7 Signs That Organizations Need To Improve Their Payroll Shared Service Centers
Jul 12, 2016
Around the globe, shared service centers (SSCs) are evolving, expanding, and delivering greater significance to multinational companies. Whereas the SSCs of yesteryear were typically implemented as a cost-cutting measure, driven by the potential financial gains of labor arbitrage, today’s shared service centers are carving a new niche as drivers of value creation and performance improvement across the enterprise.
But the shifting nature of shared service centers requires a shifting toolset of resources and functionalities – especially when it comes to payroll.
If the core model of your payroll shared service center hasn’t changed much since you first established it, then there’s a high likelihood that you need to modernize it now in order to realize benefits or improve outcomes.
How to tell if it’s time for a change? Among organizations that are most ripe to modernize or transform their SSC approach, we tend to see many similarities. The seven attributes below are the most significant – and detrimental – indicators of an underperforming global payroll SSC.
The 7 Signs of a Sub-Optimal Payroll SSC
1. High Staff Turnover
In any area or department of your business, staff turnover is a bad sign – but among SSC personnel, it’s an especially bad sign. A company’s SSC team possesses the huge responsibility of maintaining a company’s most important and satisfaction-driving internal functions (HR, Finance, Payroll, and more), so its team members should be some a company’s most reliable employees.
Turnover often suggests low staff morale, which can stem from a multitude of issues: Weak (or non-existent) leadership; arduous manual processes; lack of strategic direction; or otherwise. If your SSC employees feel underappreciated or unsatisfied – or if they don’t stick around long enough to execute their job responsibilities well – it’s unlikely your centers will maintain a high standard of service or survive in the long-term.
2. Non Employee-Centric Tools
Looking deeper at the reasons for SSC staff turnover may point you toward problems with your technology. Just as your customers’ experience with your products is essential to their satisfaction with your brand, so too is your employees’ experience with the systems they utilize essential to their satisfaction with their positions.
Take an honest look at the solutions your payroll SSC team works with. Does it deliver a modern, easy-to-navigate experience to your employees? How frequently do system errors or downtime incidents occur, and how long does it take them to be rectified? Frustration with sub-par technology tools and systems shouldn’t dominate the day-to-day experiences of any of your staff members – and payroll is no exception. Today’s employees expect more from their back-office than they used to, and modern tools are increasingly essential to ensuring overall productivity.
3. Heavy Manual Intervention
Among many payroll SSCs, the most valuable knowledge possessed by experienced staff members is how to fix recurring problems. Review how your SSC administrators spend their time.
Are they spending the lion’s share of their hours on high-priority projects, or wasting most of them on manual data input, support calls, or error correction? What about your managers – are they more focused on putting out fires than managing their team and improving performance? If getting payroll out on time seems to be a constant challenge every month, it’s a clear sign that things must change.
4. Minimal Standardization or Automation
If your payroll solution is significantly out-of-date, the amount of manual processes required of your SSC staff may go even further than you realize. Technology has come a long way since the concept of SSCs first came into existence.
If none or just a handful of your team’s day-to-day processes are automated, you’re missing out on operational efficiencies that could generate significant savings and performance improvements. Watch for areas where your SSC staff is relying on multiple tools or resources for the execution of a single task; routinely plugging excel data into calendars, for example, can create unnecessary opportunities for errors.
5. High Error Rates
In payroll, mistakes are costly – and often, unnecessary. Late, incorrect, or misallocated payments can often result in fines, legal ramifications, and employee dissatisfaction.
While no software or staff can ever achieve 100 percent perfection, a high rate of error is the biggest red flag of all. Perform an audit to review the frequency and severity of errors incurred in current arrangement, then benchmark your SSC’s error rates against industry standards to assess whether it’s time to rethink your approach.
6.Minimal performance monitoring
Is performance consistently measured and monitored across your payroll SSC? Are Service Level Agreements in place and adhered to? Do you know which key performance indicators (KPIs) to track, analyze, and benchmark in order to evaluate payroll efficiency and effectiveness over time? Can you track trends through your global payroll analytics to spot areas where increased standardization and automation can drive improvement?
If the answer to most of the above questions is ‘no’, then your organization may soon find itself a long way behind its peers.
7. Poor Integration and Data Management
When it comes to a multinational company’s employee data, there should be a single version of the truth… but there rarely is. If you utilize two or more systems to capture and process employee information, it can be difficult to cultivate precise and accurate global payroll data to drive operational improvement at a broad, holistic level.
Worse, if the systems aren’t very compatible, your team will be forced to find workarounds – which lead to errors, low morale, and hidden costs. Talk to your HR and Finance executives to learn their needs regarding employee data and determine how well your current arrangement meets them.
Taking Steps Toward Improvement
If the seven concerns above are all too familiar for your organization, then it’s time to start plotting a move toward a more effective solution.
In all likelihood, you will find many contributory factors when you investigate the root cause of your payroll issues. Common reasons include:
- Lack of senior level sponsorship and supportNegative team culture
- Poor technology roll-out
- Lack of clear project planning and/or a robust business case
- Lack of employee training and development
- Reliance on ‘quick fixes’ over system-wide
Armed with an understanding of which factors are stunting their performance, organizations can focus their efforts on a change initiative with either a “recovery” or “wholesale change” approach. Typically, organizations will focus on two to four of the following core focus efforts.
Gain Executive Sponsorship
Buy-in at the top level is crucial to the success of any SSC. Engage with senior leaders, ensure they communicate the importance of the investment in your SSC, and make sure you’re able to secure your best people to work on the project.
Create a Robust Business Case
As we’ve already stated, the motivations behind SSCs have shifted from cost-saving to value-creation. Create a strong business case that makes clear what value you’re delivering to the business, including specific targets and benchmarks for monitoring performance.
Upgrade Your technology
Aging technology is a common problem for many SSCs, and the issues are exacerbated when SSCs work with multiple solutions with their own proprietary workflows for each geography. Modern advancements in cloud technology bring opportunities for automation, standardization and data aggregation, plus insightful analytics that can impact your business at every level.
Engage Subject Matter Experts or Consultants
As payroll gets ever more complicated, outside help can drive stronger outcomes. An experienced third-party can evaluate your current state, as well as help you create a vision of what the future should look like for your SSC. Don’t be afraid to go outside your business for answers – engage the global payroll and/or shared services experts that can help ensure you get things right.
Running a successful payroll SSC can bring significant business benefits - not just concerning reduced costs, but in the form of better global payroll services, improved data, and a tighter, more efficient enterprise-wide environment.
Success, however, is not a given. Plenty of shared service operations have either failed completely or fallen behind the times, achieving nowhere near the level of efficiency and effectiveness that’s possible through modern technology. In knowing how and where to look for the signs of a failing payroll SSC, you have the best possible chance of identifying and addressing the problems that might be holding you back.