Monthly Measures: Why 2015 is a good year to benchmark payroll performance Monthly Measures: Why 2015 is a good year to benchmark payroll performance

Monthly Measures: Why 2015 is a good year to benchmark payroll performance
31 Jul 2015

In a Forbes article that was published in 2014, entitled ‘Seven things your CEO really hates (and that you need to understand)’, nearly half of the study participants indicated they hate “when senior executives recommend a strategy but have no data or evidence to support it”.

As payroll strategies start to get more attention and are being rolled into the overall strategy of the executive who owns the payroll process, payroll leaders must think about the importance and power of the empirical data needed to support the recommended payroll strategy.

The importance of benchmarking

If there are any doubts about the credibility and power of the supporting data, participating in our 2015 Global Payroll Performance Study can provide the needed insurance.

Far too many organizations do not benchmark and as a result they operate within the confines of the knowledge of few, limiting their ability to gain a better understanding of how others are managing similar challenges. In some cases, lack of benchmarking can stifle opportunities for innovation across the enterprise.

There are many advantages to benchmarking, some of which are listed below:

It provides empirical data showing how your payroll organisation compares to other organisations processing payroll with similar characteristics

Our Global Payroll Performance Study uses two dimensions to measure performance, efficiency and effectiveness. Individual demand drivers are identified for each measure and based on how you perform across each measure. We use a value grid to show how you compare.

The value grid is an excellent tool as it clearly tells your payroll story. On the same slide. It also includes indicators that show how you performed in each one of the performance demand driver areas.

The Hackett Value Grid shows how you compare to other companies
and details your status for each measurement under efficiency and
effectiveness…

If you don’t have clearly defined, unbiased data that shows how you compare to others, how do you determine where improvements are needed and what you need to do to improve? Is it easy to show how you compare to others and what you need to do to move the needle in the direction that best meets the strategic goals and objectives of your payroll organisation? If the answer is ‘no’, you need to benchmark.

It provides empirical data to identify and support current and emerging best practices

For example, one of the trends our Global Payroll Performance Study identified and our data continues to support, is the fact that top performing payroll organisations have increased their movement to shared services by more than 50 per cent over the last few years.

This is excellent data that can be used to support the business case for shared services. More importantly, it is aggregate data collected from many multinational companies around the globe, who have characteristics, including a global footprint and employee population, similar to your company.

Imagine the senior executive you report to being able to present the business case for the movement of payroll to shared services with the confidence derived from knowing how many other companies are doing it and/or have done it successfully.

It provides empirical data that speaks to the maturity of the best practices that have been implemented at your company

For example, if you are looking to increase electronic payments in order to alleviate the cost of printing, maintenance and postage necessary to mail paper checks and payslips, the Global Payroll Performance Study shows that top performing companies achieve a one-to-one ratio between those employees that receive electronic payments (direct deposit, wire transfers, pay cards etc) and those that receive electronic payslips.

If achieving 100 per cent electronic payments is part of your payroll strategy and your organisation has only focused on payments, this is empirical data that supports the additional focus on electronic payslips (also referred to as pay statements in some countries).

Furthermore, being able to view this information on a country-by-country basis (when the data is available) is valuable insight that can help you provide an electronic payment strategy to your leadership. No strategy is good if you are unable to articulate how best to implement it. Benchmarking data, coupled with other insight, is valuable to both your payroll and implementation strategy.

Ultimately, benchmarking the payroll process provides empirical data that speaks to internal culture and its impact on the success of the payroll process

Since payroll receives most of its data from other internal and external sources, benchmarking identifies those focus areas for transformation initiatives that fall outside the scope of payroll. For example, if there are a significant number of overpayments when employees leave the organisation, the Global Payroll Performance Study will help bring attention to that data.

In most instances, it would point to a deficiency in the termination process, encouraging conversations between operations, human resources and payroll. Think of how much more powerful your senior executive is when they can provide empirical data to support the need to refine the termination process, which ultimately will reduce overpayments in payroll, minimising their impact cash flow.

