Putting in a new payroll system isn’t always going to solve your problems. After all, the software that you use is only one piece of the jigsaw puzzle. There’s a whole ecosystem of processes and systems that all need to slot together for payroll to run smoothly.

Software upgrades are often thought of as magic bullets that are going to solve all of a company’s problems. If you are upgrading your payroll software, you need to do it for the right reasons and with the right underlying strategy.

With that in mind, I’m going to share some best practices when it comes to payroll software upgrades, as well as some advice to help you through the process.

Why Businesses Upgrade Their Software

So, why is it that businesses find themselves in a position where they think they need to upgrade their software? These are the most common reasons we have found:

1. End of Life

One of the most common reasons for a software upgrade is that the existing software has reached the end of its working life and the vendor has contacted the company to say that they will cease to provide support. This happens quite often because people tend to have the attitude of, “If it ain’t broke, don’t fix it”. Therefore, they upgrade only when a software’s lifespan has come to an end.

2. New Awards

Some companies look into upgrading their software because they’re adopting new awards and their current system doesn’t seem to support them. It’s true that this is sometimes the case, but there’s also a pretty good chance that they are just not aware of how to properly configure those awards into the existing software. There is also the chance that the current software has other ways of achieving the same interpretations which are immediately obvious or apparent.

3. Too Much Growth

Another common time for upgrading is when a business has grown so much that the software they were using can’t cope. If they started out with a piece of software that was designed for small businesses and they’ve grown to become a multinational company, they might struggle to make it work for them.

4. Too Much Manual Processing

If a business’s current software requires a large amount of manual processing, it can be tempting to switch to a solution that promises a greater amount of automation. The new system may mean that you won’t have to keep on running manual workarounds, however, we have sometimes found that these issues are actually operational or process problems rather than failings or inabilities of the software itself.

What Software Providers Don’t Tell You

Software providers will rarely tell you that the software itself is less important than the way you use it.

Before you even get started with looking at what’s out there on the market, you need to understand what your current processes are and what the software is doing for you within those processes.

It’s important to understand and document how your current software works and where the current gaps or inabilities in your software are. Understanding this information is essential for understanding how a new piece of software should function if upgrading is the right decision for you.

Take care to not only understand the information but also to write it down. Invite other people to read through it and to share their feedback. This will help you to understand exactly what you do and how the software that you use can help to support you with that.

You might be surprised to find that, whilst there is a gap, it’s not caused by the software. For example, if the issue comes down to the way that data is being fed into the software, you can probably fix that purely by working on your HR processes and configuration.

One of the biggest challenges in business is that a lot of people find themselves making decisions based on incomplete data. They can also fall victim to magic bullet syndrome, where they think that throwing more people at a problem or buying a new piece of software is going to magically fix things.

The brutal truth is that new software can just end up delivering more of the same problem, only faster!

A great action to take before you start looking to buy a new or upgraded system is to first optimise your current processes.

Introducing Value Stream Maps

The Manufacturing Engineering profession is a profession focussed on the optimisation of processes in a manufacturing context. We can borrow techniques and learnings from Manufacturing Engineering to help us optimise processes in our HR and Payroll space.

There’s a useful visual representation technique in manufacturing called a Value Stream Map (VSM). A VSM is designed to help you to draw a picture of a process over time, focusing on where value gets added. You’ll probably find that for 98% of the time that a process runs, zero value is being added.

There are little pockets of time through the process execution where big chunks of value are added to the final outcome, but there are big intervals of time where the outcome “waits” and where nothing useful at all is being done.

When it comes to process optimisation, it’s these wait times that you’ll want to focus on. Time is money and time spent waiting is wasted money. Let’s take a look at an example:

If someone reports an issue with the payroll system, the value from this support process comes when you provide a satisfactory resolution. However, what tends to happen is that the request arrives at the support desk and then it sits in the support queue for two days until someone reads it.

Looking at the next step of the process, the support technician then places the ticket back into the queue to be “investigated”. Maybe another two days pass before the ticket is then picked up again to be worked on.

The acts of looking at the ticket initially and then doing the investigation may have taken 15 minutes, but 4 full days have passed to add 15 minutes of value to the outcome.

You can see the tremendous waste of time for the poor person with the Payroll issue simply to have had someone spend 15 minutes on it. This could be a clear target for process optimisation.

