Road to Riches

By Kathryn Tyler Jun 1, 2004
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HR Magazine, June 2004Compensation management can put you on the path to success

For some, the term “compensation specialist” may spark less-than-exciting visions of crunching numbers on a calculator and sorting spreadsheets on your desktop, but those who wear the title say their work is a cutting-edge adventure.

“People in compensation are passionate about it,” says Bonnie Kabin, a certified compensation professional (CCP). “Compensation is fun and exciting. ‘How do I motivate this employee population? How do I make every person feel good about themselves and affirm their value?’ We feel we make a difference. I could never see myself doing anything else—ever,” says Kabin, director of professional development and certification at WorldatWork, formerly the American Compensation Association, a nonprofit professional association in Scottsdale, Ariz.

“It’s the hottest area of HR,” says Sharon K. Koss, SPHR, CCP, president of Koss Management Consulting in Seattle. “It’s a good area for HR generalists to specialize in. It really helps their careers.”

A compensation specialist—also called a remuneration professional—calculates employee compensation, maintains compensation databases, develops job descriptions, benchmarks compensation externally and coordinates annual performance reviews. He or she may also deal with employee benefits.

As compensation specialists advance in their careers, the tasks become more strategic and less administrative. Senior compensation specialists create and manage compensation plans to directly link performance and company goals with pay, including sales incentive pay plans and executive compensation.

Specializing in compensation can be a challenging—and rewarding—career choice for HR professionals.

“I was inspired to go into the HR field while growing up watching my father’s career as an HR consultant. I grew to love HR and compensation,” says Don Hubbartt, manager of executive compensation for Kohl’s Department Stores, based in Menomonee Falls, Wis. “Compensation is a great specialty of HR. My favorite part is that your job affords you the opportunity to learn the business and what drives it,” says Hubbartt, who has completed four of the nine courses required for the CCP designation.

“The overall responsibility of any compensation specialist is to manage the compensation and rewards programs,” Hubbartt says. “A great compensation program will attract the right people, reward the right behaviors and retain valued employees. Additionally, the compensation professional is charged with making sure the compensation costs are aligned with the business culture, philosophy and objectives.”

That strategic role is important. “They [compensation professionals] spend a lot of time benchmarking and keeping job documentation up-to-date, strategizing how to tie pay to performance,” says Robert Greene, SPHR, CCP. Greene, CEO of Reward Systems Inc., a consulting firm in Greenview, Ill., has also earned the global remuneration professional (GRP) designation.

If you think compensation is the field for you, you’ll need to consider whether:

  • The potential rewards mesh with your career goals.
  • You have the right mix of skills and abilities.
  • You should pursue certification.

Even if you don’t plan to specialize, the training and skills required for compensation management can benefit the savvy HR generalist.

Good Career Move?

Becoming a compensation specialist offers some impressive career rewards, including healthy job prospects and the potential for higher earnings.

“The field of compensation is specialized enough that it has weathered the challenging job market well,” says Kabin.

Hubbartt agrees: “The job market for compensation professionals is fueled by an ever-increasing pressure on companies to comply with corporate governance regulations and a continuing need to account for payroll dollars spent.”

On average, compensation professionals earn higher salaries than HR generalists or any other HR specialty, according to the 2003 Human Resource Management Compensation Survey conducted by Mercer Human Resource Consulting. Compensation managers receive an annual median salary of $97,800, whereas HR managers receive $91,400.

There’s yet another reason to consider this specialty: Due to the nature of their work, compensation specialists spend more time with senior management than other mid-level HR professionals, which can translate into more prestige and visibility.

“The biggest benefit is your work is directly linked to the performance of the business. You are exposed to the highest levels of management. You meet interesting people and get great exposure,” says Hubbartt.

A compensation specialist’s “contribution is respected and listened to by senior executives,” adds John S. Maxwell, CCP, GRP.

While such perks may be compelling, keep in mind that choosing the compensation specialty might preclude working at smaller organizations.

“A basic rule is you won’t see a dedicated ‘compensation person’ until you hit the 1,000-plus employee-sized organization, and so, in smaller firms, the responsibility would fall into the role of a generalized HR person, the finance department or a general manager. At larger organizations, such as Kohl’s, we have 12 compensation professionals,” Hubbartt adds.

Most of the time, compensation specialists report to the head of HR, says Maxwell, CEO of Capita-Global Group, a training company in Carefree, Ariz. “Normally, in a 1,000-plus organization, you would have an analyst reporting to a compensation and benefits manager who reports to the head of HR. The larger the organization, the more [compensation specialists] you have in the lower levels,” he says.

Another potential drawback to the specialty, depending on your long-range goals, is that compensation may not lead you to the top rung on the HR ladder.

“There are two separate career paths [for compensation specialists]: One is the corporate environment, and the other is consulting,” says Paul R. Dorf, managing director of Compensation Resources Inc., a compensation consulting firm in Upper Saddle River, N.J. “In corporate, quite often they will come in as a generalist, move into being a compensation specialist, move up the ranks and only go so far. Somewhere along the line, you have to move back into the generalist ranks.”

