Jerry Amernic is a writer and public relations consultant who has worked in many sectors including the HR field. He has taught at two colleges and has served as a consultant to many organizations. He writes for newspapers and magazines and is the author of several books, the latest of which is his novel 'Gift of the Bambino'.

Terri Woods remembers how compensation management used to work at her company. It was easily the nemesis of any manager.

In a nutshell it went like this. The front-line manager called in the employee and did a performance review on their service anniversary date. The manager was then responsible for awarding the employee with an increase from one or more of their compensation and incentive programs. The manager may have had only the one review to do that day, or that week, and chances were good they wanted it done as soon as possible so they could get back to work.

It wasn’t a priority.

Of course, this wasn’t anything close to being an equitable system since employees who were evaluated during a recession – when profits may have been low or even non-existent – were obviously at a great disadvantage next to those evaluated in the midst of a boom. But that’s how it was done. Then, after the interview, the manager got embroiled in an unending stream of paperwork that was guaranteed to be a painful experience.

All the company data about employee compensation and rewards was on spreadsheets so the manager had to dig out these dinosaurs and determine what kind of increase or bonus the employee deserved. This took time and often meant – even in an age of high-tech – reverting to a paper, pencil and calculator. Sometimes mistakes were made.

In fact, the entire system of compensation management was pretty close to a nightmare, as it is in many organizations. The same information keeps getting keyed in or is entered repeatedly on paper documents, and usually there are all kinds of documents – in different formats – to be filled out. In short, the whole function is time-consuming, labor-intensive, and expensive.

Woods, who is Vice President of Human Resources for the Dallas-based Hunt Petroleum, a multi-million, 375-employee organization – which makes it one of the largest independent oil-and-gas company in the United States – says she didn’t escape the drudgery of the task either. Every month she had to meet with the 12 managers responsible for compensation reviews and discuss the reviews each of them did for that particular month. She estimates this took four days – every month.

“It was a huge chunk of my time,” she says.

Easy to get bogged down
Hunt Petroleum is no longer doing performance reviews on the service anniversary date of its employees; instead the company does all the reviews at the same time. But even organizations that do it this way can suffer since a company, especially a large one, can get bogged down to the point that everything else comes to a standstill, which affects the bottom line. And then there are other factors that come into the equation. For example, what about a company that grew through an aggressive acquisitions strategy, but has since changed to an operating excellence strategy?

As the leading provider of comprehensive waste management services, Waste Management serves municipal, commercial, industrial and residential customers throughout North America. Headquartered in Houston, Texas, the company’s network of operations includes 302 active landfill disposal sites, 16 waste-to-energy plants, 69 landfill gas-to-energy facilities, 190 recycling plants, 300 transfer stations and 467 hauling companies. Combined, these resources allow Waste Management to offer a full range of environmental services to approximately 25 million residential and two million commercial customers nationwide.

But until recently this company, which today has revenues of $11 billion a year, was close to a compensation nightmare. Gary Winters, Manager of Compensation Services, put it this way: “We had 880 different payroll systems. It’s true. In the 1998-1999 time frame we grew significantly by buying a lot of little companies. We put their people under the umbrella of Waste Management, but all those companies had their own payroll systems.”

And so, says Winters, without a comprehensive and standardized approach to dealing with pay increases, one location may have awarded 7%, another may have awarded 6%, and another 4% before anyone knew the total costs.

Not effective
Lack of uniformity is a big problem with compensation management. From ‘A’ to ‘Z’, the system is often not effective; it’s just one labor-intensive function after another. Every step of the way the manager gets embroiled in paper and repetitive tasks. What’s more, there may not be any audit mechanism or trail to accurately examine the history of employee awards. This is where some practical Human Resources Information Systems (HRIS) thinking comes in handy.

“I talked with my peers in the industry and I also talked it over with our own IS people,” says Hunt Petroleum’s Woods. “We felt we had to do something. Managers making a lot of money were bogged down in a process that was largely wasted time not well spent.”

Woods said the usual thing is that people of her level blindly accept the way things are done as a necessary, time-consuming, labor-intensive process. They just go through with it. But few would argue that, in this day and age, there can’t be a better way. And, of course, there is. Woods found it with a web-based application and so did Gary Winters of Waste Management.

“The four days I used to spend every month with my managers, discussing their performance reviews, is now down to one day,” says Woods. “I go in and set up the parameters in the system myself, and all my managers have access to it. The managers themselves spend far less time on reviews and since they no longer have to sit down with papers and pencils and calculators, the level of accuracy is way up. But what they like most of all is the convenience. They can do this stuff whenever they want – early in the morning, after hours, whatever. And when it’s over and we have to go into the system to find information, we can.”

Less time now
Woods says a typical manager with 20-30 people reporting to them now spends 50-60% less time on reviews than they used to. What’s more, fewer meetings are scheduled, and both managers and their employees are more productive. And all it took was the right HRIS approach.

Winters of Waste Management makes this observation: “The bigger the company the greater the chance you’ll have variations in your pay programs. A company like ours would have one category for residential drivers, another category for accountants, and another for sales people. But most organizations want a single way to award their compensation increases and compensation managers want a standard tool so they can give everybody a fair increase.”

The solution that Hunt Petroleum and Waste Management took was OSM – Online Salary Management. It’s a web-based application developed by Sentient Inc., an HRIS software development group in Dallas, Texas. The point of such web-based software is to enhance and simplify the process for annual corporate salary planning and compensation management. This all-too-complex budgeting exercise typically includes the rewarding of pay increases, bonuses, promotions, and stock or stock options to any qualifying employee. Software solutions allow line managers to shorten the salary planning process from a matter of months to days.

