The Value of Compensation — Comp + Coffee: Ep. 45

You and I know how valuable compensation is to the health of any company — but how do we get everyone at our organization to realize that, too?

On this episode, we’re joined by Russ Wakelin, Chief Experience Officer at Payfactors, to chat about just that.

Russ talks with us about compensation strategy being at the center of profit, risk, and growth. Plus, we discuss how comp pros can better align with these 3 drivers to show the value of compensation to executives.

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Shawn: And we’re live. What’s up, Kaite?

 

Kaite: Did you have an extra large coffee before?

 

Shawn: I wish. I literally probably needed another coffee this afternoon but here we are with Bill and his Allbirds again.

 

Kaite: He loves his Allbirds.

 

Bill: They’re not. They’re fake Yeezy’s.

 

Kaite: Russ has, like, Allbirds.

 

Russ: I am wearing Allbirds!

 

Kaite: They’re Allbirds!

 

Russ: These are the new waterproof ones.

 

Kaite: See?

 

Russ: But they’re already covered with salt from the winter here in New England. So, I think I ruined them.

Shawn: Can we have a shoe off here, guys? Kaite just introduced Russ. Russ is our special guest today.

 

Russ: Thank you for having me, guys.

 

Shawn: Russ is the Chief Experience Officer at Payfactors.

 

Russ: Mm-hmm.

 

Shawn: We’re here to talk about reporting and communicating value through data insights today. We’ve done a couple of things on this recently, and we’ve talked about this in recent webinars, recent talks. But I thought it’d be interesting conversation today, because one of the things we continually see in compensation is that in order to really be strategic or be perceived as that way in the organization and to show the value that you’re adding, you kinda have to flip the script a bit, you kinda have to think about approaching it from a different angle and really showcase the results of what you’re doing by mapping to different things, if that makes sense. We’ll get more into detail on this but from at the high level now. When you think about compensation, it’s kind of at the center of profit, risk, and growth, right, Russ, as you talk about this a lot.

 

Russ: Oh, yeah. I think one of the things that I think we need to help…we, as compensation professionals and compensation evangelists, need to help business leaders understand is that comp strategy is essential to business strategy, as you mentioned, Shawn. When you think about profit, you know, your largest single expense is probably your salaries. When you think about risk, one of the most misunderstood and misplanned for risk is loss of top talent. And when you think about growth, how can you possibly plan growth strategies if you don’t understand what it’s gonna cost to move into a new region or a new sector?

 

And so, a lot of companies, you think they would understand this by now, but one of the things we talked about at CompCon is a study that recently happened last fall with our friends at Robert Half, and they did a study and they did research amongst a couple thousand employees. And they said, in this current economy, 43% of employees they surveyed would be looking for a new job in the next 12 months, and the number one reason they gave was higher pay. And you’d think most leaders would understand this, but in the same survey they asked business leaders, you know, “Hey, what are your thoughts on this? What are you guys doing?” And they said, “Well, our number one objective is retention,” which ties into that, you know, business strategy risk thing I mentioned. But when they asked, “What are you doing about retention?” Compensation was fourth after things like better communication, improving recognition programs, more training and development. So, there’s really a big disconnect between what people’s employees are actually doing and thinking about and what business leaders think they need to do to solve the problem. And I think the most interesting thing about this study was the title that got in “Fortune Magazine” when they published it last September, which was, “If you want a higher paying job, the time to quit is now.” So, if you’re not really thinking about compensation as a center to how you plan your business strategy, you’re gonna be in trouble.

 

Shawn: So, I wanna tackle that from a couple of angles, but, Bill, let me ask you something. Do you think it’s a canard to say, so, 43% of people are looking for a new job for higher pay, was that the quote?

 

Russ: Yeah.

 

Shawn: Aren’t we all looking for a new job for higher pay? Like, in other words, like, if somebody would come down tomorrow and be like, “Hey, here’s an extra half a million dollars to go work somewhere else.” Wouldn’t you take it?

 

Kaite: I’m busy.

 

Shawn: You’re busy.

 

Bill: Well, it’s rounding errors for Kaite.

