In this panel discussion recorded live at HR 2014, consultants Steve Bogner, Mike Timm, and Brigid Sternberg discuss SAP Payroll. The discussion includes how to address gaps in payroll functionality and implementations, how organizations can improve payroll processes, and tips for addressing various payroll deductions.
Steve: Hi, I’m Steve Bogner, Managing Partner at Insight Consulting Partners, and with me today are Mike Timm, from Integrated Consulting Group, and Brigid Sternberg, from SpinifexIT. And we’re here to talk about SAP Payroll, it’s something that we’ve all worked with a long time, I tease people that once you get into payroll, you don’t get out, and I think that we’re living proof of that. But you know, as we were preparing for this session we said well, what do we want to talk about, and we kind of have three key points here and I’m just going to ask the questions, present the topic, and then we’ll talk about it. One of the things that we’ve all seen, you know, there are some gaps in SAP’s payroll functionality still unresolved today, and there’s also, I think, recurring gaps in implementations that we see today. So I wanted to talk about that so Mike, what are some of that gaps that you’ve seen, you know, how do you address them when you come across them?
Mike: During implementation or even ongoing, as new personnel or people are introduced to SAP, a lot of times they don’t fully understand the process, or how what they’re doing fits in the overall process, and so it’s one of those things, continue training, but also making sure the knowledge transfer happens from either the consultants or other employees so that they understand how they fit and what they’re doing.
Steve: Yeah, knowledge transfer has always been an important thing that doesn’t always happen, you know, because sometimes when projects get behind you do whatever it takes to get the project done, and sometimes knowledge transfer is thrown overboard.
Mike: That’s right, that’s right, documentation is really important and I know that gets easily sidetracked or sidelined and cut short a lot of times but it’s very important at some point that that’s done.
Steve: Yeah. So Brigid, I know you do a lot of training, and you’ve also worked with SAP Payroll, and so you’ve talked with lots of clients out there, what are some things that you see when you go in to a client and you start training them, what are some of the gaps that you’ve seen?
Brigid: So some of the gaps that I’ve seen are really the implementation, either in the implementation they have a, not maybe somebody so strong in payroll, tax, that sort of thing, and so it doesn’t seem, the knowledge does not seem to get to the client. Also I’ve been at places where they weren’t going live for another year and their training had taken place then, so by the time they go live, again, I think Mike had mentioned, kind of there’s a gap in time with even the knowledge transfer, so that that way, you know, it’s not carrying through. Documentation of course is very important, but a lot of times they don’t go back to the documentation, that hands-on, you know, they want to get it done, but then there’s so many steps that then are missed in the process, and of course we’re talking about dollars spent by the company when you’re talking about taxes and things like that. So it’s not an area that should be easily overlooked, but it has a real tendency of happening.
Steve: I agree, I’ve seen that too, and just adding onto that I’d say a lot of the gaps I see is clients who don’t understand how payroll taxes work, in SAP in particular, and the retrocalculations, it’s always interesting to, you know, I’ve seen companies actually say, “Well, we don’t have retros here” and I smile like Mike did…it’s like, you do, you just may not know it.
Steve: So how do you address some of those gaps then, because when you go in and you’re training right, if they don’t have a basic foundation, do you actually find yourself doing that sort of skills-building?
Brigid: And that’s exactly what happens, is I start down the path of the basic training, thinking that that knowledge is there, and more often than not, essentially stopping the training and starting from ground level one, making sure that everybody’s on the same page. Even with SAP, because it is technical within the payroll clusters and the information, even explaining those pieces and things like that. So, doing the basics, making sure they understand the basics, and then starting from there to train, you know whatever product or whatever solution or whatever we’re training, but that total basics has to be there for the clients to really get it.
Steve: Yeah. I agree, I agree. So, Mike, one of the things too that as consultants I know we do a lot of is working with customers to streamline their processes. And again, kind of getting back to some of the things with training and implementation quality, a lot of times we see processes that are just wrong, for lack of a better word. They’re bad.
Mike: That’s right.
Steve: So, you know, what are some that you’ve seen, and what are some of the most common things that you’ve seen, as far as process improvement goes?
Mike: A lot of it has to do with, during an implementation, making sure you understand what the current processes are, and have businesspeople involved, it’s not an IT-run situation. Also, change management is—shouldn’t be a separate line item, so change management should be a part of the overall scope and project and fit into all these processes that we’re looking at. Then we can take those processes and say ok, within SAP, here’s what we need to do, here’s how it differs, here’s what we need to train people on or make sure they’re aware of, like retroactivity is typically new, how exactly does that work?
