Sean Luitjens – HR Tech 2023 – Leveraging People Analytics for Compensation Allocation

Connect with Sean Luitjens:

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Connect with David:

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• david.turetsky@salary.com

Podcast Manager, Karissa Harris:

• HRDataLabs@salary.com

 

Production by Affogato Media

Resources:

• Salary.com's Consulting Practice
• Visier
• Season 6 bonus 9
• Season 6 bonus 7

• “At a high level, the [HR] practitioner is being asked to pay differently but the same.”
• “Don’t be afraid to be wrong . . . The good and the bad with pay equity is that you can’t fix it on one given day, so you have the ability to aim, fire, aim, fire as you go.”

Announcer: 0:02

Here's an experiment for you. Take passionate experts in human resource technology, invite cross industry experts from inside and outside HR. Mix in what's happening in people analytics today. Give them the technology to connect, hit record for their discussions into a beaker. Mix thoroughly. And voila, you get the HR Data Labs podcast, where we explore the impact of data and analytics to your business. We may get passionate, and even irreverent, that count on each episode challenging and enhancing your understanding of the way people data can be used to solve real world problems. Now, here's your host, David Turetsky.

 

David Turetsky: 0:46

Hello, and welcome to the HR Data Labs podcast. I'm your host, David Turetsky. As always, we try and find fun, fascinating people to talk to you about the world of HR, inside and outside of HR as well. Today, we get to speak to my friend, Sean Luitjens from Visier, he'll give his past he's been many places. But we're here at the HR Technology Conference. Sean, how are you?

 

Sean Luitjens: 1:08

I'm great. This is awesome. I know you just mentioned it. But there are pigeons flying throughout here. It's very interesting. It's a giant indoor complex with pigeons.

 

David Turetsky: 1:16

Flying in the conference. I don't think that's actually a feature. I think that's a bug.

 

Sean Luitjens: 1:21

Well, I'm, you know, I do live out in the country a little bit. So I appreciate them bringing a little bit of that into the building for me.

 

David Turetsky: 1:27

Yes, rats with wings are something that we should be open for. So Sean why don't you give a little bit about your background?

 

Sean Luitjens: 1:36

So I've been in HR for 30 years, 25 years? A long time basically doing talent acquisition software, compensation benefits software, places like Salary.com and the past Korn Ferry, Mercer and now at Visier, all of it's always been around building software and working with, you know, clients and partners and never a practitioner, because honestly, David, that that looks really hard. And I'd rather provide them really cool tools and let them do the work!

 

David Turetsky: 2:04

Yeah. Well, as a former practitioner, it really is hard. But the the fascinating thing about being a practitioner and then being the solution, or trying to be an innovator in it, is that you think you know, but you don't, from what you did, because things change. And so I don't know everything, I definitely don't know everything. And so the wonderful part about doing this work is to be able to talk to people, and to be able to get their perspective on what happens now. So you're right, it is you know, being a practitioner is hard. We're going to talk about that a little bit with our topic today. But Sean, before we get to that, what's one fun thing that no one knows about Sean?

 

Sean Luitjens: 2:46

Probably some know, but I'm definitely an avid outdoors person. So which is interesting since I'm in Vegas, Vegas is in my top five places to generally not visit.

 

David Turetsky: 2:55

Really?

 

Sean Luitjens: 2:55

Yeah. So it's a lot. But you know, I love being outdoors. So basically, you know, I would say 17 year old in an old person's body but 19 so that on legal for my wife. But I love being in the outdoors. So it's interesting. So kind of a dichotomy of loving the outdoors, swim, bike, run, hike, kayak, and then work on HR technology.

 

David Turetsky: 3:15

Well, you know, the fun thing about Vegas is that the Grand Canyon's not too far away.

 

Sean Luitjens: 3:20

Be there Saturday.

 

David Turetsky: 3:21

Oh, that's amazing. And I actually run every morning, and I love running in Vegas, because it's just it's always nice out in the morning.

 

Sean Luitjens: 3:29

That's a fact.

 

David Turetsky: 3:30

And it is just it seems like it seems like you know, there's at one time right after the sun breaks when it's just the new day and it just feels wonderful to run here. So, but I hear you and good luck at the Grand Canyon. It's wonderful place to go.

