strong program to maintain and upgrade these tools, they become
obsolete more rapidly than systems offered by vendors who have a commercial incentive to remain best-of-breed.

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White Paper The Cycle of Excellence:
Compensation administration in Pay-for-Performance organizations

ERP and HRIS vendors have a vested interest in automating as many business processes as possible, often with the
support of internal information technology departments. Such systems are often so complex that the vendors name has
found its way into clients job descriptions or even job titles. The expertise of enterprise software vendors is often broad,
but not deep. Implementations can be drawn out over years with much customization of the application. As a result, the
pricing model often does not provide a compelling total cost of ownership to small and midsized firms.

Best-of-breed vendors in talent management provide both compensation planning and performance management
modules. Their services are typically offered on demand, that is, over the Internet; although a few vendors provide
on-premises models. State-of-the-art security protocols comparable to those offered by online banks and retailers,
combined with immediate upgrades and short implementations (typically less than three months) are among the reasons
software-as-a-service (SaaS) has become the preferred means of delivering talent management systems. Technology
analysts including Jim Holincheck of Gartner endorse and recommend the SaaS model for human capital management.

Conclusion
Adopting a pay-for-performance approach to compensation planning and administration can dramatically improve
organizational results and attract, motivate, and retain top talent. The most effective pay-for-performance programs are
complete systems, where the interrelated objectives of organizational development, compensation, business units are
brought into synch. Automated solutions enable organizations to reduce the margin for error in delivering rewards as well
as improve the productivity of rewards programs by enhancing the link between performance and pay.

About the author


Johanna Schlegel, CCP, MBA, Senior Account Executive

Johanna Schlegel works with pay-for-performance employers in the Mid-Atlantic United States to streamline
administration of compensation and performance programs and to strengthen the connections between people, pay,
and performance. She has an AB in literature from Yale University and an MBA from the F.W. Olin Graduate School of
Business at Babson College. She is a Certified Compensation Professional.

For more information


For more information about how your organization can improve its talent planning practices, contact Salary.com.
Corporate Headquarters: Salary.com, 195 West Street, Waltham MA 02451-1111
Telephone: 1-(866)-SALARY1

About Salary.com
Salary.com is a leading provider of on-demand compensation management solutions helping businesses and individuals
manage pay and performance. Salary.com provides companies of all sizes with comprehensive on-demand software
applications that are tightly integrated with its own proprietary compensation data sets, thereby automating the
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compensation spend. For more information, visit www.salary.com

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