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HRExaminer Radio

Guest: Kent Plunkett, CEO and President, Salary.com
Episode: 159
Air Date: March 11, 2016

 

A serial entrepreneur with deep experience in starting and growing companies, Kent is thrilled to be back at the helm of the company he founded in 1999. During his tenure as its Chairman and CEO for eleven years, Salary.com grew from start-up through its successful initial public offering in 2007; was acquired by Kenexa in 2010 and subsequently, by IBM. Before acquiring the company back in January 2016, Kent was the CEO of Intronis, another SaaS leader.

Kent holds an MBA from Harvard Business School and A.B. in Economics and Government from Georgetown University. He is a three time Inc. 500 CEO, a six-time Deloitte Fast 50 awardee and recipient of the 2007 Ernst & Young Entrepreneur of Year Award for business services. Kent is accredited by WorldatWork as a Certified Compensation Professional (CCP®)

 

Audio MP3

 

 

Transcript

 

Begin transcript

John Sumser: Good morning and welcome to HR Examiner Radio. I am your host, John Sumser. Today we are coming to you from beautiful downtown Occidental, California, the home of innovation in the great state of California. The sun, as usual, is out. The rose trees out here are getting ready to explode and it’s raining like no one never saw rain. Today we start talking to Kent Plunkett, who’s the CEO and president of Salary.com and he’s got a great story. He and his team have bought the company back out from IBM. We’re going to get to know Kent a little bit today. Kent, how are you?

 

Kent Plunkett: I’m great, John. Thank you for having me on the show and for helping reintroduce me to your tens of thousands of HR generalists and compensation folks who listen.

 

John Sumser: Yep, tens of thousands. Tens of thousands, that’s exactly right, Kent. [inaudible 00:01:12]. Would you take a moment and introduce yourself to the audience, please?

 

Kent Plunkett: Great. Yes, I founded Salary.com back in 1999 and we built the business with the intention of helping drive technology into a category which really hadn’t seen a lot of technology investment and that was the compensation segment. We built the company up over about eight years to 2007 when we had the opportunity to take the company public. We took the company public in a very nice public offering, ran it for a few years an independent company and then in 2010, Kenexa came knocking on our door and bought the business from us. Kenexa then merged with IBM and I started calling IBM to say, “Hey, I’m not sure that the Salary.com business is relatively niche, focused business on compensation is a great fit for IBM.” Who likes to sell multimillion dollar contracts. We started pursuing the acquisition and a couple years later, IBM agreed. It took a little while to make the deal happen but we eventually were able to close the deal and pick up Salary.com again, as of year end 2015.

 

John Sumser: It’s an amazing story. Before we did into that really hard, how did you get here? I can’t imagine that when you were playing on the beach in Cape Cod in your diapers that over the top of your head was a thought bubble growing, “Can’t wait to grow up and run a compensation oriented company.” Tell me the story of a smart guy in Boston and growing up and doing what you’re doing.

 

Kent Plunkett: I actually knew at twelve that I wanted to start a company that would get on the Inc 500 someday. I knew at a pretty young age I was going to be an entrepreneur. My hero, back then, was Ted Turner and I was also a sailboat racer. He was an entrepreneur and one of the first big personality that was a public entrepreneur and also a very competitive sailboat racer, so he was my idol. I actually met him when I was in college, he came to our school to talk.

 

I kind of knew at a very early age that I just wanted to invent things and I wanted to create products, products that people needed and that would make their lives better. I, of course, didn’t figure out compensation until I started doing startups after going to business school. I’ve done, actually, thirteen startups since 1991, in one form or another. The one right before Salary.com was where I had done career counseling software based on the book “What Color is Your Parachute?” We figured out that you could help someone understand their career but when they got to the end and they said, “Okay, I should be a graphic artist.” There was no information available, easily accessible, about how much you could earn in that career, what starting salaries were, what you’d make when you were fifteen years in, in experience.

 

We saw that gap in the market and a few months later we found the domain name, Salary.com, for sale and we purchased it for $75,000, which we thought was a pretty good deal for such a strong domain name. Of that moment, Salary.com was born. I was, one time, hiring a secretary and couldn’t figure out how much I was supposed to pay a secretary in Boston. Hopefully people don’t have to suffer that problem again.