 

Shawn: That kind of loyalty, we appreciate around here.

 

Kaite: I’ve got other things going on.

 

Bill: I mean, but it’s sort of like that, the old adage, you know, is everything’s for sale, the question is what’s the price.

 

Kate: Mm-hmm.

 

Shawn: Sure.

 

Bill: You know, everybody, you know, is looking for a new job if there’s a lot of money on the table to change. You know, we have interesting use case came up just last week with one of our clients who was looking at how much average new person in a given job gets paid versus the median of the market. Real point was what like…how do new hires get paid versus ongoing, and it varies by job, but you know, sort of the, no disparagement intended, but bread and butter jobs, it was, there’s a 5% premium to get a new hire in the door. And then sort of the hot jobs, whatever you want, like somewhere between, like 12% and 20% premium, but that to me, the interesting part was the 5%. Meaning, people need an enticement to move. So, you know, if I offer somebody a job that’s paying the same as what they’re getting paid now, it’s unlikely or much less likely that they’re gonna switch.

 

Shawn: Coffee change.

 

Bill: Right.

 

Shawn: It’s just not worth it to you.

 

Bill: What’s the barrier? What’s the sort of minimum for any given job?

 

Shawn: What’s the motivator to actually make somebody jump?

 

Bill: Right. And it’s not…a 2% raise isn’t enough in most cases.

 

Shawn: Right. But is this where, you know, the other thing you said, Russ, I’m gonna phrase the exact quote, but you said that they’re looking to invest more in recognition programs, but what else was there?

 

Russ: Better communication was number one, improving recognition programs, number two, and more training and development, number three, and then looking at their compensation, enhancing compensation is fourth.

 

Shawn: So, why do we think that is? Why does it fall that far behind? Is that when you’re looking to keep employees, you think more about kind of a total rewards package with the total culture and package aspect of it? When you’re looking to hire new people, you give them a bump? Is there a contrast there that we’re looking at, that when your internal comp is not as perceived as not as valuable and we need to do a better job of that versus when you’re external?

 

Russ: I don’t have any insights into what was underlying that. But my guess is one cause is or one part of the problem is people…comp is not free.

 

Shawn: And it compounds to people.

 

Russ: A communication plan is free and controlled by HR, say.

 

Shawn: True.

 

Russ: And, you know, and rewards and recognition, again, not free, but are less expensive.

 

Shawn: One time.

 

Kaite: But how can you strategically think that that’s going to make a big enough impact? You know, if you’re under paying your employees…

 

Shawn: But does this all fall into total rewards? Is that why we’re looking at more, like, future total rewards statements, like, “Oh, you might make 5% or 10% more there, but we’re giving you a little bit for your 401(k) and you get these recognition bonuses”? Is that kinda what this falls into?

 

Russ: I think that’s part of it, but I think in reality, it’s a short term mindset. I’m pointing at Kaite for those that are just listening to us.

 

Kaite: They’re not here.

 

Russ: They’re not here in the room.

 

Shawn: You can watch it live stream on Bill’s phone.

 

Kaite: It’s creepy.

 

Russ: I think it’s two things. I think for years people have been told that compensation and employee engagement are decoupled. And so, there’s these other magical ways you can retain your employees, you know, without looking at compensation. The second part is a lot of organizations have really strict compensation increase policies.

 

Shawn: True.

 

Bill: Correct.

 

Russ: That plus the cost makes it really hard to move.

 

Kaite: But you can easily implement recognition.

 

Russ: But you can go ahead and give everybody like a free gym membership.

 

Kaite: Yeah, yeah.

 

Russ: That’s much easier. And so, I think that combined with the current market where unemployment is so low today that there’s no… You can’t hire a person without taking him from somewhere else. There’s no line of people applying to your organization anymore. So, you have to entice them or you have to promote internally, and the challenge with promoting internally, I think, another delta between the, you hire someone externally and you pay them 5% more versus internally is because of pay compression, right? You can promote somebody up and pay them less for now, but if you never come back and get them to market, you’re just training someone to leave your organization two or three years from now.

 

Shawn: Correct.

