Transforming Payroll Requires a Goal, Data, and Company Support

Transforming payroll requires extensive planning, testing, and the cooperation of others within the business organization, three payroll experts said May 7.

Payroll transformation consists of fundamental changes to payroll processes, tools, and professionals to deliver payroll in a different way, said Jon Schausten, Director of Payroll at Group1001. Employers trying to transform their payroll have different reasons for doing so.

“So, where do you start? Well, in any story, you start at the beginning,” he said. “Pick something that you are trying to change, and try to make it better.”

Payroll professionals should use data to identify and measure the problems they are trying to solve, said Charlotte Hodges, Senior Payroll Manager at ECS Federal, LLC. Data must first be organized and measured to make it useful information.

“When data are processed, organized, structured, or presented in a context to make them useful, that’s when you have information,” she said. “Data doesn’t depend on information, but information does depend on data.”

Once data is collected and organized, payroll professionals can use key performance indicators and metrics to measure their progress during the payroll transformation process. KPIs measure progress based on business goals, while metrics measure progress on specific business activities, she said.

“KPIs are strategic, while metrics tend to be operational or tactical,” she added. “While they are both quantitative measurements, they are used for different purposes.”

Payroll professionals should also set specific goals for the payroll transformation, Schausten added. Some examples of possible goals are changing payroll systems, consolidating operations, and streamlining processes to eliminate manual work.

For example, Kohler Co. wanted to determine the cost of giving employees an additional vacation day or holiday each year, said Danny Schulz, Senior Manager of Payroll, Systems, and Taxes at Kohler Co. The company set this goal as part of a broader effort to calculate how much the company pays employees for time not worked.

Once payroll professionals set a goal and create a plan, they must execute, said Schausten. Executing a transformation plan requires having support and resources within the organization.

“If you’ve been in a situation where there’s change and you’re not getting people to buy in and people are struggling to see how this change impacts them and their job, take a step back and ask what the challenge is,” he said. “Pump the breaks and make sure the team is aligned and that everyone is going in the same direction.”

Payroll professionals should also constantly test their systems to identify any failures during the transformation process, he added.

Payroll transformation can fail for several reasons, including a disruption in services or a lack of communication, he said. High costs can also result in the premature termination of payroll transformations.

“Don’t assume everyone knows the cost when you are doing something,” Hodges said. “So, when you are telling somebody how much money they are saving, you [also] need to tell them how much you are spending to start with.”

One of the best ways to persuade company executives to support payroll transformations is to show how they will benefit employees, Schausten added.

“There’s nothing better than trying to sell your vision by showing how it will increase customer satisfaction,” he said. “Everybody that works for the company is our customer. We pay everybody. We touch the lives of everybody who works in the organization. So, making that experience better for the employee or associate is critical to what we do to be successful.”

The three experts spoke at PayrollOrg’s 42nd Payroll Congress in Nashville. Hodges is a member of Bloomberg Tax’s Payroll Advisory Board.