Global Payroll Transformation: Why is it so hard and how to make it work!
Transformation Programmes are fraught affairs. They rarely deliver on the business case. The most quoted statistic relating to transformation programmes is that 70% of them fail. McKinsey & Company have been analysing transformation programmes for a long time and the persistently high failure rate is staggering. This paper examines why they fail according to McKinsey & Co and applies the payroll context to provide some pointers how to make your Global Payroll Transformation succeed.
What Makes Transformations So Hard
1) Failure to Launch
This boils down to the following key issues: there is no alignment on the approach the organisation should take to global payroll and you get stuck in analysis which means the decision to proceed will not be supported at the top, managers in the scope of the transformation are not accountable to supporting the initiative so key influencer are divided and there is employee resistance to the proposed change. These factors make it all too easy to defer decision making for what is a cost/risk initiative.
2) Failure to Scale
If you have gotten past the decision stage and have had your global payroll programme approved, the next test is to generate momentum. During this scale phase, programmes often rely on change agents to evangelise the change but it is not being adopted into the day-to-day payroll operations. Everyday behaviours are not changing towards supporting the new model, the line falls back on old habits, processes and tools. When you meet this sort or resistance word spreads across the organisation and those territories that have not yet adopted are hedging their bets that they will not have to change and start to resist on the basis that the initiative will be scrapped and the change initiative is quietly shelved.
3) Failure to Sustain
Organisations are cluttered with multiple other initiatives and generally there is limited leadership bandwidth to give each real continuous support. The longer your global payroll transformation programme takes the less focus it will enjoy and the senior leadership team’s interest and support will wane. Organisations are suffering from “initiative fatigue” and only those initiatives that show clear results quickly will garner enough continued support to survive and thrive.
What can you do?
There are a number of things you can do to tackle the above key blockers to your making your Global Payroll Transformation a success. Understanding the organisations decision making process is key to get going and so that you can deploy counter measures to cross that hurdle, then you have to inject momentum and above all look for speed as focus will wane.
Get your programme approved
The first thing to do is to make your business case compelling to demonstrate clear return on investment. See Payzaar’s webinar on building the business case for global payroll transformation. A well put together business case will go a long way to winning over the senior leadership. The business case will factor in options and have a well thought out recommendation, remember the risk of paralysis by analysis so narrow the field to avoid being sent away to evaluate more options. Check if there are others in the organisation who are possibly running with similar change projects in Payroll either at a local or regional level which may compete with your initiative to clear the field. If you do not have a clear field, then try to link the success of other initiatives to yours. There is no surer way of stalling a global payroll transformation than to find a significant territory in your scope are just going through vendor change or that the HR team are pushing out a new HRIS. It gives decision makers an excuse to stall your programme until those other initiatives have been done. The HRIS rollout will get bogged down without support of Payroll Operations.
Socialise your intent with leaders across the extended Payroll Organisation to ensure that they understand and back your initiative, they see real benefits of the initiative for themselves and their operations. This may be tricky in a situation where you are moving from local payroll to shared services resulting in headcount reductions locally, in these cases socialise the initiative up a level beyond those about to lose their roles or influence due to the programme. The reason to do this is when it comes to decision time you are able to rely verifiably on support of influencers that the decision makers will look to.
Answers for the “Why Now” question
There will always be the question of “Why Now?” that will need to be answered and while this will be in the business case the answers need to have clear resonance for senior leadership. Do you have a compelling answer or set of answer to this question so that the transformation story you are telling has meaning for everyone? The answers can be a mix of risk factors, For example:
- We have concrete information security risks, we had a major breach in country X, 4 near misses in country Y and if they happened in an EU country under GDPR the potential penalties are up to €20m or 4% of global turnover. These are big scary numbers that will get the decision makers’ attention.
- We are blocking the realisation of the Finance/HR Shared Service business case which has been approved but requires the Global Payroll component to be commenced by date X and be completed by date Y. This will recruit allies to your cause.
- We have had significant compliance penalties imposed in country X of $Y because we do not have the governance around global mobility expertise in place and as we expand this will increase. We believe that this risk is building as our workforce grows and travels more frequently. No one wants the scrutiny associated with this.
- We have a clear risk in country X & Y that our in-house software is no longer reliable which has resulted in delayed payments to N,000 employees twice in the past 6 months. This is having a detrimental impact on industrial relations and or employee engagement.
- Paint the picture of the “do nothing” scenario with evidence so that you yourself and influencers around you know that this is not an option.
