Why the CEO Pay Ratio Proves the Value of People Analytics
This year, SEC regulations went into effect requiring publicly traded companies to calculate and disclose a number called the CEO Pay Ratio. This simple calculation sent organizations scrambling, throwing money at consultants, and diverting resources to meet this latest data-based requirement.
However, this isn’t the first time organizations needed to analyze their workforce data for regulatory or legal reasons–and it won’t be the last. It’s time to stop treating these kinds of requirements as one-offs, and get your data house in order. Read on to learn why the CEO Pay Ratio emphasizes why a people analytics solution is necessary to keep your organization compliant without data headaches.
State of Workforce Data Leads to State of Panic
Every time a new regulation asks for what appears to be straightforward workforce information, organizations are left scrambling. Why? Because data is everywhere.
Old data is separate from new data, performance data is separate from compensation data, international data is separate from North American data. The data is disparate and messy, which means there are higher incidences of errors and information doesn’t connect to each other. The different solutions that have been purchased to make business easier code things differently and ironically, makes it even harder to use your data.
And let’s not forget that companies produce a lot of data on top of all this. As Nigel Stoodley, Visier’s Chief Customer Officer, observed, “These data lakes make it difficult to find the credible and accurate information they need to make sound business decisions.”
Just look at the CEO Pay Ratio calculation as an example. Theoretically, all you need is your employee compensation data expressed as a single number per employee so that you can determine the median, and then, calculate the ratio of your CEO’s pay as a ratio to that number. It sounds as simple as a grade-school assignment, right? But when your data is located in several different systems and inconsistent, and the millions of rows that you finally manage to pull together break your Excel spreadsheet, this when the panic sets in for your team.
It’s a daunting task to clean and standardize all that data and make it useable, but with more data-based regulations on the horizon, this is a responsibility that organizations can’t afford to ignore. It’s also one that organizations have to take on alone.
A Single Source of Data Truth–and Trust
What if, instead of a sense of panic or dread, you could confidently respond to any and all requests for data as they came because you had all your workforce data in a single source of data truth? Imagine your historical data united with your current data, your data from disparate and regional solutions centralized, and any inconsistencies identified, resolved, and normalized into a cohesive data model.
When you have a people analytics solution–such as Visier People–that centralizes and transforms your data into a data model that supports all your potential queries, you can handle every regulatory requirement with ease and confidence that your numbers are correct.
Also, instead of relying on expensive consultants or pulling internal resources off other critical projects, your people analytics solution should include a partner committed to giving you as much value as possible. One with domain expertise and an eye on the regulatory landscape. so you can trust that they’re always ready to provide more capabilities to easily and quickly comply with whatever comes.
This is how Visier responded to the CEO Pay Ratio. We saw this regulation looming and knew that it would impact our customers, so we included the metrics and calculations in our latest release–all at no extra cost.
Now current–and future–Visier customers will be able to calculate this metric easily because:
- All the necessary data across all their pay systems already exists in their Visier People instance if they previously chose to add it. And even if this data still needs to be added, Visier will assist in adding it, at no charge, as part of our continuous value delivery model
- All those different pay structures and compensation options have been categorized for easy use
- The Employee Median Pay metric includes all of the compensation and employee elements necessary for automatic calculation
In addition, we’ve added CEO Pay and a calculation that uses the Employee Median Pay and CEO Pay to determine the current CEO Pay Ratio. This enables Visier People customers to calculate the ratio for their submission with a single click–no expensive consultant required.
Furthermore, our customers can rest assured that we’re scanning the horizons for the next requirement so that we can prepare for that as well so they don’t have to.
Beyond the Legalities and Regulations
Just like a storm gets us to board the windows, a deadline with the threat of a fine can push us to take action. While investing in people analytics will absolutely save you time, money, and headaches as you meet your legal and regulatory requirements, it would be short-sighted to stop there.
More than pulling the data and crunching the big numbers, people analytics will give you the insight and information that your HR organization needs to pivot from reactive to proactive, from tactical to strategic. Your talent drives your business’ competitive advantage and understanding the drivers to success–so you can remove obstacles and plan new initiatives–will you continuously give you a fresh advantage.
So yes, invest in people analytics so that you’re never at a loss to produce the numbers behind your workforce, and use it as your first step to launch a real HR transformation.
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