Payroll can often seem like a bowl of spaghetti, having multiple processes and procedures all intertwined. It’s complicated, varies from one organisation to another, and it’s difficult for outsiders to comprehend how it all comes together. Before we talk about the Email that you (as a C-suite exec) will write, let’s consider some of the Payroll risks which you might want to understand.
Part of the problem within organisations (and Payroll is particularly vulnerable to this issue) is that systems and processes grow organically over time. This can potentially lead to inefficiency and gaps in outcomes. It can also lead to insufficient documentation of how we do things, which leaves the company in a heap of trouble if someone leaves abruptly and takes all their knowledge with them.
What organisations need to have is a continual reset and reflection on our processes – how we said we’d run our processes versus how are we actually doing things today.
During this reflection, we can also add in the idea of refinement and optimisation – do we really need to do it that way? Maybe we can do it without this step?
A really important facet of this continual improvement is to focus always on the purpose or end goal of the process. Don’t try to refine a little step without seeing it in the context of the full process. You might find yourself spending a week or two improving the way to automate sending an email when from a broader perspective you realise the email doesn’t need to be sent at all.
Tesla is so effective because they practice this optimisation and continuous improvement relentlessly. They were able to eliminate hundreds of components and steps in their manufacturing process by simply casting the chassis of their cars in a single piece. They didn’t improve the speed of how to assemble all the components – they saw the purpose of the process was to have a completed chassis of a car as quickly as possible, so they innovated and delivered on that goal.
As long as we are continually maintaining our documentation of WHY and HOW we do things, then we are covering off on our business continuity risk in the case of someone not being able to work tomorrow.
Why it’s important for the C-suite to understand their company’s payroll
Most C-suite execs spend a lot of time looking at balance sheets and asking questions about cost and risk – and Payroll tends to be right there at the top of both lists. Payroll is one of the major cost centers for organisations and it’s also high risk because, if you get it wrong, there are many negative repercussions that follow.
However, it is difficult for execs to mitigate risks and optimise the costs of something like payroll without first understanding how it works in their company. They don’t need to understand the fine details but they do need to have a top-level overview.
Governance is critical for payroll and that means making sure that you’re measuring the right things. We generally suggest setting minimum and maximum duration parameters for each pay run. As soon as the duration of a single pay run extends outside those time parameters, alarm bells should start ringing.
If you want to eliminate unnecessary steps in your processes, you need to ensure that they’re documented. Without documentation, you’re left with a set of systems and processes in place that you’re blindly following and hoping for the best. Without documentation, any change that you make is inherently burdened with risk and you can’t truly analyse the ramifications. With documentation, everyone can share ideas to improve your processes.
The spoken word can be beautiful, but often it doesn’t provide accuracy, specificity and ease of reproduction. When we look at fairy tales (which were shared verbally), they changed with every retelling. With a printed book, every copy has the exact same words in the exact same order – thus the power of the written word.
There are simple questions that the C-suite can ask to have a better understanding of Payroll. The most important questions are:
1. Do we have a Payroll Business Continuity Plan? If so, when was the last time we tested it?
Payroll teams have a tendency to say that everything’s fine – which could well be true until a key person is off sick or moves to a different company. Suddenly, you’re left with a situation where no one is really confident regarding what to do or why they’re doing it.
The idea of a Business Continuity Plan for Payroll is to prepare in advance for these kinds of situations. The company must pay its staff on time, no matter what. It’s also important to plan for what will happen if your payroll system unexpectedly goes offline permanently as we’ve recently seen in the serious case of UKG’s international outage.
The thing to remember is that a Payroll Business Continuity Plan isn’t worth the paper it’s written on unless it’s been tested. You can think of it as the payroll equivalent of regularly testing your evacuation procedures with a fire alarm test.
2. What are the three things that you’d change about your current payroll Processes?
If you’re not moving forwards, you’re moving backward. That’s why it’s so important to regularly ask your team what they’d do to improve your current processes. This gives you the opportunity to take the best of their feedback and put it to work.
The idea here is to find out what takes the most time or is the hardest to do. Employees might say that they could solve these issues with a new payroll system. However, that’s rarely the only solution. If you do make a change, it needs to be made for the right reasons.
Ask them to approach the question as if they were building the payroll team and its systems from scratch. Would they set it up in the same way? If not, why not?
3. What are the three things that you’d change about your current payroll systems?
Here, you can ask people to focus specifically on the functions and features that could be improved in your existing IT systems.
Be aware that most of the time, payroll people are overprotective of their systems. Why? Because they feel this deep and possibly unique knowledge of a critical system gives them job security. These systems tend to be complex beasts and if only a few core employees are able to totally understand them, it makes them feel indispensable.
People often think that if they share that knowledge and make the systems easier for all of the team to understand, they will be less valuable to the company and so their employment position could be threatened. You as the CFO know that the reality is very different, but that doesn’t change human nature.
On the point of human nature, it is important to assure your team that it is with the intent to help them and hopefully make their roles easier and more enjoyable that you ask these questions.
Acknowledging the huge demands on the time of the C-suite, I have provided an email template below (as a starting point for you to modify appropriately), that will allow you to approach your payroll team to get the ball rolling. Not only will you get some tangible responses, but it will also strengthen the relationship between upper management and the payroll team.
The starting point for an email you should send
I am sending this quick email to check in with you and to get your feedback on a few thoughts. My intention is that your confidential answers will assist me to make the payroll team’s life easier, more efficient and more satisfying. I hope that the implementation of your suggestions will help you to continue with the fantastic work that you and the rest of the team are already doing and that our payroll outcomes will be world class.
I understand (and I am sure that you do too), that payroll is a critical component of our company’s success. As part of the payroll team, your input on what we can do to make further improvements is vital because you are the ones who know most about it.
I am confident that ongoing improvements can be made by looking at it from a totally fresh perspective. Imagine that you’re building our payroll systems from scratch with an unlimited budget and carte blanche to do whatever needs to be done to make a perfect system.
I’d particularly like to get your feedback on these three key questions:
1. What are the three things that you’d change about our current payroll processes?
2. What are the three things that you’d change about our current payroll systems?
3. Do we have a payroll business continuity plan? If so, what is the schedule we have in place for testing it?
This doesn’t mean that we’ll be able to adopt everything that you suggest, but at least we can analyse your preferences and work towards making them priorities. My goal is to ensure that the things you need to do your job are seen, considered and appropriately allocated with time and budget.
At the very least I commit to coming back to you with the full list of suggestions from the whole team and their allocated priority and timeframes for implementation.
Please feel free to send over any feedback on any other improvement issues and I’ll see what we can do.
Thanks so much for your input.
Now that you’ve got your email and you understand the reasons behind each of the questions, you’re ready to reach out to your payroll team. Make sure that it’s not just a token gesture. Take their feedback and act upon it.
It can help if you create a list of priorities and quick wins that you can focus on first. You’ll also want to allocate time and budget to work towards some of the longer-term changes that will improve your approach to payroll.
And of course, it should go without saying that you need to communicate with your payroll team so that they understand what you’re doing and can appreciate that you’re taking their feedback seriously. They’ll thank you for it.
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