Implementing HR/payroll administrative best practices

There is a growing need to improve organizational performance, address customer requirements, and improve accountability by focusing on results, service levels, quality, compliance, and customer satisfaction. Yet, when it comes to meeting HR and payroll administrative requirements, organizations have opted for conflicting service-delivery models/structures, dissimilar practices, and diverse technological solutions.

{mosimage}When value creation becomes the focus of HR administration and payroll-related activity, it’s important to realize that different service delivery models are possible and can result in overall efficiencies and service improvements. Unfortunately, from a structural perspective, we continue to witness the traditional “silo” service-provisioning models, coupled with unique processes and, quite often, with stand-alone technology for each silo (that is, separate processes and systems for payroll, benefits, compensation, HR, etc.). Not surprisingly, in most cases where this exists, you can expect inordinate administrative costs, indifferent customer service, inconsistent processes, numerous unnecessary handoffs,  additional data collection/entry, and processing delays for simple events, such as hiring employees, changing benefit coverage, or even increasing an employee’s salary. In some cases, it also leads to issues with compliance and labour relations, as employees are not always paid accurately or on time.

Best practice strategies and learnings
When faced with these types of issues and challenges, more and more organizations have considered the feasibility of implementing best practices as a strategy to combat the problems at hand. In doing so, it’s absolutely critical to understand that your payroll and HR functions cannot be taken at face value when judging whether a best practices initiative is needed. Your best practices strategy should be holistic in nature and, ideally, should focus on rethinking work from the ground up, looking horizontally across the different functional areas (and those sub-areas within HR itself, such as compensation, recruitment, benefits, etc.), eliminating unnecessary work, and finding better ways to do the work that is necessary. It shouldn’t simply be about downsizing or working harder, longer, and faster.

Furthermore, the strategy should be viewed as a continuous improvement initiative and not merely the “tweaking” of a process with superficial and reactive responses to short-term problems. More often than not, it’s the complete redesign of how you achieve your essential best  practice goals. For example, many best practice projects are not successful if the focus is strictly on eliminating employees. In contrast, a redeployment of employees to more value-added work is the result of the strategy, not its objective.

Organizations, that have adopted more tightly integrated people practices and systems for HR and payroll, including an overarching single-window approach to administering all payroll and HR events under a solo ownership structure, have achieved economies of scope and scale. More importantly, the change usually ensures an alignment with the organization’s business and HR objectives, plus the accompanying and interdependent people strategies. For those organizations desiring to break down the existing model and move towards more integration, streamlined approaches, and best practices, it must be noted that this change does not come easy.

Simply put, getting people who are currently involved in both payroll and HR administration (i.e., the “veterans”) to give up ownership and change the way they’ve always done things is no easy chore. So much so that those companies facing that infamous resistance-to-change syndrome have now seriously begun to look outside the organization for other service-delivery alternatives, such as outsourcing. It is important to note that outsourcing is not necessarily the right answer for every organization.

Outsourcing can be a best practice, if implemented for the right business reasons and with the right rigour and discipline. At the same time, it is crucial to remember that outsourcing doesn’t mean abdication of management responsibility, nor does it work well as a knee-jerk reaction by an organization in trouble. Furthermore, outsourcing should not replace one dissatisfaction with another.

Another important factor when examining best practice opportunities is that cultural considerations should not be overlooked or downplayed. Based on differing cultures, a best practice in one organization may not work or be accepted in another organization. Companies often turn to external consultants to achieve objectivity in this endeavor. However, use consultants wisely and strategically. Always try to avoid duplicating the talents and resources that may be available internally. In many organizations, there is an abundance of untapped talent. 

Great value in examining processes Additionally, from a best practices perspective, too often overlooked is the process redesign itself, which if looked at across the various functional lines could provide tremendous returns in terms of service quality, cost, time, and effort. When looking at payroll and HR-related processes, you need to understand the current processes, as it crosses different employees, managers, units, and departments - from where it initiates to where it ends.

However, be careful - understanding a process does not mean fullscale analysis-paralysis. When you review your entire process for a particular HR event, it is not uncommon to find that the most time (expended and elapsed) and efforts (money/people) are devoured where hand-offs occur between employees, departments, and business units (both internally and externally). For example, with the recruitment process, you could be touching more than a dozen internal/external groups ranging from the hiring manager, to a third-party recruiter, to an outsourced benefit provider and/or to the internal payroll or benefits department. And, more than likely, each area or person is maintaining some recording of the task (separate shadow files,  copies of forms, etc.), plus some audit and control systems or mechanisms. Furthermore, it is not uncommon to find where process bottlenecks occur, where inefficiencies reside, where duplication exists or where a lack of clarity/understanding is prevalent. Through this broader perspective, it is not uncommon to witness some interesting benchmarking results that are usually unfavourable from comparable best practice metrics.

