Can Payroll Actually Be Strategic?

August 19, 2014 Ray Rivera

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Not all that long ago I had one of those conversations that prompted me to reexamine something I thought I understood well.

I was a new employee introducing myself to group of enterprise software product managers, learning their roles and the products they managed. After speaking with managers of recruiting, talent management, and LMS solutions, I spoke with a payroll product manager. Nonchalantly I asked him, “What are the biggest challenges about implementations for administrative HR activities versus more strategic ones such as employee selection and onboarding?”

He cocked his head, puzzled. With the look of a terrier he asked, “How is payroll not strategic? If I can run my payroll faster, more efficiently, with fewer errors than everyone else, how is that not strategic? And if can analyze payroll data and learn more about my workers than anyone else who would hire them, how is that not strategic?”

It was very hard to argue with his reasoning, especially when it was backed up by the dozens of customers he supported.

A practice defined, but not driven by rules

Every organization uses payroll and thereby must adhere to a common set of rules. Yet that doesn’t mean implementing and configuring payroll is the same for every organization. Some businesses are young and dynamic — they seek out the latest innovations to manage costs, while their employees expect the sleekest technology, all the way down to the HR services. Such companies are often are growing rapidly, and frequently need to transform practices outgrown shortly after adopting them.

Others are long-established, with highly complex operations that have been refined over many years. They have developed numerous home grown systems and pieced them together precisely. Yet as these kinds of organizations adapt to new challenges, many of their existing systems need to be replaced, and the processes they support improved.

Even payroll departments differ as they implement their systems: some want their providers to provide multiple options, others want direct guidance and a list of next steps to take.

To sustain business as usual your partner has to do better than business as usual

Any successful payroll implementation of course begins with an keen understanding of such differences, and is followed by clear communication of what is most feasible for a particular organization and situation. Progress is greatly facilitated by a partner diligent to offer the kind of support most needed and provide documentation for it.

For payroll to become strategic for an organization, an implementation must do more than that. A successful payroll implementation also requires some form of training, or change enablement program. Change enablement best happens during the discovery and design phases, so that communication channels become established, and complicated terminology is understood by all business users and stakeholders. Implementation and deployment are not the times to figure out what everyone is doing.

Taxes are inevitable…so goes the saying. Yet even so, vendor partners typically do not update as often as the vendor. However, that should not mean that frustration is inevitable as well. as taxes need not inevitably become problematic for payroll. Partners must assist the implementing organization determine which version is most suitable for this critical area of payroll, and further determine precisely what to alter and when, and what the upstream and downstream impacts will likely be.

A payroll implementation is usually not one big project, but rather numerous short projects that make up one big initiative. Often such short projects suffer from inadequate documentation or requirements, sometimes appearing in records beyond those identified as discovery documents. To avoid later troubles, service partners should prepare for complex calculations, and determine the processes for which documents are needed.

In our experience, a significant part of the value of a successful payroll deployment proceeds from clarifying the areas that are likely to change, specifying calculations and dependencies, and creating clear documentation for creating future reports in which business can place confidence. By providing a collection of report libraries, partners can extend the functionality of standard reports, by facilitating automatic loading of report libraries client, including several nonstandard reports.

Going above and beyond…every pay period

Creating a truly strategic payroll function is much more than finishing an HR implementation on time and under budget. New systems almost always accompany new processes. Neglecting the processes which payroll systems support increases the chance that the implementation will fall short.

On the other hand, a strategic payroll function is achieved by anticipating and improving processes, especially as payroll and tax rules change, and data increasingly comes from dispersed sources. A strategic payroll function will be configured to deliver accurate payroll at the outset, and prepared for change and increased complexity, as well as adaptation to the intricacies of other systems.

A payroll partner therefore should bring expertise in partner systems and processes that support the transfer of data between these systems, providing information to payroll stakeholders throughout the organization. Such expertise in payroll process improvement helps payroll do their jobs better, and enables greater insight into the workforce.

And when any part of the workforce does better, including payroll, how can that not be strategic?

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