Payroll scorecards: Beyond gross to net Payroll scorecards: Beyond gross to net

Payroll scorecards: Beyond gross to net
14 Nov 2017

To be effective, payroll scorecards should be based on metrics and measurements that are linked to the organisation’s goals and objectives. A good scorecard will reach far beyond standard payroll operations to include critical factors affecting all areas of the hire-to-retire process.

Why it’s important?

A traditional payroll scorecard indicates:
• How many employees were paid
• How many payslips were generated
• The cost per payslip and/or employee
• The number of payments/payroll full-time equivalents (FTE) and maybe the number of employees paid/payroll FTE
• Accuracy levels.

But while these metrics are important, they only meet minimum expectations for the payroll process as the primary focus is on measuring productivity and volume. What they do not show is the factors that influence this productivity and volume, and also what is causing accuracy rates to be less than 100%.

Unsurprisingly then, almost three out of five of payroll leaders who took part in a recent Hackett poll said they felt their scorecard did not tell their payroll story adequately. They also indicated that it failed to support enterprise-wide goals and objectives or reflect their vision for the payroll process.

Most importantly of all, they pointed out that the data could not be used for decision support purposes across the enterprise. But if this is truly the case, it makes it challenging for chief financial officers (CFOs) and chief HR officer (CHROs) to clearly understand what is required to make payroll really successful.

What can payroll managers do?
Savvy payroll leaders understand that their activities are about more than gross-to-net - and their scorecard should reflect this fact. So four things to consider when designing your scorecard are as follows:

1. Identify processes that are creating problems: Measure what is important. If the goal is to produce a payroll that is 100% accurate, determine what is preventing this from happening. If there are too many manual processes, identify which ones are creating challenges.
2. Understand what happens as a result of the problem: For example, if your termination process is causing issues, does it result in overpayment, underpayment or a compliance challenge? Understanding the outcome will help you to prioritise what is important.
3. Discuss the impact of the problem with the relevant executive: For example, if a problem results in overpayment, it will have a financial impact on the organisation. As a result, depending on the size of the issue, the CFO may well be interested as it could have an impact on financial reporting activities. If the problem results in underpayment, the CHRO will be interested as it will affect the employee experience.

Other considerations worth asking yourself include: What does your scorecard actually say about the payroll process in your organisation? Could it be used to help prioritise initiatives to help make the organisation a top performer? If the answer to either of these questions is negative, it could be about time you worked on it.

 

 

By Felicia Cheek, global payroll advisory programme practice leader and senior business advisor at The Hackett Group.

To be effective, payroll scorecards should be based on metrics and measurements that are linked to the organisation’s goals and objectives. A good scorecard will reach far beyond standard payroll operations to include critical factors affecting all areas of the hire-to-retire process.

Why it’s important?

A traditional payroll scorecard indicates:
• How many employees were paid
• How many payslips were generated
• The cost per payslip and/or employee
• The number of payments/payroll full-time equivalents (FTE) and maybe the number of employees paid/payroll FTE
• Accuracy levels.

But while these metrics are important, they only meet minimum expectations for the payroll process as the primary focus is on measuring productivity and volume. What they do not show is the factors that influence this productivity and volume, and also what is causing accuracy rates to be less than 100%.

Unsurprisingly then, almost three out of five of payroll leaders who took part in a recent Hackett poll said they felt their scorecard did not tell their payroll story adequately. They also indicated that it failed to support enterprise-wide goals and objectives or reflect their vision for the payroll process.

Most importantly of all, they pointed out that the data could not be used for decision support purposes across the enterprise. But if this is truly the case, it makes it challenging for chief financial officers (CFOs) and chief HR officer (CHROs) to clearly understand what is required to make payroll really successful.

What can payroll managers do?
Savvy payroll leaders understand that their activities are about more than gross-to-net - and their scorecard should reflect this fact. So four things to consider when designing your scorecard are as follows:

1. Identify processes that are creating problems: Measure what is important. If the goal is to produce a payroll that is 100% accurate, determine what is preventing this from happening. If there are too many manual processes, identify which ones are creating challenges.
2. Understand what happens as a result of the problem: For example, if your termination process is causing issues, does it result in overpayment, underpayment or a compliance challenge? Understanding the outcome will help you to prioritise what is important.
3. Discuss the impact of the problem with the relevant executive: For example, if a problem results in overpayment, it will have a financial impact on the organisation. As a result, depending on the size of the issue, the CFO may well be interested as it could have an impact on financial reporting activities. If the problem results in underpayment, the CHRO will be interested as it will affect the employee experience.

Other considerations worth asking yourself include: What does your scorecard actually say about the payroll process in your organisation? Could it be used to help prioritise initiatives to help make the organisation a top performer? If the answer to either of these questions is negative, it could be about time you worked on it.

 

 

By Felicia Cheek, global payroll advisory programme practice leader and senior business advisor at The Hackett Group.

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