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You probably won't fully implement your Global Payroll Strategy, and that's okay

You probably won't fully implement your Global Payroll Strategy, and that's okay

Last week, I asked for your participation in another poll. This time I wanted to focus on strategy, as that has been top of mind for most global payroll managers and leaders that I’ve spoken to over the past couple of weeks. So, I just asked the simple question “Have you documented your Global Payroll Strategy?”

Here are the results:

  • 41%: Working on it…
  • 39%: Yes
  • 20%: No

Let’s also have a look at what other surveys have said about formalising a global payroll strategy. EY’s Global Payroll Survey from 2019 shared that 61% had a formalised strategy, while 39% didn’t. Their follow-up survey in 2013 showed a bit of movement; 67% vs. 33%. Another global payroll survey, by Deloitte in 2018 and 2020, showed that almost 80% are developing or have developed a global payroll strategy, which is exactly aligned with the results of my poll. Can you believe it?

This demonstrates that organisations demand the Global Payroll Function, as a whole, to be more strategically underpinned by a global payroll strategy and to formalise, document and share this strategy with key stakeholders. In this article, I want to share a view on the makeup of a global payroll strategy, and why you most probably never fully implement it. And that’s okay.

What is a Global Payroll Strategy?

For those who have followed me, you know I have a certain approach towards Global Payroll Management. I developed a best practice over the past 17+ years based on my experience managing global payrolls. This approach constantly evolves based on new insights, so I kind of see it as an evergreen approach. Global payroll management, to me, consists of 4 main components with interrelated sections. If designed and deployed holistically, these can help you achieve success. 

  1. Global Payroll Strategy: purpose statement, design principles and service delivery models.
  2. Global Payroll Governance: performance objectives, risk & control, standards and responsibilities.
  3. Global Payroll Operating Model: organisational structure, data & system flow, ways of working and performance reviews.
  4. Global Payroll Delivery: international payroll process (design & execution), inquiry management, projects and continuous improvement.

So a global payroll strategy defines the purpose statement and design principles which both result in service delivery models. That is what a global payroll strategy is all about, and then this strategy influences governance, operating models and ultimately delivery.

In this article I’ll focus on how I would approach global payroll strategy as that also relates to my latest poll. Let’s dive into those sections of a good strategy!

Purpose Statement

A purpose statement outlines the core reason for a department's existence and the value it brings to the organisation, workforce and its stakeholders. It should be clear, concise, and aligned with the broader mission and goals of the organisation and hierarchical department (e.g. HR, Finance). This purpose statement will fuel the energy and optimism of the global payroll team to work as one team, and one purpose to make all the effort worthwhile.

Some tips to get you started with your purpose statement:

  • Department Name. Begin the purpose statement by clearly stating the name of the department.
  • Overall Purpose. Summarise the main purpose of global payroll in a clear and succinct manner. This, ideally, should answer the question: "What is global payroll’s primary function and reason for being in the organisation?"
  • Value Proposition. Describe the unique value and contributions global payroll brings to the organisation, beyond the traditional table stake. 
  • Target Audience or Customers. Identify the key stakeholders of your services and understand “what’s in it for them” and how you can help them to be successful.
  • Commitment to Quality or Excellence. Express the global payroll's commitment to maintaining high-quality industry standards in its operations and deliverables.
  • Forward-looking Vision. Consider including a forward-looking element that indicates global payroll's aspirations for the future, or how it aims to evolve over time.
  • Contribution to Organisational Culture. Describe how global payroll contributes to fostering a positive, collaborative organisational culture; walk the talk.
  • Inspirational Tone. Craft the purpose statement with an inspiring and motivational tone to promote a sense of purpose and pride among the global payroll teams.

For example, a purpose statement I have used in the past:

  • “Global Payroll always delivers a pay experience at the highest standards supporting the business through adaptive delivery models and actionable workforce insights”

Design Principles

Design principles are the key to ensuring the aspired strategy is achieved, and doesn’t just stay as a nicely written document stuck in someone's cupboard or digital folder. When design principles are written in such a way that they are actionable and (local) managers enforce the usage of it when making new decisions (strategic to very operational), they are very powerful. Design principles are therefore set for one section of the Global Payroll Strategy (Service Delivery Models) and for all other components of global payroll management. Good design principles are clear and concise, relevant, actionable, aligned with the purpose statement and aid decision making. Now, give me some examples, you ask? Sure, here are some examples that I have used in past roles:

  1. We organise ourselves to aid central management and oversight and promote regional and local delivery in a way to be adaptable to business demands.
  2. We attract talent based on a match with the skill and experience profile, regardless of location to promote a ‘follow the talent’, not location-based, mindset.
  3. We have a minimum payroll FTE to employees paid ratio of 1:750 for outsourced and 1:1500 for in-house payrolls.
  4. We do not outsource processes to abdicate from accountability around compliance and commit to ensuring compliance to the local level.
  5. We will apply service delivery models (PDM) to payrolls based on predefined criteria (volume, strategic importance, complexity, localisation demands) and only deviate with a compelling business case, subject to leadership approval, supporting the business.

