Internal challenges of an integrated HR and payroll system

Organisations with systems that are not truly integrated or with separate HR and payroll systems are rapidly coming to the conclusion that integrated systems hold the key to better management information, whilst acting as a catalyst for organisational change helping to drive organisation efficiency. How many of these aspirations fall by the wayside under the weight of intra-organisational politics? What can be done to manage the risks posed by implementing an integrated system and can outsourcing remove the problems?

Mitigating risks
Any implementation carries with it a degree of risk. These will be mitigated via the risk plan included within the chosen management methodology. The focus of these registers tends to be on the technology, its functionality and the impact its failure may have on the project. Largely, these are the more tangible and relatively easy to measure aspects of the project: the consequences of failing to deliver a live system by a particular time and the contingency plan in place. However the change impact of the organisational and political ramifications of moving from a traditional payroll-led model to one where the responsibility shifts toward the HR community tends to be overlooked.

Most integrated software on the market has, at its core a far wider range of HR functionality than payroll functionality. New systems are being designed around a best practice model which requires a greater responsibility for systems’ ownership within HR than has previously been the case, in particular, a transfer of ownership to HR of the data being processed by the Payroll Department. Whilst the utilisation of this functionality will vary depending on the strategic requirements of the organisation, a key issue that needs to be considered is how to manage the interface between two parts of the same organisation whose requirements are significantly different.

It is not unusual to find the two departments in different parts of the organisation: HR under HR or Operations and Payroll under Finance. This sets up all the conditions for a classic management stand-off when the crunch comes and people have to be paid. The outcome is a foregone conclusion and the earlier this point occurs often determines the priorities for the rest of the project.

In cases where integrated systems have not been part of the operational life of either HR or Payroll, they will quite happily operate by passing information between the two functions while operating independently of one another. However when cooperation is required, there needs to be a clear framework setting out unambiguous and open requirements of both parties. Tackling these different and sometimes conflicting needs requires careful planning and a high degree of political skill.

Establishing clear processes
Key to this is proper process analysis. Done well, it can add a new dimension to the relationships within an organisation, highlight cost savings and act as a benchmark for benefits realisation. Done badly, it is an expensive way of entrenching out of date processes, ensuring new systems and old processes produce the worst of both worlds where neither will work in the way they were designed.

It is vital that the more difficult-to-determine HR measures are clearly articulated in financial terms. This takes time and investment but will ultimately allow you to reap the benefits of making meaningful comparisons of the inputs from both areas.

The issues that need to be managed cover a wide range. There is a significant place for a change management regime to identify and realign the organisation’s view of its systems as they move from being the property of a select few users to, potentially, being accessed by everyone in the business, should a full self-service roll-out be performed. This is rarely done as well as it should be, as both the process review and the change management can add significant up-front costs to a project. However, they are both vital components of the benefits realisation outcomes and have a value in ensuring clarity of data ownership at later stages of the project.

Additionally, where outsourcing is an option, it can provide important baseline information for both parties with regard to costs and savings accrued over the term of the contract and forms the basis of the framework for key performance indicators (KPI), service level agreements (SLA) and contract monitoring.

Role of the IT department
Implementations are considered by most organisations as IT projects. We would argue that they are not. The technology is merely a way of delivering identified business benefits.

There is, however, a perfectly good reason for tackling projects in this manner. Most of the skills for delivering projects and the methodologies they use have been developed within the IT and engineering industries over a long period of time and have remained in this domain. Consequently there is the danger of the technology aspect of the project overshadowing the HR and Payroll objectives and there is a need within the HR and Payroll communities to tackle this as a skills issue.

Is outsourcing the answer?
Can outsourcing provide an answer to these problems? In part, yes. The outsourcing provider, by necessity has to provide the best level of service to a pre-determined quality standard. The efficiency of that operation is the key to it being profitable and cost effective.

The provider will have a vested interest in carrying out an in-depth due diligence process which will include process mapping and benefits realisation to ensure contractual clarity. This is also an opportunity to explore organisational efficiencies in other areas of the business, utilising skills that may not be readily available at any other time.

Jonathan Smith is a Consultant with Capita HR & Payroll Services. If you would like more information about the services Capita HR & Payroll Services provides, please contact 020 7539 1501 or hrpay@capita.co.uk.