New Data Shows the (Surprising) Buyer Priorities for Compensation Management Systems

Companies often spend more time managing their petty cash drawer than they do thinking about the strategic importance of their compensation systems and structure. 

That quote from a previous iteration of our research on compensation data, technology, and buyer behaviors was one of the big takeaways we had after interviewing dozens of HR and compensation professionals.

However, that sentiment seems to be changing.

In our new research which includes responses from more than 800 employers, we found some noteworthy and surprising changes occurring in the market. For instance, more SMB firms are entering the market and going beyond the confines of spreadsheets to support their decisions and talent priorities.

Other key findings in the data:

1. More companies than ever before are using a variety of data sources, both conventional and unconventional, to support compensation practices and design
2. There are a greater number of employers using compensation management technology than any previous measurement period
3. We see a significant shift in the market on the horizon, with one in two companies planning to evaluate new technology providers in the coming 12-24 months

Some of this is due to a maturing buyer market, but other external factors are driving complexity as well. For example, one industry study found that about one in four Americans moved to a new state last year. While that is intriguing as a standalone fact, it also highlights an increasing demand for employers to understand where their people are, what pay differentials exist regionally, and how to accommodate the needs of the workforce alongside the needs of the business.

Our hiring data show that 70% of employers plan to do more remote and location-agnostic hiring in the coming year, which means companies that were traditionally concerned with local pay data have to step up their game to meet this new demand.

These signs all point to an increasing strategic importance for compensation not just as a talent practice, but as a business practice. 

Critical Drivers for Compensation Vendor Selection

The profile for a buyer of compensation technology and data has matured since our last measurement. To clarify those stages and differentiators, we have developed a compensation buyer maturity model based on our examination of data from hundreds of organizations and dozens of interviews with executives in the last two years that is featured within the research report.

Overall, we found that the decision drivers for different buyer personas vary based on where they are in the buyer journey. The table below examines the top decision points for current users, those considering a new provider, and those that are potential first time buyers.

Top Five Factors in System Choice, Ranked by Audience

As evidenced by the data, one of the biggest drivers for those changing systems is around a need for high-quality customer support. We heard time and time again in our research interviews that throughout 2020, employers needed a variety of support and assistance from providers.Note: colors are used to match responses across groups for easy analysis. The +/- figures indicate change in position since our last measurement period. For instance, +3 means a priority jumped up 3 slots on the list.

Compensation technology wasn’t immune to that demand. In those cases where support wasn’t available, those employers are now seeking new providers that can offer the help they need. It didn’t just show up in the data as a priority--it jumped nine spots to the number one thing employers want when they are considering alternative providers.

Other factors exist here, clearly, but it just goes to show that savvy buyers don’t just want a piece of software--they want expertise and a partnership from their providers.

A Developing Landscape of Smart Technologies

One major component of this research is an evaluation of the compensation technology market landscape, its key players, and their differentiators. We found continued innovation in the marketplace by the different companies we spoke with, and it signals an exciting time for the compensation professional community that is seeking to elevate the status of their function.

As an example, buyers were intrigued by offerings that tie into compensation and enable them to perform their jobs in a more effective way, such as job description management, smart alerts and notifications, and other relevant functionality. While the core capabilities of managing compensation structures, market pricing jobs, and evaluating pay data are still relevant, more mature buyers are looking ahead to other business-relevant conversations, such as pay equity dashboards to create more informed conversations with stakeholders.

The bottom line is clear: compensation has never before played such a pivotal role in the success of the business, and you need to be informed on how to make the most of this opportunity. The brand new report is designed as a tool to help you understand how to examine the technology in the market as well as what to consider when making a buying decision. In addition, it offers insights into what tools are available and how they compare and contrast. It offers a crucial set of insights for those talent-oriented leaders that want to drive strategic value through better and more data-driven compensation practices.

To learn more about the findings in this report, please join us for a webinar on December 6:

To download the full report, please click here.

You can also join us for a webinar on December 6: State of the Compensation Technology Market: How Today's Comp Pros Make Decisions, Select Technology, and Deliver Value.

Contributed by: Ben Eubanks, Chief Research Officer, Lighthouse Research & Advisory.