The idea behind a Value Stream Map is to help you to look at all of the steps along the process to be optimised and to understand where zero value is being added. It basically provides you with a cause and effect diagram where you can figure out where you are getting stuck.

Often, it’s because organisations feel a need to have governance – to ask for and receive approval for an action. There is normally an easy fix for these types of governance roadblocks, but that requires optimising the approval process.

An example of a potential solution is to give staff automatic approval to do a task if it falls beneath a certain financial threshold is a very powerful tool.

Another option may be to more effectively delegate approvals and allow multiple persons to be able to provide approvals to remove potential bottlenecks.

Process optimisation also takes input from constraint theory, which says that there will always be constraints that stop you from getting things done in an optimal fashion. In our example above, approvals were our constraint.

Constraint theory says that when we’re trying to improve our processes, we don’t just go in willy-nilly and pick any constraint and start trying to improve it.

If we make that mistake, we might speed up some aspects of our process but it’ll just lead to us creating a bottleneck with things moving more quickly towards the “key constraint”. That’s why it’s always important to first identify what the key constraint is and to target that – because if you’re not fixing your key constraint, you’re not actually going to speed up your process.

The interesting thing about constraint theory is that once you’ve tackled your key constraint, you’ll always find that another one will pop up to take its place. This is because each limitation hides the next one.

You can move from one key constraint to the next until you’ve optimised your process to an acceptable level. There will always be more optimisations if you want to keep working on them.

Therefore, it’s important to know when you’ve achieved “good enough” with a particular process’s optimisation, that way you can then allocate your time to improving other aspects of your business.

Once you’ve achieved “good enough” with your processes, then you can assess the need for your potential new software.

The Risks of Upgrading

A lot comes down to understanding why you’re looking at a software upgrade in the first place. Ask yourself, “Is an upgrade going to fix all of my problems?” or “Is there another solution that I’m not aware of?”.

Perhaps the biggest risk of upgrading is that if it doesn’t address your key constraint, you’ll be spending a lot of money on software and being left in a situation where the payments still take the same amount of time to run. It can even make your bottlenecks worse.

Another issue is that you can create considerable chaos because everyone needs time to wrap their heads around how to use the new system. That’s where Change Management comes in. You need to make sure that we’re bringing people along for the journey and that they’re buying into the idea of using the new software.

I’ve talked in the past about the disastrous Queensland Health payroll system upgrade that incorrectly paid over 50,000 people and cost taxpayers $1.25 billion. One of the biggest mistakes that they made was that they unnecessarily changed a number of the business’s processes at the same time, with no testing of the process change and no Change Management being applied.

It’s no wonder that they had so many problems.

We’re not changing machines, we’re changing people and that’s a much more complex thing to do. It’s easy to believe that by upgrading to a new piece of software, all of your problems will go away.

Unfortunately, that’s rarely (if ever) the case.

What to Ask Software Vendors

The good news is that there are some great software vendors out there who’ll take a look at what you’re doing and tell you that you don’t actually need a new piece of software at this stage.

Instead, they’ll ask you to go back to them once you’re ready. However, the thing to remember is that software vendors will usually fix the problem that you ask them to fix and if you go to them with the wrong questions, you’re setting yourself up for failure from the outset.

A common one is that people will ask, “can your software effectively calculate this award?”. The answer is generally, “yes, but it also depends upon the data that’s being fed into it. It can’t effectively calculate the award if the data isn’t there“,

Instead, ask questions like, “will your software make my organisation more efficient and more compliant?”. Most vendors will say, “yes” to that as well but the actual answer is that it depends.

The most accurate thing for vendors to say would be, “our software will likely make you more compliant if all of your other processes are working well”.

Is Upgrading the Right Solution?

Upgrading might be the right solution but there are also other solutions that are worth considering before you take that step. Ultimately, the only way you’re going to know for sure is to first understand your current processes.

It might be that you can put your current software to better use by making some minor tweaks.

The best place to start is to spend some time looking at your processes. You can head off all sorts of issues at the pass and potentially remove the need for a new system in the first place.

Of course, we can help you to gain a clear understanding of your processes, audit your existing software and determine whether you need to change. If this is so, we can also direct you to the most suitable product for you.

Businesses can email contact@agilexperts.com.au or call 1300 287 213 for free first-step advice on how to ensure your payroll processes can safeguard your payroll compliance. Follow us on Linkedin or sign up here to receive our articles direct to your email inbox.