 

Russ: And so, comp is part of all of this. And if you don’t have an approach for that and how you deal with that, you’re just mortgaging your future by doing that today.

 

Bill: And coming back to Kaite’s point, you’re not being strategic, if you’re just looking at one or two dimensions, particularly the easier ones. And I’d add on, I think, this is perhaps a little bit too cynical, but I think a lot of…

Shawn: You?

 

Bill: Yeah, me, not shocking. A lot of organizations will do surveys of their employees, and you sort of get the feedback you asked for and that they asked, “Do you want more communication?” Everybody’s like, “Yes,” you know, therefore that goes to the top of the list, but that doesn’t mean that that’s going to keep people and it’s just a thing you measure.

 

Kaite: I don’t care if a company has an amazing internal communications approach if they’re paying me garbage. You know, like…

 

Shawn: But if you understand why they’re paying you garbage, still no?

 

Kaite: No.

 

Bill: No.

 

Shawn: No, but I think that’s right. People always ask for more communication but then the next follow-up to that is, “I’m getting too many emails.”

 

Bill: Right.

 

Kaite: Yeah.

Shawn: Like, “I want more communication, but do it in a way that I like when I like it.”

 

Bill: Right. Or, “I want more communication about how you’re gonna give me more money.”

 

Shawn: Yes. “Drop me those emails or give me a raise all the time.” But no, I think you’re hitting on what’s probably right there. So, let’s talk about what does it mean to actually start to think about our view compensation more strategically. And, you know, one of things we talked about is, like, using reporting and insights to help communicate that, to facilitate the sharing of that information and helping people better understand the value of competition across an organization, right?

 

Russ: Yeah. I think there’s two things we think about, and our clients tells us all the time, to get strategic, it really does require good data insights. The first and most obvious thing is most comp professionals simply don’t have time in their normal day to be strategic, and to be proactive and take the time it takes to talk to business leaders, talk to managers, and help them understand some of the challenges we just talked about. So, the first thing you need to have is a great way to really understand and communicate out your data and get those fast responses that executives and managers are always asking you for, that report you ran from last year and they need it again tomorrow, they need it updated. And if those kinds of things take you, you know, a half a day per request or more, you’re never gonna get out from under the just the to-do list, and be able to be strategic. So, your first step towards trying to really contribute to compensation to business strategy is really, “How do I make these sort of ad hoc repeatable tasks…how do I make them just fast and simple so I can move on to the more impactful things that I could be doing?”

 

Bill: Push the button, push the button.

 

Russ: Exactly.

 

Shawn: Yeah. I mean, it’s almost like, you know, in other words, the Salesforce dashboard or whatever else, so the worthy [SP] dashboard, but what you’re saying, though, I think is important in the sense that, figure out how to automate it as much as possible, but still do those things because there’s two key roles to that. One is just, A, communicating out what you’re working on and why or what people ask for. And more specifically, if people are asking for that, fulfilling on that request regularly helps to build trust around it.

 

Russ: That’s right.

 

Shawn: So, it’s supposed to help them understand the value of compensation so as to showcase to them what you’re working on, and, you know, how that comes to life. And it builds that mutual trust and respect.

 

Russ: Yeah. You do really wanna be the center of, you know, the source of truth around data related to compensation. Those requests coming to you are a good thing. They just can’t be so hard for you to fail, you have to get systems and processes in place that you can respond quickly.

 

Shawn: Yeah, that makes sense. And then once you’re doing that, though, I mean, I think one of the keys is you can’t just have a spit out, you do things to help communicate the value of them to not only the individuals asking for it, but the broader organization, right?

 

Russ: That’s right. I think you have to get a…build a strategy in place that you can communicate out to your organization. I think part of that strategy is really having an extremely high confidence in your data, so you can actually expose the data, expose the logic behind the data, really show the source of your data. All strategic functions in the business are driven by data-driven decision-making, and they share the data they use to drive the decisions. So, if you’re not confident in your compensation data, if you are doing a lot of guesstimation and estimation, then you’re gonna go to a place where you’re not comfortable sharing that information and you’re gonna get second guessed. You can come to the table and say, “Look, here’s what we need to do, here’s the data that’s driving it, and here’s where I got the data from, and it’s a very quality source,” you’re gonna have a much better conversation.

