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by Guest Author: Lara Smart, Director LSS Group
Business transformation is a change management strategy aiming to make changes to processes, people or systems to better align with its business strategy and vision.
Why do businesses change and transform? From emerging technologies, growth, merger and acquisitions, risk & compliance, efficiency to people and talent; changes to the organization can be afoot, requiring key stakeholder engagement across corporate functions such as HR, Finance, Legal, IT, Procurement.
McKinsey will tell you that only 30% of transformations are successful, with the majority of transformations experiencing overspend and delays, often measured in years. So how do you get payroll transformation right?
Start with Strategy
Payroll transformation falls off the back of strategy. A business needs insights – whatever you gather that’s important around the lens of the perceived ‘problem’ – to define strategy and these insights can be derived from a combination of quantitative and qualitative research covering:
- What do we need to know / do?
- What data do we need to support?
- Do we have it?
- Can we buy it?
- Spoken – what people say – feedback, surveys
You should then have an overview of:
- Whether the market is changing, growing and what’s happening and emerging trends (i.e. On demand pay and Open Network)
- How well geared up the business is to solve the problem
Roadmap & Planning
Next you need to decide where you’re going. This entails creating the vision and mission based on your insights. Once you have business approval to make a change, this will drive a roadmap to setting up a strategically motivated transformation. Using a structured and proven program methodology with a clear roadmap and effective governance will provide confidence for everyone involved.
Payroll is a compliance and knowledge function. A thorough analysis of current process, compliance and future goals is needed before going through vendor selection (if that is your goal). Failure to define requirements can lead to selecting a vendor whose solution doesn’t fit your requirements, so it is important to carry out internal and external due diligence reviews.
Internal due diligence
- As-is – what does your current global payroll landscape look like across the strategic pillars? What tech, integrations, process and service taxonomies, target operating model, controls and service models are in place? Where does your data start and end? Map this information and see where you have anomalies.
- To-be – where is your strategy taking you? What are you wanting to improve? You might want to think about design principles here. Are you creating something based on automation, efficiency, cost and/or risk? Design principles will create a framework for you to make decisions when assessing a change and keep you from going off track.
- GAP Analysis: A gap analysis is what it says on the tin. It should be clear from your detailed review where the gaps are in your tech, integrations, service, data, controls, service, and people models. The gap analysis should have key definition criteria so you can rank each area against a high–low risk basis.
Don’t sacrifice compliance for ROI. While cost savings are attractive, cost savings across payroll are typically intangible. Businesses may be wishing to free up resources to focus on value-add strategic initiatives rather than admin heavy workloads that tech, integrations and RPA could drive. Freeing up valuable resource not only gives them more purpose, (potentially retaining them longer), it also adds quality and value. This drives payroll to be the strategic function it should be, offering innovative metrics, insights, and scalability to lead M&A activity and offer employees better options.
External due diligence – RFX
RFI (Request for Information) is a high-level market assessment. Utilize this to understand which vendors offer what. For example, you may want a vendor who offers integrations, managed services, business process outsourcing, payments and employer of record services, or a vendor that offers software only. The response to the RFI will help you create a shortlist of vendors you want to issue the RFP to.
RFP (Request for Proposal) is a detailed vendor assessment which should consist of questions around:
- Service and support
- Governance
- Data and security (infosec)
- Processing
- Absence management, including time and attendance (T&A)
- Self-service
- Global mobility
- Implementation
- Training
- Commercials
- ICPs and offshoring
- Country-specific requirements
You should know how you want your vendors to respond based on your earlier internal due diligence.
Vendor Demo
The next step is to shortlist and invite vendors to perform a demo of the solution and services. I would recommend putting 2–3 vendors through to this stage.
Ensure all local and internal business requirements are gathered and due diligence is complete. If an RFP is submitted with a deadline and further questions are then resubmitted, it’s potentially going through costs and analysis twice.
Business Case
The business case should be compiled in a clear and structured way linking to the business strategy and perceived benefits, and should provide options and recommendations. At this stage, you will have selected your vendor, negotiated the best and final offer (BAFO), and have the detailed commercials defined to understand one-off and recurring costs, presenting any potential ROI.
Governance
As with managing global payroll, an effective program governance structure with regular reviews, documented analysis and reporting processes will ensure checks and balances throughout the program of work, reducing the likelihood that cognitive bias and ‘groupthink’ will adversely affect decision-making.
Create a culture of cooperation
Programme success will depend on how well the entire team performs. Each individual needs to feel encouraged to contribute and give truthful feedback with confidence across the chain of command. Transformations are not straightforward and require strong teamwork, stakeholder navigation and problem-solving. Building trust and relationships underpinned by a good culture is imperative.
Transformation programs are nothing like BAU. They are highly complex, fraught with risk and vast in scale. While transformation programs offer people a chance to learn new skills, your team may not have experienced this before and can be intimidated by the scale of the challenges, so you need to ensure you have the right level of experience and skillset either with your chosen provider or within your team.
A Chartered Fellow of the CIPP and PRINCE2 Practitioner, Lara Smart brings over 18+ years of experience in problem solving and reimplementation of HR shared services and payroll systems.
She consults global organizations to execute transformation programs that enhance operational efficiencies with minimal disruption.
lara@thelscgroup.com