In today's unpredictable business climate, it is especially obvious that compensation is an investment - typically the organization's largest single expense - worth managing effectively. Failing to do that can have direct costs, such as overpayment of unproductive individuals, and can lead to various indirect costs, including forcing professionals to spend time correcting errors, issuing revised payments and alienating talented people who are not paid promptly and accurately or feel they are not compensated adequately. In the worst case, these inefficiencies can drive skilled workers to leave, and the organization then will incur costs in hiring and training replacements without corresponding certainty that they will reach the skill levels of those who left. In addition, employees who do not believe they are being compensated fairly or see no way to gain increases are more likely to depart, if they are talented, or to engage in malingering, if they are undermotivated.

Ventana Research asserts that one necessary tool for managing compensation as a strategic process is the right software. However, most companies still use software designed for other purposes - primarily accounting, HR management and payroll -augmented by desktop spreadsheets for record-keeping and analysis and e-mail for communicating the information in them. This approach is risky and can be expensive in the long run; 40 percent of participants in our compensation management benchmark research said they had found errors in payments to the workforce in the past 18 months. Such a haphazard mix of technologies prevents organizations from easily designing compensation plans and analyzing their effectiveness; it also prevents them from managing compensation on a single platform accessible to everyone in the business that needs this information.