 

Shawn: We’ve kinda joked before on different webinars that if you’re saying, “Well, this data was two years old, and I picked a survey that I just personally like best, and I’m gonna guess the market has moved by 6%. And that was two years, we didn’t have the exact match for that, so I blended a few jobs.” We’re like, “That doesn’t instill confidence.” Now, is that a better step? If you can at least express to people why that is the case, why that is the art of compensation that you take, that’s a good step in the right direction. Heck of a lot easier, though, if you can be more authoritative behind that, answer that with more authority.

 

Russ: Exactly.

 

Shawn: So, right data sources in the spot that you’re confident in, make sure that they’re matching to your jobs while they’re tracking the market as efficiently as quickly as possible.

 

Bill: I know, I would add to it, Russ sort of alluded to this, and Shawn’s question is getting at the same point.

 

Shawn: You’re giving me more credit than I’m worth.

 

Bill: True, but anyway… It’s your podcast.

 

Kaite: Our podcast, Bill.

 

Bill: Oh, whatever.

 

Shawn: You’re the star. Continue to your question.

 

Bill: You’re making me forget my point, is that, I think HR people, comp people, in particular, we tend to love being in the weeds and focusing on the data, but there’s sort of this hierarchy, you got…it can be a weird image but you poke your head above the weeds and go from data to information, to knowledge, and that’s how you become more strategic is that, your boss’s boss doesn’t wanna look at a 20-page spreadsheet with 10 tabs. What they want is they want the distilled thoughts, the important points, the high level… And Shawn, you did actually refer to this, like the Salesforce dashboard. It’s not getting in to every individual deal of every individual sales rep. It’s the roll up, you know, it’s that’s the information level.

 

Shawn: Are we on track on our number or not? And is everything pushing towards that or not?

 

Bill: Right. And then the knowledge level is what does this mean and where’s this gonna take our business, or where are we gonna to run into trouble because of this?

 

Shawn: Right. It’d be the similar for comp. I would think, do we start to see the market moving away from some roles, one way or the other? Is the market starting out to pay some of the roles that we have? That’d be kind of important to know, at least at the line manager level. Is our philosophy going to run and have us run into trouble later this year because we’re just gonna give everybody 3% raises, but the markets moving by 10? Are there key roles that we need to pay attention to that are emerging rapidly we don’t have good data for? All right. So we need to be close in touch with those kind of things that are really important, I would think.

 

Russ: Right. That’s where you’re having good meaningful conversations about the strategy and about the focus of the business.

 

Shawn: Which brings us, Bill, being a business ally then.

 

Bill: Okay.

 

Shawn: I mean, if you can do those two things well, that Russ was just talking about, if you’re thinking at a different way about compensation, if you’re being more communicative about it, if you’re showcasing results and you’re more certain in those results, and you take a different view of the value of compensation that we traditionally have, well, that allows you to align better, right?

 

Russ: I think that’s right. And I think in order to really…for the business to see you as an ally you have to take…and I think Bill made the point too, where the level of detail that most comp analysts live at, you need to level up one, you do understand how the comp data that now you have confidence in and you can explain the sourcing on and you can give good confidence in, how does that align into metrics that leadership cares about, the key KPIs for your organization?

 

You know, if there are trending jobs that you’re gonna…let’s say you’re gonna do a bunch of hiring next year, and you see that there’s a lot of market shift happening in those particular positions, and you’ve got a budget 10% more than you planned, getting that in early and talk about cost of growth with leadership, what it’s gonna take to move into that market, maybe you don’t know that Atlanta is growing 20% faster than the rest of the country, for example, having that data in front of you, that turns into a business ally. That changes the conversation from, “Oh, comp is a back office expense,” to, “Comp is really a strategic partner in the business.”

