Payroll BenchmarkingPresented on Wednesday, August 2, 20171 2017 The Payroll Advisor

2016 The Payroll Advisor2

Housekeeping3CreditQuestionsToday’stopicSpeaker 2016 The Payroll Advisor

To earn RCH credit you must4Stay on thewebinar, online forthe full 60 minutesBe watching usingyour unique URLCertificatesdelivered by email,to registered email,by September 2nd 2016 The Payroll Advisor

Our Focus For Today5 What is benchmarkingHow does it apply to payrollWhy it should apply to payrollHow to establish a benchmarking program for yourpayroll departmentCommon benchmarking mistakesMyths about benchmarkingHow to incorporate your findings to make it allworthwhile 2017 The Payroll Advisor

About the SpeakerVicki M. Lambert, CPP, is President andAcademic Director of The Payroll6Advisor , a firm specializing in payrolleducation and training. The ers ofVicki M. Lambert,is President and Academic Directora subscriptionpayrollnews servicewhichThe PayrollAdvisor , a firmspecializingin payrolleducationand onalsup-to-date onwww.thepayrolladvisor.comoffersa subscription payrollthe latest rules service which keeps payroll professionals up-to-date onthe latest rules and regulations.As an adjunct faculty member at Brandman University, Ms.Lambert is the creator of and instructor for the PracticalPayroll Online payroll training program, which is approved bythe APA for recertification credits. 2017 The Payroll Advisor

What is Benchmarking7Definitions: The process of identifying, understanding, andadapting outstanding practices and processes fromorganizations anywhere in the world to help yourorganization improve its performance—AmericanProductivity & Quality Center 2017 The Payroll Advisor

What is Benchmarking8Seeking out superior performance through thesystematic search for and use of best practicesincluding innovative ideas, effective operatingprocedures, and successful strategies—Bogan andEnglish Benchmarking for Best Practices 2017 The Payroll Advisor

Or 9 A process foridentifying andimporting bestpractices to improveperformance—A bestpractice is “anythingbetter than yourcurrent practice” 2017 The Payroll Advisor

Literal Definition 10The American Heritage Dictionary of the EnglishLanguage defines a benchmark as “a standard bywhich something can be measured or judged”. As averb, to benchmark means “to measure (a rival’sproduct) according to specified standards in order tocompare it with and improve one’s own product”. 2017 The Payroll Advisor

Benchmarking 11 Actually term is borrowed from surveyorsIf a surveyor can mark a known position then thatposition serves as a reference point for othermeasurements and other pointsThe goal of using a benchmark is to driveimprovements by assessing performance againstother who have similar products, traits, organizationsetc. 2017 The Payroll Advisor

Powerful Tool12 Powerful management tool because it overcomes whatis known as paradigm blindness in payroll this is theold axiom: “The way we do it is the best because that isthe way be have always done it”.Any business process can be benchmarked“Alone, I am satisfied with myself. With others, I ambeset by troubling comparisons—Mason Cooley 2017 The Payroll Advisor

What Benchmarking is Not13 It is not a simple comparative study, copyingpractices from other organizations, performanceassessment or a comparative analysis—it is not acollege research paper or an article for a monthlynewsletterYou are not looking for the best performance but thebest practice 2017 The Payroll Advisor

How Does it Apply to Payroll14 Once again—any business process can bebenchmarked even payrollPayroll is subject to cost controls and seeks ways toimprove performance to cut costsBest practices cut costs and maintain compliance 2017 The Payroll Advisor

Why Should it Apply to Payroll?15 In this day and age everyone needs to be the best andwork with less especially payrollBenchmarking takes the best practices from otherpayroll departments and improves yoursNo competition in our case just improvement of theprofession 2017 The Payroll Advisor

Have You Ever Asked?16 Do all payroll departments report to finance or shouldwe report to HR?How many employees do other companies have ondirect deposit?Are we cutting too many manual checks or are wedoing the best we can?How does our budget compare to other payrolldepartments? 2017 The Payroll Advisor

Do You Know17 Cost per payroll paymentError ratesNumber of manual checks cutDays to process new hiresCost per payroll inquiryDays to resolve payroll inquiries 2017 The Payroll Advisor

To Clarify18 Benchmarks tell they company where they want tobeRepresentation of the idealSets the goalFor example: the number of late approvals on timecards is currently47.The benchmark is 10 2017 The Payroll Advisor

Types of Benchmarking19 Benchmarking types vary and have numerous namesBut the one that focuses on processes or proceduresis designed for payroll departments 2017 The Payroll Advisor

Process Benchmarking20 Focuses on specific work processesIdentifies the best operating practicesUncovers how well other companies perform incomparison to you and how they achieve thatperformance 2017 The Payroll Advisor