And it can be somewhat difficult to explain, so we have to make sure it’s understood, it’s well-written so that the next person can follow up and follow through. But the streamlining of the processes, you know, there’s, like you said, some of them are just wrong. Or, there’s been some type of enhancement, say we’ve added things in between because SAP three years ago couldn’t do what we wanted. Well now it can, so let’s tweak those and streamline. And you can also add some automation with SAP, with things that will help with those processes and get you going earlier.
Steve: Sure. And Brigid, I know SpinifexIT has a lot of tools to help streamline things, so what are some of the common things that you help people streamline?
Brigid: So, really exception checks. So year-end of course is—and thinking about the processes that Mike was talking about, is, especially with payroll, often those exception checks, because they’re so tedious to do with either a wage type reporter or payroll recon, and vlookups and things like that, so they become very tedious to do and so most people, or a lot of people tend to wait until year-end to really start the audit. So within the reporting solution that we offer, and I think even if you don’t have our reporting solution but can establish some reports that do audits, checking people that you know, FICA and Medicare is out of balance...
Steve: Why wait until year-end, right?
Brigid: Yeah, why wait until year-end, catch it even, whether you can run it every pay period, or every month, but getting ahead of those audits, when somebody’s over the limits, you know, getting those fixes in place before you’re struggling at year-end because there’s so much to do. Maintaining, you know, a checklist of those processes so that you can get to year-end and know that these things are all clean. So, and a lot of times going to SAP is, because it’s a, I don’t want to say a unique software but it’s very different than a lot of them they’ve worked with. They don’t know that you can even, I mean, I had a client not even know that they could do an, infotype 221, you know, how to do manual adjustments, you know, tax balances were loaded and they were loaded incorrectly and so how to make those manual changes.
So, trying to get a checklist of processes in place and then—and you’re not going to be perfect the first time out of the gate, but the thing is is start one, start a process and whether it’s benefits enrollments or whether it’s, you know, but it, year-end taxes is a big one, but trying to get at least a process in place and then every year improving on where there was gaps, so that that way you can catch it for the next year.
Steve: Sure. You know, one of my favorite things to suggest for process improvements is for companies to start eliminating voluntary deductions from payroll, yeah, so how many times have you gone and—I’ve seen cable TV bills payroll deducted, I’ve seen, you know, fitness clubs payroll deducted, there’s a lot of things payroll deducted that I think we got into the habit of doing because we weren’t really able to do it outside of payroll very easily. But now with bill pay and the electronic banking that is so easy, right, and so I talk to payroll managers and I say, you could eliminate 50 deductions here just by saying “We’re not going to do those because you can do those yourself through bill pay or automatic deductions.”
And you see the light bulb go off in their head because they’re like, “You know, you’re right, there’s no reason that we need to do that.” So I think in addition to the technology, there’s a whole host of process-related things that can streamline payroll, and my other favorite is just expand the use of self-services as much as you can, you know, try to get all the non-value-added work out of payroll so that you streamline it, right, and you give more self-service to people because that’s what they want to do, you know, who wants to fill in a form to change your direct deposit information, right, you have to print it out, I have to fill it out, and I’ve got to send it in, when does it take effect…SAP delivers that online, and you can use it.
Mike: Well I think one of the points you made there is you asked the question, why do you do this, why are we doing that? And that’s big. The support people, so the IT group, or if it’s outsourced, they need to understand the business, how it works and how it functions, at least generally how the processes are being run so then they can say well, you want to do that, let’s talk about why, so maybe there’s a different way, or maybe it’s the way it needs to be, but it really helps if you understand the business thoroughly.
Steve: Always asking why.
Steve: Instead of automating a bad process, let’s ask “Why do we do that?” first, right?
Brigid: And I think that’s—in doing implementations, if we say, “Well I want to do this, because we’ve always done it this way,” then you’re fitting what they’re doing into and forcing, sometimes, into SAP when they deliver a different way of doing it and there are maybe even a better way to do it.
Steve: Exactly, yeah. There’s a balance though, too, I’ve pushed it a little too far and pushed the culture a little too far and then when you go live it’s a little too uncomfortable, things don’t work so well, so I think you have to stay in tune with the company’s culture to know where that line is, right, it’s not so much a technology question as a people question.
Mike: Yeah, exactly.
Steve: So Brigid, one of the last things I wanted to talk about, because it comes up as a question from a lot of people I talk with, what are some metrics that are valuable for measuring payroll, and I think we’ve seen them, you know, we’ve seen cost-per-check, we’ve seen number of off-cycles, all sorts of things like that, but what are some metrics that you would say, you’ve seen used or you would recommend?