 

Sean Luitjens: 3:44

I love it. I've done, so HR Tech, before we go to the real work, I always have I've bouyed a lot of trips here. I tell people Vegas, would jokingly, Vegas, everyone should go once, no one should have to go twice, if they don't want. But outside of Vegas, you know, Zion's a couple hours, Death Valley's a couple hours, the Grand Canyon, either rim is a couple hours, there's so many beautiful places that go out around outside of Vegas, and obviously, you know, it's the center of the universe for HR Tech this week.

 

David Turetsky: 4:09

Yeah. So Sean, let's talk about our topic for today, we're going to talk about leveraging people analytics in the compensation allocation process. And the beautiful part about that is that it's actually evolved significantly over time. Let's first start with why has it become so difficult to allocate compensation with all of the wonderful technology that is available today?

 

Sean Luitjens: 4:41

Yeah, I think just because more, you know, you mentioned the practitioners, more is being asked of the practitioners now. So and I know we'll go into depth of this but at a high level, I kind of joke at one side they are asked to differentiate for pay for performance or a nine box or come up with some complicated way to make sure that people are being paid differently. And then on the other side of the spectrum you have to pay fairly or equally. So at a high level the practitioner is being asked to, you need to pay differently, but the same. And so how do you actually square that out through the process? And the compensation process is a way to tackle some of those issues.

 

David Turetsky: 5:14

Right. But I mean, let me fundamentally disagree with one thing you just said, it's not paying the same. Pay equity is not paying the same. It's paying fairly, fairly within some guidelines, so that you're paying people doing the same work at ostensibly the same level.

 

Sean Luitjens: 5:32

Correct. Which is why I think technology becomes the key part, right? So if you don't have tech to measure how you're differentiating and document that, then you have to pay the same and you don't want to pay the same. And so now you have more tools and more things to do through the process. And I might date myself a little, you know, when 360s came out, it was kind of a thing you did it, you check the box, and it didn't matter. Now, they really matter, right? So you have to make sure everyone does their diligence goes through and why is David a better performer than Sean so that I can pay in a differentiated way? Because if I don't document and manage that, then by theory, we're doing the same job on paper.

 

David Turetsky: 6:09

We could also argue, though, that trying to differentiate with 3% increases, doesn't really help very much.

 

Sean Luitjens: 6:15

Agree.

 

David Turetsky: 6:16

Well now three and a half, maybe four, but depends still.

 

Sean Luitjens: 6:19

Depends what you read.

 

David Turetsky: 6:20

Even so we again, what you experienced. But even so it's just very hard to differentiate pay, or differentiate based on performance when you're not dealing with a lot.

 

Sean Luitjens: 6:30

But depending where we go, I think that's where there is some upside to where the tech's going now. So if you can go back and say, I'm going to lower my, you know, risk of resignation and my turnover, and I'm going to do these things because statistically, if you give me another percent, you know, so I moved from three and a half to four and a half percent or 5%, I'm going to save you two points. That's the math that you need to run up to the CFO with. Otherwise, you're asking the CFO for more money without a rationale and that's hard!

 

David Turetsky: 6:57

Yeah, I think I've tried in the past to run past CFOs, give me more money, I will, you know, try and make a business case that we're going to reduce turnover and therefore reduce costs. And I got back, well, it's not a zero sum game, you don't get that money, we have to actually keep that money. So we're increasing our margins, or at least we're steadying our margins. So I've had that happen as a practitioner. And it's a tough fight.

 

Sean Luitjens: 7:23

It is and pulling in the data analytics or whatever tool you want to use, I guess, if you pull it in from across the business and say, just out of a compensation lane, but integrate that into your your compensation worlds. The two have to get married together, otherwise, the ROI doesn't make sense. It's just a turnover game, not a business

 

David Turetsky: 7:40

Totally. And that's where I think the CFO ROI needs to generate that aha moment for themselves. When it comes from us from the compensation world, it's a self serving, you know, ask, but when the CFO comes up with it on their own, because they're getting that notification of, hey, you know, the our turnover has gone down because of our increasing spend on programs like merit or other things that's kind of natively informing them from the analytics that they trust, not from the anecdotal crap that comes out of comp that they might believe they may not believe. But this then gives them the opportunity to actually use it as a, you know, really good standard for them to follow.

