How much does that broken process cost your firm? Or that incomplete payroll calculation, or the benefits enrollment changes that require follow-up to manually adjust or correct? Or the 10% of the hiring process that was never automated? Those costs are both quantitative and qualitative, and they can add up to a significant sum.
Let's take a quick, simple example. You have payroll in-house but outsource benefits. Every pay period you get a file from your benefits provider that has changes in the payroll-relevant items such as deductions and imputed income. Your policy is that when people go on an unpaid leave of absence they can continue their benefits, but they have to pay the provider directly since no payroll deduction can be taken. For other cases, where an employee is still active but just doesn't have enough pay for a given period, you let the benefits deduction amount go into arrears and catch up on the next check.
If everything happens on time, this setup works fine when employees go on an unpaid leave. There is enough time to process the employee data, get the change to the benefits provider, who then sends a 'stop deduction' transaction back to payroll. And that is a big, remote 'if' – those changes to unpaid leave often happen retroactively or so late in the period that there isn't time to get the change to the benefits provider and back before payroll runs. So you end up trying to take the benefits deductions in payroll, and they go to arrears because there isn't enough money in the paycheck. Meanwhile, a while later, the benefits provider sends the 'stop deductions' transaction back to payroll. That takes care of the future pay periods, but now you still have to take care of the deduction arrears. That involves manually reporting on the payroll, after the fact, and then manually clearing up the arrears. Hopefully this gets done timely, because if it doesn't then payroll will take those arrears out of the next available money. At that point you've deducted for the benefits and the employee has probably – but maybe not, you will have to check - also paid for them directly to the provider. Now there is a bigger mess to resolve.
It can get even more complicated than that – but do you see the costs in there? The after-the-fact reporting and data maintenance, the impact on the employee if things are not taken care of on time?
There are a few different ways to solve this particular problem, and those solutions aren't the important thing in this discussion. The important thing is identifying these business process errors, getting a preliminary idea of the cost and impact, and then making a plan to get them resolved.
This isn't the type of work that gets most people excited. It's not a big Talent Management implementation or something that will have a large, immediate payoff in cost, revenue or qualitative factors. Some companies don't have the extra capacity, skills or knowledge to do this analysis. And because of those reasons, it often doesn't get done. It's a process of fixing a lot of small things that add up to something big. Based on my experience, most firms could free up 25% of their processing effort by fixing these small things, not to mention the positive qualitative impacts on employees. And why would anyone want to pass up that opportunity?