“Success in the digital future will depend on your company’s ability to implement digital technologies innovatively, by rethinking strategy, culture and talent.” ~ MIT Sloan Management review.

Face it we are in the digital future. It’s now.

I have quite possibly been one of the biggest skeptics on the idea that payroll could look much different from what it is today. I mean,

  1. All I want – like most people – is my paycheck. If I’m getting my paycheck – SCORE! My company’s a winner. Not much else they need to do to improve on that, right?
  2. Why would I rewrite my payroll system if it’s working? The last time I did that was a nightmare. I typically like to adhere to “If it ain’t broke….don’t fix it; If it’s got life left, resuscitate it.” (Dad was a steel laborer who grew up in the Great Depression – nothing went to waste in our house.)
  3. Where’s the payback? What could my company possibly gain from this new investment in payroll technology? I mean — can payroll help me solve business issues like cost control, competition, growth? [insert sarcastic sneer here] Nope. Payroll is not a profit center – just another expense.

Can a software company convince me to scrap my current payroll system for something new? Since I pride myself on being innovative and encouraging others to do the same, I felt it only fair to revisit my above assumptions. So, I’ve spent some time pondering this question: For some organizations, the answer might be simple. For example, suppose we’ve grown through acquisition and are running multiple payroll solutions? Or, suppose my current software is so ancient it’s held together with scotch tape? Or, suppose I have great software but didn’t implement it right the first time? Maybe my existing supplier is outdated or provides poor service. But what if none of these apply to me?

Think it through. When my kids were younger, we had this neat portable game from Discovery Toys called “Think It Through.” The game challenges the player to turn off “autopilot” responses to really think about what you’re doing. It drove my kids nuts! We don’t like to be forced to think like this. Unlike computerized educational games, this toy does not just give you the answer if you get it wrong — you have to think it through and figure it out yourself. I decided to take my payroll question (“why would I reimplement my payroll system”), turn off my own autopilot, and think it through. Using the MIT Sloan Management Review quoted above

Pay for Performance programs attract and retain workers. But Payroll is what ultimately gets the job done. How and when I process pay matters.

THINK TALENT

Is your payroll process contemporary enough to attract and engage the best talent?When I asked myself this question, I realized I’ve never ever discussed the actual paycheck with a candidate.

Most of us think of payroll as a back-office function that performs a necessary financial process. Every week, every other week or every month processes are executed by a handful of payroll process experts that ultimately result in money in the financial institutions of employees. We’ve come to expect that we will always get paid accurately and on time; so the basic payroll processes are not really talent magnets. But as labor markets tighten, a “smart payroll” (as I’ll call it) will make the difference in attracting and retaining candidates – and could do so without heavily increasing wage competition. “How?,” you ask. Stick with me.

In my experience, companies have looked to streamline payroll processes and reap productivity benefits by consolidating payroll cycles and moving to bi-monthly or monthly pays. The theory is that fewer pay cycles is less work and therefore increased productivity. But what if the opposite were true?

Imagine if employees you hire could get paid more frequently.

You’re cringing at that concept right now, aren’t you?

But – listen – what if your payroll processes ran so simply and truly in real-time that employees could be paid weekly instead of monthly without increasing your payroll resources or resulting in a performance issue and conflicts with system resources? Better yet, what if employees could draw on their pay as they earn it daily? Imagine what an attraction that would be – especially in certain labor markets. A smart payroll system could manage this.

SAP HANA enables rapid, real-time data analysis and predictions — so, why couldn’t it allow real-time pay? And if my payroll is sitting in the cloud, I wouldn’t need to worry so much about the drain on infrastructure resources – servers, storage, data centers. With fewer employees running through large batch processes, retroactively calculating a month’s worth of changes, wouldn’t a daily payroll run faster?

And – yes – I do realize that some payroll rules require a look back at an entire week (or more) to accurately process special payments like overtime or shift differentials. A smart payroll system could handle all of that if it adequately handles retroactivity. SAP’s payroll, in fact, has always handled retroactivity particularly well.

“We have the technology. We can rebuild [it]. The world’s first bionic [payroll] – better, stronger, faster.” [ The Six Million Dollar Man TV Series 1974-1978]

THINK COMPANY CULTURE

A corporate culture aligns and motivates the workforce. Culture, however, cannot be left to stagnate, or the company follows that same path.