 

Sean Luitjens: 8:26

Correct? Yeah. And again, I think that's the technology piece, and why it's got more complicated to make the business case, you've got to pull in more and more and more data from disparate systems across your company, to put it all into context for the CFO. And that's not simple. So if you imagine old school, putting it in Excel, how do you get that all squared away, to make that business case. Otherwise, to your point, it looks like I'm just trying to rationalize for more money for compensation.

 

David Turetsky: 8:49

And the CFO has become the most literate of all of the departments we deal with in terms of being able to kind of I don't know, routinize, or understand at least, or at least be able to see the the truth through the bullshit. Pardon the expression from looking at that data, right? They're really good at being able to sniff out crap when it comes to data. And, you know, it doesn't matter what system you're dealing with, if there is a integral part of what they do that actually does consume those things on a regular basis. I think it does help your business case.

 

Sean Luitjens: 9:24

Well, and I think looking back to I think that's a fundamental flaw with a lot of organizations is they do merit and rightly so they say thank goodness that's over with that was kind of miserable, making everybody happy. They don't go back and say, well, you know, 6, 12 months later, did that actually reduce the turnover in certain roles? Did high performers actually stay, people that I gave an increase to over a certain comp ratio, did they stay or go? Like, did you go back and analyze the data to say this worked or didn't work? Because I think CFOs appreciate that. You know, if you ask a CFO they're gonna want trend lines, they're gonna want productive analytics based off history. So do we produce that for them?

 

David Turetsky: 10:00

And I think that goes to then being able to see these things as being hypotheses that we test. And then actually coming back and reporting on the research. To your point back, when it becomes routine, then that actually then proves or disproves your theory, and then gives you evidence, right, but you need to have the numbers for that. And when you're dealing with things like the compensation program, you're doing this on a, not a daily basis, but on a yearly basis. And so every time you're going back to that well, for trying to justify a budget with a three and a half, or four and a half or whatever, you're using a lot of data points, and you're not making hypotheses, you're just saying, this is what it is, you know, deal with it. This is what the salary budget surveys say, you know. But I like your evidence based approach that enables you to sell a story. And I think what you're saying is, make it something where you're going to tell the CFO, what your hypothesis is, and then whether it's proven or not, so that you can justify a larger investment.

 

Sean Luitjens: 11:02

Yeah, and then adapt and move on, you know, almost like a product. I'm a product person by trade. So basically, aim, fire, aim, fire, aim, fire, right? So every company is different, we know that. And so you go back in, you look at it and say this worked, this didn't work. So let's do more of the stuff that worked. And maybe it worked in this division. And now with technology, you have that capacity to go back and say in this group, this works, in this group, the same thing doesn't work.

 

David Turetsky: 11:24

Right.

 

Announcer: 11:26

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David Turetsky: 11:37

You brought up before about pay equity. And one of the things I wanted to talk about is how have you seen companies addressing pay equity, in the context of being able to retain talent? Because you know, you can you can try and keep diverse talent. But is there really something there where you're able to actually maintain not just the diversity, but also maintain your staff as a whole?

 

Sean Luitjens: 12:03

I think pay equity is I mean, for me, it's one of the most challenging things out there, because you can't fix it by today, because as soon as you hire the next person, or the next person gets promoted? It's always a moving target. And if you're only doing merit, once a year, you know, you're hiring, it's moving throughout the year, you do promotions in the middle. So how do you arm managers who aren't, you know, pay equity experts by chance, and they're trying to do their day to day job. So if you put yourself in their shoes, they're doing a day job. And in theory, they want the best player available to do the job. And so they don't look at pay equity, they just know that I need David on the job. This is what David said he needs for pay, I almost don't care if it messes everything else up right now. Because I need David to do this job to make my number whatever my goal is in my department. And so how do you arm them with enough information and help to help them make decisions to say, well, this is what's going to happen and you know, down the road.