This should get you a good feel for design principles. As a rule of thumb, I never used more than 10 design principles. Make them general yet specific - choose what matters most.

Service Delivery Models

Now this will be the most common part of a global payroll strategy: service delivery models (SDM). Some might even argue, this is your strategy. I do think it is an important part of the strategy, but still a part of a bigger jigsaw. How I always approached design these type of models, is taking a very sequential approach:

  1. Understand your as-is state. Gather basic information around countries such as volumes, providers, complexity (internal, external). Group countries with similar characteristics.
  2. You now start defining your groups of countries. I always like to split them into Large, Medium and Small (perhaps with Extra Large if appropriate). This is a first pass based on volumes, and you apply contextual logic to move countries around.

You will now have your main SDMs, like these below, for instance:

Now that you have organised your footprint, you can start defining the characteristics for each SDM, as those will differ significantly per group. With this exercise, the design principles already defined will come into play to balance flexibility and standardisation.

  • Process: define level of process standardisation and flexibility, including governance & control. 
  • People: design the organisational structure to support the execution of the process (i.e. in-country, SSC, regional).
  • Technology: define levels of in/outbound automation, including standardisation of workflows, reporting and auditability. Understand all your input sources, per group, country.
  • Service Levels: choose the fitting service level ranging from in-house to managed service to business process outsourcing. This may also include additional HR, Legal and Tax Advisory Services.
  • Vendor Strategy: select the vendors that have the capabilities to support the other characteristics, such as Best of Breed. Accountancy Networks, Global Vendors and Global Payroll Management Platforms such as Payzaar.

If you look at these characteristics, you will see that how you design this will also be totally dependent on the business context. Are you working in a very stable, predictable environment or in an environment that changes constantly? What is your risk tolerance and appetite? Do you operate in an environment with strong central directive, or with lots of local autonomy? Fun stuff!

Why do you never really implement your strategy fully?

I love designing global payroll strategies and do so with our customers, and even just global payroll friends in general. When they are designed, you need to start deploying the strategy which often requires change. Lots of change, in a process that is very risk averse and super sensitive to the business. This is why you will likely never fully implement your strategy. There will inherently be exceptions to the SDM rules:

  • There might be a local business context that just demands having a payroll FTE on the ground, while as part of your SDMs you have centralised this capability in a Shared Service Center. Are you going to force this change? 
  • Or you have decided to integrate your core HCM to the different countries, but along the way you realise that this is just too hard or the case for change isn’t there over time.
  • You have just designed your strategy with too much overhaul deployment for the business, your stakeholders and yourself. You haven’t designed your strategy with required change that can be implemented surgically.

A common misconception is that you design a strategy that doesn’t allow for flexibility, or country nuances. I would promote you to design your strategy with this in mind, meaning you need to build in some level of agility. This could be designing SDMs for Medium and Small in such a way that you have flexibility to move countries around easily. While pushing for a full roll-out still be sensitive to change over time, as a strategy is designed at one point in time and reality will catch up with you.

So, what now?

For those who have designed their strategy (39%), please just take a look at the tips I have given in this blog to see if you can refine your strategy. I also encourage you to share this (within confidentiality) with your network as it’s important we educate others. For instance the 41% who indicated in my poll who are working on it right now, will benefit from external insights. For those who have not started a strategic position on their global payroll landscape yet (20%), that’s fine - but don’t wait too long. If you want to move away from a fire-fighting mode and solve issues structurally you do need a strategy. A strategy that has buy-in from senior leaders, as this will also secure a budget and a case for change.

I am a Global Payroll Professional, and a passionate one too! After managing global payrolls across the world for about 20 years, I found there must be a better way of doing this. I joined Payzaar - the global payroll management platform everyone needs and can easily implement.

Oh yes, we are just fun to work with too - Let's chat about the Payzaar Experience!

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