That’s because senior vice presidents of HR tend to be generalists, and vice presidents of compensation report to them. “They are parallel ladders, but the compensation one only goes up so far,” Dorf says.

Why the apparent limitations? “My impression is that you can get so specialized and consumed that you don’t have the same opportunities as an HR generalist to know a little bit about everything,” Greene says. “It may work against someone in taking over the whole HR function. They don’t have as broad of a relationship that others do.”

If you’re interested in becoming a consultant, compensation experience could take you there, industry experts say. Smaller organizations often outsource compensation, so there is a significant market for external compensation advisers.

Qualities of Compensation Specialists

Experts say individuals who succeed in the field tend to have the following characteristics:

  • Strong numerical skills. “Compensation people tend to be very numerically oriented. There’s a lot of quantitative analysis,” says Greene. Maxwell adds, “Those who enjoy statistics find this type of career satisfying.”

  • Strong analytical abilities. “It requires a lot of analytical capability. You need to analyze trends, spreadsheets [and] marketing surveys to determine what a compensation strategy is going to be,” says Barbara Swarthout, SPHR, a certified employee benefits specialist (CEBS) and director of the educational program for the International Foundation of Employee Benefit Plans (IFEBP) in Brookfield, Wis.

    “I look for an analytical person who is excited to crunch numbers all day in [Microsoft] Excel to see what business decisions should result from what the numbers tell us, someone that loves improving systems and processes,” says Hubbartt.

  • Detail-orientation. “Compensation is an art and a science,” says Dorf. “It is highly technical with a lot of research and interpretation of data. Compensation requires not only a knowledge of numbers, but also of people, how compensation fits into the overall behavioral aspect and objectives of the organization. [Compensation specialists] have to be detail- oriented and good at research and mathematical skills.”

  • Exceptional communication skills. “You’re talking about people’s pay; you can’t get any closer to them. Communication is key,” Kabin says. Compensation professionals need to be able to interact with senior executives, as well as front-line employees. Moreover, compensation professionals need to be comfortable developing and delivering oral presentations to senior management.

  • Managerial skills. “Compensation professionals who have been successful in their careers are often supervisors with direct reports, so managerial skills are also desirable,” says Kabin.

  • Discretion and an ethical orientation. Compensation specialists need to be extremely discreet, since they deal with confidential information. “We feel that we are stewards of ethics in the profession,” Kabin says. “We are privy to sensitive information. We know when there will be layoffs because we’re designing severance packages. If our neighbor is going to get laid off, we’re not going to divulge that information.”

If this describes you, perhaps you should consider studying for and taking a certification exam to help prove that you have what it takes.

Compensation Certification

Certification isn’t mandatory for compensation specialists. However, certification is becoming more common, and employers often require it for those entering the field. Certification sets a minimum standard of knowledge.

Indicative of the importance and complexity of the specialty, there are four U.S. compensation-related certifications: CCP, GRP, CEBS and compensation management specialist (CMS).

Younger people coming into compensation management tend to have certification more often than more experienced compensation specialists, Dorf says. However, certification requirements will likely increase, he predicts, as more companies ask for independent credentials to verify qualifications.

CCP and GRP certifications are offered by WorldatWork; CEBS and CMS certifications are offered by the IFEBP.

CEBS is a joint program of the IFEBP and the Wharton School of the University of Pennsylvania. “Completing a CEBS [program] is like having an undergraduate degree in employee benefits,” says Swarthout.

The most widely held designation is WorldatWork’s CCP. “The CCP designation assesses strategic and functional competence in rewards management, with the primary focus on compensation,” says Kabin. “The six core examinations and three elective examinations assess competence across the entire compensation body of knowledge, as measured by performance on nine 100-question multiple-choice examinations.”

How does one choose a designation? First, HR professionals need to decide whether they want to specialize in international or domestic compensation plans. The GRP program covers issues relating to international benefits and compensation, such as foreign exchange rates and expatriate compensation.

Next, an individual needs to determine whether it is crucial to learn both benefits and compensation management, or just compensation. Compensation and benefits are inextricably linked, but not all organizations approach them as a package. The CEBS program covers both benefits and compensation, but the CCP program covers compensation only.

Also, HR professionals need to consider how much detail they desire and how much time they have to complete the courses. (See Compensation Certification Comparisons.)

The CEBS program is more detailed and takes longer to complete than the CCP program. “The CEBS [program] is rigorous,” says Greene. “Unless you’re going to be a benefits expert, it’s [excessive].”

Courses for the CCP certification are much shorter—three-day workshops—than those for the CEBS, which are traditional, three-hour weekly classes that run for 10 weeks. However, courses for the CCP certification cost more than the CEBS courses—$1,300 vs. $800 ($400 for the exam plus $400 per course).

“It takes about two to three years [to become a CCP],” says Koss. “You can take the two-day class [offered by WorldatWork] before the third morning exam or you can self-study. I recommend a combination. A good HR person could probably self-study out of the job description module. Others, like the statistical module, are much more difficult. You can take the exams more than once. The classes are taught by seasoned compensation professionals and are quite good,” says Koss.

