Mark Feffer: Welcome to PeopleTech, the podcast of the HCM Technology Report. I’m Mark Feffer.
This edition of PeopleTech is brought to you by ADP. Its Next Gen HCM is designed for how teams work, and helps you break down silos, improve engagement and performance, and create a culture of connectivity. Learn more at flowofwork.ADP.com.
Today, I’m speaking with Brianne Wilson, manager of product management for core HR, compliance and compensation at ADP. We’re going to talk about, obviously, compensation—and compensation philosophy, things you should consider when designing your compensation plan, and why it all matters. It’s not as obvious as you might think.
Brianne, thanks for being here.
First, can you tell me what’s a compensation philosophy, and as employee expectations change, does the compensation philosophy change with it?
Brianne: That’s a really great question. Starting with the compensation philosophy, if we went by my handy textbook, the way to think about it is there’s a lot of metrics out there of what are people being paid in a certain job, in a certain location, at a certain type of company. But when it really comes down to it, as leaders in your organization … Say we’re just starting a business together, and we’re really thinking about how we want to pay people. Your compensation philosophy is your mission statement for how you reward your associates.
While you may have a certain job that makes a certain range, you can say, “We want to be competitive.” While project managers in New York City, may make XY in a salary range, we know that there’s some really great talent here in New York City, and so in order to be more desirable—and we know the hard work that project managers put in—we’re going to increase our range in this particular area, and invest in this area to draw in more of the top talent.
Whereas, there are other areas where maybe we don’t need to invest quite as much. And that’s really what your compensation philosophy is. It’s not so much making sure, if we’re paying people what they expect in the market. It’s really setting that vision statement for yourself.
I talk a lot about that with my teams, in the products we’re building, of compensation being… We often think of it as a science, but if there is an art to it. So it’s an art and a science, but at its core it’s deeply personal, because what you’re paying someone is what motivates them to show up each day. It’s the way a company reflects their investment and respect in you. It’s how they recognize the work that you are contributing, and at the end of the day that’s how you put food on the table and put a roof over your head. Making sure leaders are keeping that in mind helps contribute to a really strong compensation philosophy.
In terms of how that’s changing today, even just what’s happening right now in the world, it all ties to compensation on top of that. The younger generation, there’s a trend now in sharing salary ranges on job postings, which we used to not do. It was very not okay to ever bring up the compensation question in your interviews until you’ve already invested tons of time interviewing. That’s a huge shift, and if we think about the momentum that’s happening… We actually saw this morning on Twitter, somebody saying, “Hey, these companies that are saying they’re progressive, why aren’t you posting your salaries?”
That’s what these upcoming generations are expecting, real transparency in pay, because we don’t live to work. We work to live, and the best way to reduce biases, the best way to ensure everybody has a fair and equal shot is really making sure you know what those salaries and bonus plans and stock options are like.
If you have that strong compensation philosophy, your ability to be transparent to the public about what you’re paying people ideally, and likely to be able to happen together.
Mark: The compensation philosophy and transparency, do they go hand in hand? Or is transparency a part of compensation philosophy?
Brianne: I’d say it’s the latter. The ability to be transparent would be a part of your philosophy. We intend to invest in these areas. We are going to be transparent with the public across all of our jobs. We are going to list them accurately to everyone, so that anyone who’s applying, everybody who works here knows what each other makes. That could be your compensation philosophy.
Mark: As you mentioned, the desires or the demands of employees change over time. How has comp changed over time to meet those demands, especially as the workforce has gotten younger?
Brianne: They are being forced to become more transparent. I’ve seen it happen. [Imagine] if somebody shares with their colleague what they make. And so two people who have the same role uncover there’s a huge disparity, and that disparity might be across a man versus a woman, a white person versus a person of color. This younger generation is just so empowered in speaking up for themselves. That’s going to happen, they’re going to go to leadership and say, “I contribute the same amount of work. I have the same job. I found out this person makes X percentage more than me.” So that compensation philosophy of incorporating transparency is a direct result of those changing expectations.
