How to clean up your Comp & Ben world? - Comp&Ben Talks #2

In this episode you'll learn about:

• Why C&B typically need cleaning up?
• Why it is important?
• Challenges
• How to achieve success in setting up Comp & Ben for success?

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Transcription

Bartek Podolski: Hello! Welcome to the second episode of Comp & Ben Talks. Today I am here with Magda.

Magdalena Tur: Hello!

Bartek Podolski: Hi Magda. Today we are going to explain why the Compensation and Benefits processes need to be cleaned up. We are in November and it is definitely a hot period for Comp & Ben departments and managers. This is the time when compensation reviews usually start and right now all processes are verified by going live and being used by people. And we are going to discuss how to make these processes as effortless and painless as possible and how to clean them up. Magda, would you like to add something at this point?

[1:15]

Magdalena Tur: Just as a short introduction, let me tell you that I am a Compensation and Benefits consultant. I already spent a lot of time working in companies running such processes. Now, I am supporting clients in designing and implementing such mechanisms. It has always been very important to me to make a user-friendly and smooth process. Of course, cleaning is an important part of the whole process, especially in the Comp & Ben area which requires a lot of data organization. But I believe it is the same in every area where there are processes with a lot of data and information. We also have to point out the difficulties of the Comp & Ben processes as they need to be adjusted to the business goals and market conditions. Therefore, we should review them on a regular basis. I think that there are no problems in doing it. The problem is with the approach. Very often we are focusing on one single part of the remuneration package such as a variable pay program. But reviewing only the variable pay program without reviewing the whole package may be useless.

Bartek Podolski: Do you think it is better to focus on one of the components and clean up processes one by one? Or do you prefer to analyze all components at the same time?

Magdalena Tur: When it comes to cleaning, we should do it one by one but have in mind the big picture. It is very important because all processes are connected to each other and they interact with each other; therefore, if we do not invest our time for a good design at the very beginning, the process will not run smoothly later on. I am sure of that. Istead, we might produce a lot of mess, questions, and doubts. We might be forced to fight against the process rather than create good practices and policies.

Bartek Podolski: For me, the Compensation and Benefits processes go in two waves. Typically, the period between March and October is pretty calm and people are more relaxed. There is not much pressure during that time for employees. They only have to focus on budgeting and reporting to the financials and the board. But it is a more calm and quiet period. After that, November hits in and you have all processes on: compensation reviews, bonuses payouts, the total remuneration statements, etc. It all starts at one time and then everything is happening till March. My point is that if you prepare yourself well enough during the first period, you will be fine during the second period. But if you do not think about your processes in the summer or earlier, then your hot period will not go smoothly and a lot of manual actions will be required. It may be very stressful for you. How can we prepare ourselves for this more intensive period? And if you have not prepared anything in advance, what can you do now to make it better?

Magdalena Tur: If you are totally unprepared, it is very hard to do something right now. It is a really intensive cycle, as you said. Introducing any new solutions, when you are in the middle of the cycle, is not a very good idea. Therefore, good preparation upfront is the key, such as keeping internal data consistent. What is more, when you design a system, you need to think about the best solution having the long-term perspective in mind as well as an understanding of interactions between processes.

Bartek Podolski: But if you have not prepared for the cycle that happens this year, it is probably too late to make any changes, right? Now, you need to survive the Comp & Ben hot period with the processes that you already have. In the meantime, you should start thinking about the next cycle: how to make it easier, better automated, and robust. But changes may be implemented for the next year because right now it is simply too late to improve something. Am I right?

Magdalena Tur: Unfortunately yes. If you work in the Compensation and Benefits department, you are probably crazy busy right now. So it is not a good moment to change anything. But moving forward, you should keep in mind how to clean the processes. While they are happening, you may observe which processes work and which does not, you may evaluate current actions, talk or educate managers, and manage the expectations of other employees

[6:44]

Bartek Podolski: I do not know if you agree with me or not, but I will take a risk and make a statement that everybody has some kind of Compensation and Benefits system in a company. Only very small organizations may not have it. But if you are a bigger company, you have to have something, either a sophisticated solution or some kind of spreadsheets, Excels or another internal process. However it looks, it is also related to IT solutions - probably no one does it on paper anymore. My point is that the system may work well or badly, but it all depends on the preparation period and how cluttered it is. Recently I had an experience with one of our customers who managed to clutter their system because they were introducing a lot of random things at the request of people who shouted the most. I must admit, it is a perfect way to create a mess in a system. IT is quite complex and when you have such a situation, it means that something does not work and you need to improve it for the next year.

