For years the management of pay and rewards has been only weakly supported from the systems and applications standpoint. In fact for years the support came from either spread sheets or central computer services. However, computer and web-based solutions currently abound. Organizations have a host of alternatives available that offer ways to accelerate and simplify the administration and communications of pay and reward information. But what potential value do these solutions add to businesses? In this article we provide some ´images´ of the choices and alternatives from the standpoint of a ´shopper´ walking through an exhibit hall seeking support that make pay and rewards more powerful.
What´s needed to permit a more complete opportunity to streamline pay and rewards management? "Utility" is clearly the answer and "value" for the cost and complexity of shopping for a system that meets an organization´s needs, implementing the system in the organization, and communicating and training in how to get the most from the system is the answer. We believe the application of technology to pay and rewards is a critical priority and we have the resources to make it a reality. Then what´s needed to go the last mile or two?
Infrastructure and/or Substance?
Probably the most significant innovation in the last 50 years in the pay and reward arena was the point-factor plan invented decades ago by Ned Hay. This solution had an infrastructure for pay management in the form of jobs having various point values based on their worth to the organization. It also was a substantive solution because it provided logic of job values that helped the organization determine why and how jobs differ in value to the organization. So you may not agree with the reasons jobs were valuable but this solution did provide both a foundation for job valuing and managing pay.
The organization would value jobs based on factors such as knowledge requirements and management responsibilities. This was translated into numerical scores. The jobs with high scores were worth more to the organization than those with lower scores. And the employees in these jobs had base pay opportunities determined by how many points the job they hold is worth. Because many organizations used the same solution it became a powerful and universal way to determine the value of jobs in an organization. And it was the way to exchange information with other organizations because it became a ´standard´ of comparison. It was universally applicable and got considerable support. It worked because it was substance plus infrastructure. It may be obsolete now but we have no better way to value jobs or people for pay in an organization.
Needs for Next Decade
Things have changed and continue to change rapidly. The call is for ´agile´ solutions that can adapt as needed. The focus on flexibility is an important and essential one especially for pay and reward designs. "You get what you pay for" has always been the ´credo´ of the pay and reward field. Pay and rewards are powerful communicators of directions and values. They are also what are called sources of ´hot´ change for organizations-when changes are made to pay and rewards they impact everyone included in the change and do so quickly.
The alternative to pay and reward change is sources of ´cold´ change. For example new recruitment and selection initiatives are slow to influence the organization and then may only impact employees who are not yet organization members. A very important distinction to make that places great value on change communicated through pay and rewards. And to magnify the importance of the issue, pay and rewards are often one of the top one or two opportunity costs an organization is able to manage in order that they get the most business value from creating a positive ´win-win´ relationship with all employees. Organizations often seem more willing to initiate many other changes but hesitate in changing pay and rewards. So when they finally do make this important decision, it must be done properly the first time around. Pay change failures have lasting negative impact on organizations and employees. And they make doing it the second time around extremely hard because considerable damage to the trust bond between organizations and employees can result from failure.
Case in point for the importance of pay and reward change being successful the first time around. Many pay and reward changes get their business case from some other business initiative. For example many are used to help accelerate business performance, focus on customers or quality, or assist the organization in communicating some other key priority to employees. Pay and reward designs clearly can´t make employees do what the organization wishes. But they can communicate the fact that employees will be rewarded for helping to meet organizational goals and priorities rather than for resisting needed changes. So organizations ´put their money where their mouth is´ when they design pay and rewards to communicate critical directions and goals.
Now, turning to tools such as the computer-based pay management systems and Internet applications to support pay and reward programs and policies. It is clear that simplifying and accelerating and easing the management of pay and rewards is applauded by everyone. Computer and Internet applications are very well suited to provide this assistance. And clearly organizations that develop these solutions are well qualified to help pay and reward professionals and organization management do it better, quicker, and often less expensively than before. So the pay and reward field clearly has the need and the talent and capability exists to develop the necessary solutions. The use of technology to replace even the most sophisticated manual solutions is needed and inevitable. We are clearly ready for these systems. Just ask any reward professional accountable for getting pay and reward dollars aligned with the business goals of the organization.