I think it’s also the way we are operating as a country: The high cost of living, the extraordinary amount of student debt, that especially these younger generations are shouldering as they leave university, the expectation to understand, Am I going to be able to live off of what you might be offering me, and I’m going to work really hard, especially in the tech industry? If I’m going to be putting in a lot of hours, what’s your investment in me, because it’s extraordinarily expensive to keep a roof over your head.
Mark: How is it that companies get their compensation wrong, and why do you think they get it wrong?
Brianne: For me, it all stems back to that idea of a compensation philosophy. Compensation, there are people who are experts in this field. There are actual compensation practitioners. There are certification courses in how do you not only create a philosophy, but how do you actually create structures around that? It’s not always an area that companies are able to invest in, or are aware that it even exists. I’ve worked at many startups, so it wasn’t really until I came here that I even was aware that this role really existed.
I think areas where I’ve seen we sometimes get it wrong is relying solely on the science piece. Organizations understand, “Let’s pull survey data. Let’s go on websites that promote what these salaries are in a certain area, and we’ll just go by those.” If you aren’t being strategic and you’re not thinking about where you want to make that investment, to really pull in top talent, then you might lose out on the people you really want to invest in your for company and who’ll provide the work that you’re looking for.
Often times it’s like a moving target. Sometimes with your compensation structures it’s, “Okay, we’ve done our surveys, and we’ve created our job grades, and we figured out some way to adjust for cost of living.” But it’s not focused enough on enough different criteria or job grades enough to ensure you’re making up for all of the different ways you could be paying for someone.
Where you live is just really one thing that would have an impact on what you should be making, and [how you’re] managing it. Making sure you’re reviewing it on a frequent basis. Some companies only review their compensation structures every three years. It depends on your industry, of course. The public sector is very different from the private sector. You have more leeway in the private sector than you do in the public sector, but I’ve seen them be very much just output-oriented. “Okay, here are our ranges and we’re paying everybody inside the right ranges, and everybody’s comp ratio is 1, and we make sure our high performers are above a 1.” But really it’s about taking that human aspect into consideration when you’re making compensation decisions, and thinking beyond outputs, thinking of outcomes and thinking of insights and impact. It’s not just about your budget.
Some places will start with a budget, and say, “Well, here’s how much money we have. What can we give people?” So they’re not even taking surveys into consideration. I often advise people, “You should have your compensation structure and your compensation philosophy completely outside of your budget, and then figure out how your budget can make that work.”
Mark: You talked before about the science behind compensation, and mentioned that a lot of employers depend on surveys. How does that work out, do you think? Where do surveys fall short?
Brianne: I’m not envious of anybody who has to make these decisions. I have the fun job of just figuring out how to help them.
It’s a lot of numbers. Are you pulling from enough surveys? Are you pulling from the right surveys? Is the population size large enough? And that’s still just the science of getting, “Okay, all product managers in New York City have on average, this looks to be about their range.”
Eventually, enough survey data can get you to that, but again surveys won’t highlight where we’re making missteps as a society, or in different locations. Is that average salary range for product manager in New York missing what the actual cost of living adjustment needs to be? What’s happening in each location? E
Even if you use the surveys to create your structures, when you go in as a manager … This happened to me, the first time I had to do my compensation reviews for my direct reports, I got really, really stressed out, and I was the last person who should feel terrified of this, based on my job. I got really, really nervous. I was like, “Oh, my gosh. There’s all this information that’s coming at me. Oh God, I’ve got a minimum and a max, and here’s my budget and what does it mean? What if I’m a horrible person? What if I just really feel like being mean today? I don’t think this is accurate, but what if I don’t get along with the people who report to me? How do I know that I’m making the right decision?”
