Dignity Health Transforms the Process of Developing Compensation Plans Through Salary.com's CompAnalyst Platform

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1 IDC ExpertROI SPOTLIGHT Dignity Health Transforms the Process of Developing Compensation Plans Through Salary.com's CompAnalyst Platform Sponsored by: Salary.com Utsav Arora February 2017 Lisa Rowan OVERVIEW Dignity Health, one of the nation's largest healthcare systems, is a 22-state network of more than 9,000 physicians, 62,000 employees, and 400 care centers, including hospitals, urgent and occupational care, imaging centers, home health, and primary care clinics. Headquartered in San Francisco, Dignity Health is dedicated to providing compassionate, high-quality, and affordable patient-centered care with special attention to the poor and underserved. Dignity Health employs an array of health professionals and support staff. Its employees, a significant percentage of whom are unionized, are critical for providing excellent patient care and maintaining the organization's reputation as a leading national healthcare provider. This means that the ability for Dignity Health to develop accurate and competitive salary structures and compensation plans is crucial to retaining and hiring world-class employees and keeping costs under control. As a part of its strategy to efficiently and effectively develop fair and competitive compensation plans, Dignity Health deployed Salary.com's CompAnalyst platform in June According to Daniel Paleg, compensation manager at Dignity Health, prior to the implementation of CompAnalyst, developing compensation plans was manual and time consuming. The healthcare provider's compensation team had to compile and consolidate data from multiple sources, including market surveys, and then perform manual analyses in Excel. As a result, responding to requests for salary recommendations was time consuming and inefficient, which delayed the delivery of data Business Value Highlights Organization: Dignity Health Location: San Francisco, California Challenge: Assess and leverage market salary data to efficiently develop competitive salary structures and compensation plans for a diverse and expanding workforce Solution: Salary.com's CompAnalyst platform Five-Year Cumulative Benefits: $3 million in discounted business benefits ROI of 835% Payback in 3 months Other Benefits: 90% productivity increase attained by compensation analysts 98% reduction in the time required to undertake compensation analysis needed by human resources (HR) teams and hiring managers to recruit and undertake salary reviews. In addition, Dignity Health risked setting salaries above market-competitive levels because of incomplete salary information. February 2017, IDC #US

2 According to Paleg, CompAnalyst has made Dignity Health's process for developing salary structures and setting compensation levels substantially more efficient and helped ensure that the organization's salaries are fair and competitive. As a result, the healthcare organization is achieving salary-related savings, has accelerated the time required to develop compensation plans, and has increased the productivity of employees within the compensation, HR, and labor relations teams. More broadly, Paleg explained that CompAnalyst has provided Dignity Health the quality of data and agility it requires to better ensure that it meets business requirements for making timely and competitive salary offers to new hires and then maintains salary levels that help it retain current employees and incentivize strong performance. To quantify the benefits of Dignity Health's use of CompAnalyst, IDC asked Paleg about his organization's process to develop compensation plans before and after the deployment of CompAnalyst. Based on the data collected during the interviews, IDC calculates that Dignity Health achieved total discounted business benefits of $3 million over five years through its use of CompAnalyst, resulting in a five-year ROI of 835% and a breakeven on its investment within three months. IMPLEMENTATION Dignity Health's decision to implement CompAnalyst was prompted by several factors. Paleg stated that Dignity Health was looking for an agile and robust solution that could automate its compensation process and help it develop competitive market-driven compensation plans on a central repository. Dignity Health wanted a solution where its compensation analysts could determine a competitive salary structure with more accuracy in much less time, help its HR staff and hiring mangers retain and recruit the best talent, and enable its efforts to set fair and competitive compensation levels with all employees, including in negotiations with union representatives. Prior to implementing CompAnalyst, Dignity Health was obtaining compensation data from multiple sources, including market surveys, and subsequently analyzing the data in Excel. This was time consuming because raw data had to be extracted from various market surveys and entered into an Excel file frequently for as many as 30 different facilities. As Paleg noted: "Everything used to be done in Excel. We had to collect raw data from up to 13 surveys, analyze it in Excel, and then create reports for each state in which Dignity Health operates." As a result, the process of collecting and analyzing salary-related data was time consuming, inefficient, and more prone to error. Dignity Health knew that it needed to find a better way to address the challenges associated with setting and maintaining competitive salaries for its tens of thousands of employees whose compensation vary significantly depending on their position. To address these challenges, Dignity Health implemented CompAnalyst in June Because CompAnalyst is an agile cloud-based solution, the deployment cycle was completed within four and a half months and primarily required the time of only one compensation analyst. In addition, three directors across different teams and another analyst spent approximately 20% of their time facilitating the deployment. Over the years, Dignity Health's compensation team and how the team uses CompAnalyst have evolved. Until two years ago, the compensation team was responsible for only collecting and analyzing market data, which would then be passed onto HR and hiring managers in various facilities. However, since 2014, Dignity Health's compensation team has established itself as a center of excellence and uses CompAnalyst to not only collect and analyze market data but also develop salary structures and specific compensation plans. According to Paleg, Dignity Health continues to see significant value from using CompAnalyst to support compensation-related activities IDC #US

