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Five Ways Benchmarking Enables Better Decisions

Jul 25, 2019  | Tag: Analytics

In recent years, multinational companies have begun to give greater consideration to the value of global payroll data as a source of insight and information about their workforce. Not only is payroll typically the most regular, consistent touchpoint with employees across an organization, but it also manages the most complete and up-to-date record of employee data available to a company. It makes sense that business leaders would seek to tap into that resource.

Ongoing developments in payroll platforms and technology have equipped companies with more advanced tools for data analytics. These tools are helping businesses of all sizes look beyond outcome reports and standard SLAs around accuracy or timeliness. Advanced analytics let companies monitor KPIs that matter and start to see how the process itself impacts payroll performance. Benchmarked and monitored over time, this analysis will help unlock the strategic potential of payroll.

Changes That Count

A few key shifts in the make-up of global payroll departments have paved the way for greater use of data analytics and benchmarking. Across most industries, the payroll function has moved out from under the leadership of the finance department and into the reporting line of human resources. Documented by Mercer in its payroll benchmarking report back in 2015, this move signals “a change to a more strategic and people-orientated focus” — a trend that continues today.

Additionally, we’ve seen an important change in the profile and experience of payroll professionals being recruited by multinational companies. More organizations are seeking to employ payroll practitioners with strategic competencies, such as process re-engineering, performance improvement, and analytics skill sets. These are practitioners who, with the help of strategic payroll metrics, can help improve the function’s overall effectiveness rather than just increase the accuracy of the monthly payroll run.

FInally, the ability of payroll systems to provide comprehensive, end-to-end analytics is greater than ever. In contrast to traditional methods of aggregating data from across different in-country payroll systems, today’s leading payroll solutions present a unified platform with fully centralized data. Such a solution runs all payrolls in all countries on the same, single platform, collecting all source data in one place, in one format, ready for analysis.


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Insight Begins With Benchmarking

Benchmarking global data around employment, HR, and payroll operations is not new. A handful of regular reports from renowned, established service providers and analysts offer useful figures such as regional salary averages and workforce planning trends. 

However, a small number of global payroll vendors are now able to provide benchmarks using anonymous data from across their customer base, such as in the revolutionary Payroll Efficiency Index introduced earlier this year. This information goes way beyond the headline figures of salary trends and can drill down into detailed information, such as the cost of specific job roles in different countries. The key difference with these benchmarks is that the data includes a company’s own information, which exists in real time. The data is live and transactional, not static and immediately out of date, and therefore reflective of the real world and its daily fluctuations. 

Taking things a step further, today’s advanced analytics tools enable individual companies to track their own metrics and benchmark that data against regional and country figures, as well as their past performance. It’s this capability that’s changing what’s possible for global payroll teams in terms of performance, process improvement, and value offered to the broader organization.

Applying Insights for Better Business Decisions 

Every organization is unique and will undoubtedly search for the insights of most value to their specific circumstances and goals. However, here are five common insights that can be derived from global payroll benchmarking data, along with the business decisions they support:

  • Labor cost comparisons and distribution—Detailed comparisons of the total cost of specific job roles in particular countries, including not just salary, but taxes and benefits. This provides a far more accurate picture of the true cost of payroll and employment, and how it differs worldwide.

Business decision: Helps to plan future expansion or resources for a new project. For example, this payroll data can help executives identify the most cost-effective region in which to recruit a new team.

  • Compensation data—Relates to anonymous benchmark data for bonus and commission plans, showing what is being paid out to staff in certain job roles in specific countries. This provides a more accurate comparison than, say, a local salary survey as to what it might cost to acquire the necessary level of talent.

Business decision: Supports talent recruitment and retention decisions. You’ll be able to answer questions such as, “In our highly competitive market, is our compensation package strong enough to attract and retain the best people for this key role?” It can also help with standardizing bonus schemes, as well as succession planning.

  • Overtime costs and trends—Reveals whether you could be paying a premium through overtime in a certain region. Comparative analysis from global payroll data will help pinpoint countries with excessive overtime, which is a metric often absent from many strategic workforce dashboards.

Business decision: Improves workforce planning. If you are made aware of certain countries with high overtime costs, you can quickly take action to remedy the situation.

  • Labor trends—Provides comparative data on the average length of employment — statistics that illustrate the time people typically stay in certain job roles in a given region or country. This data can be filtered to show length of service by age or gender.

Business decision: Supports succession planning. Based on demographic data, you’ll be able to predict how long certain people are likely to stay in their jobs, as well as potentially understand why people leave. So you’ll be able to find ways to change the dynamic and keep key people for longer.

  • Flight-risk assessment—Similar to the previous example, can also be used to predict the potential flight risk of new hires based on their profile. This insight could be part of a set of criteria used to evaluate the profiles of different candidates for a particular role.

Business decision: Improves decisions on hiring, as well as the development of staff. Your business will be able to make more informed decisions to reduce the number of bad hires, identify high-turnover roles, and reduce the risk of someone in a critical role leaving unexpectedly.

Getting the Basics of Benchmarking Right

The global payroll benchmark data drawn from real-time analytics can provide invaluable business insights, with these five potential use cases just a starting point for better workforce planning and talent management, as well as overall payroll processing and performance.

However, as payroll management information becomes a key part of the strategic toolset, strengthening the foundations for business decisions, benchmarking analysis must be done constructively to ensure its benefit. With a wealth of data instantly available and powerful analytical tools at your fingertips, it can be tempting to create a myriad of different metrics. More importantly, benchmarking data is open to interpretation, so if robust principles aren’t followed, you could find yourself basing decisions on misunderstood information. 

A disciplined approach is therefore required to ensure information is interpreted properly in the benchmarking process. This means assessing comprehensive payroll data on a strictly like-for-like basis, while being clear about the precise definitions of your benchmarking metrics.

The volume of data is also a key consideration. Small sample sizes shouldn’t be dismissed, but it’s important to apportion the integrity of the findings appropriately. Don’t base an entire strategy around a limited dataset. At the same time, be wary of filling the gaps with survey results, which can often be misleading.

Successful adoption of strategic payroll technology also requires you to integrate your benchmarking metrics with a balanced scorecard to ensure they support your company’s overall business goals and HR strategy. This typically means a smaller number of key metrics routinely evaluated to provide precise insights, whether per pay cycle, quarterly, or at year end. Done right, global payroll analytics and benchmarking have enormous potential to significantly benefit the companies who use it to their advantage.

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