I didn’t feel that the numbers were enough, because everybody who reports to me, in my opinion, I’m very lucky to say, they’re all high performers. That doesn’t mean they’re high performers all in the same way. That’s something that surveys cannot assist you in. Even performance reviews, which is your way of evaluating people, that’s still bringing qualitative into the science. Even two of my direct reports, even if they both get four out of five on their performance review, that doesn’t mean those fours mean the same thing. What if there’s a person who’s always been a four? What about somebody who was a two and now they’re a four? What if I knew something was going on with one of my direct reports? They were having a personal tragedy that I knew impacted the work they were doing. There’s a lot of personal touches when you’re making those decisions that simple survey data and compensation structures just really cannot be able to spit out a number and tell you what to do as a manager.
Mark: ADP has compensation data, and I wondered if you could tell me what’s the role ADP’s compensation data can play, and also why is it unique? Why is it valuable?
Brianne: The main thing is the sheer amount of data that we have. ADP processes payrolls for one in six Americans. So we have a ton of data of what we are paying people, and there’s a lot of different ways we can slice and dice that data, to provide insights.
That’s been a big focus for ADP—how do we translate all that data, all that science? Yes, we can contribute to the science. The science is important. We just have this sheer wealth of data that is unlike any other organization when it comes to what people are paying people.
The technology that we have to provide insights, I think, is where we’re really making a huge difference because you can uncover things around diversity and inclusion, and whether or not there’s any unconscious bias happening at your organization, to help you better contribute to that compensation philosophy.
I heard an example of a place where they gave a differential based on gender. They wanted to close the wage gap. They understood that there was a bias happening, so what if we took things like that, those things that we just might not be aware of to add to our compensation structures? Just that sheer wealth of data that ADP has helps to figure out where are we making missteps. I think that’s where we really become powerful in the compensation world as we keep growing.
Mark: My last question is, what do you think the future looks like in terms of compensation? And how do you see ADP building toward it?
Brianne: I think what I see for the future of compensation, it really comes down to shifting that focus from being a science to understanding it’s an art, and being incredibly personal.
Again, the need to shift to transparency, the upcoming generations of our workforce demanding that transparency, and advocating for themselves, the cost of living, the student loans that we’re shouldering, all those things we’ve already talked about here today.
I think that’s what compensation is shifting, making those shifts to being more insight- and impact-driven. Taking those insights and figuring out how we can make change, I think is where I’m seeing compensation heading.
That’s my goal for the compensation products, and where ADP is heading is how do we keep collecting this data, and start advising leadership, and advising leadership and advising our managers on.. maybe you need to make this consideration in your compensation structure. Again, I think it’s such a great example of finding areas where you can put premiums on, give mall percentages here there, to make up for the fact that there might be bias in your organization. Publishing your agenda, your practice of how you create your compensation strategy. This is where I’m seeing things heading more and more. It’s not just going to be compensation practitioners who are aware of how the decisions are being made. We’re starting to show breakdowns of, “You got a 12% increase at your annual review, but here’s all of the decision points that went into it: Your merit because of your performance rating, you got a cost-of-living adjustment, you got a promotion increase, or any other number of reasons.
Really communicating at all rankings in an organization, of why every single compensation decision is made is where it’s heading. I feel like it’s always been a black box. I think that black box is very much about to be very much blown wide open in the coming years as compensation keeps scaling.
Mark: Brianne, thank you very much.
Brianne: Thank you. I love talking about compensation, so anytime.
Mark: That was Brianne Wilson, manager of product management for core HR, compliance and compensation at ADP.
And this has been PeopleTech, from the HCM Technology Report. This edition was sponsored by ADP. Next Gen HCM, designed for how teams work. Learn more at flowofwork.ADP.com.
And to keep up with HR technology, visit the HCM Technology Report every day. We’re the most trusted source of news in the HR tech industry. Find us at www-dot-hcm-technology-report-dot-com. I’m Mark Feffer.