 

Shawn: I mean, yeah, I think those are the key to this. If we take a slightly different view, and to your point that you’re just making and level up one notch, start to think about what really matters to our boss’s boss, or the department of line managers and how do we help align with them, help them understand the value of compensation, what it can do, but also help deliver things that can help them do the jobs more easily. If a department is looking to grow this year, for example, well, how are they gonna do that without knowing what the market is to hire the right people? And then the question will be, well, what about the people that are already there? What about the people in those roles? Is that gonna cause any issues, to your point that you were making earlier, Bill, bringing new people that are making 5% more if they’re doing the same job, we have to account for that, too. And this doesn’t even start to tackle some of the bigger issues that businesses care about right now, which the fair pay, making sure that we’re doing that as well as we possibly can, especially in areas where it’s law. Those are some of the more strategic roles that compensation can play now and really have an impact on a business. It just requires breaking out of the traditional mold, the responsive, the reactiveness that we’ve always been accustomed to, I guess.

 

Bill: Yeah, we’re not just here to crunch numbers. Look, it’s necessary, but that’s not sufficient to do the job.

 

Kaite: It doesn’t end there.

 

Shawn: It’s what’s needed to show the results.

 

Russ: It’s interpreting the numbers and applying them to the strategy. That’s hard.

 

Bill: Right. And as I think we’ve said numerous times, here before, like that is 80% of our time and the 20% is what to do with it. And it should be the other way around. We should get that data… But, you know, apply the rest rule, you should be confident that your data is good and accurate and, you know, on point, and then take that and then spend the majority of your time using that data to help the organization improve, to grow, to be strategic.

 

Shawn: If you have…if you’re able to set up, and we’re talking about a dashboard or regular reporting and insights that just happen, you set them up well, they’re just happening around in the background, that takes away a lot of that time where the data is always being refreshed. You always have the most up-to-date stuff in there or you’re having it track to, you know, whatever you’re looking to see, market movements, hot jobs, what’s happening in certain geographic areas, Russ, as you said it, like, whatever it is that you wanna see departmental stuff, at least it’s all there. And then you can make the decisions from there, you can start to interpret what it means.

 

Bill: And imagine just thinking about simple things like, “Where are we losing people? Like, what department? What geographic part of the country? What roles? And then where are we…?” You know, nobody likes to talk about these things. “Where are we keeping people more than we should?” In other words, you know, hint-hint, “Where are we overpaying? So that, you know, people aren’t willing to leave because we’re paying them too much, even though perhaps they should, they’re a bad fit or, you know…”

 

Shawn: Why is there not turnover?

 

Bill: Exactly. I mean, that is actually… I mean, perhaps not a bigger problem but it is a problem. You know, because if you wanna be lean and mean, you want to be the best, the strongest, you have to keep an eye on both ends of the performance curve.

 

Shawn: Bill always has the stuff to mirror us, Russ. He’s looking at me when he says it. He’s like, “Why is there not turnover?” And he gives me this look and he does this all the time.

 

Russ: I don’t know what that means.

 

Shawn: Me neither.

 

Bill: Me neither.

 

Shawn: But it causes me to sleep less well at night. I would like to sleep well, Bill, for once.

 

Bill: Sorry.

Shawn: But I think that’s right. You can start to look at both sides. That just depends on, to your point, what is it that you wanna measure? What do you want to look at? And if you set that up, so that’s happening for you, then it’s up to you to figure out what the results mean, and how to communicate and convey them out to the rest of the organization. But they put you in that better, more strategic, more thoughtful spot than just to go and participate in the survey again. “Oh, I gotta map my jobs again, I gotta get the surveys back and get them into the system.” It’s not that, it’s almost the opposite of that, because that stuff should just be happening. We can use technology now. We’ve done great previous podcasts on this. We can use technology now to help us with that.

 

Bill: And there’s a huge amount of power in knowing the answer before a question is asked. And, in fact, even raising it as a point of discussion, that we’re losing people in this part of our business. And you bring that up and now people are gonna have, like, a deep and meaningful conversation about, “What are we doing wrong? Or what could we be doing so that we are better positioned for what our company’s real goals are?” And the company’s real goals are never about making sure that, you know, our comp ratio is, you know, whatever it says in our comp philosophy.

 

Shawn: Right. Now, you’re gonna have more interesting conversations around why are people turning around that department? Why are people not turning in the other departments?