Example21 2017 The Payroll Advisor

Before Establishing a BenchmarkProgram 22 Before beginning a benchmark program you need tofocus on 4 things:First you need to recognize that benchmarking takes anew mentality—I am probably not the best ineverything and probably not perfect in everything Ido--Somebody does it betterSecond you must be eager to learn from othersThird you must remember that it is adapt rather thanadopt—learn about it and adapt it to your payroll 2017 The Payroll Advisor

Before Establishing a BenchmarkProgram 23 And finally-fourth Must also remember that one process may be furtherfrom the goal than another process but doesn’t affectthe bottom line as muchProcess improvement is about priority as much asoverall efficiencyWhere will I make the greatest difference to thebottom line is where I start first 2017 The Payroll Advisor

How to Establish a BenchmarkingProgram24The benchmarking process consists of five phases: 2017 The Payroll Advisor

Planning25 The essential steps are those of any plandevelopment: what, who and howWhat is to be benchmarked? Every function ofpayroll has a product or an output. So benchmarkingis appropriate for any payroll function 2017 The Payroll Advisor

Payroll Labor Distribution26Payroll Processing Labor Distribution7%Payroll Processing8%Input Processing16%Data Maintenance28%Tax FilingCustomer Service27%4%Controls and Reconciliation10%Time Card Processing

Planning 27 To whom or what will we compare? Benchmarkingmust be conducted against the best companies andbusiness functions regardless of where they exist.How will the data be collected? There is no onedefinitive way to collect the data and it depends ontime and budget available 2017 The Payroll Advisor

Data Sources 28 Accounting and Finance Benchmarking Consortium Payroll Associationwww.americanpayroll.orgBureau of Labor Statistics—lots of data! www.bls.govBooks or publications such as BNA Bloomberg’sPayroll Department Bench and Analysis 2017 The Payroll Advisor

Analysis 29 Study the process in your own organizationCareful understanding of your current processes andpractices must be achieved before benchmarking canbegin.You have to understand how you do it so you cancompare to how they do itEstablish your metrics and AnalyticsDetermine your current performance “gap”Project future performance levels 2017 The Payroll Advisor

Let’s Talk About Metrics30 Metrics have a dualityIt is both a process and a numeric resultFor example: a company wants to determine thenumber of timecards approved by supervisors afterthe due date Metric is the tool used to find outBut commonly the resulting number is also called ametricA metric measures and is also a measurement ofwhere a business is 2017 The Payroll Advisor

Metrics Tell Us 31 Where we wereWhere we areWhere we are goingYou can’t apply a best practiceunless you know where you were,are and want to go Example: how many employeesare on direct deposit is a metric 2017 The Payroll Advisor

Analytics32 The science of logical analysis-Dictionary.comRefers to the combination of skills, technologies,applications and processes used by organizations togain insight in to their business.The process of obtaining an optimal and realisticdecision based on existing dataThe discovery and communication of meaningfulpatterns in data 2017 The Payroll Advisor

Examples of Areas to Determine Metrics33 Average number of payrollpayments per employee Percentage of employees on directdepositPercentage of employees receivingchecks Percentage of employee receivingboth check and direct deposit Number of W-2s vs. number ofactive employees Number of FEINs and taxjurisdictions per enterpriseNumber of state and localjurisdictions per FEINPercentage ofpenalties/interest paid on totaltaxesPayees processed per FTE inpayrollPercentage of errors by type 2017 The Payroll Advisor

Direct Deposit Example34 Let’s say you are a company of1500 employees and you have 61%of your employees on directdepositAccording to one latest benchmarkmetric companies with 1,000 to2,000 employees have 75.9% ofemployees on direct deposit 2017 The Payroll Advisor

Back to Our BenchmarkingProcess Integration35 Communicate the benchmark findingAcceptance by management is key—mention costsavings and have the data to back you up Direct deposit cost vs. paper check costs asexample for your companyEstablish functional goals to implement thefindings—goal of 70% direct deposit 2017 The Payroll Advisor

Action 36 Develop action plans to implement the findings of thebenchmark study—in our example bring up yourdirect deposit percentage—how did they get thathigh? Advertising campaign--New hire orientationImplement the specific actions and monitor theprogressRecalibrate the benchmarks as needed 2017 The Payroll Advisor

Barriers to Action37 Need to determine the barriers that can prevent theactionExample:Cultural Practical Financial Must be prepared to present a variety of ideas abouthow to implement change—flexibility increasesodds of adoption or action 2017 The Payroll Advisor

