What is Comp & Ben? - Comp&Ben Talks #3

In this episode you'll learn about:

• What is Comp&Ben?
• Why it is important?
• Challenges
• How to achieve success in setting up Comp & Ben for success?

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Transcription

Bartek Podolski: Hi! This is Bartek Podolski and...

Magdalena Tur: ...Magda Tur.

Bartek Podolski: Welcome to the third episode of the Comp & Ben Talks. Today we decided to have a general topic. Probably we should have started our podcast with it, but somehow it did not happen in the first episode. Anyways, today we will answer the question: what is Comp & Ben, and how it fits in the HR department and the whole organization? I will start with the thought that small companies that are at the beginning of their journey do not need the HR department. What a company in an early stage of development needs, is HR operations and somebody who will solve legal issues. When an organization is growing, a more sophisticated HR department is needed. It might be useful to have talent acquisition or employer branding departments. When a company is becoming bigger and bigger, a need for Compensation and Benefits, financial planning, and controlling starts to emerge. Do you agree with me?

Magdalena Tur: Yes, I fully agree. The shape of HR departments depends on the maturity of organizations as well as HR functions. It is formed exactly as you said and we can compare it to the ladder. The first step - HR operations - is needed to start running the company. Sometimes it is associated with Comp & Ben, but it is a completely different story. HR operations deal with legal obligations which are resulting from hiring an employee such as preparing a contract and taking care of the payroll. It is different from creating payment policies.

Bartek Podolski: And it is something that you have to have.

Magdalena Tur: Ensuring that the proper amount will be sent to the employee at the proper time is crucial for HR operations. To sum up, HR operations include job contracts, payrolls, working schedules, taxes, social benefits, insurance, etc.

[2:47]

Bartek Podolski: Right now you are talking about the basics of HR - it is the most generic issue related to HR, right?

Magdalena Tur: Yes, and it is a very broad area. I have not mentioned that before, but it also may contain health and safety issues. In general, these topics are related to money and billings; however, it is not about creating strategies and policies regarding the methods of payment. On the next step on the ladder, you will find more psychological aspects of HR which are focused on creating a good place to work with a friendly environment - it will enable acquiring people from outside the organization. What I mean by that are recruitment and employer branding activities. On the top of the ladder, you are getting the awareness that you need to create a bunch of internal regulations which will explain how, why, and when people are remunerated in the company.

Bartek Podolski: To summarize, at some point, you start understanding that a plan is needed not only for legal obligations but also for better organization in a company and to make the work easier for managers. Comp & Ben is more about planning, creating payment policies, motivating employees, and keeping the retention of people. It is about working on the organizational structure of payments in certain positions. So, recapping this part of our conversation, we can say that Comp & Ben is a part of HR...

Magdalena Tur: Yes, but it is a very important part.

Bartek Podolski: Correct me if I am wrong, but it is crucial to think about Compensation and Benefits when you plan the HR structure. Usually, at the beginning people are very much focused on operations where they do not think about planning, preparing policies, or motivation programs for employees. When a company is growing, also an awareness increases and you realize that HR needs more attention. Focusing only on operations is not enough anymore and it must be changed. At this point, employer branding and other activities aimed at working with people and developing their soft skills may be crucial.

Magdalena Tur: Indeed, at this stage, some of the HR business partners might be involved in planning employees’ paths, establishing training, or a development program.

Bartek Podolski: When such a basis is being created, you start noticing the need for the Comp & Ben which will be concentrated on financial planning, payroll policies, payment scales, motivation plans, etc. To be honest, I was not aware that Comp & Ben is involved in so many activities related to planning and strategic thinking. But they are, right?

[5:56]

Magdalena Tur: Yes, they are. What is more, you need to be aware that the development of HR costs a lot. In a perfect world, it would be great when just one day you get a quite significant budget on the table and think about the way it will be spent. While planning the Compensation and Benefits, you should take into consideration business goals, company overall performance, and overall spendings regarding everything related to people motivation, remunerations for the most effective employees, and so on.

Bartek Podolski: I think we managed to explain how Comp & Ben fits in the HR area in the organization. Why it is important to have such a department in the organization, especially in the bigger ones, where you have hundreds or thousands of employees? What might happen in a huge organization if there is no Comp & Ben department?

Magdalena Tur: Again, it is about having control over the budget. When you have thousands of employees, you are obligated to pay remunerations to them. You need to be prepared not only for that but also for extra spendings such as bonuses or long-term incentives. It is important to have a wider perspective, not only for one month or one year.

