If your company is like a ship and your CEO is the ship’s captain, payroll is the engine. The problem can be that if your payroll processes aren’t functioning correctly and you don’t really know how they work, you could be heading straight towards an iceberg.
Most organisations have a Payroll Manager of some form but it’s rare for people in payroll to get promoted to the C-Suite. A lot of the time it’s because they’re so good at what they do that people are afraid to interfere with it.
This means that a lot of senior executives don’t fully understand what payroll entails. When we as a company use the term “payroll”, we’re actually talking about HCM: Human Capital Management.
That covers all of the systems and processes that provide people with what they need in an organisation, from onboarding, through time & attendance, rostering, pay, leave, learning, performance, and ending in offboarding.
We use the word “payroll” because it tends to be the most obvious and explicit aspect of all of the above processes.
A lot of people make the mistake of thinking of technology as being at the heart of payroll but the reality is that the technical system is just a way of executing more complex instructions more quickly.
A person still needs to describe and document what the instructions to be followed are. And a person might have to reconfigure or redescribe the instructions if regulations change or if you add new awards.
At least technical systems can repeat the same process over and over again without making mistakes. They don’t get sick, and they don’t get hangovers or get tired.
The hard parts of setting up a robust and reliable payroll system are the people and the processes that will use the technical system. A technical system can only work as well as the data that’s being fed into it. If the people and the processes aren’t supplying the tool with good data, it doesn’t matter how good the tool is.
You could be heading straight for an iceberg without even knowing it.
Ironing Out Inefficiency
Now that you understand how supplying your technical tools with the right data can stop you from accidentally sailing towards the iceberg, let’s take a look at some of the inefficiencies that can slow your ship down.
One of the big inefficiencies we see is with rostering. Consider the example, when a staff member is unable to make a shift.
A manager will have assigned that staff member to a shift and the employee will say that they’re unable to work it. When that happens, either the manager must find someone else to take the shift or the employee needs to find someone to cover for them.
The problem is that the employee will often look for just anyone who can physically take the shift, and they might not necessarily select someone who has the right skills or roster availability. Some technical systems are very effective at overcoming this inefficiency.
Other inefficiencies can come from an end-user perspective. There is a challenge to make sure that people are clocking in and out appropriately. It can be cumbersome and mistakes can happen.
There are systems that can use GPS or even Bluetooth to determine whether people have clocked in and out, but they’re still not perfect.
Then there’s the scale at which these systems work. Let’s say you have a fast-food restaurant with 50 to 100 employees who may work across two or three shifts a day throughout a seven-day week.
It can take a day to create a week’s worth of rosters, and they may still not be perfect. Most people start by just cloning the previous week’s roster and tweaking it. The cleverest technical systems will take the same week from the previous year to catch things like public holidays or specific events (Grand Final anyone?).
However, creating rosters can still be a huge source of inefficiency.
Unfortunately, these rosters determine your operational efficiency as a whole. If you’ve got too many people or the wrong people, you’re paying too much per shift. If you haven’t factored in that a football match is finishing next door at 9 PM and all of your staff are scheduled to finish at the same time, that leaves you with no choice but to let your customers down or to pay your staff overtime.
The efficiency of your roster isn’t about how long it takes to set up; it’s about the quality of that roster. Fortunately, there are systems coming out now that use AI and machine learning to create hyper-efficient rosters, but there’s still no system where you just press a button and it creates the perfect roster for you.
No software could ever do that, because it couldn’t understand the uniqueness of every company or every local situation.
A lot of people don’t realise how impactful scale is on cost. When you work with huge organisations, an extra three cents every hour for each employee can add up to tens of millions of dollars a year. It’s critical to know when you’re paying too much for a shift.
You also need to make sure that you’re not paying too little. That’s important from an ethical, legal and cultural standpoint. It’s the company’s responsibility to ensure that they are not underpaying staff and to make sure that payroll has the correct and up-to-date systems and processes in place.
Most companies try to validate their payroll is correct by running different reports and cross-checking their data but that is a time-consuming and inefficient process. That’s why there are “real-time audit” systems now that run in parallel to the payroll and Time & Attendance systems.
They independently process the same data and, if both sets of results match, it’s a good sign that you’re paying your staff correctly.
Even the most seasoned ship captains don’t just blindly follow their maps. They double-check their navigation using everything from the stars to GPS devices and it’s not uncommon for two or three different sailors to independently confirm that they’re heading in the right direction before the order’s given to gun the engines.
This kind of redundancy is designed to stop major screw-ups like the grounding of the Ever Given.
Active Management
Heading in the right direction is one thing but you’re not going to move at all if you don’t spend some time on maintenance and active management. As simple as it sounds, if you want to keep things shipshape, you have to keep the ship in shape.
If an organisation isn’t actively maintaining its systems and processes and working to make them better, they will naturally slide into inefficiency. That’s the nature of the universe.
If you want your systems and processes to deliver, you need to spend money and proactively work to keep them in order. That’s where external eyes can be helpful.
They can validate your systems and processes and provide a fresh set of eyes without having to worry about privacy. You can’t get employees in your office to have a look because suddenly you’re exposing them to data that they're not supposed to see.
External eyes also see things from a completely different perspective and are very valuable in discovering risk and inefficiency.
It is also important to invest in employees by providing training. If people have been in the same job for twenty years, it’s easy for them to lose sight of the latest trends and best practices.
They can even fail to realise that they themselves are the source of inefficiencies. Very few people are good at looking critically at their own work and figuring out where they could be doing things better.
Setting Sail
So where do we go from here? Well, Cap'n, you're planning on being in it for the long haul and taking your business on a successful journey.
You've checked that everything is ship-shape and Bristol fashion! You have analysed your risk.
(You have probably checked out our article “A Quick Self-Diagnostic to Measure Your Risk Profile” just to be sure.)
You can now set sail for the far horizon!
Anchors away!