How Compensation Management Software Can Provide an ROI of 249%

To help businesses realize the full impact of better compensation management and communication, PayScale commissioned Forrester Consulting, an independent research firm, to conduct a study evaluating the total economic impact of Payscale. This blog post is an excerpt from the study. You can download the full study here.  

If you’re still making compensation decisions based on gut feel, or if managing compensation surveys is becoming a resource drain, it may be time to consider bringing a modern compensation management solution into your organization.

At this point, over 6,500 organizations ranging from small businesses to Fortune 500 companies have chosen PayScale to help them make better decisions related to compensation and make the work of comp easier, faster and more insight-rich.

Earlier in 2017, we asked Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) that organizations may realize by deploying PayScale’s compensation intelligence platform.

Interviewed Organizations

To understand what types of compensation situations our customers faced, we had Forrester interview the following customers.

  1. Senior VP From Company Within the Finance Industry

This banking institution has 4,000 employees. Their compensation management team uses PayScale MarketPay to participate in 10 to 15 compensation surveys and review 500 positions annually.

  1. Director of Compensation From Privately Held University

This private university had 1,700 job titles that need regular compensation review. They were on a three-to four-year review cycle that has improved to annually with PayScale MarketPay.

  1. Executive Director of HR From Healthcare Nonprofit

This umbrella nonprofit organization with a primary focus in healthcare has 30 senior living communities, as well as activities in child education and communication. They use PayScale Insight to manage most job compensation reviews to help identify and manage at-risk employees in positions that are paid below the 25th percentile.

  1. Compensation Analyst at a Technology Services Provider

This technology company focuses on healthcare services and has 800 employees. They use PayScale Insight to handle quarterly job compensation reviews — more frequent than many organizations that review annually — to stay competitive in key technology areas like data analytics.

  1. Director of Compensation at a Professional and Technology Service Provider

This professional and technology services firm has 4,000 employees worldwide. They use PayScale MarketPay to manage the broad, detailed and global compensation surveys it requires to adequately set compensation for employees in specific jobs and specific reasons.

Key Pain Points

Common issues that some of these organizations faced that led them to investigate new compensation management solutions and select PayScale Insight or PayScale MarketPay were:

  • Compensation surveys were becoming a resource drain and delivering less value. Before PayScale MarketPay, companies tracked and analyzed salary surveys with lots of Excel spreadsheets. Answering each survey required a lot of cutting and pasting from the organization’s enterprise resource planning (ERP) system to the survey response forms.
  • Data gaps were growing. Some positions were growing so fast that annual salary surveys couldn’t keep up. Organizations did their best to adjust, but there were still difficulties filling or retaining key positions if compensation was not set properly.
  • Compensation for many positions was decided by gut feel. Pay decisions were unstructured, often set at whatever the last person in the role was paid or by what the hiring manager felt was a “right” salary. “It was more of a manager gut feel. They would just ask the person what their previous salary was and try to get them more than that,” said the compensation analyst at a healthcare service provider. This lack of compensation strategy and pay-decision structure was leading to many issues related to compensation management, hiring and retention.
  • Too many positions were priced below the 25th or above the 75th percentiles. Most organizations target the market median, but without the right tools to manage and track compensation, they actually end up paying significantly lower than the market; this can lead to increased turnover. Even pay that is too high can be a problem — the organization could possibly be paying too much, and it’s a very difficult conversation to have with an employee to try to resolve.

What are the requirements for compensation management solutions?

The interviewed organizations searched for a solution that could meet their needs to:

  • Help manage and speed up the logistics of salary survey response, submission and review
  • Provide accurate data with good job matching rates
  • Help identify and resolve “flight risk” positions that are paid too little
  • Help reduce turnover and recruiting costs
  • Help improve employee satisfaction

Curious about the cost savings and business benefits these organizations achieved through PayScale? Download the full study The Total Economic Impact of PayScale to find out!

Tell Us What You Think

What are your toughest problems around compensation management? We want to hear from you. Share your story in the comments.

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