5 Reasons Comp Tools Matter

Perhaps the most pressing challenge for any business is attracting and retaining talent. This is even more true for fast-growing businesses because great talent fuels their growth and helps them scale — but only when it’s financially viable.

To build a capable and motivated workforce, you need to ensure employee pay is both competitive and fair. Instead of relying on guesswork and gut feelings to achieve your goals, you need dynamic compensation tools that help you make the right decisions about how to pay and reward your people.

5 Reasons Comp Tools Are Important

Whether your organization has felt the impact of turnover amid the “Great Resignation” or finds it difficult to attract individuals with scarce, in-demand skills, you know how important it is to build a successful strategy for finding and keeping talent. In fact, finding the most effective ways to attract and retain talent is one of today’s most pressing business challenges. According to a recent Conference Board survey, CEOs named attracting and retaining talent their number one area of focus for 2022.

There are many variables that employees and candidates consider when making career decisions, but pay is always at the top of the list. In a Society for Human Resource Management (SHRM) survey, 63 percent of employees said that overall compensation was a very important factor in their job satisfaction. Moreover, recent Gallup research revealed that better pay is the number one factor candidates consider when choosing a new job.

Offering compensation that encourages candidates to accept job offers and motivates current employees to stay engaged and productive is critical. Compensation analysis tools hold the keys to building pay packages that are competitive, fair, and consistent with your company’s finances, goals, values, and culture. In essence, compensation software help to bring your compensation strategy to life.

Here are five ways comp tools help you attract and retain talent for continued growth:

1. Supports Management of Company Finances and Burn Rate

To make compensation offers that contain the optimal mix of cash, equity, and other incentives, it’s critical to understand how each offer impacts your budget and equity pool. Without this understanding, you run the risk of burning through cash and your option pool quicker than you anticipate.

Comp tools allow you to see how new hire offers, employee increases, and other awards affect your finances. By illustrating your spending on salaries, bonuses, and equity awards, compensation analysis tools help you manage your burn rate and stay aligned with your budget throughout the year.

2. Helps You Pay Competitively and Consistently

Although you need to hire and retain highly talented individuals, every job offer and compensation discussion shouldn’t feel like an exception. With compensation software and analysis tools to guide your decision-making, you can develop consistent pay practices and build employee pay packages based on a sound, data-driven compensation strategy.

Comp tools deliver compensation intelligence to support your growth, so you won’t have to wonder if employee pay is competitive; you’ll know. Instead of underpaying or overpaying relative to the market, you can use compensation software to better understand the competitive pay landscape and make decisions based on carefully vetted benchmark data.

3. Supports Future Compensation Planning

Comp tools aren’t just for helping you make job offers and navigate compensation requests from candidates and employees. They can also provide data to help you model future compensation costs and compare scenarios for cash payouts and equity awards. For example, if you’re considering a transition to a fully remote or hybrid work model, you can use salary analysis tools to forecast pay packages for employees in different locations. You can also use compensation software to plan future compensation expenses associated with a new business unit or expansion.

4. Improves Transparency for a Better Employee Experience

Compensation tools provide the data you need to determine how you want to pay internally and relative to the market. With this data, you can make fair and consistent compensation decisions that increase transparency and build trust with your workforce.

Given the employee desire for more transparency and the trend toward more pay transparency laws, now is the time to leverage compensation software to drive more conversations and clarity about pay ranges for each job level.

5. Aligns Comp Decisions to Your Diversity, Equity, and Inclusion (DEI) Strategy

Pay inequities can exist in any organization, regardless of industry, stage of growth, or location. In fact, pay equity is so universally present that 86 percent of companies in a World at Work survey said they made pay equity adjustments in 2021.

Compensation tools allow you to identify and correct any existing pay inequities by making it easy to compare employee pay across job functions, levels, and roles. As a result, you get one step closer to meeting your company’s goal of offering fair, equitable pay.

Key Capabilities to Expect From Your Compensation Software

Whether your company is just getting started or is ready to launch an initial public offering (IPO), it’s never too early to explore how you can benefit from using compensation analysis tools. However, not all comp tools are the same, nor is the data you access through those tools.

For example, free compensation analysis tools off the internet and comp benchmarking from unreliable sources may be based on employee-submitted and unvalidated data. By basing your comp decision-making on this data, you can quickly fall out of step with the market and inadvertently overpay or underpay employees. Without reliable compensation analysis tools, you also lack the compensation modeling and forecasting support you need as your organization grows.

Conversely, when you utilize compensation analysis tools from a reliable source, you can be assured that comp benchmarks and data are accurate, helping you execute your company’s compensation strategy successfully. Here are just a few of the benefits you can expect from modern compensation software:

• Reliable market analysis, including location-based data
• DEI evaluation tools
• Forecasting tools to enable hiring planning and burn modeling
• Salary benchmarking data submitted via company HR information systems and validated for accuracy and completeness
• Insights to help you compare pay with companies of your industry, size, and funding stage

Leverage Comp Tools to Support Your Growth

When operating a company in growth mode, you can’t afford to rely on manual compensation research or unvalidated salary benchmarks. Taking shortcuts can drive inconsistent compensation decisions and pay practices that aren’t competitive with the market.

However, when you use compensation analysis tools that offer reliable benchmark data and tools for forecasting employee pay, you can allocate budget dollars more effectively and control your burn rate. Furthermore, compensation intelligence tools can take the guesswork out of determining the right mix of salary and equity when making job offers and determining pay adjustments. As a result, you can maintain competitive, consistent, and equitable pay practices.

To see how OpenComp’s compensation analysis tools can help you build and execute a robust compensation program that supports your continued growth, request a demo or sign up for free today.

Caitlin Allen is VP Marketing at OpenComp and has served in similar roles at Happy Returns, Lyft, and Andreessen Horowitz. She also writes about topics including marketing, sales compensation, and happiness. Connect with her on LinkedIn here.