Executive Summary

Total Compensation Management

Compensation management is a key talent management process involving all workers and managers within an organization. Determining and providing the appropriate compensation for each person — whether it involves base pay, merit pay or variable pay and incentives such as bonuses — is critical to attracting and retaining productive members of the workforce, including full- and part-time employees, contingent workers and contractors. The complexities of compensation often prove to be a core challenge for human resources departments as they strive to keep the organization productive, satisfied and motivated while ensuring equitable and defensible pay practices across the entire workforce.

New digital tools and capabilities in compensation are able to not only personalize rewards but can help organizations model compensation pool funding or compensation based on organizational structure.

The ability to offer a personalized employee experience, particularly when it comes to compensation and rewards, is a competitive differentiator and should be a key part of an organization’s efforts to attract and retain top talent. A tight labor market and shifts in worker expectations have put pressure on organizations to accommodate worker preferences in total compensation, where monetary and non-monetary reward schemes must be flexible enough to be personalized while still maintaining equity. Artificial intelligence and machine learning technologies increasingly make it possible to personalize compensation and rewards in a way that scales. New digital tools and capabilities in compensation are able to not only personalize rewards but can help organizations model compensation pool funding or compensation based on organizational structure. These systems can support complex plans and packages and automatically trigger a new compensation plan or configure individual packages when a worker’s status changes. They even can match jobs to compensation market data when no direct matches exist, analyzing the cost of adjusting compensation for certain job families or business segments. This is particularly relevant with the rise of skills-based hiring and promotion, where organizations must compare roles and related pay based not just on job family or title, but on the skills and competencies needed to perform in a job regardless of the functional title or organizational placement.

Total compensation management (TCM) vendors have responded to requests that they improve existing functionality. Examples include the flexibility to consider an array of factors and better visual displays of budgets, including pool allocations to workforce segments such as high-potential workers or those with desirable skills. Systems are also offering more configurable and personalized total compensation statements and much better support for communicating with employees about total compensation. These platforms also integrate to varying degrees with performance management tools and financial systems as well as payroll, competency models, third-party administrators of equity plans and other systems.

The corporate compensation function once was satisfied with distributing a compensation statement just once a year to note base salary and any bonuses. These statements have now evolved to highlight everything the organization spends on the worker, including benefits (not just insurance coverages), the value of accrued PTO, potential variable compensation and incentive payout scenarios as well as various nonfinancial rewards. Further, the annual compensation and rewards review cycle has given way to the more progressive trend of continuous compensation management. Historically, organizations have approached compensation planning cyclically, assessing the marketplace at regular intervals to ensure employee remuneration remains competitive and equitable. On the surface, this approach provides a structured way for organizations to gauge market trends, adjust compensation frameworks and budget accordingly. But in an increasingly competitive business landscape, companies recognize the vital role of continuous compensation planning in ensuring success by mitigating the risk of attrition and overzealous outlays on recruitment and retention efforts. Organizations maximizing technology to continuously monitor and adjust compensation plans will be best positioned to remain agile and responsive in an ever-evolving market.

Despite the improvements in available systems and tools, we continue to see an overreliance on spreadsheets to manage and report on data during a compensation cycle. Line managers, HR and compensation professionals along with senior leaders often think spreadsheets are more convenient, flexible and discrete. Unfortunately, this misperception can cause serious problems. Among those organizations using spreadsheets, nearly one-third (29%) said they occasionally find errors that result in incorrect payment to employees while an additional one-half find errors that they are able to correct before payment. Still, the majority of organizations we surveyed continue to rely on spreadsheets in their compensation management process, with more than one-quarter (26%) using them exclusively. Today’s best rewards platforms present data in a spreadsheet-like display, requiring minimal training and offering far better security and version control. Vendors now offer rich visualization capabilities, easy integration with employee data, market pricing data and far more modeling and what-if analyses than spreadsheets can provide. These systems also minimize the risks of data errors that can lead to financial liability or employee flight or disengagement.

