Real-time Market Data: The Panacea for Compensation Decisions

Are you tired of using outdated compensation data to make pay decisions? Real-time market data is the panacea. Charlie Franklin, CEO of Compa, and Nick Klute, a senior compensation leader at DoorDash, recently held a webinar to discuss the benefits of using real-time market data in compensation decision-making. This is a summary of what they discussed.

Missed the live conversation? Access the recording here.

Key Topics:

• Real-time market data: What it is and how it improves compensation decisions.
• Reducing equity compensation guidelines and model: Companies are reducing equity package guidelines and changing their compensation philosophy.
• Pay transparency: The importance of educating leaders and employees on how compensation decisions are made.
• Navigating macroeconomic changes: How to make compensation decisions during times of market volatility.

Real-time Market Data: What It Is and How It Improves Compensation Decisions

Do you ever feel like your compensation data is outdated as soon as you receive it? Join the club. Many compensation leaders have been bitten by outdated compensation data, whether by a prospective employee rejecting what you thought was a competitive offer or by current employees who have been recruited by competitors with enticing offers above your compensation models. According to Nick Klute, with real-time market data, these problems disappear into the ether. It’s been his experience that real-time market data provided up-to-date information on pay ranges and offers and allowed him to make informed compensation decisions that were relevant to the current market.

Real-time market data also offers insights into how the market is changing and where it's headed. This allows him to make proactive compensation decisions that keep DoorDash ahead of the curve. Nick noted that if you’re relying on data that’s 6-12 months old, you risk eroding the trust management has in compensation leaders competence, especially if a top candidate rejects an offer because the data set you were working from was, to put it bluntly, irrelevant. Real-time market data lends credibility to a compensation leader’s function and enhances their role as a critical player in the success of an organization. Bottom line: in many respects, real-time market data not only greatly improves the nature of compensation discussions by replacing irrelevant information with factual information, but it also elevates the perception of the compensation leader as a critical player at the table, rather than a lagging contributor.

Reflecting on how real time data has impacted comp leaders, Charlie Franklin said that ten years ago comp leaders often had to untangle comp data that bounced all around. Then, it didn’t make sense and couldn’t be trusted. Today, with the flux in the economy, comp data that looks stable and steady can’t be trusted because there are fundamental changes happening all the time. This paradigm shift makes it crucial to have real time data.

Nick also discussed the value of monitoring many data points to determine comp trajectory and to predict how to address the market and competition. Charlie emphasized how vital it was to turn comp leaders into predictive forces inside their companies, rather than lagging managers who dabble in one-off anecdotes to adjust compensation. When comp leaders are out front leveraging a reliable system, they can play a more strategic role in helping the company plan for what’s coming. To this point, Nick discussed how access to thousands of data points from various tech companies via the Compa ecosystem was so much more valuable than merely relying on internal metrics or self-reported compensation data points exclusively. The net of it is that the quantity of data points leads to the quality of compensation decisions and practices. 

Reducing Equity Compensation Guidelines: Companies Are Changing Their Compensation Philosophy

If you’re struggling to keep up with the changing compensation landscape, particularly with respect to equity compensation guidelines and models, you're not alone. Many companies are reducing their equity packages for existing and new employees in response to market volatility. Others are looking to adjust their vesting schedules to ensure they retain their most valuable employees. In all cases, it means employees may not receive the same equity packages they would have in previous years.

To navigate these changes, it's important to have good data to educate your leadership team on why the changes are necessary. This can best be achieved by looking at key competitors in key markets to understand how their equity packages are changing and how your model and guidelines compare. Additionally, it's important to look at cohorts of employees and understand how the changes will impact them specifically. This will allow you to design interventions that prioritize those who need it most and minimize negative impacts, including attrition of highly valued employees. Generationally speaking, Nick and Charlie discussed why younger employees over the past 18 months because of the down economy were opting for more cash and less willing to take a larger percentage of their compensation in stock. 

Pay Transparency: The Importance of Educating Leaders and Employees on Compensation Decisions

Gone are the days of a black box approach to compensation decisions. Employees and candidates are expecting more transparency in how compensation decisions are made. In this new Jerry Maguire era of “show me the money” there exists a parallel, expected element from candidates which is “show me the calculation.” This very large elephant in the room is and will remain a permanent fixture, requiring compensation professionals to outline in more detail the objective rationale for pay decisions. 

Compensation leaders aren’t exactly operating as “day traders” with respect to daily ups and downs of real-time compensation data like stocks, but rather looking at the current data in relation to the horizon and predicting how models might change over time. As a compensation professional, it's critical to educate your leadership team on the importance of transparency in compensation decisions. This will build trust with employees and ensure that pay decisions are fair and equitable.

Nick and Charlie also addressed the impact of pay transparency on top of funnel drop outs. Without real time comp data, pay bands in job ads might be arbitrarily low and cause companies to miss out on top candidates right off the bat. For top candidates who do engage, Charlie discussed how much more productive and effective compensation discussions can be when real time data is front and center. These frank and fair discussions tend to improve communications and candidates have a much better experience in the recruiting process. 

Navigating Macroeconomic Changes: How to Make Compensation Decisions During Times of Market Volatility

The current economic climate has spawned new challenges for compensation decision-making. With market volatility, it can be difficult to make informed decisions that keep your company competitive. In certain tech areas, layoffs are taking place regularly which has increased the supply of certain cohorts of talent. As such, recently laid off candidates might be offered less than incumbents for the same job. 

One way to navigate these changes is to use real-time market data to inform your decisions. This will provide you with current and relevant information on pay ranges and offers. Additionally, it's important to be proactive in your compensation decisions and prioritize interventions that will have the most impact.

Conclusion

Real-time market data is the future of compensation decision-making. With its up-to-date information and insights into market trends, it allows companies to make informed and proactive decisions. Additionally, adjusting equity compensation guidelines and prioritizing pay transparency are important for building trust with employees and ensuring that pay decisions are fair and equitable. By using real-time market data and being proactive in compensation decision-making, companies can navigate macroeconomic changes and stay competitive in the market.

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