Starting a payroll transformation project is not an easy decision, but it can be extremely rewarding if executed correctly.
Over the years, we've helped dozens of companies launch successful payroll transformation projects, and one of the biggest takeaways is that the preparation and planning that is done before kick-off is just as important as working on the project itself.
To help you identify the different factors you’ll need to take into account to better start defining objectives and executing plans at a later stage, we have applied our extensive experience to elaborate our essential pre-transformation checklist, where we'll go over the different boxes multinational organizations need to tick before kicking off a payroll transformation project, including:
- Mapping the organization's starting point
- Determining the project's objectives and scope
- Planning process and technology changes to meet those objectives
- Analyzing In-country providers & the organization's existing payroll landscape
Understanding your starting point
So let’s say that you want to create a change initiative around your global payroll process. Of course, to make that happen you are going to need some resources, a budget, and a sign-off from the organization itself.
To achieve all that you need a rock-solid business case that can prove to stakeholders and decision-makers that investing in new technology, building new processes, or changing service delivery models will deliver positive results at a reasonable cost.
But before embarking on the creation of this document, the first step to guaranteeing its success is to understand your current situation and establish your baseline. Taking a deep look at your current payroll operation will enable you to highlight the areas that are working better and spot those that present issues, an information that you will be using, later on, to define the goals of your transformation project.
“Essentially, you need to carry out a situation assessment”, says Trevor Townsend, Payzaar’s COO and a seasoned professional when it comes to helping companies implement successful payroll transformation projects.
“You want a full understanding of your current payroll delivery model, how payroll is done -outsourced to local providers, in-house, with an aggregator, or through a combination of these-, getting the basic blocking and tackling around how your payroll is delivered, how many people are involved with it, and how the payroll organization interacts with other parts of the business”.
As a part of this, says Trevor, “it’s very important to ask your team what’s working well and what isn’t so that you can pinpoint areas for improvement”.
“Understanding the costs of running payroll, both internal and external” would be the next step. “Sometimes that can be hard, especially when you have a mix of traditional global payroll, aggregators, and ICPs, with some invoices being settled by your local business units and others you hold centrally”, explains Trevor, but “getting ahold of the true costs of your global payroll operation is essential because this will help you start to formulate your business case”.
“With all this in mind, you can then start articulating a catalyst for change, and defining the message for transformation within the payroll organization. You have to give yourself the purpose that you will then present to those outside of your team that need to approve this initiative”.
Understanding the organization’s change behaviors
“Organizations are change-resistant, and this manifests itself in the fact that 70% of transformations fail”, says Trevor, “and one of the main reasons they fail is that they never get the start of the process right”.
“What I would recommend to overcome this failure to launch and get to the starting gate is to look at successful transformations within the organization, and see what you can learn from them: What made those successful? Who led those change initiatives? Talk to the people who have pushed through significant change in the organization and discuss the informal approach they made to build their case -but also see if you can find some people within the organization that tried to push for change and couldn’t get it off the ground, because there’s a lot you can learn from that as well”.
“Companies cannot back every initiative and, at the end of the day, you are going to compete for the scarce resources that the organization has, so it’s very important to try and learn as much as you can about the successes and failures of other initiatives, and figure out what made them succeed or fail and, ultimately, how those leading them influenced the decision-making process”.
That will help you figure out who you need to engage with, what specific stakeholders will want to see to be persuaded, and how you can make your transformation project successful based on aligning it to that particular stakeholder’s priorities.
This cultural aspect, insists Trevor, is essential: “we can all engage in a very intellectual-level exercise and build an amazing business case, but you also have to pay attention to what’s going on in the organization”.
Setting goals for your payroll transformation project
Once you understand how things operate, what your baseline is, and who the influencers in the organization are, it is very important to use that information to start looking ahead and focus on what needs to be achieved, and what are the reasons behind your payroll transformation project.
