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Optimized Design Approach for SuccessFactors Compensation implementation – Case Study

(The case study is intended for SuccessFactors implementation consultants and end users with SuccessFactors experience, especially SuccessFactors Compensation Management)

For the past 8-9 years, we have seen most SAP customers trying to venture into cloud space and HCM has been one of the primary modules to have come up with lot of cloud enhancements and streamlined processes. Being an SAP Partner the last 24 months have been largely successful and satisfying with SuccessFactors implementations. However, it has also presented new challenges. These implementations were not only successful but have given wide variety of experience for to us as an implementation partner, to venture out into different industry segments. One of the modules we have been leading from the front is SuccessFactors Compensation Management. With 3 implementations in the last 24 months, it has just not been a big portfolio booster for us as an implementation partner but also a personal milestone and achievement for me. All the 3 implementations have been global implementations with up to 30+ countries, various languages and currencies, distinct industries, varied and complex processes which came with fair amount customization and calculations.

I have been Professionally certified in a couple of modules and Compensation is one of them. Based on my experience in these years, I believe that with any implementation, the challenge is not only to translate and transform customer requirements into processes but also to achieve optimization which should aim to reduce manual maintenance over the time achieving fast and streamlined work culture. With multiple countries in scope compensation implementation can be tough nut to crack to achieve optimization, however we as implementation partner have been successful to have presented our clients with SAP best practices along with customization with minimum manual maintenance. One of these implementations which presented a great deal of challenge with lot of customization along with a successful optimized design was with a leading ‘Semiconductor chip design and manufacturing’ organization.

With an employee base nearing 16k, various countries in scope and with a few SuccessFactors modules already been implemented, this customer was well experienced with the SuccessFactors user interface and a few other technical aspects. Their Compensation planning, till now, was done through their own custom-built tool. Their requirement to us was to replicate the features of their highly customized tool within SuccessFactors Compensation, or at least if try to be as close to the tool as possible. This presented a great deal of challenge as the implementation involved lot of custom calculations. Along with the customization, the other challenge was to optimize their process by configuring just one (1) Compensation Template which should accomplish planning for Salary (Merit), Equity and Sales Incentive Bonuses.

Below are the factors that we analyzed to come up with our design.

Elements that supported 1 compensation template:

  • All countries to have same planning dates
  • Single Approval Workflow (route map)
  • Common compensation components – merit, adjustment, promotion, sales incentives, equity

Challenges:

  • Business Unit/Business Group (BU/BG) heads to be part of the approval workflow – to plan and/or review compensation recommendations for their respective BU/BG
  • Complex Sales Incentive calculation – included splitting the Annual Salary pay component group to include Sales Incentives based on the Sales Incentive splits driven by job grades
  • Promotion to be based on automated job grade – job code association
  • Promoted Job Titles should not show the suffixes which default through the job code – job tile sync rule.
  • Different EC publish effective dates for different countries

Implementation Design and Approach:

The common elements supported 1 template design for all the employee population, but customization presented several challenges.

  • To incorporate BU/BG, as the implementation partners, we recommended to use the Compensation Planner hierarchy where the system provides the ability to designate planners and all the direct reports would roll up to that designated planner.
  • The above design presented a known system restriction where the EC Salary Pay Matrix failed to update the new Salary Range, new Compa-Ratio. This is a known defect in which Salary Pay matrix table references the current job grade instead of the new pay grade. Due to this defect the Compensation Planner hierarchy design had to updated to the Standard Manager hierarchy. The BG/BU heads were given  Executive Review permission.
    • Granted and Target Permission Groups were created for BU/BG heads and their employee population, respectively. By assigning the Permission Role with Executive Review, BG/BU heads were able to plan/view Compensation recommendations for their respective employee populations.
    • A default route step is assigned to Compensation Admin where all forms would be routed to that Admin and the Permission Role with Executive Review permission is activated manually for a set period.
  • Sales Incentive splits were loaded through lookup tables based on employee job grades. With multiple scenarios to achieving the splits, almost all the custom amount and money columns had to be leveraged. A new Pay Component Group was created to show the total compensation which included the annual salary and the sales incentives and the Sales split percentage was based on this new Pay Component Group which divided the amount into Sales incentive pay component and Merit Pay Component.
  • To link the pay grades and job codes for Promotion, the Pay Grade foundation object was updated with Job Code association. This allowed the job codes to be mapped with pay grade. Once the Compensation planner/reviewer selected the pay grade, the job code drop-down was restricted to only show the mapped job codes to the job grade that has been selected.
  • A custom field titled ‘New Job Title’ was created in the job information portlet with read only permission to the Manager. A business rule was created which captured the first two words from the original Job Title field and placed it into the New Job Title field, which ensured suffixes from Job Title were eliminated. The New Job Title field was mapped to the Promoted Job Title.
  • A lookup table with country and effective date was created to map effective dates into the EC publish xml code based on different countries. This enabled the Compensation and Job Information portlet to default to the corresponding effective dates when compensation components were published in EC from Compensation module.
  • Equity planning was configured using the standard ‘Lumpsum’ field which ensured that standard guidelines feature can is leveraged without impacting the Annual Salary field.

Personally I have seen that most implementation consultants have their own approach for a SuccesFactors implementation, while some follow a basic approach to address the issues by providing a solution. I have seen multiple compensation plan templates being configured to address country/region specific requirements, configuration of 7+ route map approval steps, not effectively leveraging Executive Review feature for the approvals etc. While there is nothing wrong in any of the approaches, the requirements generally drive multiple templates configuration. However, while at the design stage if one keeps an eye on ‘optimization’, I am pretty sure the implementation will not only address the pain points or issues, it would eventually streamline their business process in a cost effective way, with less manual maintenance and with maximum efficiency .

The above mentioned customer has completed its second compensation cycle and started with the third planning cycle with very minimal changes to the original design which gives an impression of a successful implementation.

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