If you were offered 100 ways to improve your payroll
processes would you accept ?
This case study covers how Leanpal specialists identified
just that by working with a client team in a large organisation.
Background
The payroll department for the national branch of a global
service organisation discovered some anomalies with their data processing,
which was handled by an external organisation. These anomalies effectively
meant that they had underpaid national insurance by hundreds of thousands of
pounds in one financial year. Recognising the error 9 months into the financial
year enabled the company to correct the payment deficit (so punitive penalties
were avoided) but the outwards cash flow was an unexpected shock for the
company in the 4th financial quarter.
Normally there should have been controls in the payroll
department and finance function, which would have detected the error sooner,
but nonetheless the national branch placed the blame firmly with the data
processing company. The local management claimed 100% of the fault was due to
the data processor, and wanted to change the service provider immediately,
however the senior management decided a thorough review of the payroll
processes was a more prudent approach, to ensure if and when the service
provider was changed, that their own internal processes for payroll were as
robust as possible.
The approach
Leanpal was contracted to map the payroll processes,
identify any issues and prepare an action plan for the management to address.
Leanpal specialists - one an expert in lean principles and value stream
mapping, one a chartered accountant with expertise in payroll and auditing
undertook the project in 6 weeks over a 3 month period.
The approach was as follows:-
Scoping the work and agreeing with management a charter for
the project
Defining measures of activity and performance for the
payroll department
Value stream mapping the payroll processes
Identifying the issues then prioritising these into an
action plan
As those of you who have tackled lean in the office already
know, the issue with understanding losses and wastes in administrative
functions is the lack of transparency.
In this case the payroll office was “boxed in “ with historical
records (so an opportunity for some basic 5S!) but other than that all of the
“added value” or non-added value work was conducted through data entry data
processing and data manipulation.
It is much easier to see added value in a factory as the
product is transformed, and consequently the famous lean wastes, overburden and
unevenness are also easier to detect. Faced with a room full of people desks
and computers the process has to be teased out into a visual format to help
understand whats going on - hence the use of value stream maps.
In our case the payroll team identified a number of work
streams. Each stream was mapped by the participants identifying all the tasks
performed within the process from start to end..
After mapping this, the time for each task was established,
then each task was challenged as to whether it added value or not. From the
performance measures established we were able to quantify the non-added value
issues.
Problems were identified in discussions with the
participants both from their own perspective and by comparing their process to
“best in class” from the Leanpal audit perspective In all over 100 issues were identified, some
of which were easy to fix, others requiring improved discipline at all levels
of management. Of the 100 only 32 were the responsibility of the external
service provider.
What went well during the project?
We had good participation from about half of the people
assigned to the project, they were open and honest about the issues and keen to
make a difference.
We were able to establish a performance measurement
system (which they didn’t have time to do before as they were so busy
correcting mistakes! ) This system helped the team see where the real problems
were, and in future gives them the tools to further improve performance with
management support.
On the Leanpal side the combination of a process mapping
expert with a lean background and a chartered accountant with payroll
experience meant that all of the process was drawn up and that the right
questions were asked at the right time to thoroughly understand the issues. We
were able to compare and contrast the payroll processes with industry best practice,
a san external objective view.
What could have been improved?
The team allocated to the project was too small - we were
unable to convince the national manager to release representatives from all the
functions to participate. So we were reliant on only a few viewpoints, other
functions did not get the opportunity to add their contributions or understand
the process we were going through. The action plan developed could have been
more quickly implemented if more of the functions had been involved both from
the viewpoint of resource availability and “buy-in” to the issues identified.
Team building and communication would have been improved if more people had
been involved.
Benefits of the exercise
In all, the company were convinced of the value of the
exercise and went on to implement the actions identified. It’s perhaps
difficult to fully quantify the financial benefit of the project because the
benefits will arise from improving system controls and reducing risk of future
errors.
Interested in applying this approach to your organisation?
Call +44 7870134609 or email mark.colvin@leanpal.com