No evaluation of compensation management technology would be complete without a review of its ability to support organizational efforts to ensure pay equity in the workforce. Workers’ expectation to be compensated equitably regardless of race, gender, ethnicity, age and other demographic characteristics is more prevalent than ever. This expectation is bolstered by potential investors’ increased focus on organizations environmental, social and governance (ESG) standards and behaviors as social consciousness has become a more important consideration in investment decisions. Evolving regulatory and legal requirements have also put a spotlight on the issue of pay equity, and yet our research reveals that fewer than one-half (43%) of organizations actively manage compensation equality today. Compensation management software can help organizations make informed and equitable compensation decisions.

For more than two decades, Ventana Research has conducted market research in a spectrum of related areas including TCM as well as broader HCM areas ranging from employee experience, learning management, workforce management (WFM) to payroll management and learning. We have also done research on the employee experience and candidate engagement. Our continuous research and analysis of the market for business applications and technologies guide our comprehensive approach to this Value Index.

This Value Index report evaluates the following vendors that offer products that deliver TCM as we define it: ADP, beqom, Ceridian, HiBob, Infor, Oracle, Paylocity, Payscale, PeopleFluent, Salary.com, SAP SuccessFactors, UKG, Unit4 and Workday.

Value Index Overview

Ventana Research has conducted market research in a spectrum of related areas for human capital management and across business applications to the digital technologies to support business. We have also led the establishment of the management and governance of TCM products use of collaboration capabilities, social media techniques and location-related analytics. The findings of these research undertakings contribute to our comprehensive approach.

This market report on the Total Compensation Management Value Index is the distillation of over a year of market and product research efforts by Ventana Research.

This market report on the Total Compensation Management Value Index is the distillation of over a year of market and product research efforts by Ventana Research. It is an assessment of how well vendors’ offerings will address buyers’ requirements for TCM software. The index is structured to replicate an RFI/RFP process by incorporating all criteria needed to evaluate, select, utilize and maintain technology, and maintain relationships with vendors.

In this Value Index, Ventana Research evaluates the software in seven key categories weighted to reflect buyers’ needs based on our expertise and research. Five are product-experience related: Adaptability, Capability, Manageability, Reliability, and Usability. In addition, we consider two customer-experience categories: Validation, and Total Cost of Ownership and Return on Investment (TCO/ROI). To assess functionality, one of the components of Capability, we applied the Ventana Research Value Index methodology and blueprint, which links the personas and processes for TCM to an organization’s requirements.

Unlike many IT analyst firms that rank vendors from an IT-only perspective or consider futures or vision over what is available in the products today, Ventana Research has designed the Value Index to provide a balanced perspective of vendors and products rooted in an understanding of business drivers and needs. This approach not only reduces cost and time but also minimizes the risk of making a decision that is bad for the business. Using the Value Index enables your organization to use TCM to achieve the levels of organizational efficiency and effectiveness needed for engaging digital experiences to meet your buyer, consumer, customer and partner needs. We use our research-based analytics and methodology to generate the Value Index ratings. We then build them into a set of indicators presented in both analytic and graphic form, each depicting the value of a specific vendor’s offering to your TCM needs.

The Value Index is not an abstraction; we use a carefully crafted best practices-based methodology to represent how organizations assess vendors and products.

The Value Index is not an abstraction; we use a carefully crafted best practices-based methodology to represent how organizations assess vendors and products. The Value Index is designed to ensure objective research and guidance to organizations looking to assess and evaluate applications for business and IT needs.

The structure of the Value Index reflects our understanding that the effective evaluation of vendors and products involves more than just examining product features, potential revenue or customers generated from marketing and sales. We believe it is important to take this comprehensive research-based approach, since making the wrong choice of a TCM technology can raise the total cost of ownership, lower the return on investment and hamper an organization’s ability to reach its performance potential. In addition, this approach can reduce the project’s development and deployment time, and eliminate the risk of relying on a short list of vendors that does not represent a best fit for your organization.

