Choosing the right compensation technology system for your business can be overwhelming.
With so many platforms to choose from, each offering a different suite of features and tools, identifying the right one for your business can feel like a second job.
But as we calculated in our previous post, The ROI of CompTech, this kind of software isn’t an operational expense, it’s an investment in turnover prevention.
We’ve put together this guide to help you choose the best platform for your company. Our goal is to get you thinking more holistically about your compensation philosophy. From bands to paying for performance to communicating comp packages internally and externally, it all affects your employees and the bigger issues of retaining talent.
*In part one, we’ll help you evaluate what your needs are from a compensation planning and communication standpoint.
*In part two, once you’re ready to start your search, we can help you match your company’s needs to critical software decisions like design, functionality, budget and implementation.
No company’s compensation is perfect. Let’s begin with a systematic process for determining the gaps between your current comp system and your desired one. Based on Pave’s strategic consultative framework we use with our customers, we’ll take you through a series of questions and insights to help your human resources team clarify problems and identify solutions.
What is your funding status and estimated employee growth?
Compensation is vastly different for seed companies, series a/b/c companies, public companies, and so forth. If you’re an early stage company with fifty employees and moderate funding, then you may not be thinking about a robust performance compensation strategy just yet. A one pointed, simple comptech solution will make more sense at this time.
Whereas if you’re venture backed, hiring hundreds of people, scaling rapidly and moving towards going public, that’s a different story. Your comp philosophy is likely to be more advanced, and requires a technology with more robust functionality. Remember, comp philosophies are constantly evolving. Today’s seed companies are tomorrow’s public enterprises, and all of them need to account for these evolutions from a comp perspective preemptively.
What team members are involved in comp?
Overseeing compensation can require collaboration from numerous stakeholders. Ensuring pay transparency takes a village, although sometimes compensation will be only one person’s responsibility. Depending on your head count and org chart, you may have team members in People Operations, Total Rewards, and Finance Leadership involved.
Whoever comprises your compensation committee, this group of people provides input, raises potential issues, makes decisions, and owns the rollout of the philosophy. This team also informs key software features like permissions and access within your chosen comptech platform. More on that later!
How are you currently communicating compensation?
A common complaint about comp is when there’s an inconsistent narrative between HR, recruiting, candidates and the rest of the team. Think about some of the gaps around salary and equity story your team is telling. What plot points would you like to include as you grow? Which characters are going to play a role in that narrative? D
Decide how to round out that story, and filter your comptech decisions around the platform that best helps you do so. As an example, certain technologies thrive in organizations with complicated recommendation logic, or that offer advanced equity. And if your company has a simpler strategy, then there are different solutions to consider at this point in your lifecycle.
What data security and privacy issues matter to you?
Human resources is rightfully wary about incorporating (yet another) platform into their tech stack because integrations rely on data integrity, and not all people ops team practice HRIS hygiene. If you're going to bring on comptech, get your ducks in a row. In a world where companies are throwing people’s data in a spreadsheet somewhere, make sure to select a provider that goes above and beyond industry standards with their data security efforts.
Once you give a company your data, you have no idea how they will store it or enable employees to access it. We recently published a piece called Compensation Data & GDPR: What It Means For Your Organization, which we recommend you read before you even begin your search. Any comptech solution should be SOC2 Type II compliant.
Their data should undergo quarterly penetration testing, ensuring strict organizational and technical controls to protect compensation information. This aspect of data security is particularly important if your company operates outside of the US.
What’s your current way of showing offers?
If your candidates don’t understand the upside of their job offers, then you need to educate them. If no action is taken, ignorance will continue to prevail. Comptech is a powerful tool for decreasing offer decline rates and giving recruiters and hiring managers a leg up on the competition.
If your offerability is the kind of problem you’ve spent time trying to solve in the past, the right tech can help you solve it going forward. By acknowledging the holes in your current hiring process, you can find a platform that helps potential employees get fired up about what is working for you might mean long term. The conversation around total rewards can begin even before they get hired.
How well do you and your team understand compensation?
If managers don’t have a solid grasp on compensation (and how to have sensitive conversations around it), then inequities and biases can arise. Also, if there are no easy ways for managers to track individual numbers, the amount of exhausting manual work increases by an order of magnitude.
This understanding (or lack thereof) of comp relates to company size. If there are only forty employees at your company, for example, that would require quick training on the subject. Whereas if there are five hundred people, that’s a full scale training initiative that must go through the whole organization and requires significant orchestration.
Either way, if you want to assure alignment across the entire organization, then the right platform can help you gain control of your comp philosophy and scale with you.
How are you educating employees on equity?
Equity is a complex currency. Human resources teams get flooded all the time with questions about all things equity from curious employees. (That’s why our most popular blog post of all time is The Startup Equity Glossary!) But if you are spending hours and hours putting together lunch and learns on equity that aren’t moving the needle, this is a golden educational opportunity.
Perhaps there’s a system to better gauge your employees’ compensation IQ. Imagine if you conducted an internal equity survey. Might that show you the extent to which your employees understand how equity contributes to their total comp, both now and as the company matures?