The Exhibit Hall
All the major pay and reward conferences and most human resource conferences of note have extensive exhibit halls that are available to vendors who market their wares to conference attendees. Over the years these exhibits have evolved from opportunities for both small and large vendors to meet and greet potential clients and friends to major ´extravaganzas´ with huge booths and marketers hawking their products and services over amplified microphones and giving away everything from stuffed toys to chances to ´win´ prizes at various games of chance. Often these exhibits ´pit´ two vendors situated next to each other in contests of volume and the size of the stuffed toy they offer. But do not be swayed by any of this-it is very serious business. Conference exhibits are one of the best opportunities for organizations to compare and contrast the alternatives based on their needs and what vendors have to offer.
Put together a list of the features and capabilities your organization needs relative to computer-based and/or web-based tools. What are the five most important things a system can provide to your organization? What is your ´wish list´ and what questions do you want potential vendors to answer to give you and your organization assurance that they can deliver to your business? What do you need to know beyond the demonstration that will help you and your organization make the right selection? Or, make no selection from what is available at all. And what feedback can you provide to the vendors offering products and services that can help them deliver a solution that meets the needs of your organization? It is a two-way street with you getting what you need and also providing feedback to the organization so they can consider being ´on target´ for what your application needs are.
What´s Available and What Isn´t?
A careful tour of the exhibit hall suggests that a large number of computer and web-based applications are available to pay and reward professionals. While the vendors come and go (and that is a problem we will return to shortly), they do tend to dominate a large proportion of the most vocal selling opportunities that get nearly universal attention. It adds a ´carnival´ atmosphere to conference exhibits with ´barkers´ who ´hawk´ their wares and try to outdo each other if not in product sales certainly in the attention they get from visitors to the conference exhibit hall. It is honestly a great deal of fun and we have several ´loads´ of toys and other paraphernalia from these conferences.
Many ´laps´ around the exhibit halls in the last decade or so have provided us with some foundation upon which to comment on the direction computer and web-based products are taking as compared to possible alternatives that could be available. Let´s start with the powerful value many of these systems provide clients. Because they are important and their use and numbers grows by leaps and bounds annually. The advantages they provide include the following:
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Record Keeping: They all provide a streamlined and understandable way to manage the data needed to administer pay and reward programs. They keep records and integrate with the organizations data processing and systems capability.·
Management of Costs: The solutions permit the active management of pay and reward budgets based on pre-determined parameters. They allow tracking expenses and evaluating the relationship between goal and metric performance and costs incurred.·
Administrative Ease: They facilitate administration and ease access to the substance of the programs. This increases the speed with which all pay and reward programs can be managed. And they permit management of these programs by ´non-expert´ personnel.·
Communications: Graphic capability permits frequent communications of progress to goal performance to be monitored and presented. Participants can receive periodic updates and information on ´where we are´ and also ´where we need to go´ relative to metrics and objectives.·
Reporting and Analysis: Data analysis and report preparation is facilitated and accelerated. Information can be ´sliced and diced´ in a customized fashion to meet a variety of needs. And the speed of access is much quicker than without such systems.·
Forms and Formats: The systems provide ways to organize the information and ways to manage it from a computer terminal. They display the information in a businesslike fashion and permit comparisons and updates and standard ways for employees and managers to look at the information. They are ´standardized´ and this helps with training on program workings and facilitates continuous improvement.·
Improved Accuracy: The systems universally ensure a level of accuracy that is not possible without these solutions. They directly utilize the information available on the organization´s general HRIS and quality control over information is substantially improved and checks and balances are provided.The plus side builds an effective case for these systems. They do provide infrastructure for plan administration. They are like accelerated record keeping and analysis tools. They sort and dice the information and display it quicker and easier than if you do it on a software spreadsheet of some kind. They do add value and are important tools to apply and use.