 

Bill: Right.

 

Shawn: Yeah, those are absolutely…those kinds of conversations are definitely something that executives would care about.

 

Bill: Correct. And that gets you more attention and that makes you…

 

Shawn: Sit at the table.

 

Bill: …an ally, a partner.

 

Russ: The other thing to your point…

 

Kaite: A comp strategist.

Shawn: Exactly.

 

Bill: A comp strategist.

 

Russ: The other thing that you get when you start to map compensation metrics to business metrics is you can start seeing what the impact is and start figuring out ROI for initiatives. As soon as you start talking about ROI, return on investment, you’re now talking about a place where you can say, “Well, yes, it’s gonna cost budget to, you know, target these specific jobs to move them at market or above market, because they’re extremely competitive, but the ROI and their retention increase there is X.” And that’s where you really want to be thinking. If you’re over those conversations, you’re doing it right.

 

Bill: You’ve won.

 

Shawn: Yeah. If you know, it’s gonna be a 21% of somebody’s salary to replace them, which is, I think, one of the numbers that floats around out there for certain jobs, does it save you more to keep that person on and give them a little bit of a bump as opposed to turning and turning and turning? Now, if you bake turning and turning and turning into your model, like some businesses do, then you’re probably fine. It depends on what your strategy is.

 

Russ: There’s some places you can’t do that. If you’re a software company and engineers are your bread and butter and, you know, if your competition gets 10% ahead of you, you’re gonna lose 20% of your engineers, that’s an easy ROI sell, right?

 

Shawn: Right.

 

Russ: So, there are a lot of people in those situations, and that’s just software. When Amazon moves in and starts…we talked about it before, they’re paying 50 bucks an hour and all of a sudden your hourly employees are leaving, that’s a problem.

 

Shawn: Yeah, that can affect retail shops, that can effect…

 

Russ: That’s everybody.

 

Shawn: …anything, any organization that’s at or about that minimum wage level that can affect…

 

Bill: Everybody on Main Street. It’s crazy.

Shawn: Look at you, Bill, with your quips.

 

Bill: Quips. And anybody that, you know….

 

Kaite: Donning a pair of Yeezy isn’t his…

 

Shawn: He starts to get philosophical.

 

Bill: Just talking about my shoes.

 

Russ: You know, anybody that’s doing these things, even considering them is way ahead of their competition, which gives them an advantage, you know, and so, you know, way to go all you “Comp and Coffee” listeners. At least now you’re armed and potentially dangerous.

 

Kaite: Armed and caffeinated.

 

Russ: That’s right. Armed and caffeinated.

 

Shawn: All right. Well, I hope this has been a productive conversation today. It’s our goal to help you just think a little bit differently about it. Think about how to measure some of this stuff. We’ll probably be back in the future. We’ve been doing a lot recently. We just did a webinar around how to measure compensation and the value of it. Shoot us an email at coffee@payfactors.com if you want a link to that. But we’ll probably be back soon with more on that. I mean, we’re always interested in everybody’s thoughts on it.

 

If you have any thoughts on this show, on this specific episode, leave them in the feedback or email us at coffee@payfactors.com. If you want a glossy Bill, you could probably get that just by emailing us, if you want it signed, you have to include a tip. It’s just the way he works. He does accept Bitcoin.

 

Kaite: Oh, interesting. Because of the…it’s not Allbirds, it’s Yeezy’s. Sorry. Also, Russ, if you wanna hear more about what Russ has been talking about today, we actually have a link to… You did a presentation on this topic that we could share.

 

Shawn: We’ll share that in the notes.

 

Kaite: This is one our keynotes at CompCon 2019 was Russ.

 

Shawn: Russ will also be in Phoenix next week.

 

Russ: Yes.

 

Shawn: If you’d like to catch up with him at the…

 

Russ: Tony [SP] Awards, if you’re there, say hi.

 

Shawn: There’s a Tony Awards?

 

Russ: Yep.

 

Shawn: All right. Thanks, everybody. We’ll see you soon.

 

Russ: Thanks.

 

Kaite: Bye.