 

We believe that HR generalists, in particular, should have the opportunity to find a quality answer quickly and easily and that was how we built the product. I’m a product person, in this company I get to write code, I get to build really big data sets and put them together to make a compelling product and that’s what makes me happy. That’s what gets me up every morning, is to build a great product that people really like using.

 

John Sumser: You’ve got this absolutely heroic story where the company gets sold and then years later, after lots of persistence, you win company back and bring the old team back to the game. Tell me what that’s like. What a crazy thing.

 

Kent Plunkett: It’s been really fun. We spent a year kind of buying the company back from IBM, and the process, that was a very tense time for me and my family and my close partners because we really wanted to get back in the saddle and reestablish Salary.com as the preeminent company in the compensation technology space. IBM had done a reasonable job with the business but it wasn’t their focus. The day we got it and we had a hundred and ten employees coming over, about fifty of which had been hired originally by myself and Yong Zhang, my partner, who was the CTO and COO of the company since the year 2000, they felt relief and customers sent us emails and said, “Thank God, you’ve rescued Salary.com.” We get to reassert ourselves now and start to work on the product and begin to take the product forward again. That’s been really exciting and really rewarding.

 

John Sumser: How’s the world changed? You’d think that there are many challenges associated with doing the kind of thing that you’re doing but certainly one of them is that it’s a fast moving marketplace and things are different than they were when the team was last assembled. What’s changed?

 

Kent Plunkett: A lot’s changed and not so much has changed. You have very solid, traditional data providers like iMercer, sells great data, Willis Towers Watson, also is a great provider of data in the category, and those companies are still strong and prospering and doing a great job providing data to compensation analysts in the form of surveys. Fortunately for us, you’re supposed to have three sources of data to price any one job so it’s not a winner take all market. That market hasn’t changed that much where you coexist with your competitive peers and you try to do so in an orderly manner and that really hasn’t changed much.

 

There are some people that advertise themselves as disruptive vendors. Folks more on the consumer side or media side, like a Glass Door, where they don’t share the same commitment to consistency and accuracy of data but they are publicizing data and just pushing data out, whatever data they can collect. That’s led to a rise of kind of this concept that employee reported data can be useful. I think that HR generalists and compensation professionals as a whole have rejected the quality of that data as being useful or having utility. Consumers are finding it helpful in helping them make decisions and to frame their own thoughts about their own compensation so to ignore that trend is reckless. On the other hand, I don’t think it’s changed what the core data suppliers that we would recommend people work with, people like a iMercer or Willis Towers Watson or Salary.com for your hardcore compensation and data needs and data you can trust.

 

John Sumser: Okay, how about technically, how about the evolution of the job hunter who now has transparency on a thousand levels? Does that make your work different?

 

Kent Plunkett: I think there’s a lot of pressure on line managers and HR generalists and rolls up into the compensation specialists. When employees come in and want to have a discussion about salary and they start with a number that’s not accurate. That’s a much tougher discussion because instead of sitting there and saying, “Look, what’s on this piece of paper here, you’ve matched yourself to the wrong job. You don’t understand. We’re a larger company or we’re a smaller company than typical and here’s other factors that impact on our compensation decision making as to why we pay you like we pay you.” That discussion, we think, is extremely healthy but it’s a tougher discussion to start when people’s first place they may go is to a search engine to just kind of see what pops up and then they take that paper in. Those companies aren’t necessarily following best practices and compensation like we do. That makes it, I think, a more difficult conversation for HR.

 

You can’t stop the media wave because people have found that the audience will follow if you publish data about compensation. You can’t find the drive towards transparency and openness and people’s desire to consume the content. It’s going to be out there and I think it’s a lot like newspapers versus the bloggers. Which is the newspaper claim that they have better quality and the bloggers volume kept going up. I think it’s a reality that we all have to just deal with and the key is, I think to train and be ready for the conversation about what happens when somebody comes in with an argument about getting a raise or a question about their compensation that’s based upon a social number. If you’ve done the right work and you’ve prepped your people you should be able to turn that conversation into a very positive discussion about pay performance and what the company’s philosophy is.

