3 Shifts Happening in Compensation Right Now

3 seismic shifts Matt McFarlane sees happening in compensation right now:

1. Pay transparency legislation is forcing companies to share numbers. But sharing numbers isn’t enough - employees want to understand the “why” behind their comp. How did you arrive at that number? What’s the methodology?
2. Gen Z (25% of workforce by 2025) has zero taboo discussing compensation. They view employment differently - no more “jobs for life.” This means comp needs to be part of a larger, intentional employee value proposition.
3. Technology is democratizing compensation tools. Even smaller companies can now access sophisticated comp solutions that were previously only available to enterprises. No more clunky spreadsheets.

Matt says there’s often a disconnect between rewards and incentives. Getting a 2% or 10% raise means nothing without context and narrative.

The future isn’t just about paying people fairly. It’s about:

• Making comp decisions meaningful
• Empowering managers with data
• Creating transparent processes
• Building compelling narratives

The path to ditching comp spreadsheets

Why spreadsheets still dominate comp planning (and how to fix it).

Haris dropped a truth bomb about why teams keep reverting to spreadsheets:

1) Data consolidation is broken

When you’re missing critical data points like performance ratings, you’ll always go back to Excel. Getting ALL your data in one place is step 1.

2) Rigid visualization kills adoption

Some teams care about OTE, others about variable comp, others use custom formulas. Your tools need to flex to how YOUR team thinks about comp.

3) Everyone speaks different comp languages

Some swear by compa-ratio, others by range penetration. Tools need to adapt to your mental models, not force you into theirs.

The good news? AI from tools like CandorIQ make it easier to get the views YOU need - custom charts, additional columns, different formats.

But garbage in = garbage out. No amount of AI magic can fix bad source data.

How to think about your compensation philosophy

Your comp philosophy isn’t just about market rates - it’s about who you are as a company.

Matt highlighted this often-overlooked truth: Your approach to pay reveals your deepest organizational values.

Here’s what stuck with us:

Some companies anchor heavily on individualism - wide pay bands, performance-linked compensation, embracing pay differences based on impact.

Others prioritize equity - fixed pay points where everyone in the same role gets paid identically.

Neither is inherently right or wrong. What matters is alignment with your mission and values.

Quick example Matt shared: A software company paid their Customer Experience team at 90th percentile - way above market. Why? Because CX was truly the heart of their business model. They backed up their “customer-first” talk with their wallet.

3 key pillars to nail your pay position:

1. Competitiveness - What percentile do you target vs market?
2. Internal equity - Should all roles follow the same positioning?
3. Affordability - Can you actually fund this approach?

Pro tip: Don’t skip involving your people in these discussions. The pushback Matt hears most: “They’ll just ask for more money!”

Reality? When framed right, employees provide invaluable insight into what’s working, what isn’t, and what truly drives retention.

Your comp philosophy speaks louder about your values than any mission statement ever will.

How to design a merit cycle employees actually trust

Stop running compensation cycles blind.

3 things Matt McFarlane says we’re all doing wrong:

1) Running cycles without clear objectives

Most companies jump straight to spreadsheets without asking “why are we doing this?” Your process should map back to specific goals.

2) Throwing untrained managers into the deep end

We expect managers to understand compa-ratio, range penetration, and other “compensation gobbledygook” without proper training. Then wonder why they can’t explain decisions to their teams.

3) Missing the communication piece entirely

The best practice he learned? Pre and post-cycle town halls. Share your comp philosophy, pay positioning, and department-level metrics openly. It drives accountability and builds trust.

Pro tip: Give managers a simple red/yellow/green playbook for handling different employee reactions. Don’t leave them hanging with “talk to HR” as their only response.

The most successful comp cycles he’s seen aren’t about the spreadsheets - they’re about clarity, training, and communication.

See you next week!

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