There are distinct advantages to attending the classes, WorldatWork’s Kabin says. “There is always the opportunity to self-study for all nine exams, although you would miss out on the networking and practical application that you get from attending the practitioner-led courses and interacting with your peers, so we don’t typically recommend self-study for the entire program.”

Hubbartt, who is currently enrolled in the CCP program, agrees that networking is an extra benefit of attending classes: “Do it for the knowledge and people you will meet, not for the certification,” he says. “Some of my instructors have included current and former heads of HR and compensation from Fortune 500 companies.”

Once you receive your designation, you must keep it current. “It’s not a requirement to recertify—we wouldn’t yank somebody’s certification—but it is preferred that members recertify every three years,” says Kabin. “They need to have 12 continuing education units (CEUs). You can get credit in a variety of ways—being a member of our organization, attending classes or conferences, work projects, publishing, teaching, etc. We have employers call us and ask if someone is current with their certification. In this quick-moving profession, you’re forced to attend education just to keep up.”

Hubbartt suggests that compensation specialists tailor their education to their immediate needs. “Don’t be afraid to take a course out of order if you are looking at an upcoming project where you think a specialized class might be helpful.”

 

Becoming a certified compensation professional may improve your job prospects. According to a survey by the International Society of Certified Employee Benefit Specialists, 61 percent of respondents have changed employers since earning their CEBS designation, and 75 percent of those felt the designation was influential in obtaining the new position. Kabin notes that WorldatWork gets about 1,000 job postings for compensation specialists per year, and, of those, 80 percent require or prefer CCP-designated candidates.

Plotting a Career in Compensation

Compensation professionals’ career paths are varied, but typically begin in HR.

“The norm is a background in HR, but often you will have finance professionals cross over into compensation,” Hubbartt says. “I sought out an MBA early on in my career, and it has helped my compensation career. I better understand the financial ramifications of business decisions, know how companies account for business activity and have a better understanding of the general financial marketplace.”

Within compensation, there are subspecialties, such as sales incentive compensation and executive compensation. “The most difficult area in compensation is executive compensation, because the knowledge base becomes more difficult,” says Dorf. “You have to know not just market data, but [also] tax laws, [Securities and Exchange Commission] requirements, accounting regulations, etc. It’s a highly specialized area.”

While executive compensation is important, it’s not the biggest specialty. “There’s a very small number of executives in this country. So there isn’t as great a need for executive compensation people as for other types of compensation professionals,” Kabin points out. “It’s a niche.”

Switching to the compensation specialty from another area of HR is possible, but timing is key. “The point at which you can cross over from a generalist to a compensation specialist is at the entry- or mid-level,” Dorf says. “Senior-level individuals who are generalists don’t normally move over as compensation specialists.”

HR professionals who have the interest, stamina and mathematical abilities to complete certification training establish a standard of excellence in this specialized field. But even HR professionals who do not plan to become certified should consider some level of compensation training, experts say.

“In surveys, compensation and benefits are [HR professionals’] weakest areas,” says Greene. “Every HR person ought to learn enough about compensation to understand what impact it has on staffing and development, performance management, and the rest of HR.”

The Society for Human Resource Management (SHRM) and its affiliate, the Human Resource Certification Institute (HRCI), both based in Alexandria, Va., as well as other organizations, offer compensation courses for HR generalists.

“HRCI does not offer specialty certifications. We offer the PHR, SPHR and GPHR certifications, which are generalist in nature,” says Cornelia Springer, HRCI’s executive director. If you’re thinking of obtaining a PHR or SPHR certification from HRCI, you should be aware that about 20 percent of the questions on the exams relate to compensation and benefits. Also, many compensation certification courses qualify as recertification credits, so you may want to consider taking one to keep your PHR or SPHR designation current. In addition, SHRM offers an online compensation overview course called “Compensation Trends.”

Kathryn Tyler, M.A., is a freelance writer and former HR generalist and trainer in Wixom, Mich.

Web Extras

Certificate or Certification?

A “certificate” and a “certification” may sound like the same thing, but they are vastly different. A certificate merely states you have completed a certain course or group of courses.

In contrast, certification means that you have passed one or more examinations developed by a professional organization in your field, thereby demonstrating that you have a certain level of knowledge. Individuals who become certified may place recognized designations (acronyms) after their names and often must agree to adhere to a code of conduct.

“Our organization, as well as others, offers compensation programs that individuals may undertake instead of certification or while they are pursuing certification,” says Bonnie Kabin, CCP, director of professional development and certification for WorldatWork, a nonprofit professional association in Scottsdale, Ariz.

Also, the International Foundation of Employee Benefit Plans (IFEBP), in addition to its certification programs, offers a certificate series in topics such as compensation and benefits, and compensation management. “It’s a well-rounded, broad overview of compensation concepts,” says Barbara Swarthout, SPHR, CEBS, director of the educational program for IFEBP in Brookfield, Wis. “It’s good for those who are brand-new to the field or HR generalists looking for a refresher.”

Some companies offer certificates, but not certification. For instance, HRCertification.com offers a certificate program in compensation. “Our online programs give the managers the ability to check their employees’ progress and test scores,” says Charlie Bross, president of HRCertification.com, based in Alpharetta, Ga.

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