Variance reports apply to Timekeeping and Payroll too
As I introduced in my book Lean Labor, the Perfect Paycheck is a concept borrowed from the manufacturing term “Perfect Order”. A Perfect Paycheck one that is accurate, delivered on time, and at the right price.
Delivering a Perfect Paycheck is a good first step in achieving Lean Labor. That’s because not only does it deliver quick reductions in waste, but more importantly it sets up an accurate baseline of data to make better labor related decisions during the day.
But let’s face it, when it comes to spending more time building jet engines or making sure an employee’s time card is accurate, the jet engine gets the attention. This is the challenge that people in IT and Payroll present to me when their Perfect Paycheck efforts aren’t broadly adopted.
While there can be a variety of reasons for Lean or any type of project to stall, one common theme is that the participants don’t understand the issues and the benefits. Effort and reward may be experienced by different people or departments. Or when it comes to timekeeping and payroll, often it seems that the administrative pain isn’t worth the gain. A couple of minutes here and there are much less important than ensuring an order is delivered on time.
When it is Operations that doesn’t seem to be adopting the changes required to achieve the Perfect Paycheck I ask “What are they being asked to do and what are the consequences if they don’t?”. While the responses are varied ranging from the Payroll department will fix the mistakes to people aren’t paid accurately all the time, it typically boils down to one situation. The Operations group doesn’t understand the cost of not making change and feels that they have other tasks to do that have more impact on the company.
One of the simplest techniques to remedy this is what I call the “Paycheck Variance Report.” Operations is very familiar with tracking and controlling variances. A variance is an unexpected change in cost or time needed to complete an operation. Variances can originate from a wide variety of places. It might be that the price of the materials shot up recently or someone was on overtime when they worked that week and it cost more than expected. It could also be a positive variance where someone was able to accomplish something faster than expected and it cost less. Operations and Finance reviews these variances closely and while they know they can never get every variance under control, they do make a continuous effort to do so. One area I have never seen tracked in a variance report is the timekeeping and payroll process. As you might imagine, since these processes are not tracked, they are not improved unless the variance is too large to miss. In order to make your Paycheck Variance Report simple to understand within your company, get a sample of a variance report that is written today and copy the format.
I suggested to one payroll project manager who was suffering from project crawl that they start tracking all the issues and recording how much time and money it was costing Operations and the company as a whole. He could then deliver this Paycheck Variance Report to the Operations Manager on a monthly basis. He would then be able to look at this report like he would his other variance reports. He may not act on every one, but you can be sure that if any of the issues ranked higher in terms of cost or time than a more traditional variance, he would be on it in a flash. One thing about Operations, when it comes to saving time or money, I have never seen them biased about what they need to do to execute on the project. But they must be convinced that what they change is going to be worth the effort.