Compensation management software typically interfaces with most HRIS software, however, this interface is something you will want to check on before choosing a vendor. One of the main reasons HR people are interested in specialized compensation software is that it lets them dump the troublesome, error-prone spreadsheets they used in the past.

Expensive to maintain
“In far too many organizations the compensation management process consumes disproportionately large amounts of management time and is very expensive to maintain,” says Devin Squeri, Founder and President of Sentient.

“Somebody has to put that information on spreadsheets, then e-mail it to the manager, often with a paper list of all the business rules in that organization. This is not an accurate system and can lead to budget over-runs. Any organization can have five or six different types of compensation for its employees and there is nothing to stop the manager from going outside those parameters. You have no idea how easy it is to over-compensate some people and under-compensate others. Really, it’s like throwing darts at a board. In a time with more strict budgets, it is critical to ensure that the awards go to the key people”

As for cost, Squeri says no one gives a second thought to making a phone call and asking HR when such-and-such a person was hired or what raise they received last year. But, he says, every time you pick up that phone it costs the organization about $33. That’s in terms of time. And this keeps adding up.

The basic flaw with this process is that it’s reactive and not at all proactive. You need information, so you look through your files, give up and then make the call. What’s more, the system – and it really isn’t a system at all – is such that there are no accurate and readily available reports for managers that track and compare employee performance and compensation over time. And since errors are made and people may not get the compensation they deserve, the work force can readily perceive the unfairness of it all. This leads to loss of morale and then, when your good people finally get up and leave, it’s hard to replace them.

What about EEO (equal employment opportunity)? The same problems exist here. If you’re looking for information about the level of jobs and salaries paid to certain categories of people – and the system is paper-based, full of errors, and time-consuming – then what you get might not be what you need.

Everything was streamlined
Both Woods of Hunt Petroleum and Winters of Waste Management say that OSM has helped streamline the process, but it also does more than that. The system leaves an audit trail which allows for better analysis, employee performance tracking, and compensation history. As for cost, the ROI can be quick. Woods says her company has been using OSM for a year now and has easily saved over $200,000 in lost time and productivity.

“It more than paid for itself in the first year and the updates are minimal,” she said, adding that a big advantage is that even ‘non-techies’ at her company are comfortable using it. She said the interface between the product and the company’s payroll is easy and that it’s simple to verify information. She summarized the benefits:

• Less time on reviews
• Greater productivity and accuracy for managers
• High level of security
• Ease of use
• System flexibility and convenience.

“Even our managers who are normally very averse to using a computer, and we have some of them, have no problem,” she said. “You point and click on a person’s name and the record comes up. With each entry the updates are made automatically. So now our managers don’t use spreadsheets.”

An important decision in setting up web-based systems is security – deciding who gets access to what. In the case of Hunt Petroleum, the company’s main goal was not restricting access, but giving better access to managers outside the corporate office. With earlier systems, managers outside the corporate office didn’t have as much access to information as those in corporate. The new web-based system allowed more equitable access to data

For CEOs and CFOs
Says Don Chapman, who is Vice President of Marketing for Sentient: “The ultimate beneficiary of the system is the CEO or CFO. It is our job to assist the VP of HR in making higher-level executives aware of how much company-wide productivity enhancement is available from HRIS add-ons. Companies invest millions in their HRIS systems and this is one easy and direct way to get a greater return on that outlay.”

Chapman says it’s no secret that compensation planning is probably the “most dreaded” HR task. He even used the word “hate” to describe how many people feel about it. And while he says almost everyone thinks there must be a better way, most don’t realize that add-on solutions like OSM can be operational in as little as two weeks with immediate cost-saving results for the entire organization.

Waste Management is now in the final year of a three-year turnaround that included, among other things, the complete rebuilding of its Information Systems processes. The company felt it was important to develop a culture that accurately and fairly measured the performance of the organization as a whole, and of the individual employee. Its online report to shareholders has these words from A. Maurice Myers, Chairman of the Board, President and CEO: “We have created methods and measures for key performance points so that we can track our progress frequently, regularly and accurately. We have created a company-wide conduit for communicating with each other and with our customers. We have launched programs that dramatically improve the way we manage our costs, our market strategies and our service standards.”

5,000 users
An effective HRIS approach was the solution to a big problem. But one of Waste Management’s concerns in the process is that it didn’t want to get into writing code which would be costly and time-consuming. So the company looked for a system that could be configured to meet its needs without having to write any custom code. It was able to get its compensation software configured quickly and then go right into simulated testing. Today Waste Management has almost 5,000 managers using the system in order to plan for 40,000 employees.

“Being web-enabled makes it easy to use,” Winters says. “It’s accessible. You can do it from your home or from a hotel as long as you have access clearance. This is good because you don’t have to pull the software down to your PC and we all know that a lot of people in the same company have different PCs on their desks. It also provides standardized reports and lets you send your reports right to Excel which is a big improvement over doing everything yourself on a spreadsheet. The time saving is substantial.”

Winters says he likes using an intuitive, web-based, intranet environment because it can shorten the salary-planning process from two months to two weeks by eliminating the use of spreadsheets and the collection of hard-copy data. The result is increased efficiency and accuracy. He also says it allows for better control over things like EEO and affirmative action.

But Winters advises one to tread cautiously when looking for a new way to improve compensation management. He said the worst-case scenario would be installing a new system and getting it online only to have it crash and not deliver the goods. Waste Management didn’t take any chances; the company rigorously tested its new system by having 250 users hitting the entry key at the same time – just to make sure it works.

“We are now moving to more fairness and consistency with compensation management,” Winters says, “and our people are happy about that.