 

John Sumser: It’s such a complicated conversation to have somebody who you care about, who works for you, who comes to you with what they believe is an accurate picture of the world, having to figure out how to tell them that their picture of the world isn’t accurate, with data, when they’re not prepared for the conversation to go that way. That’s pretty tough to [inaudible 00:13:20]. Are you going to help your customers prepare for that?

 

Kent Plunkett: I think our customers, generally, are prepared for that because our customers, by committing to our products and our best practices, are preparing themselves to have that conversation in a proper manner. What I am seeing out there is, more and more, businesses between one hundred and five hundred employees are committing themselves to do some form of compensation work. Unfortunately, they don’t always have the right training to know what to be able to differentiate as to what are the quality data sources. Sometimes they end up using data sources that are more suspect. For the most part, if you’ve committed to doing proper compensation work then you should be in a position to have that conversation and frankly, I give a lot of credit to HR generalists. I’ve found that our customers know how to have that conversation and they know that conversation is going to happen. I think you’re better off having the conversation with the employee have that conversation with a headhunter or executive recruiter.

 

John Sumser: Great, great point. You’re back fresh from adventures, that should mean that Salary.com is about to see a wave of innovation that’s not available to people who’ve been inside of the market for a decade. Help me understand what your innovation trajectory looks like and what you’re thinking about as the improvement path as you move forward?

 

Kent Plunkett: We’re very excited and people are very energized on the product management team and the development team. We’ve brought back, in addition to the fifty people that we hired originally and that stayed with the company during the acquisitions, we also brought back another thirty head count. Mostly in technology and product management that have worked with Yong and I over the last five or six years on other projects. We kind of kept our core group of technologists with us the whole way and they are now back in the saddle here as well.

 

The technology and innovation [inaudible 00:15:54]roadmap work that we’re doing is extremely exciting. We’re now going to the phase where we’re significantly engaging our customer base to find out which of the great ideas that we have that we can pick from to do next, they most want and also to see if there’s other things that aren’t on our roadmap currently, for consideration, that our customers think would be important to making their work life better.

 

Between the excitement that we have in product management and development and the input that we’re getting from our customer base, I think we’re in great shape. We certainly have the largest and most compensation knowledgeable development team of any company I know of. We are well prepared to code like crazy and bring more data and more functionality out over the next two or three years. We’re very excited about where we think the product can get to.

 

We think the category is ready to get products that are more than data entry screens on a webpage and then some reporting and analytics up against it. We think there’s a lot of opportunities to utilize some of the power of APIs and the Cloud that’s come out and to move dramatically into big data analytics. We think that’s going to be a really transformative growth phase for the products. Frankly, most of the companies that we compete with today in compensation technology, don’t have the horsepower to go down that road but we do.

 

John Sumser: I hadn’t thought of this before but are you imagining the ability to forecast the trajectory of a specific employee’s salary growth so that when the compensation people look at it, they go, “Oh, this woman is on a different trajectory than other people in the category and so we might want to navigate the compensation conversation differently.” Is that predictive analytics in compensation?

 

Kent Plunkett: It is, that’s absolutely one of the concepts and it’s one we’re hearing from our customers. There’s sets of legislation being signed into law or winding it’s way through different legislative bodies. In particular in California, and in an executive order signed just this January in Washington DC, then also in the Commonwealth of Massachusetts where we’re located. Which is really putting teeth into the compliance portion of equal pay and diversity, paying people of diversity the same across the company. That’s going to put a lot of pressure on the internal equity and the internally equitable allocation of pay. There’s new reporting requirements that happen starting second half of next year for the federal government.

 

California has taken a more stringent approach and actually demanded that people study some concept called job equivalence which means you take the jobs, for example, that several women hold, over in one division and you have to compare them against other comparable jobs, that say men hold, someplace else and make sure that you’re pay practices are comparable between comparable jobs. That’s going to put a lot more pressure on organizations to do disciplined compensation work and I think that’s very good news for our society and it’s probably not bad news for people who support best practices in compensation at smaller companies and larger companies. Most larger companies already do a lot of this work but it is going to be a driver of the need for particularly HR generalists who probably become more expert in compensation analysis and best practices and start to deploy them inside their company.

