Employee compensation is a business area that can significantly benefit from APIs and real-time data. With increased access to data through APIs, employees gain more transparency and ownership over their compensation, while HR decision-makers get a full picture of the success of their compensation program, says Perry Doody, chief product officer, CompTrak.
In 2021, many companies are redirecting their focus to embrace organizational API strategies. APIs or Application Programming Interfaces can enable companies to share and receive data from sources that were once inaccessible. They can help combine data from the internet, cloud-based software, SaaS applications, and even internal legacy systems.
The business world is pushing the growth in the standardized APIs market, with the API market expectedOpens a new window to register a CAGR of over 17% until 2025.
APIs mean having all the numbers relevant to a business at one’s fingertips, which can power efficiency and innovation across departments. That is a vast improvement on the ‘data islands’ that have populated the landscape for far too long and have caused business-related data to be fragmented and dispersed. But even with API growth and access to shed loads of real-time data, the opportunity to realize its full potential often remains untapped.
Compensation is one business area that stands to benefit significantly. Integrating real-time data into compensation strategies has the potential to elevate productivity, improve data-driven decision-making, and license employee experience to flourish.
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What Does This Mean for HR and Compensation?
With data centralized as a result of APIs, previously inaccessible information from HR, operations, finance, and sales can now power compensation processes and decision-making. Increased access to up-to-date data from across different silos in the organization means decisions are better informed than ever.
APIs ensure that all of that centralized data is delivered in real-time, allowing it to be updated from its source automatically, with high frequency. That is where ‘nudges’ come into the equation.
Proactive reminders or ‘nudges’ can update employees on their performance mid-cycle. If an employee knows it will only take a few more sales or a certain number more 5-star reviews to hit their target and thus boost their bonus, they will be all the more prepared to go that extra mile.
Looking at performance through compensation does not have to be limited to a retrospective analysis, where employees can only consider how they performed in previous years. Transparent real-time data means instead it can be ‘in the moment’, with employees able to see their actual performance figures and compensation value at the point of viewing. That way, they can see the evidence of their recent hard work, rather than try to guess if they are more productive this year than last.
Transforming Compensation
Transparent data on compensation and performance not only empower employees but also positively impact on their relationship with the institution at large. Just consider how opaque the traditional compensation delivery can be; a sheet of paper with the all-important numbers. Without any further explanation or detailed calculations to back up the compensation value, all an employee can do with a compensation slip is shrug or smile and carry on.
Supporting the need for a revised model, the 2019 Deloitte Global Human Capital Trends reportOpens a new window states that only 18% of respondents believe that their companies have a “very transparent†model to communicate pay information. The modern alternative builds trust between employer and employee, with both on the same page, with the same information, working together towards hitting performance targets.
Another critical use of APIs is to collate marketwide data, from which managers can reap the benefits. Data on salary trends in the industry, competitor salaries and company performance relative to competitors can enable decision-makers to make real-time salary adjustments at the pace of the market. That information can be indispensable to employers who can ensure high performers are sufficiently compensated. In the 2020 Compensation Best Practices ReportOpens a new window , 66% of organizations said employee retention was a top concern.
Ultimately, the more transparent, real-time data available, the better equipped all stakeholders will be to make faster data-driven decisions.
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Reaping the Benefits
Compensation platforms fueled by real-time data are an essential tool in the fight to win the talent war. Employee experience is boosted by transparent, trust-building compensation and performance data, and ‘nudges’ will play their part in hitting targets, meaning better performance and more organizational growth.
Decision-makers also gain an overview of the effectiveness of their compensation programs. With real-time data on compensation and performance, they are well placed to pivot, tweak or redesign programs based on how external factors may be affecting your business. Companies can analyze how much external disruption, like the COVID-19 pandemic, for example, is affecting numbers and whether performance targets should be readjusted to keep employees engaged while working remotely.
Facebook was one company that choseOpens a new window to pivot drastically with their compensation process due to the COVID-19 pandemic, giving all employees an “exceeds expectations†performance rating for the first two quarters of 2020. Other companies reportedly canceled their next review cycle altogether.
What the future holds and how precisely to respond are open questions, but having an agile compensation platform with the power to adapt and pivot has scarcely ever been more valuable. In one fell swoop, compensation platforms enriched by real-time data can bring outdated compensation programs into 2021. Real-time data on market trends, salaries and performance can be centralized, making it easily accessible at all levels of an organization. This clears the way for talent retention and top-level decision-making to flourish and employee experience to reach ever greater heights.