 

David Turetsky: 13:01

To me, that problem that you're highlighting comes down to training the manager on making sure whether it's David who needs to be supported from a pay perspective, or what he says he needs to making sure Barbara doesn't suffer, because David's getting the increase that Barbara should have gotten, and that David and Barbara aren't on the same level playing field, especially given performance and education and experience and things like that.

 

Sean Luitjens: 13:26

But I think that's the, you know, remediating it is hard, right, highlighting it, I wouldn't say is easy, but you highlight it, and there's a giant gap, and I don't, I haven't seen any companies, maybe you have, that said, well, I'm just gonna go ahead and I'm gonna bite the bullet this year and make pay equity, and I'm gonna pay it all right now and catch everybody up. Generally, what I've seen, most companies are trying to create a remediation strategy moving ahead. And say over the next couple years, while I'm doing my 3% increase, I need to catch these people up and kind of move forward. And so I think giving managers both the tools, but also kind of a forward looking predictive analysis to say, you know, if you make this change, you're only making the problem worse, or here's how you make the problem better over time, or here's the, you know, here's the differentiation, if you don't make it, what happens if I don't give Sean an increase? Even though I might want to? What's his risk to resignate or go somewhere else based on what we know in the market?

 

David Turetsky: 14:20

Well, it is a multivariate equation, right? And once you're trying to solve for, as you said, you're trying to solve for for David or Seann and Barbara, you need to make sure that that awareness of what those puts and takes do to affect pay equity. You mentioned the plan, and the plan is very important. Because once you find out you have a problem and the awareness is there. It doesn't help if you're, you know, doubling down on that when you give merit increases and they're 3% whether it's peanut butter or not, it doesn't help. But but typically what I've seen is is that that plan gets made with the CFO and there is, there is or are money set aside for those remediations to happen over time. And then to your point before, every subsequent pay change has to be taken into consideration in order to make sure that things are done, right.

 

Sean Luitjens: 15:15

And I think that's where I leverage, you know, leaning on tech, and there's solutions out there to say, here's my problem, here's how much it's going to take, here's how I look at it going forward, what happens, you know, with my pay philosophy to handle that? So if you basically model my pay philosophy on it, you know, I know you say you can't differentiate, you know, three and a half percent. So, you know, giving seven to the top and I'm giving zero to the bottom.

 

David Turetsky: 15:37

Well yeah, you'd have to do that.

 

Sean Luitjens: 15:38

Document all that. What happens? And when it goes back into that, you know, when I talk about fixing your turnover, are you also fixing pay equity at the same time? And can you take a look back and say, what, what did that do? You know, so I used this strategy, I think it's the best strategy. I went with a nine box strategy and then I realized that you know what? That didn't work, you know, females left or females got left behind, or what have you with this. So I need to go fix, fix that.

 

David Turetsky: 16:06

Well, sometimes doing the right thing means that your organization has to suffer through some turnover. And I think we've seen significant I mean, in each personal situation we've dealt with and as a, as a boss, I've seen this happen, where I've had to make significant improvements in pay equity challenges, where I knew that in doing that I was gonna have to lose some other staff. That had to be okay. Because doing the right thing sometimes means pain. That's got to be okay.

 

Sean Luitjens: 16:33

I think that's the hard part is I fundamentally believe I'd say all, maybe there's somebody who's not, most organizations want to be fair and good payers. Like I I do think they want to be, then it comes to the financial issue of do I want to bite the bullet on the money? And how do I make that happen? And to your point, how do I, is it worth me losing my best talent over this? So it becomes hard choices. I think if there was, money wasn't an issue, and turnover wasn't an issue, which now I'm in total rainbows and unicorns, pot of gold at the end? Yeah, exactly, then I think people want to be fair payers, but then I think they just slowly fall out of the fair payer funnel, as they go down. And difficult decisions have to be made. And, and I still always come back to the hiring, the manager, the line manager, he has a number that is not at Human Resources number, you know, generally. They've got something, they've got a business number, they have to hit and you are telling them they can't get this player to make, to get this goal, if they do it. And that hard decision isn't so hard for HR, it is. But the line manager now has to not make his number and his bonus might be made on his number. And it gets complicated and personal very fast.