However, they have some shortcomings that may or may not be critical. Some of these possible defects include the following:
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Lack of Uniqueness: They are all the ´same´ or will be before the next conference exhibit session. Seemingly, the systems lack differentiation. If one is able to gain a unique feature others do not have, the others will ´mock´ them as soon as the programmers can get back to work following the viewing of ´what the other organization is doing´.·
Absence of Better Practice: All of the systems are essentially ´value free´ and use this as a selling point. All say that their system can accept any programs and policies the organization wishes to implement and use. Instead of creating the opportunity to improve existing practice, these systems reinforce existing practice no matter how well aligned it is with organizational goals.·
Accelerate Goal Mismatches: Times are changing fast and once existing practice is reinforced with an automated pay and reward solution, the focus is more on making the ´system´ work rather than approving policy and practice to better communicate the key goals and priorities of the organization. Where goals and metrics do not match current needs, they often don´t change during the transition to the new system solution.·
Lack Critique Capability: The systems are designed to reinforce existing practice and no capability exists by means of the system to apply evaluative criteria to judge the extent to which the substance of pay and reward programs meet the ever changing needs and goals of the organization. Capability exists to evaluate the ´rightness´ of plans and programs to match the strategy and objectives relative to pay and rewards to the needs of the organization and relate this to ´prevailing practice´ or to however the system might define ´best practice´.·
Only Infrastructure: The systems are like a set of book covers without any text, plot, or pictures to make reading the book worthwhile. They provide value free architecture but now content. And the organizations marketing these systems promote this as a ´good´ thing. They say the purchaser can implement any pay and reward solution they wish into the system. Perhaps trying to make buying the sys tem as easy as possible? However, this often merely propagates and unaligned pay and reward solution.·
Instable Provider Sample: With a few exceptions the vendors change nearly annually. A few years ago some 30 vendors were selling ´360-degree performance management products´ that were computer supported. Now, there are none offering such products. Every trip through the vendor products arena for pay and reward products finds fewer and different vendors. Only the largest of the providers continues to exist from year to year. And they only with significant change to talent and human resources. The provider base is not secure and an organization may buy from someone who will not be there to service the purchase.·
Encourage Complexity: Because the systems make administration more streamlined and quicker, it is possible to implement a highly complex underlying pay and reward program. Where systems are more difficult to administer, the tendency is to simplify the design and the communication messages delivered. The systems make it possible to manage pay and rewards without simplifying the messages or the metrics and goals.·
No Link to Data: The systems do not provide data on pay and reward neither competitive practice nor report prevailing practices relative to reward design. They do not include information even when they are organizations that survey practice and commonly market the results to others.The problem isn´t that these solutions don´t add value to the organizations that use them. It is just that they have not made the powerful ´value to the business´ leap that seems within their reach. If you would have predicted a few years ago upon first seeing the systems for the computer and/or web-based management of pay and rewards, you would have believed they would be more universally used in medium and large organizations at least. That is not the case but rather only the large organizations have moved to sophisticated pay and reward management solutions that are computer/web-based.
The Next Decade (Shorter we Hope)
What needs to be done to make the appeal of computer/web-based systems more attractive for the management of pay and rewards? We have given you some clues about how this might best be accomplished. However, there are two key goals that need to be accomplished:
Priority #1. Innovation, not ´Follow the Leader´: New product and service development needs to focus more on determining and responding to client or potential client needs rather than merely ´swiping´ gadgets and ´tools´ from competitors as a result of viewing their screens at exhibits. It is time for organizations offering these products and services to differentiate themselves from others. It is a time for uniqueness rather than similarity. While the products obviously must do some things in a similar fashion and offer some basic capabilities such as administering, providing reporting and facilitating management of pay and rewards, it´s likely that more capabilities that differ from product to product will serve the long range business goals of the organization. Product similarity results in products becoming commodities and that influences pricing and usage.
Priority #2. Substance, not just ´Infrastructure´: The ´excuse´ most purveyors of pay and reward computer or web systems use for not adding substances is that ´users can implement any program they want and our system will permit them to include and manage it´. They suggest that customers want to have the system manage their existing pay and reward solution and not require a different solution to be implemented. The best way to address this would be to provide he user the opportunity to use a ´best practice´ pay and reward solution that can be selected from alternatives imbedded in the system, or use the existing system. And to educate the user on what cold be a better solution given the possible choices that are available. In other words putting substance in the system to go with infrastructure and give the user viable alternatives.