Bartek Podolski: It is about strategic thinking, as we already mentioned.

Magdalena Tur: Yes, it is also about keeping consistency in policies. A company should not forget about being fair to employees. But it is not only about the internal procedures but also the external market needs to be monitored. If you do not know what is going on outside of your organization, you are not able to acquire new people.

Bartek Podolski: We can say that HR tasks are related to everything that is happening now, while Comp & Ben is about the future and constantly thinking about how to attract and retain the right people, how to plan and budget activities related to employees. Another aspect is controlling and making sure that everything is executed on time. Don’t you think?

Magdalena Tur: Yes, controlling might be a part of Comp & Ben. Sometimes it is a separate function, but still, it is closely connected. I think that Compensation and Benefits is a department between financial control and HR operations. In this department, you definitely must be in line with legal rules. But the soft part of HR is also important.

Bartek Podolski: Comp & Ben also helps in managing the budget, right?

Magdalena Tur: Indeed, it is one of the main functions. What is more, you need to manage it fairly because all other activities are associated with it. It also influences how the company is perceived by employees. If rules and regulations are clear and understood by others, it is easier to retain the most important talents in the organization as well as attract people from outside.

Bartek Podolski: For me, as a person who has most of the knowledge about the business side of Comp & Ben from books and articles, it is very interesting and surprising. Especially, because I have experience in implementing HR software. But when I think about Comp & Ben, I see that it is more about motivating people through the right payments based on the performance or KPIs. It is also about making payments based on the proper salary brackets. For you, on the other hand, it is more about managing the budget, which is a hard skill related to financials.

[10:17]

Magdalena Tur: In fact, you have two goals related to Compensation and Benefits. The first one is about financials which are connected to emotions and other soft aspects of people management. The second one is about KPIs or short-term incentive programs which are focused on increasing motivations. Both execute certain policies in a company. What is more, those two perspectives are equally important. And it is Comp & Ben’s job to explain to other employees these two aspects.

Bartek Podolski: Sounds like a challenge. It may be hard to make people aware of how and why Comp & Ben does certain things.

Magdalena Tur: On the other hand, people need to understand all policies, internal regulations, and the general meaning of all these documents. When they are aware of it, they also will be able to accept decisions they do not like. But the most important action is to make everything clear and transparent to employees.

Bartek Podolski: One of the Comp & Ben functions is also creating a strategy, right?

Magdalena Tur: Yes, and when you do it you have to take into consideration all budget restrictions.

Bartek Podolski: Later, you have to explain to people why they, for example, do not get bigger pay rights or why they received so high KPIs...

Magdalena Tur: ...or why they cannot be promoted.

Bartek Podolski: I think that Comp & Ben department actually helps in structuring the process of being promoted. They may establish rules on how people will be graded for getting a promotion.

Magdalena Tur: Exactly! This is all on Comp & Ben. Budgeting is important here because in certain positions you need to pay a certain amount of money. If you have 10 people on the same level, you should pay them more or less equally. Therefore you need to see if all people should be on the same level. Maybe they can be treated differently.

Bartek Podolski: It should be made more formal so that they know why they are remunerated with such an amount of money. We all need to remember that people look at the market; therefore, we also should be aware of everything that is going on in the market and how our remuneration fits in the market.

Magdalena Tur: Definitely, an internal, as well as external perspective, must be kept in mind and you should be aligned with both. I think it is also one of the main responsibilities of Comp & Ben. They must be fair internally and competitive externally.

[13:40]

Bartek Podolski: As a Comp & Ben consultant do you sometimes have situations when people ask you or your clients why they are not paid as high as it is said on the market? Do they ask questions about budget and the way of money distribution?

Magdalena Tur: Very often. It may happen every day; however, it is good when people can rise such a question and get the answer. The worse are rumors in the kitchen because such topics might cause frustrations. It is worth remembering that Comp & Ben is about connecting money spendings with revenues and business goals. Therefore, people need to understand that Comp & Ben is only one of many departments with budget restrictions. We should do everything to treat everyone fairly and remunerate well for a particular performance. We should be sure that everyone knows what is expected from them and employees know what they get when tasks are accomplished. The main responsibility of Comp & Ben is to make people understand all of it.

Bartek Podolski: From my experience, it is not possible to be 100% sure that everything will go smoothly. But when you communicate everything properly, you increase the chances that employees understand it and will not feel frustrated.

Magdalena Tur: After a few years, managers will also be more aware of the wider perspective and will be able to answer employees’ questions.