To ensure the accuracy of the information we collected, we asked participating vendors to provide product and company information across the seven categories that taken together reflect the concerns of a well-crafted RFP. Ventana Research then validated the information, first independently through our database of product information and extensive web-based research, and then in consultation with the vendors. Most selected vendors also participated in one-on-one consultative sessions, after which we requested them to provide additional documentation to support any new input.

Ventana Research believes that an objective review of vendors and products is a critical business strategy for the adoption and implementation of TCM software and applications. An organization’s review should include a thorough analysis of both what is possible and what is relevant. We urge organizations to do a thorough job of evaluating TCM systems and tools and offer this Value Index as both the results of our in-depth analysis of these vendors and as an evaluation methodology.

How To Use This Value Index

Evaluating Vendors: The Process

In our view, business improvement efforts should be based on best practices that research indicates deliver value quickly. Our Value Index evaluates total compensation management business systems and tools in accordance with that belief.

We advocate using the Value Index as part of a structured approach that begins by incorporating these steps into a program document that will both summarize and detail your initiative or project. Then consult the Value Index to ensure you make choices that will yield the results you want.

The steps listed below provide a framework for a technology-driven business improvement project.

1. Define the business case and goals.
   Develop the business case for investment. Define the mission of the business project: What is the purpose, why is it important, what outcome do you want to achieve and how will you measure the project’s success? The goals should be grounded in your organization’s strategy and plans and should make clear the expected outcomes.
2. Specify the project’s business requirements.
   What must be done to achieve these goals? Defining the business requirements helps identify what specific capabilities are required with respect to people, processes, information and technology.
3. Assess the required roles and responsibilities.
   Identify the individuals required for the project at every level of the organization from executives to front line workers, and determine what each will contribute.
4. Outline the project’s critical path.
   What needs to be done, in what order and who will do it? This outline should make clear the prior dependencies at each step of the project plan.
5. Develop the technology approach.
   Determine the technology approach that most closely aligns to your organization’s requirements. Then develop a comprehensive list of potential vendors and products that best fit your needs.
6. Establish technology evaluation criteria.
   Define the business and technology criteria that you will use to evaluate vendors. We recommend using the criteria we have developed based on our Benchmark Research and use to build the Value Index: Adaptability, Capability, Manageability, Reliability, TCO/ROI, Usability and Validation. This step will provide the tools necessary to move from a long list to a short list of vendors and products that you will then evaluate for final selection.
7. Evaluate and select the technology properly.
   Weight the seven categories of technology evaluation criteria to reflect the organization’s priorities. Then evaluate the short list of vendors and products based on your business case, requirements and the technology evaluation criteria for your project.
8. Establish the business initiative team to start the project.
   Identify who will lead the project and the members of the team needed to plan and execute it. Have them begin by establishing a timeline and allocating resources.

In addition to evaluating existing suppliers, the Value Index can be used to provide evaluation criteria for new projects. Applying our research can shorten the cycle time when creating an RFP.

Products Evaluated

The Findings

All of the products we evaluated are feature-rich, but not all the capabilities they offer are equally valuable to users or support everything needed across the entire life cycle of use. Moreover, the existence of too many capabilities may be a negative factor for an organization if it introduces unnecessary complexity. Nonetheless, you may decide that a larger number of functions is a plus, especially if some of them match your organization’s established practices or support an initiative that is driving the purchase of new software.

Factors beyond features and functions or vendor assessments may become a deciding factor. For example, an organization may face budget constraints such that the TCO evaluation can tip the balance to one vendor or another. This is where the Value Index methodology and the appropriate category weighting can be applied to determine the best fit of vendors and products to your specific needs.

Overall Scoring of Vendors Across Categories

The Value Index for total compensation management in 2023 finds Oracle first on the list with ADP in second place and SAP in third. Companies that place in the top three in any category earn the designation Value Index Leader. Oracle has done so in all of the seven categories, ADP in four, SAP in three, Workday and beqom in two and Unit4, Ceridian and HiBob in one category. All are Value Index Leaders.