 

David Turetsky: 17:40

Yeah, but that's why I always say, and people who've listened to my podcasts will know, that I've always kind of pronounced HR is not HR, HR is the business. And if we're setting ranges or rates of pay, and we're giving guidelines, we're giving managers the information to make business decisions, we're not making it for them. But we're doing it in context of being a trustee, for the board and for shareholders or for the ownership of being able to manage their money fairly and accurately. And so I don't buy people blaming HR, that's bullshit. That's just a copout.

 

Sean Luitjens: 18:18

Well I think HR can help a lot, at the beginning of the year, you know, before you get the increase that comes down from the CFO, are you communicating that up? Hey, by the way, every quarter, this is the amount of money we would need to remediate. Here's the issues. Here's what we did last time. And so I think part of the problem has always been once a year, the CFO has this dreaded period of time, of which someone comes to him and says, we need money for remediation versus it's always on their mind. It's always in the back of their mind. And here's the money. So when they get a three and a half percent, and they're like, Well, here's the number, you know, they know, it's not enough.

 

David Turetsky: 18:52

Okay, but everything you just said there are business decisions, just like managing your AR, managing your debt, managing other things, they're business decisions, and that are the levers that are in the key hands of the right stakeholders, whether it's the CFO or the business owner, or the manager who's making these decisions. HR is guiding them on it. And they're using data to your point before and analytics to be able to provide them with which is the best investment? Is it fixing a pay equity issue? Or is it giving a person an increase who, you know, helps drive your business forward? I would argue that because there have been structural issues with pay over time that a lot of the people who have now pay equity issues have not been enabled in order to be able to get that pay and to be able to make those decisions, because they could have been or should have been in that same position as the person who we're talking about might be the person who's not getting that 7% increase because of this. Yeah, sorry, that was a very political statement. But

 

Sean Luitjens: 19:58

Well, I think you know having the technology and the tools to push down your pay philosophy to fix that will help managers because I think again, this is something I saw, you know, might have been a world at work survey, you know, 33% of managers have either never done or doing their first or second equity run through. And so it's not their core competency either. You don't hire a process manager because of their HR skills, you hire them, because they're great at being a process manager.

 

David Turetsky: 20:21

Or the Peter Principle, you grow to your highest level of, of,

 

Sean Luitjens: 20:25

Well, it's not your core competency in your job. And they probably don't ask. You know, I mean, I've been hired as a product manager, several times, right? No one's actually asked what my HR skills are, how I am as a manager, right? And so if you can push that pay philosophy down and give them some guiding principles and some information in context, they're generally smart people, right? So you give them some context, say, here's what's going to happen. Now, here's the risk of resignation if you move this up and down, here's what happens in the next couple years. And you give them some of those tools to push that philosophy down to help them along the way. Again, I know you'll say some, not everyone, but most people want to be fair payers, and I assume most managers want to be fair payers, as long as you give them the tools.

 

David Turetsky: 21:06

Yeah, I don't necessarily completely agree that every company wants to be. Some know their pay gap and do nothing about it. Some don't want to know what their pay gap is. And then some go to the extent of actually not only understanding their pay gap, but then learning what's the statistical significance of their pay gaps and whether or not they're ones that need to be or must be taken care of.

 

Sean Luitjens: 21:30

Fair, the ostrich method that is my favorite there. That is still my favorite as long as that's a legitimate way. You talk to companies, I don't want to know because if once I know, then I have to admit I have a problem. And I

 

David Turetsky: 21:42

Or do something about it!

 

Sean Luitjens: 21:43

mentally choose to not, to ignore it. But if I don't know I have a problem, I didn't choose to not fix it. Right?

 

David Turetsky: 21:49

Hey, are you listening to this and thinking to yourself, Man, I wish I could talk to David about this? Well, you're in luck. We have a special offer for listeners of the HR Data Labs podcast, a free half hour call with me about any of the topics we cover on the podcast, or whatever is on your mind. Go to Salary.com/HRDLconsulting to schedule your FREE 30 minute call today. And that kind of gets to the last question, which is what could organizations do in order to start making inroads in these extremely complex business decisions?