Magdalena Tur: Definitely. All managers who are shouting for changes, updates, and other similar things should be aware of the restrictions that you have. More importantly, they should know that these restrictions come from the policy which was agreed based on some logic. If you educate managers well enough, you should not have people insisting on you to change anything in processes. While everyone is aware of the rationale behind certain actions, a mess shall never occur in the process. Of course, everyone has some kind of solution that supports the process. At least it may be an Excel file. What is very important, these systems shall cooperate with each other. While combining the data, we should put them cleaned up and in a logical order.

Bartek Podolski: I think we can put aside the discussion about the systems that might be used. If it is an Excel file in a large organization, then we have multiple files and spreadsheets that are related to each other with many accesses granted to many people from different ends. While a lot of employees may have possibilities to enter changes, it will be very easy to break it down. The better system you have, the more closed it should be.

In my opinion, the Compensation and Benefits department should have a mentality like Product Owners, meaning, it would be great if there is one person who cares and looks for a system. There should be a person who checks what kind of operations are being done and verifies if someone did not make changes that ruin something. As it is a pretty complex task, a product owner mentality may help because you have one person that cares about the system and makes sure that it will work not only this year but also the next ones. It is important to have a strategic, long-term perspective rather than focusing only on surviving the next “hot period” in the Comp & Ben department. In my opinion, too many times the case is about surviving the most intense time at work.

Magdalena Tur: Definitely, your approach is better. It may save a lot of time and money while remaining a system in good shape. Of course, the main role of the Comp & Ben department is supporting the business, but a change of mindset from operational to strategic thinking might be beneficial to everyone. We definitely should care about the system, adjust it reasonably, and always look at the organization as a whole (to be aware of other processes that happen in a company). Comp & Ben has never been very much exposed in companies; therefore, it does not have enough visibility and is forced to say “I am the owner of the system, I’m the owner of the process, I know why things are set up this way”.

Bartek Podolski: People from the Comp & Ben department can also easily explain why some reports may not be delivered. They can justify that some actions will not be taken because it will disturb other functions of the system or it will require too many changes or it will require setting up a totally new function. Sometimes it will be recommended not to prepare some kind of report. People in the Comp & Ben department might spend time more efficiently while focusing on core documents such as compensation review. Other, non-urgent reports might be delivered after March, not now. Very often I am a witness of a situation when something needs to be changed just before the go-live date. It might be very stressful for everyone. If someone from Comp & Ben agrees on making adjustments just before the process starting date, there is a lot of risks that something may not work.

Magdalena Tur: I had such an experience, so I know how hard such a situation might be.

Bartek Podolski: Nobody will ask you why the process does not work. You may not get a chance to explain that everything fell because of the last-minute changes asked by the managers. They will not remember about it. At the end of the day, the most important thing is to make the system live with the core functions on the agreed date. There are usually two ways: the system might work or might not work. You want to be sure that you are aiming at the first path. At the end of the day, nobody will ask if additional functions for creating two reports are introduced. People will ask if you were able to deliver the key compensation documents needed for this year without any major incidents.

Magdalena Tur: Prioritizing is very important here. It is not a process when you ask for holidays. It is about your money. If you see discrepancies in the area of compensation, you become anxious and emphasize the problem to managers and system builders.

Bartek Podolski: It also may be a very stressful situation, right?

Magdalena Tur: Definitely. Managing questions and calming down employees is not an easy situation. Sometimes managers do not know how to answer the question because they are not fully trained.  Actually, it is a very bad idea to allow such a situation to occur. It will bring a really huge amount of additional work to the Comp & Ben manager.

[14:50]

Bartek Podolski: I would take a risk and make a statement that people in the Comp & Ben department might spend long nights at work during the hot period. I remember you told me about the situation when you were working all night on triggering a process. Right?

