A step-by-step guide to help payroll departments target, eliminate waste
Waste surrounds us and every day it becomes more expensive to ignore it. In a competitive environment, it’s no longer enough to be just accurate or focus on waste found in defects — that’s an expectation.
We have to view each process under a new lens to ferret out waste in all its forms, especially in the payroll process.
That lens is a simple methodology making sources of waste visible wherever they reside and in any process. As a result, you’ll be able to address the following questions:
•Where can I change my payroll process to make the most improvement in the least amount of time?
•How can I rapidly reduce my processing costs and make the most of my resources?
•How can I increase the quality of my results without adding new costs?
Begin by taking a good look at the processes surrounding you. You’ll probably see some very busy people trying their best to get through mountains of information and feverishly following up on lost or missing data.
Take a closer look using some methodology
Rapid improvement does not begin or happen in a boardroom. It begins and happens with the people who do the jobs.
As the internal customers of the process, they are very aware of workarounds and obstacles surrounding them and are in the best position to solve the problems at hand.
Change is not always easy or welcome. By engaging front line staff in the solution, you build ownership of change from the beginning. So select team members from these people.
Create a simple map of the process
The benefit of a map is it makes otherwise invisible transactional process suddenly visible to all and so it’s much easier to spot problems.
The key to an effective map lies in what you capture. need to focus on capturing the drivers of waste within the map — not just the flow of activities.
Here is a step-by-step methodology:
1. Record and name where a process begins and ends.
2. Start at the initial step and ask your team: “what happens next?” Then move to the next step. Continue until you’ve filled in each step between your start and end points. Label each step.
3. For each process step, identify in estimated terms how long work sits before someone can act on it. Record this as wait time.
4. For each process step, identify how much work is waiting to be processed. Record this as inventory.
5. Estimate how much time is spent working to complete each step. Record this as process time.
6. For each process step, have the team identify obstacles they encounter or workarounds they employ to overcome them.
7. Have the team identify where in the process they end up doing things twice and what process steps are affected by doing re-doing work.
8. Record where items are handed off for approvals.
Address the wait time and inventory
All processes have inventory and all inventory leads to some level of wait time. While someone works on one item, other items accumulate – and so does wait time and cost. Delays add up across the process, resulting in lost time, capacity and opportunities.
So, add up all the wait time you documented in your map.
Ask the following questions:
1. How much information is arriving at one time? Are there opportunities to level out how much is delivered at once?
Determine the point where the data is originating and see if a change in timing of delivery or quantity is possible. By matching the flow of input more closely with what is possible to output, delays can be eliminated and you’ll speed up the response time for any errors found and address inventory and wait time.
2. Is incorrect or missing information causing delays?
Create a simple check sheet to record erroneous data by type. This will help determine what sort of errors are submitted the most. Target errors with the supplier of the information for correction to eliminate the top drivers first. You’ll be able to keep track of progress using the same check sheet.
Address the approvals and validations
The need for an approval is often the result of a reaction to a past problem that has, over time, slowly become part of the landscape -- even when the risk of re-occurrence has been eliminated. Identify any approvals you noted in your process map and ask: Why are the approvals in place and are they only present because of a missing preventative measures or for some long past concern?
Quantify what the approval or validation is seeking to achieve. If it’s only an inspection point then that inspection is happening at the most expensive stage. Any corrections will need to circle back through many hands, and distract the team from their primary tasks. To determine what needs inspecting, use the check sheet from step two to easily find leading causes at the point of inception.
If an approval is requested under the guise of “compliance”, would some other action upstream of the approval eliminate the need for this activity? Has that action already taken place?
Address the re-work
From the analysis in step one, the areas where re-work occurs should now be visible, often for the first time.
As a hidden, but incredibly expensive issue, re-work costs a company time, money, opportunity, reputation, and morale. If your process is heavily reliant on inspection rather than prevention, then discovery of re-work will often occur at the most expensive point, often many steps away from where the problem originated. To begin to address this, ask the following questions:
1. Do we capture the type and frequency of defects we find?
If the answer is yes then sort data by the most frequently occurring defects to establish top drivers. Use this data so actions can be taken where they will have the greatest and most rapid effect.
If the answer is no, then use the check sheet from step two so that defects can be captured quickly and easily and thus determine top drivers.
2. Are we checking for the right things at the right time?
Starting with the end of your process work backwards and for each step ask:
1. What does the output of the previous step need to be for this next step to be successful?
2. Where does it fail in delivering that today?
3. Could I create or guarantee that output earlier in the process where the cost is less?
Document where you have gaps, what’s required for success and what’s being measured or managed. Identify the areas with the greatest cost, time, or risk of failure and address these concerns first.
Address non-value added steps and processing time
A clear methodology is not about making people work harder. Processing time should almost always be looked at last. It’s the elapsed time that matters, as that is your customer’s view of your process. Tackle it by addressing the wait times, inventory, approvals, and rework loops discussed previously.
By working in the order of the steps as described, by the time you get to this stage, there shouldn’t be a lot of non-value added left that you could quickly address without incurring some other resource cost. To begin to address anything that might remain, ask the following questions:
1. Of the process steps that remain, how many contribute directly to processing payroll, and how many are support activities? Are they all required?
List the support activities and determine what outcomes they are supporting and how. Work with the team to determine if any of these activities can be combined or eliminated by some change to the direct activity they are supporting.
2. To improve processing time for any remaining steps, determine if the new process you’ve created with the team now requires some changes in how its controlled.
Install visual performance indicators for the team with targets linked to your company’s strategic goals. Illustrate the progress that was made quickly and provide visibility to any outstanding issues the team identified along the way on a “to do” list. Encourage a cycle of continuous improvement by actively engaging the team as those items get completed.
If your gains are small at this stage, that’s great. It means you’ve done all the important stuff outlined above in the right way and in the right order.
Daniel O'Rourke is director, operational excellence for Ceridian Canada. For more information, visit www.ceridian.ca.