Brigid: So, from a metrics standpoint, and again it, you can do those, you mentioned some really good ones to do, but overall, even pay-to-pay comparisons, solutions or tools, that you’re comparing what happened last pay period to this pay period, easily finding outages and things, because sometimes retros can pick it up, if you can, you know, identify it, but a lot of times it’s not, someone just falsely entered something incorrectly—
Steve: Put an extra zero on the end of something…
Brigid: Yes. So trying to do—but the thing is, not getting caught up in looking at every single employee, and we have an advantage at least with the solution that I currently work with, is that we have filtering within the solution, so you can say, I want to see these people and see the hourly rate with different filters than somebody in a salaried condition, but really trying to build, in any solution, trying to build in those and/or type conditions in the metrics so that people can tell whether they’re running an accurate or balanced payroll, even you know, balancing with finance, you know, once you’ve run your payrolls and things like that, balancing and taking a look at what is feeding into different cost centers and seeing if there’s difference within those. But yes, it’s a must in order to assure, of course, you know, W-2s in a year-end is successful as well. So you do have an ultimate reason for doing those checks all the way along.
Steve: Yeah, I agree with you, if you’re monitoring as you go along it’s a lot easier than waiting until the end of a quarter or the end of a year. And then fine-tuning things, I’m totally with you, it’s, sometimes it’s quite a culture change because you have old, old systems where you have to balance things, right, cause the system doesn’t handle some conditions properly, and you don’t find it unless you balance—
Steve: And that concept doesn’t really work in SAP’s payroll, so like you said, you’re looking at pay-to-pay, you’re looking at variances, you’re focusing in on the things that could go wrong and looking for those. So Mike, what would you add to that?
Mike: I’ve actually been somewhat surprised with the number of companies I’ve gone to work with where they don’t keep any type of statistics on how many bad paychecks there are or what the cause of it is, and so a couple of companies I work with I thought did really well, the most recent one we went and we did a project where we defined here’s where we think some of the break points are, what are the failure points? And so for a period of two or three months we kept track, kind of where are those, and then we could go after that and talk to the different groups, or in one case, in some of the cases they found payroll was actually causing the issue more often than they realize. So we could then take that and change some processes or help reminders.
And as part of that project charter, we made sure to say we’re not using this to point fingers, we’re going to help, we know there’s process breakdowns, let’s figure out where those are. And that was very enlightening. And so in their case, they had no—they had a general idea that so many off-cycles per week, that type of thing, they didn’t know in general how many bad paychecks there were. And we got to the point where we did the statistics and they said we can have a failure rate of two percent every week, and at the end of three months, they changed to 99, and then they said after that, you know, we’re shooting for 99.9. And they’ve gotten to that because they kept track of this. And at first there was a lot of resistance, even from payroll, cause now we have to track this on top of our daily work that we’re doing, but they ended up reducing their overtime on their payroll processing days, made them happy.
The other instance was many years ago with SAP, and the approach was totally different, there it was pointing fingers, so in their case it was a smaller company, and they decided that if we do an off-cycle, regardless of whose fault it is, the cost center that the employee belongs to is going to get charged $100. That was just, they came up with that number, and they cut down on their off-cycles significantly after the first month, cause—
Steve: Cause there was a consequence!
Mike: There was a consequence. And then managers were getting everything and they took a different approach, but in both cases it really helped companies get the processes down and help us figure out where things needed tweaking.
Steve: That’s great, yeah, I’ve seen some of those things too, I’ve seen the finger-pointing and I’ve seen it where it’s not finger-pointing, I think that works better.
Steve: But I agree with you that it’s surprising how many firms don’t track the issues and then start doing that root cause analysis, right, how did this happen, how did it go wrong, and then actually fixing it. And I’ve told payroll departments the same thing, I said a lot of what’s going to cause your payroll checks to be wrong is happening outside of your group, so this is new for a lot of payroll managers, get comfortable going outside your group and tracking down those root causes and working with those other departments to resolve the issues, it’s in your own interest.
Mike: That’s right.
Steve: And like I said, it takes time.
Mike: Working with them is very key, and that can be difficult depending on the organization, because sometimes the groups don’t get along. Usually, if it’s done right, and carefully, you know, it ends up making it overall better, anyway.
Steve: Usually. Good projects are about good people.
Mike: That’s right!
Steve: It’s not so much the technology.
Mike: We’re trying to get this right, we want the employees happy at the end of the day, you know, want the paychecks right, and that’s how we can get there.
Steve: Great. Well guys, thanks for your time, really enjoyed this, and appreciate your insights.
Brigid: Thank you.
Mike: Appreciate it.