The payroll function is an essential part of any organization. After all, our employees don’t work for free. Payroll professionals are recognized as important, even essential. But strategic? Let’s be honest—most people wouldn’t use “payroll” and “strategic” in the same sentence. Perhaps they should. Maybe there’s more to payroll than meets the eye.
Payroll has traditionally been thought of as a back-office—a transactional support function. Our primary purpose was—and remains—making sure employees are paid accurately, compliantly, and on time. But just as we’ve been talking for years about HR becoming more strategic and “taking a seat at the table,” payroll’s time has finally come.
The Definition of Strategic
What does strategic really mean? Being strategic can be defined as using the learnings of the past and insights from today to guide thinking and decisions of tomorrow. In other words, it means bringing real and meaningful data and information to help inform and guide business decisions. It means speaking in terms the business understands–return on investment and revenue growth come to mind–and delivering insights into decisions the business is making to achieve them. Our partners in HR have become quite adept at doing this, pulling data and information from talent acquisition and performance management systems to ask, and respond to, business questions involving such topics as ideal hiring profiles, effectiveness of training programs on performance and retention, and linkages between performance evaluations and career progression.
Payroll, with all of the data coming through the process, is in a great position to provide insight into some critical business questions of our own. Payroll can provide tremendous value to our organizations, moving above and beyond the transactional and tactical to delivering meaningful operational statistics, identifying actionable trends, and delivering key business insights.
For example, your company may be considering options for expanding the workforce–should the company open a new facility in a new location or expand an existing location? Payroll’s strategic insights might include painting a fuller picture into the full cost of the workforce–not just salary but overtime, perquisites, shift and other premium payments, etc. Payroll could also partner with HR to deliver turnover reports from the existing location as well as the cost of that turnover, potential costs in a new location, and other relevant operating information. This would help inform the business by providing real, concrete data upon which decisions are made.
Indeed, the time is right for payroll to address this challenge. As noted above, HR has embarked on this journey and is making clear the need for HR-informed business decisions. It is earning its seat at the table by taking a more global approach to HR processes and management. HR is consolidating systems and harmonizing processes, creating an environment where the data is consistently and accurately tracked and making access to that information easier. HR can now provide meaningful reports and use analytics to develop impactful insights. They are beginning to proactively inform business decisions.
The financial management and accounting functions did this similarly years ago, with similar results. With that effort under way (if not complete), it only makes sense that payroll would join in the effort, sitting as it does between HR and finance/accounting.
How can payroll effect this change and become a true partner in the business? How can you transition your payroll organization into a strategic function that has the proverbial “seat at the table?” As a payroll leader, it is important to think critically about the business–asking the questions you would have if you ran the business, and then thinking about how the data you have will help you answer/address them.
As you’re thinking about these questions, though, you’ll need to make sure the basics are being done–that payroll is fulfilling its basic function as efficiently and effectively as possible and that key objectives are being met. These key objectives are for the payroll department, of course, but they also should align with the corporate vision. You’ll need to build on the trust the organization has in payroll and raise awareness of all that payroll does in support of your organization. For example, expand on and publicize the metrics you use to evaluate the effectiveness of the payroll function today. Issuing basic reports such as headcount and payroll costs as well as operational efficiency reports such as payroll accuracy and timeliness reports to key stakeholders will help build awareness of the breadth of the payroll function. Likewise, providing insight into compliance requirements–and how well you’re meeting them–will help enhance payroll’s reputation for operational excellence as well.
Create a Robust Technical Environment
You’ll want to make sure your technical environment is as robust (and secure!) as possible. Whether managing systems internally or using an outsource provider (or a combination of both), cloud technology will help drive consolidation of data, improve access, and minimize reliance on IT for ongoing support and maintenance. Consider adoption of new technologies such as robotics process automation (RPA) and artificial intelligence (AI) to help drive increased efficiencies and reduce manual interventions. Likewise, fully engage with and leverage your technology and service provider partners to utilize these technologies, and to help manage compliance and other processes.Consider shared services and centers of expertise if you haven’t already, and harmonize processes where possible. Work with your HR and finance business partners to create full life-cycle flows from HCM through finance and accounting–including data and process–to create a truly integrated environment.
These moves will help you optimize your resources, drive increased efficiencies, and set the stage for enhanced capabilities around reporting, trend analysis, and predictive analytics–in short, business intelligence for strategic payroll.
As you, as a payroll leader, begin to think through the move to strategic payroll, it helps to put yourself in the position of the business owner to think about the questions you’d be asking. Some examples of questions aimed at strategically aligned operational efficiency and business intelligence information available from payroll that you should ask (many in concert with HR and finance) might include the following:
- Are we operating payroll as efficiently as possible (reporting on direct deposit, payroll resources to employees, etc.)?
- How are we faring in terms of compliance (tax penalties, changes in processing)?
- Are salary projections accurate and in line (cross-geo positioning in compensation ranges, total overtime costs, trends in overtime, etc.)?
- Do we have the right mix of employment types for our business model (employment status, overtime, leave, contingent, etc.–fully loaded labor costs)?
- Should we hire new staff or pay overtime to existing (overtime costs)?
- Are my managers executing to organizational productivity goals and how are they tracking across regions?
- Are there correlations between turnover rate, schedules, type of work, overtime, etc.?
- Can I predict if an employee is reaching burnout levels (overtime hours, number of direct reports, etc.)?
- Do I need to hire additional staff and, if so, when—considering future sales/needs and ramp-up time?
- Are our managers scheduling accurately based on business demands and customer patterns?
Making the transition from a transactional function to a strategic leadership function isn’t always easy, and it may not be a straight path. With forethought, planning, alignment to corporate vision and objectives, and business partnership with other functions, the journey can be a rewarding one for you and your team. You may see numerous benefits, including an increase in business performance, increase in value of the function within the organization, stronger competitive advantage through strategic workforce deployment, improvement in effectiveness of payroll through more rigorous measurement and focus on performance, and a better ability to adapt to business conditions through better alignment with organization’s strategies.
This article was originally published by the Global Payroll Management Institute (GPMI), www.GPMInstitute.com. GPMI is the world’s leading community of payroll leaders, managers, practitioners, researchers, and technology experts. Subscribers connect with each other through networking discussions, collaborative opportunities, and access to education and publications dedicated to global payroll strategies, knowledge, research, employment, and training. GPMI also publishes several global payroll texts and white papers as a benefit to subscribers. Get more information at www.GPMInstitute.com.