It provides empirical data to support the number of resources necessary to process payroll at your organization

It’s budget time and you need more resources. Increasing and/or decreasing the number of resources can be challenging for most. The Global Payroll Performance Study details how you compare to other organisations from a staffing perspective in each of the sub process areas.

Empirical data can be used in several different ways. For example, it can be used to justify more resources in the tax filing and payments sub process area if you see other companies in countries with similar complexity are outsourcing and reallocating resources to other more analytical type activities.

This data adds more insight to the payroll strategy and justifies movement in the staffing area. Think of how much more comprehensive empirical data makes the case for change. If you are not or have not benchmarked before, these are some of the benefits you will gain by participating in our 2015 Global Payroll Performance Study.

Benchmarking should be performed on a regular basis to continuously measure the pulse of your payroll organisation.

Don’t be afraid to share your performance study results, as payroll’s performance is a good reflection of the internal culture of the organisation. It can help identify those specific areas that need to be refined to ensure all employees are paid in an accurate and timely manner. As more and more internal organisations are competing for project funding using analytics to make their business cases, it is imperative payroll professionals are similarly equipped and ready to compete with the right data and tools. The organisation with a comprehensive scorecard that contains the right information will be competitive.

With perfection comes privilege

When the right people have the right information at the right time, the results can be powerful. Savvy payroll professionals who truly understand the power of benchmarking are ahead of the curve in that:

• They are able to distinguish themselves from other organisations that simply calculate gross to net
• They are able to identify and describe the negative consequences that even a small number of exceptions occurring every payroll cycle can have
• They are able to create a compelling business case to support projects that are necessary to move their organisation to the next level.
• They are able to make a significant contribution in terms of business value to the company because of the wealth of knowledge they possess about their organisation.
• Most important, they are able to make accurate, informed decisions supported by their detailed understanding of the contributors to payroll performance.

If you’ve never benchmarked before, 2015 should be the year! If you’ve benchmarked in the past, join us again to see how the changes we’ve made to the 2015 Global Payroll Performance Study help better tell your payroll story.

By Felicia Cheek, global payroll advisory programme practice leader at The Hackett Group

In a Forbes article that was published in 2014, entitled ‘Seven things your CEO really hates (and that you need to understand)’, nearly half of the study participants indicated they hate “when senior executives recommend a strategy but have no data or evidence to support it”.

As payroll strategies start to get more attention and are being rolled into the overall strategy of the executive who owns the payroll process, payroll leaders must think about the importance and power of the empirical data needed to support the recommended payroll strategy.

The importance of benchmarking

If there are any doubts about the credibility and power of the supporting data, participating in our 2015 Global Payroll Performance Study can provide the needed insurance.

Far too many organizations do not benchmark and as a result they operate within the confines of the knowledge of few, limiting their ability to gain a better understanding of how others are managing similar challenges. In some cases, lack of benchmarking can stifle opportunities for innovation across the enterprise.

There are many advantages to benchmarking, some of which are listed below:

It provides empirical data showing how your payroll organisation compares to other organisations processing payroll with similar characteristics

Our Global Payroll Performance Study uses two dimensions to measure performance, efficiency and effectiveness. Individual demand drivers are identified for each measure and based on how you perform across each measure. We use a value grid to show how you compare.

The value grid is an excellent tool as it clearly tells your payroll story. On the same slide. It also includes indicators that show how you performed in each one of the performance demand driver areas.

The Hackett Value Grid shows how you compare to other companies
and details your status for each measurement under efficiency and
effectiveness…

If you don’t have clearly defined, unbiased data that shows how you compare to others, how do you determine where improvements are needed and what you need to do to improve? Is it easy to show how you compare to others and what you need to do to move the needle in the direction that best meets the strategic goals and objectives of your payroll organisation? If the answer is ‘no’, you need to benchmark.

It provides empirical data to identify and support current and emerging best practices

For example, one of the trends our Global Payroll Performance Study identified and our data continues to support, is the fact that top performing payroll organisations have increased their movement to shared services by more than 50 per cent over the last few years.