“We see clients of all sizes and shapes that drive transformations for many different reasons”, comments Marc-Oliver Fiedler, Payzaar’s CEO. “It could be that your payroll operation has grown in complexity, and now it’s paramount for the organization to have better oversight and control over what’s happening across countries and entities. It could be that there’s a focus on driving efficiency across the organization, and you need to find ways to get more productive, so that becomes a driver to start looking into what you can do differently”.
It could also be related to compliance and risk management, to boost security. Or as part of a search for ways to reduce costs across the organization and make the most out of the existing resources.
“We also see clients that are starting to realize now the value of the information that exists in the payroll environment. In this context, a driver for change could be achieving better data transparency and analytics. And, of course, at the end of the day, the employee is the end customer of the payroll team, so another important focus could be improving the service offered and the overall employee experience”.
“In any case, what we have found”, says Marc-Oliver, “is that for a transformation initiative to succeed it is essential to prioritize and be focused. Otherwise, you run the risk of trying to do too many things at the same time. In a transformation project, there will always be tradeoffs, you have to pick your battles and make tough decisions”.
Because payroll lives within the broader organizational context, you also need to understand what the objectives of the business strategy are, and how the transformation that you are looking into initiating for payroll fits into the organization’s general strategy.
The more your project’s goals are aligned with those of the organization as a whole, the easier it will be to get the approval you need.
Another interesting aspect to look into is whether there are already initiatives that the payroll transformation plan can fit in, for example, a digital transformation project. On this note, it is essential, adds Marc-Oliver, to “understand how those existing initiatives might impact your project, whether it is positively or negatively, supporting it or blocking it”.
“Understanding what’s going on around you and how your project can make use of an alignment with that broader context is extremely important”.
Choosing the right global payroll management solution
To choose the right solution to help you transform your global payroll operation, one of the main aspects to consider is what exactly is your desired outcome. “An example could be a high-level team who wants greater control, scalability, and standardization to be achieved as part of this change. Then they need to think about how they can move from their current payroll model to a model that fits their organizational context and can provide those results”, says Trevor.
Many organizations have a hybrid model for their global payroll operation: some in-house payroll, some third-party providers that are independent and on a country per country or regional basis.
“Our customer Blue Prism is a good example of this: they were expanding internationally very quickly and they wanted to gain control across that footprint to get better visibility over their payroll operation. They didn’t want to move all their payroll operation into a fully outsourced system, like an aggregator, because it was important for them to keep some payroll in-house. Ultimately they wanted to operate to a standardized, controlled payroll approval process to keep good housekeeping, while at the same time their organizational context demanded speed and agility because they were growing quickly”.
Another option would be to fully outsource to one central provider. “In that case, you need to contemplate what the risk of disruption is and what is the cost associated with that”, explains Trevor. “When planning what could be successful in that context, in terms of payroll transformation, you have to consider that the effort, costs, and disruptions that come with it might complicate its approval by the organization, who might indeed want greater control but will probably have no appetite for such a disruption”.
If your organization is moving into the shared-service space, “the key priority will be to put functions into the shared-services center very quickly, and then you need to look for a model that can match that speed, ensuring that the shared-services center can operate in a single home platform and get visibility and control for their global payroll operation swiftly without having to rip and replace their existing payroll services”.
Sometimes, adds Trevor, “the organization has zero appetite for looking into its current payroll processes but might feel more enticed to look at some point solutions if they, for example, want better analytics around global payroll data. One of our customers, a pharmaceutical business spanning over 63 countries, with 18,500 employees, had a very point reporting problem they were trying to solve around leave accruals, but they had no interest in disturbing the existing payroll landscape to do that”.
The work done with this client is a very good example that “often, when we talk about transformation, we tend to think that it’s a big, all-encompassing project, but it can also be a much smaller change that delivers high impact and value in a very short time”. In this case, a layer of reporting was added on top of their payroll operation, which didn’t disrupt any of their existing processes but quickly solved their specific reporting needs.