Bartek Podolski: It is also about creating a mechanism that goes by itself. The goal is to communicate everything clearly when new people join an organization so that newcomers feel well in a company from day one. Such an approach may help in building better organizations in the future. It seems like a long-term goal.

Magdalena Tur: Again, it is about two perspectives: financials and people. We have to build awareness among employees about the way of their remunerations.

Bartek Podolski: You just said a very interesting sentence that Comp & Ben is connecting money spent with business goals and revenue. It makes sense to me! What is more, the role of the Comp & Ben department is to make people aware of how and why it is done in a particular way.

[17:17]

What other challenges do you see in terms of Compensation and Benefits? The other day we spoke about tools and processes which very often are not good enough or they do not change when the organization evolves. Adjusting them may also be one of the challenges. We also mentioned the need of educating people and making them aware of the Comp & Ben role.

Magdalena Tur: And it will not happen right away. Education is a process and it is not easy to understand the Comp & Ben area. Some time must be spent on clarifications and explanations. Processes are also challenging, especially because people do not like changes. While you want to improve something, employees feel insecure in topics related to money and their remunerations. To do it right, good preparations are needed before. Comp & Ben needs to plan how to handle reluctance and resistance among employees.

Bartek Podolski: What makes the case even more complicated is that sometimes you have hundreds of managers who manage thousands of people. And how many people do you usually have in the Comp & Ben department?

Magdalena Tur: Usually it is a very small team of only a few people. Sometimes it may be only one person.

Bartek Podolski: This is the reason why Comp & Ben needs to collaborate closely with other departments. They should work with HR to get some help in people management.

Magdalena Tur: Definitely they should. Comp & Ben happens a little bit on the backstage of HR. It means that it is important within the organization but is less exposed to the business. Very often top-level managers are not fully aware that someone is managing budgets, creating payment rules, etc. If they do not know about such a function, they will not cascade processes to Comp & Ben. It is your job to make them aware of it because managers are very busy people.

Bartek Podolski: We have to remember that on the other side is financial control, expectations from the executives, and money restrictions. People in the organization need to understand why it is not possible to spend everything on payments. It seems that there are two forces. The first one is controlling, budget planning, and policies. On the other side, we have expectations from the managers. Comp & Ben is just in between.

Magdalena Tur: You are right. Compensation and Benefits are in the middle. What is more, it is often perceived by managers as a part of financial control and it is not a full picture. Some employees think that it is a part of HR operations but it is not a full story of Comp & Ben either. Generally speaking, people are not aware of the real value that this function makes to the company. How can we change it?

Bartek Podolski: By expressing that it is one of the central functions within an organization. For example, if we have a company with offices in many countries, Comp & Ben will be centralized and probably based in the headquarter. Then policies and regulations prepared by Comp & Ben may be cascaded to other offices and be adjusted in accordance with, for example, country regulations. HR departments which are dealing with payrolls are mostly local.

Magdalena Tur: Yes, HR is usually connected with the local labor roles.

Bartek Podolski: This part of HR cannot be centralized... Indeed, there are quite a few challenges related to Compensation and Benefits related to the education of employees, tools, processes, and reducing the feeling of anxiety during changes within these areas. The other day we also spoke about the exposure of Comp & Ben as usually it is not emphasized well enough. As we already mentioned, the HR department is needed in the first place. Then we need some more sophisticated actions related to HR operations. Comp & Ben is at the end of this chain. The organization has to be aware that it needs planning and strategic thinking.

Magdalena Tur: And once you are aware of it, you need also tools and processes. But here we have a problem because very often it is not possible to get money for IT tools if you are not visible in the organization.

Bartek Podolski: The case of convincing managers to allocate money to Comp & Ben is even harder because it is a long-term investment and it will pay off in a long run. Generally speaking, people tend to focus on the current issues, they think about the current payments and benefits rather than having the future in mind. For example, I am a very impatient person and I want to have everything worked out now. But running an organization is a long-term process. Changes implemented today may bring results three or six months or even one year from now. Sometimes you use time and energy now, but only to make things happen later. And sometimes without actions or investments taken today, things may go worse in the future. But it is only my perspective…

Magdalena Tur: I think it is a very good perspective. However, the employee’s points of view may be a bit different. People will feel more comfortable when they know that someone has all the payments processes under control not only this year but also the following ones. When the right processes are in place, employees feel peaceful about their payrolls.