This is excellent data that can be used to support the business case for shared services. More importantly, it is aggregate data collected from many multinational companies around the globe, who have characteristics, including a global footprint and employee population, similar to your company.

Imagine the senior executive you report to being able to present the business case for the movement of payroll to shared services with the confidence derived from knowing how many other companies are doing it and/or have done it successfully.

It provides empirical data that speaks to the maturity of the best practices that have been implemented at your company

For example, if you are looking to increase electronic payments in order to alleviate the cost of printing, maintenance and postage necessary to mail paper checks and payslips, the Global Payroll Performance Study shows that top performing companies achieve a one-to-one ratio between those employees that receive electronic payments (direct deposit, wire transfers, pay cards etc) and those that receive electronic payslips.

If achieving 100 per cent electronic payments is part of your payroll strategy and your organisation has only focused on payments, this is empirical data that supports the additional focus on electronic payslips (also referred to as pay statements in some countries).

Furthermore, being able to view this information on a country-by-country basis (when the data is available) is valuable insight that can help you provide an electronic payment strategy to your leadership. No strategy is good if you are unable to articulate how best to implement it. Benchmarking data, coupled with other insight, is valuable to both your payroll and implementation strategy.

Ultimately, benchmarking the payroll process provides empirical data that speaks to internal culture and its impact on the success of the payroll process

Since payroll receives most of its data from other internal and external sources, benchmarking identifies those focus areas for transformation initiatives that fall outside the scope of payroll. For example, if there are a significant number of overpayments when employees leave the organisation, the Global Payroll Performance Study will help bring attention to that data.

In most instances, it would point to a deficiency in the termination process, encouraging conversations between operations, human resources and payroll. Think of how much more powerful your senior executive is when they can provide empirical data to support the need to refine the termination process, which ultimately will reduce overpayments in payroll, minimising their impact cash flow.

It provides empirical data to support the number of resources necessary to process payroll at your organization

It’s budget time and you need more resources. Increasing and/or decreasing the number of resources can be challenging for most. The Global Payroll Performance Study details how you compare to other organisations from a staffing perspective in each of the sub process areas.

Empirical data can be used in several different ways. For example, it can be used to justify more resources in the tax filing and payments sub process area if you see other companies in countries with similar complexity are outsourcing and reallocating resources to other more analytical type activities.

This data adds more insight to the payroll strategy and justifies movement in the staffing area. Think of how much more comprehensive empirical data makes the case for change. If you are not or have not benchmarked before, these are some of the benefits you will gain by participating in our 2015 Global Payroll Performance Study.

Benchmarking should be performed on a regular basis to continuously measure the pulse of your payroll organisation.

Don’t be afraid to share your performance study results, as payroll’s performance is a good reflection of the internal culture of the organisation. It can help identify those specific areas that need to be refined to ensure all employees are paid in an accurate and timely manner. As more and more internal organisations are competing for project funding using analytics to make their business cases, it is imperative payroll professionals are similarly equipped and ready to compete with the right data and tools. The organisation with a comprehensive scorecard that contains the right information will be competitive.

With perfection comes privilege

When the right people have the right information at the right time, the results can be powerful. Savvy payroll professionals who truly understand the power of benchmarking are ahead of the curve in that:

• They are able to distinguish themselves from other organisations that simply calculate gross to net
• They are able to identify and describe the negative consequences that even a small number of exceptions occurring every payroll cycle can have
• They are able to create a compelling business case to support projects that are necessary to move their organisation to the next level.
• They are able to make a significant contribution in terms of business value to the company because of the wealth of knowledge they possess about their organisation.
• Most important, they are able to make accurate, informed decisions supported by their detailed understanding of the contributors to payroll performance.

If you’ve never benchmarked before, 2015 should be the year! If you’ve benchmarked in the past, join us again to see how the changes we’ve made to the 2015 Global Payroll Performance Study help better tell your payroll story.

By Felicia Cheek, global payroll advisory programme practice leader at The Hackett Group