An additional key consideration is to recognize the different components within most HR/payroll processes, namely:

  • data collection
  • data input
  • data output
  • data reconciliation
  • data reporting

Organizations that do not pay ample time examining the data-collection piece will normally fall into the “garbage-in and garbage-out” trap. Within the HR/payroll administrative business, the two primary business-drivers are accuracy and timeliness. Without focusing on the very front end of a process, these two drivers will be adversely impacted. Accordingly, you should not spend an inordinate amount of time and effort building back-end audits and reporting tools when the real problem is in the data-collection phase itself. You’ll also witness far greater benefits when data collection is the focus. In many cases, the front-end problems are usually linked to behavioural issues with employees and/or managers not adhering to requirements or timelines. In defense of these employee and/or managers, several are unaware of the resultant consequences of their poor behaviour, so a simple communication or education strategy can go a long way towards achieving the outcomes you are seeking.
Technology will not cure all ills
Regrettably, when best practices are examined by organizations, too many will jump to the conclusion that new technology solutions will provide the biggest bang for the buck. Not surprisingly, software vendors heavily promote this conclusion. It has been proven that technology can be a powerful enabling tool when deploying best practices, but it must be considered in the context of an overall strategy that also encompasses changes to the organizational structure (including service-delivery models and the people within it) and the cultural readiness of the organization to accept the new ways of conducting HR and payroll administrative practices and underlying processes.

Technology can improve efficiencies and productivity for businesses; however, there are things that technology can’t do - especially in the area of payroll and HR administration. Ask most individuals who have recently implemented a new HRIS or a new payroll system and they will quickly tell you this. When the subject is how to get the most return on investment in the areas of payroll and HR administration, it is important to first talk about people and best practices rather than beginning with discussions about the power of technology and software functionality. When implementing new software, you quickly realize that technology can’t enhance a process that is fundamentally flawed.

Again this is where the value of looking at your processes comes into play. Your reviews of existing processes when mapped from an end-to-end perspective (i.e., from a vacancy to getting the employee onboard and being paid) will usually illustrate this for you in a very simple and quick way. Good technology, properly implemented, can favourably affect the quality of your HR and payroll operations. Organizations must learn that their initial focus needs to be on the real business needs, the desired HR/payroll outcomes, and the best practices supporting them. From this, you would consider investing in technology to fuel and enable those objectives. Too many organizations spend money on technology and do not reap the results, because there is usually a disconnect with the busi ness requirements, poor implementation, lack of training or incorrect technical selection. It is disturbing and costly when technology is implemented for technology’s sake, or in situations where the business owners are not fully engaged in the selection process.

Always put the customer at the forefront
Best practices should always be customer-centric. Unfortunately, when speaking to organizations about best practices, many HR and payroll practitioners don’t realize that value should be defined by the “receiver” as opposed to the “provider” of the services. Quite often, far too much emphasis is placed on what is being done today (for example, on trying to perfect existing models or fundamentally flawed processes), as opposed to taking an in-depth and overall look at what is being delivered (whether good, bad, or indifferent).

There is a tendency to react to the perceived needs of clients, instead of exploring ways to learn, create, and measure the value of certain work and delivery mechanisms. For instance, when was the last time you asked your customers (the employees receiving HR/payroll administrative services) if they were happy with the services being delivered, if there was value in the services provided, or if the service was appropriate or for that matter, even needed? If you do poll your customers, you will likely be surprised by the answers you receive.

Don’t overlook change management
It’s not uncommon for individuals and organizations to initially embrace the concept of best practices, only to find the actual implementation efforts daunting and time-consuming. Simply put, it’s hard work. Additionally, finding “extra” time to begin a project of this nature, when you are already busy with day-to-day responsibilities, may seem impossible. You need to have full-time resources attached to achieve the intended results and objectives. Furthermore, the old adage, “If it ain’t broke, don’t fix it,” may seem to be the optimum (and easiest) route to take. But really, it’s not - especially if you are a high-cost service provider. At some point, sitting idle will catch up with you or your organization. Remember that today’s focus is more on low price and high quality, which has replaced the low-price or high-quality standards that were accepted in the past.

In summary, implementing best practices typically results in significant changes in organizational culture and employee behaviours. Employees in many areas throughout an organization are impacted by changes to organizational structure, reporting relationships, role redesign, job competency requirements, informationsharing, and teamwork, as well as performance management and training. Effective change and transition management is essential to successfully implement any best practice you are adopting. If an organization ignores or trivializes the change, the effects could be costly and damaging.

Ian J. Mise is the founder and president/CEO of LeadingEdge Payroll Group Inc., a consulting firm with business operations across Canada, specializing in HR/payroll administrative best practices, benchmarking,  HR/payroll compliance, and implementation management. Its client base includes some of North America’s largest public and private sector organizations.
A former president and CEO of the Canadian Payroll Association,
he is recognized across North America as a foremost expert on HR/payroll
best practices and is frequently called upon as a consultant, speaker, and
author in these areas. Ian can be reached at (416) 848-6899 ext. 228, or by
e-mail at [email protected]