Magdalena Tur: Yes, it happened when we had to go live with our processes and systems, but there were six systems with different data and one of the systems was not tested properly. It was a very challenging situation, but at the end of the day, the system must have worked because people trusted me. They believed that their money was in good hands. It is my responsibility to make the system work on time.

Bartek Podolski: People have these expectations that everything will work perfectly on the next day, right?

Magdalena Tur: What is more, everyone wants to get a pay increase.

Bartek Podolski: And everything is communicated upfront...

Magdalena Tur: True. Everyone knows when the new system will be available and they are expecting it on this particular day.

Bartek Podolski: When the date is set, you have to do everything you can to deliver it on time. I am sure it is not an easy task. Why is it important to have the system in place? We already discussed the Compensation and Benefits challenges such as accountability to the board and the financial department. They also have to meet managers’ expectations and other stakeholders. Good preparation of the whole Comp & Ben process will reduce the stress. What is important in the whole picture is data and its quality. As you mentioned, companies may have one system per each type of compensation. While there are many small systems, you have to find a way to integrate data from these sources.

Magdalena Tur: This is the reason why people may use Excel. It is a tool where you can combine all data. The system should work for you, but still, its main function is to store and export data to Excel or Power BI. It should not go this way, but it is the effect of messy system implementation.

[17:55]

Bartek Podolski: What else is important? Preparing a system upfront, cleaning up the data, introducing changes in advance not on a last-minute basis, testing the system before starting - these actions will make life easier. We also said that November is not a good month to change anything. Now is the time to focus on daily work and survive the intensity of the workload. While having the process going, we can only think about how to make it better for the next year. Whatever your system is now, you just have to deal with it.

Magdalena Tur: While making any implementations, you should also think about the general Compensation and Benefits policy. Creating or updating a system must also respond to your overall needs and a bigger picture.

Bartek Podolski: Assuming that the next year you will be able to make changes in the Compensation and Benefits process, what benefits may you get from improving the system? The most obvious one for me is less stress and smoother operations. People will get the possibility to log in to the system and make all required actions such as: entering data, reviewing subordinates’ payments, and introducing pay raise into the budgets. But what other advantages does the Comp & Ben department might get from improving their processes?

Magdalena Tur: Good access to quality data is the key, especially for reporting. It is needed before the process, during, and after it. It is also very important for the planning phase and getting better control of costs. It is not only about the salary review, but about other costs control related to the Comp & Ben which should be monitored all the time. A good system will allow you to see all elements of the remuneration package and make a good analysis of each component.

Bartek Podolski: When the process is finished, it should be reported to the board, top executives, financials, and accounting department. Remuneration statements for employees also need to be prepared. In fact, there are a lot of endpoints that should be easily done after closing the hot period. But when you are doing it manually, trying to combine data from many different sources, you are...

Magdalena Tur: …falling into another nightmare. Such activities will consume another month or two of your life.

Bartek Podolski: Exactly! What is worse, still everybody expects from you that it will be done. I think here we can also define the Comp & Ben challenges that could be very stressful especially this time of the year. Do you see any other challenges related to wrongly-prepared or messy systems?

Magdalena Tur: On the other side you always have people, right? It means that you may have the best data and system in the world, but then you have managers. They need to be aware of how everything works, what are the expectations from them, why the whole setup looks like this, and what should be the product of the process. Just to clarify, the final product should be a remuneration package that is not only adjusted to the market but also internally consistent.

Bartek Podolski: Indeed, everything must be done in accordance with the budget, policies, agreements, etc.

Magdalena Tur: Employees should also understand the big picture because one thing impacts the second one.

Bartek Podolski: We are talking here about hundreds or even thousands of people who are affected by the system and the final product of it. It means that everything needs to be prepared well and on time.

Magdalena Tur: I hate unexpected changes; therefore, I always say that making for example a new implementation just before the process starts is a very bad and stressful idea.

[23:18]

Bartek Podolski: How to feel successful in the end? If we could summarize our discussion in a few points, what should the Comp & Ben department do to achieve success not only this year-round but also in the next cycles?