So, what has tech got to do with culture? A lot. Information builds transparency and trust and connects us to each other. Technology solutions that workers enjoy using will create a progressive, modern workplace.

Transparency – Trust – Culture. Like many other companies, in late 1990s the organization where I worked adopted SAP ERP technology. While staunch HR managers held the line at “we are never going to let technology drive our business decisions,” the world around them was already changing. They didn’t notice that the very act of architecting a global ERP was changing the way we worked, the culture of secrecy, our willingness to take [educated] risks and the ability to work differently in order to compete in a global marketplace. The change was dramatic. Quite literally, one day we barely spoke to our co-workers in another country. The next day the Global Employee Systems Team kicked off and everything about how we would collaborate, communicate, respect differences, and challenge each other changed. That was one small step in the progression of Human Resources.

We were so deep in the “doing” of implementing ERP that we didn’t stop to appreciate that not only had our processes changed. We had changed.

ERP enabled globalization and automation – of processes, data and decision-making across geographic, cultural and language boundaries. For the first time, headcount – a seemingly simple stat – could be tracked all over the world in a single source. Instead of our people records being locked up in file cabinets in a separate room that was also locked, data was readily available to employees and managers. When Payroll processed, it was no longer an isolated task in a back office, but part of an integrated process that relied on HR, employees and managers themselves to succeed. And despite all that change – Payroll did more than succeed. Processing time was cut in half.

The process of implementing technology had changed the way we looked at things, changed the way we communicated with each other, and changed the way we worked.

How exactly could a new payroll system impact culture?

Although we’ve come a long way with technology, our workplaces haven’t really caught up – at least not on the HR side. You’ve probably heard this a million times: “Employees want the same consumer-like experience that they have at home.” That’s a nice way of saying that employees really expect to be treated the way we expect them to treat our customers. But HR resources available to provide great customer service internally are limited.

Add to this fact that Research by SHRM (Society for Human Resources Management) demonstrates that employee engagement is a corporate objective for many leaders – yet, many employees still lack a sense of engagement. Much of the activity – and research – on employee engagement focuses on benefits and compensation as sources of employee engagement. Few focus on the “hassle factor” for employees in managing their benefits and compensation.

You can give employees great perks, but if they don’t know how to use them wisely, can’t get answers about these quickly, the perceived value can quickly diminish.

I’ve sat on the receiving end of employee questions and complaints regarding pay and benefits. It’s time consuming, demotivating and distracting to both HR’s productivity and to employee productivity. Why does it have to be that way?

In my reimagined HR world, these conversations would not exist. They don’t need to exist.

Smart payroll puts my pay and management of my deductions at my fingertips. Smart payroll allows me to model the impact of pre-tax medical plan deductions (for example) on my take home pay. Smart payroll lets me see how much my paycheck will be real-time as my overtime racks up or my scheduled hours increase or decrease. Smart payroll can easily show how my overtime was calculated – and explain (in English) any differences in deductions. Smart payroll is as easy and accessible as my bank account. Let’s say I want to change my bank or my tax withholding amount. Smart payroll would allow me to do just that online immediately. Behind the scenes, bank data can be validated to confirm the employees’ data entry.

Smart technology like that gives your business the “cool factor” – engaging employees in your mission to modernize and grow. It also reduces misunderstandings, telephone inquiries and frustrations on the parts of both HR and your workforce.

THINK STRATEGY

Every business has a vision and a strategy for achieving that vision. Where does HR and Payroll fit in? Funny – I’ve worked in HR and in IT for HR for most of my career and don’t remember HR and payroll being considered in the strategy (except, perhaps, when costs needed to be reduced).

Too often the basics of managing our “most valuable resources” are not considered as part of the overall company strategy. Yet, one misstep in regard to managing and paying your workers can sidetrack your organization’s growth strategy – and I’m not talking only about penalties and fines for non-compliance. I’m talking about the ability of your payroll system to accurately predict and manage costs and to grow with your company, easily adapting to new countries and to changes in pay models, legislation or union requirements.

Imagine a system where real-time data could be taken into finance to help assess and predict labor costs. At long last, companies could determine exactly where and how to apply cost reductions — and it might not always be a workforce reduction.