Bartek Podolski: Jack Walsh once said that people often ask a question: “what is in it for me?” and it is a natural situation. I think that Comp & Ben answers this question.

Magdalena Tur: At least it should. If not, a big mistake is being made. You always have to remember two perspectives: the financial one and the people-related point of view. If you have great processes and tools which are not understood by people on all levels of the organization, it will not work or impact behavior. But in fact, this is the outcome that you want to achieve at the end of the day because behavior impacts the revenue.

[25:30]

Bartek Podolski: It requires good leadership. Actually, it is a very interesting topic, but we will talk about it another time. Now I have one more question: how to achieve success in the Comp & Ben area? What would you advise to an organization that does not have a proper Comp & Ben department to make it a successful part of a company?

Magdalena Tur: In fact, many things determine success in this area. I would say that Comp & Ben is one of the most complex departments in the organization. Many different things need to be taken into account. But the most important is to start. Looking at the market, I see a lot of bigger companies that do not have Comp & Ben at all. They have never had it. We have to remember that our business environment is changing faster and faster. Right now it is almost impossible to function properly without Comp & Ben roles and long-term ways of thinking. At least, you should start planning remuneration policies and procedures as it is not possible to implement changes fast in these areas. Adjustments in the Compensation and Benefits department will go slowly and won’t be made within one day. It is a process, which should be started. The sooner it happens, the better.

Bartek Podolski: And starting is never easy...

Magdalena Tur: No, it is not. But it is needed to make improvements later. But doing nothing may cause more problems as the world keeps changing all the time. For example, you have inflation rates and disruptions on the market. Without a strategy, you may crush pretty fast.

Bartek Podolski: You mentioned a very important thing which is adjusting to the market. Without any connections with the outside world, you will not do much. It is also important to be updated regarding all actions in the industry and on the market.

Magdalena Tur: It is also one of the biggest differences between Comp & Ben and financial controlling. Compensation and Benefits need to observe the market...

Bartek Podolski: ... and financial controlling observes numbers.

Magdalena Tur: Actually I cannot imagine Comp & Ben which does not monitor changes on the market. They should compare data about internal salaries with reports from external sources.

Bartek Podolski: We also mentioned that education is also important. Comp & Ben needs to be sure that employees know about their existence, understand their role, and how it can help in achieving success. Last, but not least, I wanted to talk a bit more about processes and tools. I believe it is easier to carry on work when there is a process. When you build a process, you may see what does not work properly and needs to be improved or changed. What is more, some people may leave the organization, but processes will stay no matter what happens within the organization. It will be useful for everyone to have processes and procedures.

Magdalena Tur: Yes, but only under a condition that the process and policies are adjusted to the market. Another advantage of having well-organized processes is good access to data. It may help you in proving to managers that Comp & Ben is essential in the organization by defining the right directions and building trust among employees. When you promise something to your people, you have to deliver it. To do it, control of the process and money are needed.

Bartek Podolski: I agree with you, especially in situations when you promised bonuses that need to be paid out. I think we will talk more about processes in the next episode; however, it is worth underlining that somehow bonuses payout needs to be connected with the individual performance or achievements and total revenue of a company.

[31:11]

Magda, is there anything else that you want to add?

Magdalena Tur: No, I think we touched on many important topics today.

Bartek Podolski: Ok, so let me summarize our conversation. We were talking about Comp & Ben as a part of HR, which is not very obvious to people from organizations. We mentioned that Comp & Ben is needed in larger organizations where financial planning and budgeting remunerations become a must. Comp & Ben aims at connecting money spent with revenue. What is more, it is in between financial planning and people’s expectations. The role of Comp & Ben is to connect these two perspectives. We also said about the importance of education about the Comp & Ben role among employees. There was a discussion about why policies and procedures should be created. Additionally, we said that strategic thinking is one of the main competencies of Comp & Ben. We underlined that Comp & Ben’s actions taken now will bring success but in a long-term perspective. Once the Comp & Ben department establishes proper goals, a mechanism for many years will be created. Am I right? Would you add anything to it?

Magdalena Tur: I think you mentioned everything. I just want to encourage everyone to think about remuneration management in a long term perspective. It is not an easy task, but it is worth the extra effort. What is more, I want to emphasize that HR is not complete without Comp & Ben...

Bartek Podolski: And we are big fans of Comp & Ben! Thank you for this episode. In the next one, we will talk in detail about processes that are happening in Comp & Ben.

Magdalena Tur: Sounds like a plan. Thank you for today and see you soon.

Bartek Podolski: Thank you and see you next time.