Executive Summary: Rapid change on many fronts is altering how we compensate employees - those whose knowledge, talent, and effort our future success depends upon. Consider the steady move toward globalization, the growing public distrust and scrutiny of corporate management, and looming demographic change that promises to make talent recruiting and retention far more challenging. These and other factors are destined to transform traditional compensation practices. And, as always, the competitive advantage will go to those quickest to adapt.
Seemingly oblivious to such wide-ranging change, many organizations, including a surprising number of very large organizations, rely on labor-intensive processes and decades-old technology - primarily spreadsheets - to administer what is commonly their largest single expense, compensation. While manual systems and spreadsheets may be suitable for entrepreneurs and small businesses, such mini-applications are no longer up to the demands of advanced compensation plans or today's more complex regulatory environment. As compensation needs outgrow entrenched legacy systems, companies face growing cost and risks in using them. Typically, such systems are associated with errors of significant size and cost, a dearth of management insight, inability to truly link pay with performance, and other seldom-noticed pitfalls that make corporate leaders ever more vulnerable.
A longstanding reluctance to replace existing systems, whatever the resulting benefit, for many years led software developers to avoid designing sophisticated compensation solutions. This has recently changed, however, as compensation plans and regulations have grown more complicated. Today, organizations have access to a variety of comprehensive full-featured solutions that can deliver real benefits, including substantial cost savings, dramatically reduced error rates, automated reporting, and valuable management insight. Moreover, some systems can be operational within 90 days and payback times are often remarkably short. With so many strong advantages, the greater risk for organizations may well lie in continuing to struggle with legacy systems they have clearly outgrown.