The overall representation of the Value Index below places the rating of the Product Experience and Customer Experience on the x and y axes, respectively, to provide a visual representation and classification of the vendors. Those vendors whose Product Experience have a higher weighted performance to the axis in aggregate of the five product categories place farther to the right, while the performance and weighting for the two Customer Experience categories determines their placement on the vertical axis. In short, vendors that place closer to the upper-right on this chart performed better than those closer to the lower-left.

The research places vendors into one of four overall categories: Assurance, Exemplary, Merit or Innovative. This representation classifies vendors overall weighted performance.

Exemplary: The categorization and placement of vendors in Exemplary (upper right) represent those that performed the best in meeting the overall Product and Customer Experience requirements. The vendors awarded Exemplary are: ADP, beqom, Oracle and Unit4.

Innovative: The categorization and placement of vendors in Innovative (lower right) represent those that performed the best in meeting the overall Product Experience requirements, but did not achieve the highest levels of requirements in Customer Experience. The vendors awarded Innovative are: Payscale, SAP and Workday.

Assurance: The categorization and placement of vendors in Assurance (upper left) represent those that achieved the highest levels in the overall Customer Experience requirements, but did not achieve the highest levels of Product Experience. The vendors awarded Assurance are: Ceridian, HiBob, Salary.com and UKG.

Merit: The categorization for vendors in Merit (lower left) represent those that did not exceed the median of performance in Customer or Product Experience or surpass the threshold for the other three categories. The vendors awarded Merit are: Infor, Paylocity and PeopleFluent.

We warn that close vendor placement should not be taken to imply that the packages evaluated are functionally identical or equally well suited for use by every organization or for a specific process. Although there is a high degree of commonality in how organizations handle total compensation management, there are many idiosyncrasies and differences in how they do these functions that can make one vendor’s offering a better fit than another’s for a particular organization’s needs.

Occasionally, vendors elect not to participate in our Value Index process even though they meet our criteria for inclusion and are actively marketing their offering to the focus of the Value Index. We assess the vendor and products based on publicly available information, briefings we have received from that vendor, and our direct experience or experience of our clients with the vendor’s offering.

We explicitly indicate if a vendor has participated because a lack of information could have a negative impact on our evaluation and therefore the vendor’s Value Index rating and classification. With respect to the adequacy of publicly available information to do a thorough evaluation, vendors that limit information about their company and products on their website and through other easily accessible means limit our ability to have the depth otherwise found through active participation. The impact of a vendor not participating hinders organizations’ ability to do their own assessment.

We advise organizations to assess and evaluate vendors based on their requirements and use this research as a reference to their own evaluation of a vendor and products.

Product Experience

The process of researching products to address an organization’s needs should be comprehensive. Our Value Index methodology examines Product Experience and how it aligns with an organization’s life cycle of onboarding, configuration, operations, usage and maintenance. Too often vendors are not evaluated for the entirety of the products; instead, they are evaluated on market execution and vision of the future, which are flawed since they do not represent an organization’s requirements but how the vendor operates. As more vendors establish a Chief Products Officer role, it is essential for them to be more engaged in the product experience that they and their organization represent.

The Ventana Research Total Compensation Management Value Index 2023, based on the methodology of expertise and research, identified the weighting of Product Experience at 80% or four-fifths of the total evaluation. Importance was placed on the categories as follows: Usability (20%), Capability (20%), Reliability (15%), Adaptability (10%) and Manageability (15%). This weighting impacted vendor rankings in Product Experience and the resulting overall rankings in this Value Index. The ranking of the vendors, with Oracle, SAP and ADP being Value Index Leaders, is a result of their commitment to total compensation management technology. As the Value Index Leader and best in class in Capability, beqom met a broader range of needs for overall total compensation management, while Workday was a Value Index Leader in Usability and Adaptability.

