Have compensation professionals, once the math and data heroes of the HR world, fallen behind the curve in analytics?
New research suggests it could be so. In their joint report 2012 Metrics and Analytics: Patterns of Use and Value, WorldatWork and Mercer find that compensation functions continue to rely almost exclusively on benchmarking techniques and haven't yet moved to the more advanced analytical methods, methods like simulations and predictive modeling, that many of their peer professionals are using to support decision making.
In the WorldatWork workspanTV video below, Mercer's Haig Nalbantian and Brian Kelly discuss the research and its findings.
In our exchange on the research, Haig Nalbantian called attention to the opportunity that he feels our profession appears to be missing (noting, as I recently did, that we seem to be stuck in an old paradigm):
It raises great concern for me that Compensation practitioners, who once led the way on use of analytics to support policy decisions, are now falling well behind their counterparts in HR and certainly in other parts of the organization where analytics are routinely deployed - Finance, Marketing, Operations, etc. This is mostly because they seem stuck in the old "compensation silo" that actually inhibits their ability to ask the right questions in the first place. Thus, while the discipline has evolved conceptually to adopt a total rewards perspective, the tools commonly used by rewards practitioners have not kept pace; they have not been adapted sufficiently to allow practitioners to measure how total rewards actually play out in organizations and how the various components of total rewards affect workforce and business results.
In what must be more than sheer coincidence, HR and compensation analytics have also been on the minds of many of my Compensation Cafe colleagues lately, as evidenced by some of their intriguing posts on the topic:
Get Rich Quick! Margaret O'Hanlon
Diamonds and Data Mining! Stephanie Thomas
We've Gone Too Far with Metrics! Stephanie Thomas
Out With Metrics, In With Analytics! Jacque Vilet
What's your take on all of this?
Yes, we're definitely still stuck in the paradigm that "compensation" equals "dollars" rather than compensation equals an important, integrated element of an overall value proposition to employees. Therefore, we look at the data through this more narrow lens primarily via external benchmarks.
I compare data to analytics as I do information to wisdom. And while the report shares that executives want this more sophisticated analysis (aka wisdom) to make better business decisions, I'll bet a lot of money that heads of Compensation functions are not getting the time, the resources, nor the funding/backing from those same executives to do the deep dives necessary. (I would be thrilled to be wrong and simply blame it on laziness or disinterest...)
Even before all of that, however, is as Haig suggests: "what is the question we're asking?" Because while executives may want certain analytics when they see it on a menu and think, "that sounds great!", the question I hear them usually ask is "how much does x company pay for y position?" And that's the question Compensation keeps answering. As I'm neck deep in my Masters thesis, I'm painfully aware of just how important crafting the question is in order to be able to accurately respond.
As many of our discussions do, the conversation gets back to how the Compensation function must be influential on, and integrated with the business and talent strategy so they can help build the deeper questions in advance to get the buy-in to be able to answer once the strategy is executed.
Posted by: Mercedes McBride-Walker | July 06, 2012 at 02:16 PM
Mercedes:
Great points and bottom line - thanks for sharing them here.
And good luck on that Masters thesis!
Ann
Posted by: Ann Bares | July 09, 2012 at 01:31 PM