How to Power Your Company’s Growth With Compensation Management
If you do not make use of a proper compensation management software solution, you will watch your competition outgrow you.
The terms “compensation” and “management” taken on their own are essential to the functions of your company in different but interconnected ways. However, by marrying the two terms, you can significantly fuel the growth of your company.
Valued, high performing employees are essential to the healthy ecosystem of your business, and properly implemented compensation practices are the glue that binds those employees to your organization for the long haul.
So why even bother and what is compensation management, to begin with?
What is it? Specialized software that works in conjunction with your company’s processes, policies, and procedures to streamline total compensation for your employees—from personal days, vacation time, benefits, and more.
Why Do it? Maximize returns by rewarding your employees in a timely, organized, and transparent manner, building loyalty, value, and increasing retention along the way.
Why Now? If you’re thinking about your company’s growth, it’s time to adapt to the swiftly changing demands of the industry. It’s time to reengineer HR to face the complex challenges of the modern workplace by properly rewarding your valued employees, simplifying and streamlining compensation processes, and tapping into a variety of other benefits to your business.
A little over 70 years ago, American psychologist Abraham Maslow published a paper that continues to affect and influence the business world to this day. The paper, published in 1943, was called “A Theory of Human Motivation” and outlines a hierarchy of five sets of human needs.
When one need is satisfied, Maslow argued, the desire to fulfil the next need sets in. The system of needs, which is now commonly reproduced visually as a triangle or pyramid, has been co-opted by many business owners and managers to represent a key to employee fulfilment and business growth.
Interestingly, as applied to business, Maslow’s theory ranks compensation at the middle rung of the pyramid, while ranking other needs such as job fulfilment closer to the top. However, things are not so neatly compartmentalized in the 21st-century workplace ecosystem.
This is where the idea of total compensation comes in. “Compensation,” as it’s ranked on Maslow’s pyramid, is archaic and does not reflect the actual, complex, multi-pronged model of compensation that is the reality in the work environments of today.
Compensation is no longer just a paycheque or a salary. Businesses with an eye for growth and development have now shifted to rightly take into consideration a total compensation model. Total compensation is a more complete and nuanced account of the rewards each employee enjoys as part of their compensation package, which may include personal days, health plans, benefits, bonuses, leaves of absence, vacation pay, and more.
Taking this model into account, compensation and job fulfilment are no longer separate needs as they are integral to each other and very closely aligned. Taking another look at the pyramid, total compensation addresses each need in the hierarchy.
Physiological Needs: Bread and butter. Food and shelter. In other words, a straightforward salary that’s an essential component to your employee’s quality of life.
Safety Needs: Safety needs in a contemporary work culture translates to a balanced lifestyle, and overall health and wellbeing. A comprehensive employee health and benefits package can address these needs.
Additionally, the right insurance plan can be invaluable to individuals and families, protecting both their peace of mind and quality of life. Health and safety matter above all else—that’s why insurance is such a huge aspect of your employees’ total compensation.
Social Needs: Implementing a total compensation package that is fair and transparent can help boost happiness and positivity in the workplace while fostering feelings of loyalty in your entire team. Your employees will feel good knowing that their workplace values equality and will feel confident navigating a space where no one takes advantage of the system at the cost of others.
The social needs of your people are important. A healthier social atmosphere at work starts with prioritizing leave management, vacation adherence, personal days, and fair and transparent benefits for all.
Esteem Needs: When employees are appropriately and diversely compensated, their self-esteem skyrockets and they feel appreciated and valued. Additionally, your team’s hard work should be met with a fair and equitable compensation package that is administered on time and without error. Anything less might seem unprofessional or careless.
Timeliness also matters when it comes to esteem needs and retention. With a total compensation solution, the leadership team can ensure that top performers are recognized for their valuable contributions today—not in six months after they’ve been recruited elsewhere.
Self-Actualization: Self-actualization, at the very top of the pyramid, is a space where a business and its employees both feel valued, respected, and rewarded. It represents the fruits of the leadership team’s labour when making total compensation a priority. A successful organization should aim to invest in their people and in turn have their people wholly recognize the value that’s been placed in them.
Employees that attain high levels of emotional positivity in the workplace unwaveringly trust that their organization recognizes their overall value and potential and always has their needs in mind. Trust, transparency, and fairness with total compensation are key factors in building self-actualization within your business.
Armed with this awareness, employees turn into leaders and innovators, taking their success—and the success of your business—into their own hands.
Three Immediate Benefits of Compensation Management
- Improved Cost Efficiency
When employees are compensated fairly, on time, and without error, they will likely be more loyal, place more confidence in their leadership team, and recommend their workplace to others. Implementing an integrated compensation management solution will ensure that HR administers all forms of employee compensation seamlessly and efficiently. In turn, you will likely see an increase in satisfaction and a decrease in turnover.
Speaking of turnover, do you know just how much it’s costing your company? A recent article for business.com says that the “general estimates for the cost of turnover are 25 to 50 per cent of the annual salary for the position.” That means that by reducing salaries and making other compensation related cuts for the financial benefit of your business can hurt you in the long run, given the extremely high cost of turnover.
- The Ability to Recognize and Reward Excellence
How are you tracking your top-performing team members?
How are you ensuring that their hard work is not going unnoticed or falling through the cracks?
