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5 Profound Pitfalls of Spreadsheets in Compensation

There are several benefits of spreadsheets in business - but unfortunately compensation planning isn’t one of them. With up to 70% of your company’s operating costs being compensation, why would you risk relying on spreadsheets to manage your compensation planning process?

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5 Profound Pitfalls of Spreadsheets in Compensation

Let’s examine some pitfalls of using spreadsheets for compensation planning:

  1. The Error Effect
  2. Risky Business
  3. Flying Blind
  4. Growing Pains
  5. Tick Tock

The Error Effect

While any human intervention increases the potential for error, organizations often rely on many different managers in the compensation process, compounding the risk and opportunity for error. As each manager submits their version of a planning spreadsheet there are several opportunities for errors. Numbers are added manually, with edits hopefully saved each time, formulas may be applied or changed incorrectly, and new employees may or may not be included… You get the idea. Multiply this by hundreds of managers and your compensation analyst is up against the almost impossible task of consolidating everyone’s input, identifying errors, recalculating models and sorting fact from fiction.

Risky Business

Just as concerning as the risk of errors are the issues of security and compliance. Compensation data is confidential and with potentially hundreds of spreadsheets floating around the company, along with the inevitable laptops that go missing, you have a recipe for disaster. Ensuring compliance with industry, state, local and federal mandates may prove challenging as well due to reduced control of the process. Security and audit trail requirements must also be kept top-ofmind. With so many spreadsheets in circulation across managers, divisions and departments, the multiplier effect makes the ability to track who changed what as well as maintaining control over data access an almost impossible task.

Flying Blind

Revenue Per Employee is one of the most useful ratios to compare business performance with competitors, and is a key indicator of how efficiently your company is performing compared to your competitors. Ideally, your company wants the highest revenue per employee possible, as it denotes higher productivity, something that will make your CFO, and the entire executive team, smile.

Growing Pains

As companies grow and build out their organizations, manual steps and the paper chase of disconnected spreadsheets simply can’t scale to effectively manage the compensation planning process. A company on a growth trajectory from tens to hundreds or thousands of employees requires agility and the ability to quickly react to change. In a high growth environment, spreadsheets can quickly become unwieldy and wildly complex. Compensation planning also requires analyzing and sorting data from numerous sources, both internal and external, including market data, survey data, salary targets and more. Attempting to aggregate large amounts of disparate data with spreadsheets requires cobbling data together, manually inputting that data, sorting columns, entering formulas – and then hoping that the hundreds of managers who receive it don’t mistakenly change key data details.

Tick Tock

All of the challenges with spreadsheets that we’ve explored above take an enormous amount of time to manage. Compensation analysts want to deliver strategic value to the organization. Instead, with spreadsheets as their key tool, they get bogged down in tactical, menial work while spending more time chasing down managers to complete their compensation planning tasks. So stop wasting time! A move away from spreadsheets to an automated compensation management system enables compensation analysts to shift from a tactical contributor to a strategic player in the HR organization.