Traditional vs. Modern-day Compensation Management
Modern-day compensation management has become a critical and integral member of the talent management family.
Compensation management in its new avatar uses financial and nonmonetary benefits to attract, retain and reduce turnover, improve performance and enhance employee engagement.
According to Workforce.com, traditional pay differs from strategic payment in the following manner:
| Traditional Pay | Strategic Pay |
|---|---|
| Supports command and control management and traditional job hierarchies. | It is designed with business objectives and strategic planning. |
| Driven by duties and responsibilities in the job description; focuses on tasks. | Motivates and rewards critical behaviors; focuses on contribution. |
| Highly structured design with little room for flexibility. | The flexible design adapts to changes in business priorities. |
| Tightly controlled communication, “need to know” basis only. | Openly communicate the shared vision, performance expectations, and success. |
Strategic Compensation Management.
With global competition for talent increasing, and today’s business environment changing rapidly, organizations need to take a strategic approach to compensation planning and management.
Your organization faces fierce competition and limited budgets and must execute with razor-sharp focus or be left behind. To succeed, you need a workforce that clearly understands the strategic business objectives and can quickly adjust course as business needs evolve.
The SAP® SuccessFactors Compensation solution transforms workforce compensation into a critical component of your overall talent strategy. This strategic compensation management solution enables compensation professionals, business leaders, and managers to align compensation programs with business objectives.
Unlike traditional compensation management solutions that simply automate and streamline compensation planning, SAP SuccessFactors Compensation features a unique set of capabilities to help you model and manage competitive compensation programs and motivate your workforce.
Aligning compensation management with your company objectives
Employee compensation is the most significant expense for most companies. Compensation planning that relies mostly on e-mails and spreadsheets is error-prone, unsecured, and unproductive.
Most solutions lack the deep integration with talent management systems to seamlessly bring the needed data to compensation administrators and line managers so they can determine who is truly high performing and reward them appropriately.
SAP SuccessFactors helps organizations to build and deliver compensation strategies that keep employees engaged and aligned with business objectives. They simplify compensation planning and reduce risk with configurable workflows, approval rules, and validation checks.
They also make use of compensation metrics, relevant employee data, and calibration tools to make fair and objective pay decisions.
- Use powerful tools to simplify compensation planning
- Gain instant insight into key compensation metrics and relevant employee details
- Drive consistent execution of compensation strategies across your organization
Compensation Budgeting
Compensation planning discussed above involves preparing budgets to address salary increases, salary structure adjustments, promotion increases, and variable pay expenditures.
Typically, the budget process occurs well in advance of fiscal year-end so that cost projections can be included in operating budget forecasts for the coming year.
SAP SuccessFactors helps organizations effectively manage global compensation budgets with precision:
- Drive consistent execution of compensation strategies across the organization with central oversight and guidance, and with the flexibility to optimize compensation programs for local markets
- Customize rewards packages that incentivize employees with bonus programs based on business, team, and individual performance goals
- Reduce risk with configurable workflows, approval rules, validation checks, and reports that increase process efficiency, improve budget accuracy, and help ensure compliance
- Gain visibility into budget utilization across your organization with roll-up reporting, and improve decision making with access to compensation metrics and relevant employee data
- Tie employee performance with rewards and use calibration to help ensure fair, objective compensation decisions that align performance goal achievement with bonus payouts to instill a true pay-for-performance culture
Calibration makes the compensation process unbiased
Calibration process in organizations allows managers to allocate ratings that are fair and objectively distributed across the organization. It provides one integrated approach to performance, compensation, succession, and talent profile data.
The calibration process ties employee performance with rewards and recognization. Calibration also helps ensure that performance goal achievement is aligned fairly with bonus payouts to process. This instills a true pay-for-performance culture within the organization.
SAP SuccessFactors calibration feature helps ensure fairness, engagement & retention:
- Align performance and goals with compensation
- Provide a clear linkage between performance and employee compensation
- Help ensure objective, fact-based decisions around performance and compensation by removing manual calibration processes and providing intuitive, visual comparisons of employees
- View ratings and pay distributions in bin and grid views and visually compare employees
- Use easy-to-read graphs, views, and filters to make sense of calibration goals and status
Use SAP SuccessFactors Compensation Management to motivate employees and increase retention
Compensation Profile provides an instant insight into key compensation metrics and relevant employee details.
Reward employees for their contributions and motivate them to perform at their best:
- Communicate the full value of rewards packages to employees with configurable personal compensation statements
- Inform employees of bonus plan eligibility and potential bonus plan payouts awarded for meeting specific targets
- Use rewards and recognition tools to keep employees motivated throughout the year by recognizing their achievements and outstanding contributions when they occur
- Ensure objective, fact-based decisions around performance and compensation with Calibration
- Track financial and business goals, and compare target metrics to actual results and determine pay-outs (using step scale models or linear interpolation)
- Quickly assess and validate the compensation process with Live Metrics
- Forecast business and fiscal results to model different bonus pay-outs (More than 20 pre-built reports, covering: Pay for Performance, Budget Rollups, Exceptions, Discrimination and Legal Compliance, Employee Details)
- Provide easy-to-understand reports of bonus calculations for managers and employees
- Combine compensation, training, and employee data with additional business data for more comprehensive compensation visibility and insight
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