Return on investment is an important measure of any software purchase.
You can already hear your CFO asking:
How will this new platform pay for itself, and how quickly?
Fair question. Implementation of any new tool can be expensive and labor intensive. Human resources teams need to maximize their investment before committing to any company wide solution.
In our experience working with people operations teams at hundreds of high growth startups, we believe that a compensation technology solution pays for itself many times over, if it is the right solution.
Comptech isn’t an operational expense, it’s an investment in turnover prevention. You’re buying time, speed and sanity. And it scales.
Considering employee retention is the livelihood of your business, why wouldn’t you ensure that you’re managing it to the best of your abilities?
We can all agree that merit cycles are time consuming, burdensome, and oftentimes a manual process. Worse yet, if they base employee compensation planning on stale, outdated data, then their company is vulnerable to bias, salary inequities and other fair pay problems.
Comptech streamlines that entire process so HR teams can focus less on processing spreadsheets and more on developing and retaining top people.
In our recent post, we explained what comptech is, where it came from, how it works and why it matters. Building off of that definition, in this post we will explore the return on investment of compensation technology. By the end, we’re confident you’ll have an answer to the question, how will this new platform pay for itself, and how quickly?
One lens through which to view a comptech investment is employee retention, which is as important (if not more important) than acquiring talent. At any given organization, a single departure can lead to numerous expenses, and more than just the financial ones.
One key employee leaving can become the rock in the organizational pond that sends expensive ripples in all directions.
Now, the exact cost is tough to pin down, since every company is different. It also depends on the level of seniority of the employee. Here’s a collection of the most recent research on the true cost of employee retention:
These soft and hard costs include, but aren’t limited to:
In short, depending on which employee departs, that separation event might cost companies between $50,000 – $100,000.
Which begs the question:
If there was a technology to prevent even one great employee from leaving, would you use it?
Many human resources and people operations professionals would answer a resounding yes.
Every company seems to be trying to crack the employee retention nut. Particularly in a buyer’s market when candidates have more choices than ever before.
Naturally, there is no shortage of strategies on how to retain employees. But considering that jobseekers continue to rate compensation as one of the most important considerations to make when contemplating a job change, organizations can reduce the likelihood of paying these high costs if they’re more strategic about investing in the right HR tech stack.
Comptech has a strong return on investment because it solves many of the leading problems that traditional compensation practices create. Based on our ongoing customer conversations, here are the leading pain points, as they relate to three key stakeholders:
It’s tough to estimate how much these problems cost companies per year. Tens of thousands of dollars? Hundreds of thousands of dollars? A million dollars? Priceless?
The bottom line, that cost would greatly outweigh the expense of implementing a new compensation software.
Your time, speed and sanity is too valuable to sacrifice.
If you were able to prevent even a small cohort of employees from leaving to find better compensation packages each year, that effort will more than recuperate the cost of a software platform. Relatively speaking, comptech would be pennies on the dollar when compared to the expense of payroll, not to mention the other costs incurred.
Ultimately, using a comptech solution will set you up for success to pay transparently, fairly and accurately in the future.