Who owns multi-country payroll?

One of the most enjoyable projects I’ve worked on in recent years was when we were asked to demolish a global payroll business case put together by an IT consultant for a European multinational.

If you ever watch home improvement reality shows, you’ll know that while owners get a kick out of redesigning their loftspace and choosing their doorknobs, the biggest smiles come when they take a sledgehammer to their interior walls and 1970s kitchen cupboards. Likewise, any kid with a Lego set knows that it’s all very well getting the creative juices flowing building trucks and fire stations, but it’s far more fun smashing everything up afterwards. And so it is with strategy reviews and business cases – there’s a lot of satisfaction putting together a comprehensive and compelling argument, but it’s much more fun explaining why someone else’s approach is completely barking.

Of course, we weren’t specifically hired to tear this particular business case to pieces – our job was to analyze whether it made sense or not. It’s just that very early on – from memory, somewhere in the second sentence, just after the eighth repetition of the words ‘seamless solution’ – it was obvious that this one needed some serious TLC.  In home improvement terms, it didn’t just look like a 70s kitchen – it had dry rot, the plumbing was backed up and someone had dumped their leftover asbestos in the oven.

To be fair, many of the issues we uncovered weren’t unique. For one thing, like many multinationals starting out in global payroll, the company hadn’t taken account of all of the costs of continuing to process payroll in its current (in-house) set-up. It had tracked payroll salaries and software licenses, for example, but skimped on many of the indirect overheads associated with its workforce and the costs of maintaining and upgrading systems. This matters, of course, when you’re weighing up the financial benefits of keeping payroll in-house against the cost of outsourcing.

But there were also a number of tell-tale signs that belied the origins of this business case – not least the fact that its authors primarily saw the payroll initiative as an IT project. Technology is an essential component of any multi-country payroll project, of course – from core functionality and country-specific capability through to the user interface, the ability to integrate, and the quality of the workflows and middleware that vendors rely on to move data. But in global payroll – as in most business transformation initiatives – IT isn’t everything. Success rests on a big melting pot of factors including process management, controls, vendor management, cost visibility, performance measurement, risk mitigation, functional and country-specific domain expertise, the quality of employee service, moving money and much more.

This tunnel vision certainly isn’t restricted to IT professionals, and nor is it representative of the profession – in fact, I’ve been involved with a number of successful multi-country payroll projects that were initially driven by members of the HRIT team. Nor is single-mindedness an IT-specific trait: there’s a long list of people that claim a stake in multi-country payroll, starting with the HR or finance function that payroll reports into. Both functions are deeply embroiled in global payroll – HR in part because of its oversized influence on the quality of data going into payroll, finance for everything from the GL feeds to its close interest in the vast sums of expenditure that payroll manages during every pay cycle. But other functions also touch different parts of a global payroll project, from Risk & Controls through to Treasury and procurement.

As a result, business cases that are too heavily biased towards one perspective are unlikely to withstand executive scrutiny. This includes business cases built purely on cost – while centralizing, streamlining and standardising on best practices can bring significant cost benefits, the reality of multi-country payroll is that the benefits of reducing risk and layering on better central management control come at a price. Ultimately, a successful business case for a multi-country payroll initiative will include a combination of factors ranging from the global payroll owner’s operational goals – delivering timely, accurate and compliant payrolls as efficiently and effectively as possible – to business imperatives around mitigating risk, improving scalability and ensuring the quality of employee service.

This column was adapted from an article that first appeared in Payroll World

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