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3 minute read
The world of compensation is complex and influenced by a variety of factors such as company size, location, industry, and philosophy. One thing that unites compensation professionals across the board is the critical role of data in making compensation decisions.
For many years, traditional survey data has been seen as the gold standard. While this remains true, technological advancements and volatile market conditions have increased demand for real-time data as a supplementary source. Getting compensation right is critical, and in order to have an effective data strategy, compensation leaders need answers to questions like:
- How reliable is real-time data?
- What data sources should they use in conjunction with their surveys?
- When should they deploy different data sets?
- And, how do they effectively pair survey data with alternative data sources?
The Role of Data in Compensation
Taking a “shot in the dark” is not an option for compensation professionals, whose actions have real, visible impacts on both the employer and the employees. On one hand, there is a need to meet stakeholder expectations by aligning compensation strategies to organizational goals and budget. On the other hand, there is a need to serve as champions for employees and foster an environment where people feel fairly compensated, valued, and motivated. Striking this delicate balance requires a level of precision that can only be achieved through reliable sources of data.
Traditional Survey Data
Traditional compensation surveys are a highly credible source of data and widely considered to be the gold standard. During survey participation season, thousands of companies around the world share details of employee compensation and total rewards with third-party survey vendors. These survey vendors then follow a rigorous methodology to analyze and validate the data. The meticulous nature of these surveys paired with high-volume, comprehensive data sets give users confidence in the accuracy and reliability of the results.
Real-Time Data
Recently, the compensation landscape has also started to see the rise of real-time data. Crowdsourced data is a commonly known type of real-time data in which an employee self-reports their compensation and rewards information to public platforms like Glassdoor. Recently, Compa released Compa Index, which “collects compensation data using offers from applicant tracking systems”. This has piqued the interest in offer-based data as another viable form of real-time data. Real-time data is relatively newer and often less regulated than traditional compensation surveys, but more and more compensation leaders are starting to see a place for it.
The Value of Supplementing
While traditional compensation surveys remain fundamental in the space, compensation professionals are increasingly turning to real-time data as an alternative source, especially during times of market volatility. Given that traditional survey results are typically released yearly or at regular intervals throughout the year, they may not always feel reflective of the current state of the labor market.
During times when the market shifts faster than expected, compensation teams may be faced with pressing organizational needs—such as a sudden increase in demand for a particular role or changes to an organization’s financial standing. In these moments, real-time data can provide a pulse on current market conditions, as well as arm compensation teams with another layer of credibility they need to implement, justify, and communicate their pay strategies.
Supplementing with real-time data may also help compensation teams take a proactive approach in their talent strategy. In today’s day and age, employees also have several resources at their fingertips that provide insights into how much people are getting paid for a particular role. Sources may include third-party forums, conversations with other recruiters, and pay ranges listed on other job postings. These sources will not have the same level of accuracy that traditional surveys do, but they nonetheless empower employees to step into salary conversations with more knowledge. By supplementing with real-time data, compensation teams can stay more up-to-date on the latest market trends and gain a competitive edge when it comes to attracting and retaining top talent.
Integrating Multiple Data Sources into Workflow
Using different data sources helps compensation professionals gain a more comprehensive understanding of market conditions impacting their pay strategies. A critical part of understanding how to weave these data sources together is to recognize that they have different use cases. Charlie Franklin, CEO of Compa, explains this using the analogy of an energy grid; Charlie compares an energy grid’s base load to traditional survey data because it offers stability and thus is great for “foundational, high-volume, and stable pay strategy” while real-time data is better equipped to handle “volatility or peak demand.” Additionally, given the unique capabilities of each data source, it may not be necessary to supplement with real-time data for all your jobs. Instead, it is arguably more efficient and beneficial to focus on supplementing your “core” jobs (such as a software engineer for a tech company or a financial analyst for an investment firm), since these are areas where you need to be the most competitive.
Traditional survey data and real-time data each offer its own unique value. Having both tools in the toolbox and knowing how and when to weave them together gives compensation teams a fresh perspective and a competitive edge needed to keep up in this ever-changing market. Having a comprehensive data set also provides greater confidence and credibility when building your case or justifying and communicating decisions to both stakeholders and employees.
BetterComp partners with both your favorite compensation survey vendors and real-time data sources to help compensation teams make the most informed decisions. Connect with our team of experts to learn more!