Magdalena Tur: Planning is the key. In the Compensation and Benefits area, there is no place for badly planned actions that are not prepared upfront.

Bartek Podolski: Don’t you have this feeling that people working in Comp & Ben focus a lot on “now” and they do not think about the future? They always postpone thinking about improvements, but later they go on holiday and they never implement changes...

Magdalena Tur: I have been in such places and I think no one can stand such a situation for a long time. After the hot period people feel burned out a bit; but if others still expect good results without good tools and processes, it will never happen. In such situations, people will get frustrated, feel overworked, and leave the organization. I do not believe that people will be eager to handle so much stress every year. It needs to be improved.

Bartek Podolski: When people have a feeling that next year everything will look exactly the same, they may not be motivated to work on their tasks.

Magdalena Tur: Exactly! It is not a nice perspective, isn’t it?

Bartek Podolski: We also mentioned in the last episode that the Comp & Ben systems are not very much exposed in the company as tools that are making a big impact. Usually, they are underinvested or underappreciated. They have been treated as backstage or just an internal process that is not that important to the company. But still, there are requirements from the Comp & Ben employees to prepare reports and do all the work well. When people are unhappy, they may leave the company. And I always say that people are everything in the organization.

Magdalena Tur: This is the reason why it is urgent to implement good systems. It is already hard to find someone who can manage the Comp & Ben functions in Poland...

Bartek Podolski: Do we actually have proper schools where the Comp & Ben specialists are educated?

Magdalena Tur: There are one or two post-graduate courses. Indeed, it is noticed that there is a need on the market to educate such people. But I think that specialists working in the Comp & Ben departments now learned everything only by doing.

Bartek Podolski: Probably no one said as a child: ‘I want to be a Comp & Ben specialist”. I do not think that people know about this job and function until they learn about it during their lives.

Magdalena Tur: When they dive deeper into HR...

Bartek Podolski: Well, HR is seen as a soft skill department when people talk to others and make sure that everyone in the company is happy. In the Comp & Ben department, you need not only soft skills but also hard mathematical and analytical skills. It depends on the process, but if you focus on calculating bonuses or sales commissions, you need to know mathematical formulas. When people think of HR, they are not aware of it. They do not know that this job requires making analysis, simulations, reports, and constant calculations. They need to know some stuff about median and averages - it can be scary for many people.

Magdalena Tur: And I think it actually is. The other problem is that HR is not a natural choice for mathematicians. And Comp & Ben departments are not the natural choice for HR specialists.

Bartek Podolski: So it is treated as a separate department, right?

Magdalena Tur: Yes, it is a tricky situation, especially because you may have a very small team with too many things to do. Therefore, a good system is a must. On the other hand, there is a better understanding of the system support needed than a few years ago. But still, there are a lot of things to do…

[29:24]

Bartek Podolski: If we could just briefly summarize our discussion by giving one piece of advice that could help others in achieving success in the Comp & Ben department, what would you say? I think that adapting the product owner mindset might be helpful. Then you have a person who sees the system and all processes as a whole and as an end product that needs to be delivered. It also gives you a chance to think strategically and focus on the future. What is more, you get a chance to improve something in the upcoming years; you reduce the level of stress, and you do not have to quit the job after March. I think it is about the mindset change and dealing with managers’ and end-users expectations, right?

Magdalena Tur: And it is about education as well. Managers and other employees need to understand the approach, processes, and deliverables of the Comp & Ben departments. This function is not visible in the company; therefore everyone should understand what it means to give somebody a pay rise.

Bartek Podolski: And there are so many perspectives to take into consideration: a perspective of an employee, the board, managers, etc.

Magdalena Tur: We should also remember about long-term planning so that no one disturbs our plans made upfront.

Bartek Podolski: I think that managing expectations are also important. Especially when you have to meet the expectations of so many people: employees, managers, legal and financial departments, the board, and top executives. Everybody wants something different…

Anyways, Magda, I want to thank you for this great conversation. Is there any final remark that you want to make at the end?

Magdalena Tur: We already talked a lot so I think that this is it for today. Thank you!

Bartek Podolski: I think we can wish a good period for Comp & Ben departments this year that will be without too much stress. Survive it with good results!