Can we have intelligent, real-time labor analysis and staffing?

Strong businesses effectively align supply and demand of resources. Are we really doing that “just in time”?

In HR, we conduct workforce planning relative to future projects, future sales, office growth, anticipated attrition, etc. We seem to pay less attention, however, to real-time Human Resources labor forecasting – except in the retail industry where a reliance on past performance helps to inform required staffing week by week. To effectively achieve that kind of “real-time” scheduling in a manufacturing environment would require real-time access to current sales, orders, commitment dates and available inventory. Who are the available workers with the right skills? What’s the weekly budget relative to required to meet production? Can the plant manager access this data real-time and make wise choices?

If the core HR and payroll system includes strong work scheduling and time management processes, managers closest to the workload can more easily adapt and adjust staffing levels – in near real-time. An efficient process, of course, would require that the super user or manager be able to make certain changes (work schedules, filling open positions with temp staff) at the plant — which is not the case today.

A smart payroll system would eliminate the IT middle man wherever possible.

Many payroll changes – like the just in time staffing scenario described above — seem to be delayed by IT processes — which I fully support! Smart payroll – thought – would allow more changes at the payroll administrator’s level – where and when it makes sense.

In my experience, union dues, work schedule rules, or simply new categories for earnings or new deduction amounts for benefit plans have had to go through complex IT processes. Annually, we would receive a table of new medical plan costs in EXCEL format from HR. There were six entries for each of 40+ medical plans. It’s a lot of data entry and a lot of room for error. Documentation came from the HR person which flowed to the payroll administrator for verification which flowed to IT to schedule, make the changes, test and release into production. In my mind, these things are not part of the payroll engine, but – rather – are part of the day-to-day business of managing payroll. In most cases, this is not a configuration or programming change – it’s just data.

The payroll system should be friendly to common business changes – allowing the super user (that person closest to the business change) to input the new data.

My colleague, Steve Bogner, Managing Partner of Insight Consulting Partners, explains this quite well in his blog, “Future Payroll Works for You:”

“Since Future Payroll has a lot of business knowledge, it can ask us questions and create this new payment type just the way we want it. And we can add our own business logic to spur questions that are specific to our own company (which bonus program does this payment add in to?). We test, adjust and tweak until we like the results. Future Payroll captures the test results and sign-offs so that we can make the auditors happy, and then we go live with it. And we push it to production when ready.” – Steve Bogner

Here are some of Steve’s other ideas:

  • On compliance reporting: “…we could have a purpose-built report that selects all the same data, automatically creates a filing-ready PDF form at the right time, emails a notice to the approver that it’s ready to review…”
  • Business rules: “… it has to come with comprehensive, easily accessible business knowledge…So Future Payroll must have this business knowledge built-in, constantly updated and maintained, easily reportable and backed by [the software company] for every country.”
  • Interfaces: “…[Interfaces are] built for each company’s implementation – what a waste of resources! Future Payroll would deliver a common process for this scenario so that customers have a 90% solution ready to go.”

Okay. So admittedly no change is easy. BUT if it were easy – would it be worth it?

Back in the late 1990s, many of us were white-knuckled down implementing new payroll systems – largely in fear that our outdated technology wouldn’t survive Y2K. Those of us who chose to move to Enterprise Resource Planning for payroll and finance, gained so much more than new technology. For the first time we were able to connect all of our businesses in common processes and with a single source of data. Today, cloud solutions take that a giant step forward.

If we can adopt a payroll system that is in the cloud, the chances are good that payroll will continue to be modified over time to create an environment that eliminates redundancies, manual workarounds and slow progress towards change. The agility of cloud will enable rapid adaptation to emerging technologies and competitive practices – no longer are you handcuffed by the fact that your platform is not on the most current version of the software.

To get the value – you have to be willing to make the hard choices: (1) to make the software switch to cloud (2) to make your processes lean (3) to change your mindset and your staff’s mindset about how business is most efficiently run.

The thing is – I don’t know what all the answers should be. Unlike the “Think it Through” game, there is no single combination of answers that result in a solved puzzle. Collectively – and in collaboration with other users – we can give voice to what we each believe payroll needs.

I would love to hear your thoughts. Tweet, Facebook, LinkedIn or otherwise express your point of view with #WWPD. Let’s get this conversation going in full swing.

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