3 BENEFITS CompAnalyst has enabled Dignity Health to develop fair and competitive salary structures in a timely manner. With an employee base of almost62,000, which includes both unionized and nonunionized staff, and thousands of positions to be filled each year, the healthcare organization must be able to hire and retain talented employees. According to Paleg, CompAnalyst enables this by helping the company offer fair and competitive salaries and making the overall process for setting salaries significantly more efficient. Among the benefits are higher job acceptance rates. As Paleg stated: "Using CompAnalyst to develop compensation plans has helped Dignity Health increase its job acceptance rate by offering competitive salaries [that] are aligned with market expectations." As with any major healthcare provider in the United States, a large number of Dignity Health's employees are unionized, and their salary structures are negotiated through Dignity Health's labor relations team and union representatives. During the negotiation process, Dignity Health's labor relations team often consults with the compensation team to determine fair and competitive salary structures. By using a robust market pricing tool such as CompAnalyst, the compensation team is able to provide the labor relations executives with accurate wage scales that are based on market data and analyzed against benchmark salary data developed from hundreds of employer-reported compensation surveys. As Paleg articulated: "By having CompAnalyst, the compensation team is able to develop highly competitive market-driven wage scales. For newly bargained positions, we are able to leverage CompAnalyst to provide accurate market-based information. We can do this by reducing the time we spend calibrating this information and providing it to the labor relations team. They are then able to make strategic decisions quicker and provide an overall cost analysis to the presidents and CFOs of our hospitals." The ability to consolidate market data on a single platform and analyze it through various analytical features available on the CompAnalyst platform enables the compensation analysts to provide salary structures that more closely reflect market norms. The benefits of CompAnalyst also extend to the productivity of those within the labor relations team. By accelerating the time required to analyze market data, the labor relations team is able to save time during negotiations because the salary structures are available in a timely manner. In addition to helping Dignity Health set fair and market-competitive salaries, CompAnalyst has generated significant efficiencies for the teams responsible for salary analysis and working with job applicants and current employees. Since deploying CompAnalyst, members of the compensation team have witnessed a significant increase in their productivity. Dignity Health's compensation team consists of nine employees four compensation analysts, three managers including Paleg, a director, and the vice president of compensation, who leads the team. The compensation analysts are responsible for developing salary structures for new positions and vacancies that require replacement around 1,500 per year and assisting the HR and labor relations teams with periodic requests to review existing compensation plans. Before deploying CompAnalyst, compensation analysts were spending an average of five hours per job to determine the compensation plan. The analysts were consolidating data from multiple sources, including market surveys, and doing their analyses manually in Excel. However, CompAnalyst has enabled the analysts to gain access to compensation-related market data and surveys from various sources and analyze the data on a single cloud-based repository. This has enabled the 2017 IDC #US