You’re not alone if you find your team doesn’t have a solid grip on equity topics. This is common with growing companies, and exposes a real need for modern total rewards solutions.
What systems are you pulling data from for merit cycles?
Perhaps you’re stuck on spreadsheets and it’s a huge pain. Data errors from hard coding and pulling the wrong numbers from systems can cause costly and time intensive issues. Other teams may be using seven different spreadsheets with columns going to QZ to run a merit cycle.
In short, it may be time to break the yearly cycle of manual surveys. Leveling up your HR stack can save you from manual work, and also from errors. What’s important from a comptech perspective is you should have a compatible HRIS and cap table software.
Without these integrations, you won’t be able to find a solution that’s scalable, accurate and efficient, regardless of your size or funding stage.
What do you want to do differently in your next merit cycle?
As your company iterates on its philosophy and improves how it plans and communicates compensation, it’s important to think down the line to your next chapter. It’s one of the most important workflows to get right as a company, and you’re not alone.
Merit cycles change every six months it seems! In startup time, a year feels more like five years. If you raised a round of venture capital twelve months ago, and you’re close to official unicorn status, your internal compensation models will have to change. And if you’re not prepared, organized and communicating transparently to employees new and old, that’s a recipe for bias and attrition.
For your next merit cycle, there may be improvements and efficiencies to be gained. Consider public companies, whose shares have liquid value and play a tangible role in an employee’s comp package. It’s in the best interest of the company and the employees to have those broken out during merit cycles to set proper expectations for both parties in future refreshes. If your comp planning tool does not offer that feature, consider upgrading your systems accordingly.
What do you want your managers to see?
Compensation requires security. You need permission access around certain data so only the right people see sensitive info about employees. At the same time, transparency is critical. If you don’t give your managers some discretion when it comes to compensation planning and communication, they will feel disempowered, and ultimately won’t own their decisions.
As your company scales, you’ll want to find a comp platform that allows you to pivot when needed. For example, sometime down the road, your managers might want to double down on equity options, and that may change permissions. If that’s in your company’s near future, then be sure you’ve put the infrastructure in place to allow a different level of managerial access.
As your company increases in size and speed, it’s imperative that however much you push the comp gas pedal down, your tech meets you where you are, and also grows with you as you scale.
How are you approaching recommendation logic?
Rec logic is the unique group of variables upon which companies base an employee’s comp change. This might include salary, variable, bonuses, and even new equity grants. Typically, this algorithm is created to reward strong performers and account for changes in various market conditions.
When it comes to data driven comp planning, recommendation logic is both an art and a science. It’s a key lever for how you plan, communicate and convert your philosophy into reality. But it’s also different for each company, depending on size, philosophy and technology.
Now, typically HRISs will create some kind of internal comp planning tool. But that’s often more about checking a box, rather than genuinely innovating and solving a problem. If your company wants to begin offering more complicated recommendation logic, then we suggest investing in a specialized solution.
In our experience, many of our customers will extend their tech stack and bring on Pave to work in tandem with one of their existing systems to enhance the user experience. If that bifurcated approach works for your unique recommendation logic, then there are comp planning solutions to accommodate that.
Now that you’ve evaluated your needs from a compensation planning and communicating standpoint, it’s time to commence your search. In the spirit of fairness, we’re not going to list all of the different platforms you can choose from. Instead, we’ve broken the comptech decision into key categories for you to match your needs to software: Service, User, Product, Compensation & Pricing.
If you've ever purchased software before, you know that customer support is a critical part of your discovery, implementation and optimization journey. First time buyers of a tool like comptech might not be considering their customer experience, but the software is only as good as the team helping you use it better. Here’s what to look for with your comptech:
The person (or team) purchasing comptech software isn’t the only one using the platform. There are potentially hundreds or thousands of employees and candidates who will want to engage to review their equity, view job offers and learn more about their benefits. Based on our research and interviews with users, these are the most common features to consider:
When it comes to the actual comptech product, you’ll want to find a solution that’s easy to use, saves you time and effort, and most importantly, reinforces your compensation philosophy. Look for these key features:
There is no shortage of technical, operational and interpersonal challenges in benchmarking, planning and communicating compensation. There are so many important issues affecting your team, and here are the most common ones you will want your comptech solution to provide:
As we outlined in The ROI of Comptech, a top employee leaving is reported to cost companies between $50,000 – $100,000. Now, if you’re looking to invest in a single point solution, say, one of the platforms that solely deliver comp planning tools, or total rewards portals, the sticker price won’t be as high as that number above.
However, if you want to go up market and invest in a full suite solution that offers salary benchmarking, comp planning, total rewards and more, you can expect your price tag to be higher to reflect that elevated level of value. What matters most here is filtering your budgeting decision through the lens of this question:
How will this new platform pay for itself, and how quickly?
This is why comptech software isn’t an operational expense, it’s an investment in turnover prevention. Here are the key aspects to think about in regards to price:
We hope this guide has helped you evaluate what your needs are from a compensation planning and communicating standpoint, and helped you match your company’s needs to critical software decisions like design, functionality, budget and implementation.
Good luck in your search!
P.S. You should use Pave. We're awesome.