The answers that you have for “Why Now?” need to make the decision makers feel sufficiently uncomfortable about the position so that they have to act. The best decisions ultimately are derived from the even fewer decisions that get made and are followed through!
The next question: “How do you know you can do it?”
Having the correct model, tools and preparation in place is key to success. You need to have a solid basis upon which to execute your Global Payroll Transformation. You need to have a credible plan that integrates people process and tools to both deliver the transformation and drive if from an initiative to part of the fabric of the business.
The decision makers know the 70% failure statistic, and you have made them uncomfortable about the status quo by pointing out the risks and failures in your current payroll operations. The preparation is key to convince them that your Global Payroll Transformation will fall into the 30% success bracket. This preparation will need to include activities to reduce the two largest reasons for failure: management behaviour not supporting the initiative and employee resistance to change. Make sure you do not overlook the human component in your preparation.
You have now had the decision approved, then next thing to do is to generate momentum and successes in the programme. Your planning should have weave in early wins that help you to generate momentum locally. Look at your plan as a source of news flow out to the organisation:
- We have delivered 15,000 payslips through or shared service centre using our new model in the past 2 months since migration
- We have 7/12 countries working to our global model according to plan
- We have served 1595 employee queries in less than 1 hour in the past n weeks
Programme Outcomes rather than Programme Activities
Programme infrastructure is necessary to track, monitor and control. The industry of the programme office and project activities can often distract from the thing that senior leadership is focused on most: see tangible outcomes. You need to be relentless in demanding outcomes. Ultimately the outcome is about transforming your payroll infrastructure. The outcome is better payroll experiences for staff, reduction in errors and risks, increase in productivity, additional services you can bring and that the business values.
As you generate momentum and bring more payrolls under the scope of the Transformation Programme ensure that your communication is engaging the beneficiaries of the programme as well as the unwilling while simultaneously pull up the ladders behind as you go so as not to let local teams the opportunities to revert to old ways and habits. The key here is that when a crunch happens that the local payroll teams and management teams know where to go to get support and ensure that support will be available. They will look for opportunities to test the service you are delivering. As part of your business case there should be additional services that the local management team will benefit from: Data Insights, Costs, Compliance, Global Mobility Advice. Articulate what they can expect over and above what they are getting today.
Balancing Global and Local Objectives
A key aspect in a global transformation is to recognise that as human beings we are very change adverse and in the context of the change you must also acknowledge that your objectives and benefits of moving towards a global model for payroll may not be the same as the objectives of your local teams. Where these conflicts arise you will need to manage them carefully and heed warning signals. How can you achieve your global objectives – e.g. better governance, more efficiency, stronger compliance, improved data transparency – while imposing minimal undue impact on local teams?
“No-Change Change” – Maximize Global Impact, Minimize Local Disruption
Is there a “no-change change” model, i.e. a model that supports the objectives of the global change programme but minimizes the change at the local level? Part of the challenge with Global Payroll is that it is an amalgamation of things that are “hyper local”: tax, social security, reward and benefits structure and compliance obligations. Your global transformation approach needs to recognise this “hyper local” environment and the objective may be different and competing:
- Process standardisation vs local variation
- Global mobility vs local compliance
- Global insights vs local reporting needs
- Global costs vs local cost
While some will be aligned:
- Information security
- Accuracy and timeliness
- More automation instead of manual work
Introducing Open Payroll Platforms – Bridging Global and Local Objectives
New open platform models like Payzaar are ideally suited to support and bridge these global and local priorities. This is achieved by layering transparency over the top of local operations. What this means is that the global objectives can be achieved by connecting the existing payroll landscape to these open platforms, without causing unduly disruption and pushback from the local teams by forcing the replacement of the local payroll solutions. And this change can be done very quickly. Keep what works (i.e. your local payroll solutions), and optimize on top (i.e. connect them in a central, open platform). It is truly a “no-change change”. The key benefit to the global team is speed and transparency. Using traditional global aggregator models too much time is spent ripping out local payroll platforms and services, and replacing them with those of the traditional aggregator. This has the effect of generating hostility locally as well as bogging your transformation down from a schedule perspective. If you can avoid this rip and replace of the local solutions, you will speed up your programme and hit the sustain state while avoiding the local teams becoming alienated. The open global payroll model reduces local resistance, accelerates rollout speed, decreases cost and risk of transformation while giving you global controls and standardization.