Another reason why transformations often fail, assesses Trevor, is that “you manage to finally get to the start gate, but then you cannot roll the changes out because it is very difficult, lengthy, and disruptive, and then the organization loses its patience. The solution then could be to do something more agile, that doesn’t take years to implement”.
In summary, “you need to pick solutions that are scalable and attentive to the agility needs of the organization. Because, let’s face it, payroll isn’t necessarily synonymous with agility, and any disruptions there, any costs added, are going to become very noisy within the organization”.
Potential solution providers for global payroll management
In recent years, the payroll landscape has seen the emergence of fully-managed payroll services with good compliance and support services being delivered through some of the global accounting firms. They have a direct presence in many countries around the world and great compliance expertise, so that’s a model that can work for many organizations.
As for the well-known aggregator model, as Trevor Townsend points out, “it does come with quite an amount of disruption and transformation risk, and that needs to be evaluated and assessed carefully before making a decision”.
A solution that offers process standardization, global data flows, integration, and global analytics, and that can be implemented quickly while maintaining your existing payroll landscape (whether it’s fully in-house or a hybrid model with both a central team and ICPs), might be the best possible one for those organizations with a low risk appetite. An open global platform, such as Payzaar’s, would provide exactly all that.
“These tools allow you to start small and expand”, explains Trevor. “Often, out of the gate you don’t get everything you want from the organization, but you might get approval for a starting point. It’s normally easier to get backing for a smaller-scale initiative linked to a key issue within the organization, and that gives you a starting point that you can later expand on”.
Getting buy-in from the organization
“No matter which path you take, which goals you are pursuing, ultimately the success of your initiative hinges upon getting the right kind of support and buy-in from the organization”, says Marc-Oliver Fiedler. “The key in any transformation project is to get people behind what you are trying to do. You need to sell your vision”.
To achieve that goal, “as you are going into this process, learning from others and seeing how and why other members of the organization have succeeded running this kind of project, discovering what the buy-in process was, can be very powerful. You don’t have to re-invent the wheel, just look into how others managed to take their projects off the ground and follow their steps”.
It is also critical, adds Marc-Oliver, to understand “who the main stakeholders are, who you need to get behind you. This is normally not easy to find out, because it doesn’t necessarily follow reporting lines. In many organizations, some people pull the strings and make things happen without necessarily having the official title for it”.
So understanding the organizational context and the individuals in these roles of power and influence, and their motivations and drivers can be the difference between getting the backup you need or not.
Sometimes, as Trevor mentioned previously, it is easier to not broaden the scope too much: “bring your transformation project to a size that is digestible for the organization. Historically, payroll transformations have been perceived as extremely disruptive, and therefore it is not easy to persuade the stakeholders to approve this kind of change. So think about how you can shape your plan in a format that can get to the endpoint step-by-step, getting support for some of the quick wins you can achieve without all that disruption”.
Ultimately, to get the buy-in, you need to demonstrate what the value of the project is for the stakeholders involved and for the organization as a whole. “To support your business case, it can be quite powerful if you have already run a small proof of concept that demonstrates the value that can be extrapolated when running the change at a larger scale”.
Marc-Oliver also suggests, structuring the case “in a way that can link to other initiatives within the organization that already have a budget allocated to them, which will also facilitate getting that necessary approval”.
“If you want to get what you want”, adds Trevor Townsend, “make sure you take that more agile approach to your business case, socialize it within the organization and iterate it based on the feedback received, and be aggressive about the numbers because I guarantee you colleagues will be aggressive about theirs, --and get the change you want! This is one of those cases where culture eats strategy for breakfast: this is not an intellectual exercise, it is a cultural exercise with an intellectual component”.
All this can be summarized into “do your research”, asserts Marc-Oliver Fiedler. “Understanding the internal procurement process, its stakeholders, their motivations, and the general organizational context, and applying all that knowledge to your business case is what’s going to allow your project to fly within the organization”.