Keeping hardcopy files on each employee is not exactly efficient. It also means that tracking their performance is anything but seamless. It can lead to many more complications down the road.
With a compensation management solution, you are provided with an accurate and up-to-date portrait of your company’s leaders—making it easier to reward and encourage top talent. According to The Economist, reward-based pay (or any reward system that fits under the rubric of total compensation) can “motivate employees and align their effort more closely with the aims of the organization.”
With compensation management, business owners have the freedom to make essential pay-related decisions based on measurable performance data. Rewarding your top performers, without creating a disorganized and convoluted process for HR, will facilitate a work culture of dedication and commitment for everyone.
- Increased Visibility and Transparency
With streamlining and clarity comes visibility and transparency—two sought after workplace objectives that can help fuel the growth of your business. With the proper compensation management, you can collect solid and measurable compensation data that can then be compiled and shared across different levels of your business.
Data can help shed light on the equitability of total compensation as well as create healthy goals and competition.
According to an article titled “Why Being Transparent About Pay Is Good for Business,” The Wall Street Journal cites a study by Emiliano Huet-Vaughn, who “found that participants who were shown their earnings and how they compared with others generally worked harder and increased their performance.”
Along with visibility often comes more control, more autonomy, and a greater ability to self actualize— for both employers and employees.
With increased visibility, compensation management can:
Empower managers with the ability to communicate about salaries, incentives, benefits, and other forms of compensation with their team. Websites like Glassdoor and LinkedIn are already creating a more transparent, self-serve space where employees and prospective employees can explore salary expectations and other forms of compensation and benefits. By educating and empowering business leaders and managers to effectively communicate compensation philosophies, strategies, priorities, and more, you can create a deeper, more trusting, and longer-lasting connection with your team.
Help with the analysis and visualization of compensation data-related practices and procedures with complete accuracy, no matter how complex the figures. Providing human resources, management, and business owners with the right tools to analyze and visualize the Big Picture will help all areas of the organization.
The bottom line is: After you implement a compensation management solution, you will immediately start benefiting from cost efficiency, reduce turnover, attract and retain top talent, and be able to see your business clear-sightedly with increased transparency.
Compensation and Communication: Intertwined
How compensation management can help facilitate communication is a topic worth revisiting for a moment. It’s essential that a business knows how best to establish, negotiate, and communicate the different aspects of their employee’s total compensation.
- HR must properly communicate about benefits and rewards or what’s the point of having them? You may have made an investment that you are not seeing a return on simply due to a lack of communication. This essential information can be disseminated with ease, clarity, and consistency by implementing a compensation management solution.
- The relationship between salary, benefits, and perks must be clear to your employees. As we’ve established, there is more to compensation than a number on a paycheque. Amazingly, comprehensive benefits may be more valuable to an employee than an extra zero in their salary. Always communicate with your team in terms of total compensation.
- Management should be straightforward about how performance affects compensation, promotions, raises, transfers, and the like. If you have the right people on your team, they’re likely leaders with an eye toward their future development and the growth of the business. When managers create a clear picture for employees looking to advance their careers—educating them on the process, eligibility requirements, goals, and increase in compensation— you will see your workforce flourish and meet its potential.
BONUS: Conduct internal surveys to ensure that your organization is meeting the expectations of your employees, and to address any frustrations early on. Your company’s compensation packages should be sustainable given your size, budget, and financial stability, while also externally competitive.
- Receive fair compensation in a timely, organized, and consistent manner managed using resources that are appropriate in a 21st-century workplace.
- Receive the appropriate compensation based on their skills, level of education, job requirements, key performance indicators.
- Feel encouraged, challenged, and motivated through a) workplace transparency and b) a deep understanding of their total compensation.
- Simplify and streamline the complex administering of compensation to ensure accuracy, efficiency, cost-effectiveness, and the appropriate use of resources.
- Attract and retain top talent by recognizing and rewarding excellence and eliminating unnecessary turnover, while still managing to protect finances, maintain the budget, and grow business.
- Help leadership communicate more effectively with their team about total compensation practices, increasing loyalty and deepening connections.
Going back to the question “Why Now?” when it comes to compensation management— because as our world becomes more and more technologically advanced, all industries are in a state of flux. Now is the right moment to capitalize on this time of change by overhauling HR functions and by committing yourself to grow, develop, advance, and restructure if necessary. And it is necessary.
There is no avoiding it—mismanaging the various facets of total compensation is detrimental to the growth of your business. Besides, it consumes valuable resources that can and should be reallocated elsewhere to keep your company competitive.
The process of managing compensation can be lengthy, disruptive, and convoluted for team members, business owners, and HR departments already stretched thin by the changing times. You must bring your organization into the 21st century by making use of the technological advancements available to you.
All-in-one compensation management software can help HR administer benefits and other forms of total compensation while reducing hefty turnover costs, ensuring efficiency and accuracy, and facilitating better communication practices. A streamlined and comprehensive software solution can even go far beyond compensation management, including services such as electronic transfer of data to insurance carriers, risk mitigation for compliance and audits, a variety of monthly billing options, and more.
Your people are important. Administering compensation is a core function of human resources. A simplified but high functioning HR department is integral to attracting and retaining high-functioning employees. High-functioning employees will power your company’s growth like a 100-watt bulb.
So here’s a bright idea: Invest in the right compensation management solution for your business today and see your opportunities light up!