Many organizations will only evaluate capabilities for those in IT or administration, but the Value Index identified the criticality of Usability (20% weighting) across a broader set of participants or types of personas that should also participate in total compensation management.

Customer Experience

The importance of a customer relationship with a vendor is essential to the actual success of the products and technology. The advancement of the Customer Experience and the entirety of the journey an organization has with its vendor is critical for ensuring inevitable satisfaction in working with a vendor. Thus, a vendor’s offering is not just about technology and should be evaluated using a lens that ensures the proper assessment and selection of a vendor. Technology providers that have Chief Customer Officers are most likely to have greater investments in the customer relationship and the focus to their success. These leaders also need to take responsibility for ensuring the marketing of their commitment is made abundantly clear on website and in the buying process and customer journey. Our Value Index methodology examines Customer Experience to 20% or one-fifth and represent the framework of commitment and value to the relationship. The two evaluation categories are Validation (10%) and TCO/ROI (10%) and are weighted to represent their importance to the overall Value Index, balanced with the Product Experience.

The vendors that rank the highest overall in the aggregated and weighted Customer Experience categories are Value Index Leaders Oracle, ADP and beqom. The category leaders in Customer Experience provided an impressive level of information to communicate their commitment and dedication to customer needs for total compensation management.

There were many vendors that have not made this a priority and provide little to no information on their website, in presentations or during our evaluation. Many have customer case studies to promote their success but lacked the depth on how they support an organizations’ journey to total compensation management. This makes it increasingly difficult for organizations to evaluate vendors on the merits of their commitment to customer success. As a result, many of the vendors did not rank as well in Customer Experience, though it does not mean their products will not provide total compensation management. As the commitment to a vendor is a continuous investment, the importance of supporting customer experience in a holistic evaluation should be included and not underestimated.

Appendix: Vendor Inclusion

All vendors that offer relevant total compensation management products and meet the inclusion requirements were invited to actively participate in the Value Index evaluation process at no cost to them. If a vendor did not respond to or declined the invitation, a determination was made whether to include it in our analysis based on our inclusion criteria. These criteria are designed to ensure we include all vendors with geographic operations, customer base and revenue, as well as all relevant aspects of the products’ fit for the particular category being evaluated.

For inclusion in the Ventana Research Total Compensation Management Value Index for 2023, a vendor must be in good standing financially and ethically, have at least $15 million in annual or projected revenue (as verified using independent sources such as ZoomInfo), sell products and provide support on at least two continents, and have at least 25 customers. The principal source of the relevant business unit’s revenue must be software-related and there must have been at least one major software release in the last 18 months. The product must provide total compensation management for enterprise processes and have a product that provides compensation-specific application supporting: manager and employee, analyst and administrative, analytics and planning capabilities in standalone form or as part of a suite of applications.

If a vendor is actively marketing, selling and developing a product as reflected on its website that is within the scope of the Value Index, it is automatically evaluated for inclusion. We have adopted this approach because we view it as our responsibility to assess all relevant vendors whether or not they choose to actively participate.

Five of the 14 suppliers responded positively to our requests for information and provided completed questionnaires and demonstrations to help in our analysis of their total compensation management products. Technology vendors that actively brief and update on their company, product and customer efforts were used as input to the analysis in the Value Index. Online material that was generally available was used for the analysis, along with briefings and any information the vendor did provide.

Vendors that meet our inclusion criteria and that do not participate in our Value Index are assessed on publicly available information and this could have significant impact to their Value Index classification and rating.

Vendors of Note

We did not include vendors that, as a result of our research and analysis, did not satisfy the criteria for inclusion in the Value Index, or were not included because they have not actively engaged with our firm on the topic of the Value Index. These are listed below as “Vendors of Note” so organizations utilizing this assessment guide can be assured of our exhaustive review. Inclusion criteria validation was completed to the best of our ability using information publicly available or through our research.