Research Route to Substance and Innovation
HRIS solutions of all types and shapes are a prime sponsor of association exhibits and conferences. The largest and loudest sales pitches come from those marketing systems intended to support human resource program management including pay and rewards. The developers and marketers of these systems and the sponsoring human resource or computer systems associations could sponsor important research to explore an evaluation of ´what´s offered´ as compared to ´what´s needed´. This would provide the opportunity to find out what customers think of alternative systems and also provide a powerful body of knowledge to guide both users and providers on what to develop, unique arenas to explore, and how best to target a specific customer base that is seeking various solutions that make sense and solve problems.
There is precedence for this type of research. Human resource associations and organizations sponsor or co-sponsor research projects into issues of training, development, pay, benefits, and ´best practice´ in a host of alternative programmatic arenas. And they should be biased to provide support for such exploration because of the sponsorship computer and web-based automation solutions provide for their conferences and other goings on. And such unbiased research would provide organizations with the opportunity to select from alternative courses of action that can lead them to finding a niche that fits their business goals and priorities.
The research could start by exploring the types of solutions the organizations are currently using in the pay and reward field. They could continue by asking for information from organizations concerning their view of the future for pay and rewards and their ´wish list´ for new solutions and directions. They can ask for a critique and evaluation of whatever solution they are using to manage pay and benefits. This must include not only systems they purchased from outside providers but their own systems applications as well. Some of the alternatives to explore include issues of strategic pay and reward direction, selection of goals and metrics, addressing issues of competitive practice and use of survey information, and other issues to be explored and evaluated.
A creative way needs to be created to gather the ´what´s needed´ information relative to automated systems and web based applications. The research should not just explore what is offered presently. Indeed it should also explore the improvements that are needed based on some education about what the top organizations are doing in pay and rewards and how this may be used to design better pay and reward solutions. Some of the issues that need to be addressed include skill pay and the broader use of variable pay and incentives deeper in the organization. And how automated computer and web based solutions can be used to accelerate the use of these systems.
Some Conclusions
Current HRIS applications to pay and reward management provide only infrastructure and they are not unique. This is a problem. If we were in the business of developing and selling such systems we would focus on developing unique solutions and including alternatives relative to how best to meet organizational goals through improved pay and reward solutions. However clients that use these systems and pay for them report that they do not provide a route to improvement in the quality and alignment of pay and rewards to match organizational goals. And they walk the exhibits just like we do and listen to the ´barkers´ screaming their advertisements and offering stuffed animals as a prize to watch their displays.
It´s time for putting more ´beef´ on the bones of HRIS applications for pay and rewards. The directions should be guided by some additional research and exploration of alternatives. However, we would be very surprised if the time hasn´t come for adding content that represents the future of pay and reward design including access to contemporary survey data. And also the need exists for innovation and unique solutions that provide potential advantage to gain a sustained edge over competitors. What do you readers think the future of computer and web based solutions might be? Where are we going and what alternatives are available?
Patricia K. Zingheim PhD and Jay R. Schuster PhD
Pat and Jay are partners in Schuster-Zingheim and Associates, Inc., a globally recognized pay and rewards consulting firm located in Los Angeles and founded in 1985. They consult with a wide range of companies throughout the world on the development of total rewards, incentives, and other pay solutions. Pat and Jay were selected as pay and motivation gurus in The Guru Guide. They are authors two best-selling rewards books, Pay People Right! Breakthrough Reward Strategies to Create Great Companies (Jossey-Bass, 2000) and, The New Pay: Linking Employee and Organizational Performance (Jossey-Bass Publishers, 1996). They are authors of over 300 articles in business magazines on the subjects of rewards and organizational effectiveness. Both are contributors to publications such as Fortune, Across the Board, Wall Street Journal, Working Woman, and Business Week. They have appeared on many television, cable, and radio programs including CNBC, CNNfn, NBC, and CBS. They speak throughout the world to leadership audiences interested in creating a high-performance workplace through people. Their web site is www.paypeopleright.com