 

Sean Luitjens: 22:28

Yeah. Which, you know, I'll preface it with what you said earlier, it's, there's a small merit, there's a small budget to make it happen and it's a pay issue. Right? So fundamentally, you have to change someone's pay. I don't know about you. But I haven't heard any company say we're going to fix pay equity by reducing some people salary, to lower them. So that's not a thing.

 

David Turetsky: 22:46

No.

 

Sean Luitjens: 22:46

And so now you're talking about spend, and you only have three and a half percent. So I think the first thing is that they go out and they build the foundation of the tool so that you can differentiate with pay, and so that you can actually go back out and say, is this a pay equity issue or is someone an underperformer, over performer and there's all those realms in there?

 

David Turetsky: 23:04

Oh, absolutely.

 

Sean Luitjens: 23:04

And have a documented pay philosophy, this is how we pay. We want to pay at fifty-seven and a half percent of comp ratio or whatever, you know, however scientific they want to be. And we're going to use pay for performance or nine box and then document that. Before you start talking about the comp allocation software, and tools like that you need to have that foundation so that you can then go make a concerted effort to put that in place and look forward. Like where do you want to be, you know, if you don't know where you're going all roads lead you there. Right? And so make sure you you know, kind of understand where you want to be, and when you think you can get there.

 

David Turetsky: 23:40

But to me, the add on to that is educate, educate, educate, inform, give insight, give as much information as possible. You're mentioning all the great analytics you can bring to bear. It's not just about the comp ratio, it's about, as you mentioned before, what's their, you know, readiness to resign? What's their, you know, what's their flight risk, you know, if we want to go there, you know, what are other things that we can look at, you know, performance over time, or other things that are the leading indicators as to, you know, how do I allocate this three and a half percent or more, you know, it's 4%, or whatever it is, how do I give the right decision in this really complex, crazy world?

 

Sean Luitjens: 24:19

And don't be afraid to be wrong, and I say that from the standpoint of, if you're afraid to be wrong, you'll kind of go ostrich method and say I did my best effort. I

 

David Turetsky: 24:28

Or the peanut butter method, yeah. don't want to

 

Sean Luitjens: 24:29

Well, peanut butter is the safe way right? Although actually, statistically it's wrong because make it worse right? Statistically 3% of a bigger number's bigger than the smaller number. So you actually just make the problem bigger, but be be willing to go back and say we had a good thesis, we put it together, we put it into play. Let's go back and see what happened. And then be like, Okay, we were good here. We were bad here. Let's just get smarter as we go and address the problem. See the good and the bad with pay equity is you can't fix it on one given, one given day. And so it is a long term effort. So you have the ability to kind of aim fire aim fire as you go.

 

David Turetsky: 25:07

And being wrong. And getting or having turnover happen isn't necessarily bad. Yes, there's some regrettable turnover and there are people we don't want to lose. But what happens when there's turnover? It brings opportunity for other people, right? And so, to me that the longer tail here is, I look what you were talking about before, fail, and learn and then move on.

 

Sean Luitjens: 25:31

That's you're aiming at GPS. It's a pay equity GPS, you know, recalculating.

 

David Turetsky: 25:36

Right.

 

Sean Luitjens: 25:36

You know, you just kind of, that road's closed, that didn't work out. And I think it's gonna get complicated. You'll find some divisions or departments have, you know, what you thought was going to work worked and for another set of individuals that are good at a job, it didn't work.

 

David Turetsky: 25:48

Yeah,that brings up flexibility, right? Giving guidelines that are flexible, based on the business need of the individual area. Totally agree. *Sound* There are whales loose at HR Tech!

 

Sean Luitjens: 25:59

In Vegas by way, which is

 

David Turetsky: 26:01

Inside where the pigeons are.

 

Sean Luitjens: 26:03

Yeah, I did not know those two cohabitated.

 

David Turetsky: 26:07

Only in Vegas! Sean, it was a pleasure. Thank you very much for coming on.

 

Sean Luitjens: 26:22

Yeah, always a pleasure. Great to see you.

 

David Turetsky: 26:24

Great to see you too. Thank you very much. And thank you everybody for listening. Take care and stay safe.

 

Announcer: 26:29

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