 

John Sumser: Oh, that’s very interesting. This is an environment where being able to intelligently compare two jobs, sort of on the fly, would be an extraordinary tool. I assume that means that there’s some development effort headed in that direction so that you have a sort of an instant comparitor, whether or not the infrastructure of the company is set up to have one, is that a direction you’re headed?

 

Kent Plunkett: It is one of the directions that we’re working on because of the demand to do what’s called job leveling, and be able to say that this job over here is the same as that job over there, it has increased. To do that work by hand is a very expensive consulting project so we are working on technology that makes that easier. Of course, we’ve been offering products that support job leveling work since we founded the company because compensation, in the end, is about data mapping. It’s about mapping your company’s jobs against an index to the world of work so that data can flow. My company’s accountant two job is the same as the Salary.com’s indexed mid level accountant and once you say, these two are the same, then the data can connect and you can start to report data for, not just your company, but all the peers who also participate. That’s the heart of compensation, is that kind of job leveling and data mapping. I think that the capacity for technology to provide better and better solutions is going to increase dramatically as the data becomes bigger and the processing capabilities grows over the next five years.

 

John Sumser: It’s a very interesting time. In general, HR is trying to get more evidence based and data centric and so there are lots of things that are changing inside of the HR universe and so that means you’re riding a wave that might leave the [inaudible 00:23:10] of your competitors struggling to figure out how to build the technology. My real question there is, how do you maintain focus? Because so much of your client base is going to be hungry for data tools that work that it seems inevitable to me that you will get pummeled with distractions and so I’m interested in understanding how you navigate.

 

Kent Plunkett: One of the nice things about Salary.com is that in this, the new Salary.com, we only purchased the compensation point solution products from IBM so we have the luxury of staying very tightly focused on the compensation businesses. If people knew Salary.com back in 2007, 2008, we had a payroll division, we also had a talent management business and were competing with Success Factors in the talent management business, among others. We also had a skills based competencies business. Those businesses were either sold off by IBM or IBM has retained them.

 

We only bought the compensation assets and that would be for the consumer market, small business and for enterprise. That gives us a great deal of more focus than we had back in 2008 when this company was over five hundred employees. It’s a smaller company, more nimble, but, fortunately, very profitable. Because the compensation products were the economic engine of both growth and profitability for Salary.com when we were public. We were investing heavily building out the payroll and talent management capabilities in those businesses. Those were generating significant losses and the compensation business was always profitable.

 

We have a nice profitable business and that gives us the luxury of having some profit to reinvest in building out our technology stack. That’s a great luxury and something that our competitors probably can’t match the amount of money that we can put to work to kind of move the innovation dial forward in the category.

 

John Sumser: That’s really exciting. We have blown through our allotted time and I wonder if there’s anything that I should’ve asked you that I didn’t.

 

Kent Plunkett: No, but I’d like to make a quick statement which is just, thank you, John and thank you to all the customers that have given us great emails and great feedback over the last two months. We did a campaign to reach out to all of our customers and we have 3,600 enterprise customers and then a whole bunch of small business customers on top. The feedback we got was overwhelmingly positive and appreciative and so many of those customers have been with us for over ten years and it was just really rewarding and felt really good to go to work everyday and know that I was going to talk to a couple of good customers and I went home with a smile on my face, virtually everyday the last two months. Thank you to my customers that are listening and those of you out there that hopefully will benefit from using our free website or potentially our products, that are built for corporate use, in the future. John, thanks again for having us on the show.

 

John Sumser: Okay, so why don’t you take another moment to introduce yourself again and tell people how they’re going to get ahold of you?

 

Kent Plunkett: Great. I’m Kent Plunkett. My email address is Kent.Plunkett@salary.com and our corporate number is 617-863-8000 and we really look forward to working closely with any of the audience that’s interested in going further into best practices and compensation.

 

John Sumser: Thanks so much for being here, Kent. It’s been a great conversation. You’ve been listening to HR Examiner Radio and we’ve been talking with Kent Plunkett who is the CEO and president of Salary.com. The company that he founded way back in the fifteenth century, I believe, and has recently reacquired from IBM and he’s installing the original team with some innovative engines and headed into a bright and shiny future. It’s been great to have you, Kent, and thanks everybody for tuning in. You’ve been listening to HR Examiner Radio.

End transcript



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