4 compensation analysts to develop competitive and accurate salary structures for a job within five minutes. As a result of the time savings, the four compensation analysts have witnessed a 90% increase in their productivity (see Table 1). TABLE 1 Productivity Impact of CompAnalyst on Compensation Analysts Efficiency/ Productivity Impact Before/Without CompAnalyst (FTEs) With CompAnalyst (FTEs) Efficiency/ Time Savings with CompAnalyst (FTEs) Change in Efficiency (%) Change in Productivity (%) Core compensation analyst team (four members) Source: IDC, 2017 Apart from the compensation analysts, the compensation management team periodically uses CompAnalyst to review the work of analysts and undertake its own analysis. Each member of the compensation management team is saving 45 minutes per week on average. The time savings achieved by members of the compensation team trickle down to certain employees within the HR department. Dignity Health's talent acquisition team, which consists of 35 employees, often requires compensation analysis for new vacancies. Because the compensation analysts are able to accelerate their analysis with CompAnalyst, the talent acquisition team doesn't have to wait for data to proceed with the recruitment process. As a result, the talent acquisition team has faster access to market-driven compensation data, which accelerates the recruitment cycle and increases the ability to hire preferable candidates. As Paleg highlighted: "Before CompAnalyst, the talent acquisition staff sometimes waited one to two days to obtain market pricing. However, salary structures are now immediately provided by the compensation team." On average, eight to nine hours per week are saved across the talent acquisition team because of CompAnalyst." Dignity Health's HR department has 145 HR operations managers. These managers act as intermediaries between the compensation team and the hiring managers and provide support for various HR functions. For example, if a hiring manager needs to post a new job opening or requires certain salary structures to be reviewed, he/she would reach out to an HR operations manager who would then coordinate with the compensation team. By accelerating the compensation analysis process with CompAnalyst, the compensation analysts are able to provide the HR operations managers with the required data in a timely manner, which is then passed on to the hiring managers. On average, one hour per job is saved when the required analysis is done using CompAnalyst IDC #US

5 Quantifying the Benefits From the interviews with Paleg, IDC quantified the salary-related cost savings recognized by the labor relations team and the staff time savings that Dignity Health is realizing through its deployment of CompAnalyst. IDC puts the value of these benefits at an average of $924,000 per year over five years. Salary-Related Cost Reductions CompAnalyst has helped Dignity Health's compensation analysts develop competitive market-driven salary structures that the company's labor relations team can use to negotiate compensation plans with unions that represent a significant number of the company's employees. Having access to robust and timely market-based salary data through CompAnalyst has helped Dignity Health develop salary structures at near or more than competitive market rates. Although the difference is not significant on a per employee basis, IDC calculates that as a result of developing competitive market-driven salary structures through CompAnalyst, Dignity Health has saved an average of $276,000 in salary costs per year over five years. Compensation Team Productivity Benefits CompAnalyst has substantially changed how Dignity Health's core compensation team works by nearly eliminating time spent on the manual process of collecting and processing salary-related data to make its recommendations. As a result, Dignity Health's compensation team analysts require far less time to conduct these analyses, which must be done for roughly 1,500 positions per year, making them far more efficient. In addition, management within the company's compensation team also saves time with CompAnalyst by having more immediate access to market-based salary data. IDC puts the value of these benefits at an average of $365,000 per year over five years. HR Team Time Savings Because the compensation team is able to complete its work in significantly less time, it is able to push through recommendations to teams such as the talent acquisition team and HR operations managers much sooner. As a result, the HR team has more timely access to the data it requires to do its job, reducing the friction associated with conducting salary analyses and increasing its productivity as it recruits and interviews prospects and subsequently works with employees. Although these efficiencies are generally less significant on a per-instance basis, they add up across the thousands of positions for which the HR team must interface with the compensation team. As a result, the HR team has benefited from considerable time savings. IDC puts the value of these benefits at an average of $280,000 per year over five years. Return on Investment IDC calculates that as a result of deploying CompAnalyst, Dignity Health achieved discounted benefits worth $3 million over a five-year period commencing in late 2006 while making a discounted investment of $323,247 over the same five-year period. This resulted in a five-year ROI of 835%, and Dignity Health witnessed a return on its investment in CompAnalyst within three months (see Table 2) IDC #US

6 TABLE 2 Five-Year ROI Analysis Benefit (discounted) $3,021,537 Investment (discounted) $323,247 Net present value (NPV) $2,698,290 Return on investment (ROI) 835% Payback period 3 months Discount rate 12% Source: IDC, 2017 IDC calculates the ROI and payback period in a three-step process: 1. Measure the financial benefits directly resulting from the solution, including operational cost reductions and increased staff productivity. 2. Ascertain the total investment. 3. Calculate the investments and benefits over a five-year period and calculate the ROI and payback period. The ROI is the five-year net present value (NPV) divided by the investment. Payback period (expressed in months) is the time required to pay back the initial investment and establish a positive cash flow. To account for the time value of money, IDC bases the ROI and payback period calculations on a 12% discounted cash flow IDC #US

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