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Operations, meet Payroll, your new best friend when it comes to understanding labor spend

September 24, 2012

I just returned from the American Payroll Association’s Fall Forum in Las Vegas. This was my first interaction with the APA and I have to say I was impressed with the organization and the attendees. I was invited to speak on the topic of the Perfect Paycheck to a group of senior payroll leaders. While this subject was not new to them, what surprised me was the amount of energy they had around the subject of Lean and continuous improvement. As it was the first time interacting with the APA I decided to stay a couple of days and see what I could learn. For those of you who are not familiar with the APA, it is an association of payroll professionals that has been ably led by Executive Director Dan Maddux for over 20 years. I had the opportunity to speak with Dan during the conference where he painted his vision for the organization. As he recounted various stories about the APA’s members, I was amazed to see how fiercely loyal APA members are. As one example, he noted that over the past couple of years as companies budgets have been cut, members have been paying their own way to attend the conferences. These conferences are heavily centered on continuing education. Dan explained to me that while community was a part of the reason these professionals attend the conference; the larger reason is that the knowledge required to run payroll changes so rapidly that professionals cannot afford to stop learning. Without continuous education their ability to do a good job diminishes and their career prospects dim as well.

I began to realize the complexity of what these people do every day and how rapidly the information that impacts payroll changes. Wages, taxes, stock options, pensions, one time bonuses, company policies, garnishments and benefits are all changing throughout the fifty states. And these are all coming from different sources. To add an entirely new level of complexity, Payroll departments are now being asked to consolidate their global payroll operations. In addition to the wage and tax variation, Payroll managers must now also contend with different types of tax filing requirements, restrictions on how cash can be moved around the world and data privacy laws limiting what data can be moved.

I also heard interesting stories about how payroll managers used the data that they know so well to help solve workforce issues. One person created a report that showed a specific department that was experiencing high turnover was actually being over-worked. She highlighted the amount of overtime this department was working and sent it to management. Management was shocked, they had never seen an “overtime by person” report and had no idea it was so concentrated in one department.

If there was one shared frustration in the group though: Many payroll managers feel they have much more to offer besides accurate processing. When it comes to labor spend, these people know exactly where every dollar, yuan, peso and euro are going. They are intricately involved in everyone’s pay and as a result know what is going on in the company.

If you are looking for hidden costs or capacity in your operation, payroll data is a treasure trove of information. Many companies view this role as a function necessary to pay their people. What they don’t realize is that the data required to process payroll can tell you quite a bit about how your operations are running. Those looking for a competitive advantage would do well to set up a meeting with their payroll director and start taking advantage of a new angle on operational excellence.

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