Using People Analytics to Inform Compensation Strategy

Key takeaways

• Compensation professionals have used data for years, and people analytics builds on that foundation.
• People analytics teams provide extra resources, specialized expertise, and fresh perspectives.
• Compensation and people analytics teams achieve better results when they work together.

If you've been in the HR space, you've probably heard about people analytics, the data-driven method of studying people processes, functions, and challenges in business environments. It's sometimes called HR analytics.

Professionals in the reward function have long been using data analytics to optimize business outcomes through means such as talent retention and acquisition. In other words, people analytics is nothing new. This may have led some reward professionals to believe they had little to gain from drawing on expertise from their “PA” peers, who are exploring many of the same data-driven processes that compensation has built its house on.

However, now that people analytics is here to stay, it is time to ask how compensation teams can use it to build a stronger compensation strategy.

How people analytics can support compensation strategy

The people analytics team can help the reward function in three key ways:

1. They can be an extra resource for diving into analytics projects that reward teams may not have time (or bandwidth) to pursue.
2. A people analytics team may have expertise in specialized areas such as machine learning that the reward team does not.
3. The analytics team may provide a fresh perspective on what analysis would be useful; they can be great thinking partners because they do analytics all day.

The key to using the analytics team effectively is to treat it as a partnership.

And strong partnerships also depend on having reliable market data. The right tools can help compensation teams turn workforce insights into better pay decisions.

CompAnalyst® AI-powered Market Data combines trusted compensation data with AI-driven insights to help compensation teams make informed decisions. Learn more about it here.

Why compensation and people analytics should work together

One reason a partnership is useful is that everyone can benefit from a nuanced and detailed understanding of compensation data. Obviously, it is unwise to assume that people analytics pros have a comp planner’s degree of knowledge (or insight!) about comp data.

The most critical step in analytics is often navigating one’s way to the right question. This journey is so often better done in a partnership than a solo venture, or worse, a rivalry.

Again, people analytics and comp analytics are not two rival sports teams competing for relevance in a fabricated business bracket. Don’t skimp on the time set aside to work together even if it seems like the analytics team is eager to run off and start cranking numbers.

Examples of people analytics in compensation

Examples of workable analytics projects may not come immediately to mind. That’s quite fine; even normal for most. You may need to step back and think about questions that you would like to have answered but may have been pushed out mind because you didn’t have the resources to solve them.

One reward leader used the analytics team to review the extent to which a performance management plan was achieving its objectives. They explored questions such as:

• Did the actual compensation decisions align with the pay-for-performance policy?
• Did high performers over several years receive pay commensurate with their performance?
• Were performance ratings given consistently in different parts of the organization?

These types of projects help compensation teams understand whether their compensation strategy is delivering the intended results.

Solving data challenges together

A long-term issue around the relationship between reward and people analytics is that people analytics teams are often consumed with more work from data management than data interpretation. They’re worried about finding a way to pull data out of their HRIS in a form that is suitable for deep analysis.

These same data management issues can be equally concerning to reward professionals. The time reward spends partnering with the people analytics team will pay off in shared data management solutions that provide people analytics teams with cleaner data and reward functions with the capabilities they need.

Technology can help bring compensation data, market data, and planning together in one place. CompAnalyst® helps compensation teams manage market pricing, salary structures, and compensation planning in one platform.

Conclusion

If you have been spending time with your people analytics group, then you may already have discovered it's a wonderful partnership. It can be refreshing for people analytics professionals to work with others who are already skilled in handling data. Likewise, compensation professionals benefit from partnering with a team that is eager and capable of helping solve complex business questions.

If you’ve overlooked the potential of working together, then reach out and find a project to collaborate on.

Need help building a stronger compensation strategy? Salary.com Consulting works with organizations to improve compensation programs, pay structures, market pricing, and total rewards strategies.