Maturity 38 Leadership position is obtainedPractices are fully integrated into the processExample: you now have a 81% direct deposit rate 2017 The Payroll Advisor

Avoid Common Benchmarking Mistakes 39 Confusing benchmarking with taking a survey Benchmarking is finding out what’s behind thenumbersAccepting pre-existing benchmarks Example: You heard that it is “normal” for payrollto have Use benchmarks that apply to yourpayroll size, company type etc. 2017 The Payroll Advisor

Common Mistakes Continued 40Forgetting about complianceYes that company has 100% of employees on directdeposit—maybe they are in a state that permits thator maybe they don’t care 2017 The Payroll Advisor

Common Mistakes41The process is too large andcomplex Avoid benchmarking theentire payrolldepartment at one time Take one or two tasks orprocesses at a time andthen move on to thenext- 2017 The Payroll Advisor

Common Mistakes 42Misaligning your benchmarking topic with the overallstrategy of the companyExample: You are working on customer service thecompany wants cost reductionVs. 2017 The Payroll Advisor

Common Mistakes43Picking a topic that is too intangible and difficult tomeasureExample: Customer satisfaction in the payrolldepartment 2017 The Payroll Advisor

Mistakes 44 Not establishing the baseline to begin with Don’t go out and begin benchmarking othercompanies until you have analyzed your ownprocesses thoroughlyNot researching the benchmarking partners ordata thoroughly Must have the right match 2017 The Payroll Advisor

Benchmarking Myths45It is too expensiveIt can be but use of published material andelectronic surveys can keep costs downVs. 2017 The Payroll Advisor

Myths46Management doesn’tunderstand orsupportbenchmarking forpayroll 2017 The Payroll AdvisorPayroll is a costcenter not a profitcenter so anythingthat cuts costs willbe understood bymanagement ifpresented that way

Myths 47 You canbenchmarkonly with thebestcompaniesand only usethat as yourgoal 2017 The Payroll Advisor Improvementis the goal notcompetition Even if you aresmall you cando better

Myths48 No one is like me so I can’t get the data tobenchmark Example: The Jet PropulsionLaboratory in Pasadena CA is a uniqueentity but there are other payrolls whodo time and attendance based onprojects, who have a large employeepopulations on visas etc. Every payrolldepartment can find like payrolls 2017 The Payroll Advisor

Myths 49 Benchmarkingis only for BIGcompanies 2017 The Payroll AdvisorEveryone canbenefit fromimprovement Small companieslike to compareto other smallcompanies aswell

How to Incorporate Your Findings To SetYour 2018 Goals50 The value of benchmarking comes from the process ofimplementing the changes to improve performanceagainst a chosen standard not from the measurementitself—must be included in goalsHow it will be implemented should be included in theplanning stages to get management to buy into anychanges that will result from benchmarkingOnce you find where your performance “gaps” arethese should be the goals for the upcoming year 2017 The Payroll Advisor

Setting Goals 51 Let’s go back to direct deposit You found you were well under the performance levelfor having employees on direct depositYour 2018 goal is to meet a % of employees—say70% by the end of 2018You would use the methods adapted to your companyto accomplish this goal 2017 The Payroll Advisor

Setting Goals 52 Let’s now say you were on par with or exceededanother benchmark area. This time you would set agoal of maintaining that benchmark for 2019 or ifpossible increasing it. 2017 The Payroll Advisor

Resources53 Ammons, David, A Proper Mentality for Benchmarking Van Wart, Montgomery, The First Step in the Reinvention Process: Assessment Camp, Robert C, Benchmarking: The Search for Industry Best Practices That Lead toSuperior Performance Wikipedia Trimble, Dave, Benchmarking-Uncovering Best Practices and Learning From Others Benchmarking PLUS 1999, Avoid These Ten Benchmarking Mistakes Gooden, Susan Tinsley; McCreary, Samuel, Review: That Old Time Religion: Efficiency,Benchmarking and Productivity Benchmarking Part 1, Quality America Inc. Anne Feltus, Exploding the Myths about Benchmarking 2017 The Payroll Advisor

Are There Any Questions?54 2016 The Payroll Advisor

How Can Ascentis Help Me?55Ascentis Payroll is a Web-based, Internetpayroll system that allows you to processpayroll in real-time, ensuring 100%accuracy, flexibility and control. With liveprocessing and instantaneous auditing,Ascentis Payroll software can reducepayroll processing time by as much as30%.

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2017 The Payroll Advisor 6 Vicki M. Lambert, CPP, is President and Academic Director of The Payroll Advisor , a firm specializing in payroll education and training. The company's website offers a subscription payroll news service which keeps payroll professionals up-to-date on the latest rules and regulations.