Payroll management is an area in HR that is often only an afterthought in businesses. It's not a place where managers usually look at when improving processes or looking at cutting costs.
Our data suggests that shouldn't be the case. In fact, 86.05% of companies in the Philippines experience some form of challenge when it comes to their company's time, attendance, scheduling and payroll. So, why don't companies take advantage of this?
Another way to look at the chart above is to break down the pain points into two broader categories:
- Tedious and manual processes
- Inaccuracy of data
- Visibility / reporting
What this means is that most companies get a solution (in this case a payroll management system) because they are having issues or facing problems. Only 13.95% get a system because they are growing so fast they need a more efficient way to scale their operations.
A Simple HR Decision Matrix
|Good Decision||Bad Decision|
|Change||Scenario 1||Scenario 2|
No Change (status quo)
|Scenario 3||Scenario 4|
Here's a simple HR decision matrix with two decisions and two outcomes.
On the left side (x-axis) are the decisions and on the top side (y-axis) are the outcomes.
The decisions are either change your current systems or stick with your current processes right now. The other side of the matrix is the two outcomes -- you either assess it's a good decision (meaning you get the promised benefits) or a bad decision (you just wasted time and resources).
On a side note, to get some little form of clarity behind the discussion, changing your company's systems leaves you with three options:
- Develop your own
- Get a product / service
- Outsource the function
We'll tackle this on another post in the future.
For now, let's take a look at the HR decision matrix in detail.
This is the scenario we all want -- where we make the change and reap the awesome benefits. This includes the promised time-savings, efficient work processes, and improved productivity.
Getting this right, though, is another discussion.
If, and when, you decide you are getting one, make sure that you consider these 4 factors when choosing a payroll management system. While that post was specifically written with software-as-a-service (SaaS) solutions in mind, I'm pretty sure you'll gather enough information there to apply it when considering outsourcing or developing your own solution.
If you are considering SaaS, download one of our free resources to determine when is the best time to invest in a payroll management system.
Overall effect: net positive
This scenario is a cross of a decision to change your systems then the outcome is that it was a bad decision. This is the case where your company decides to change your current systems and ended up worse than where you originally started.
On the cost-side, this is remedied by a refund in your payment by the vendor or supplier. Depending on your agreement and how early or late you found out that it's not worth pursuing, you should be getting at least 90% of the payments made. In this case, the only irreversible investments made is that of time and the costs associated with that time.
Overall effect: net negative
Scenario 3 is going to be a never-ending debate. I'd like to argue that your company's current systems outlive their current usefulness a long time ago.
Peter Drucker warns us about investments in managerial ego in his book, The Effective Executive:
“No one has much difficulty getting rid of the total failures. They liquidate themselves. Yesterday’s successes, however, always linger on long beyond their productive life. Even more dangerous are the activities which should do well and which, for some reason or other, do not produce. These tend to become…'investments in managerial ego' and sacred.”
Here's another perspective to consider: the likelihood of your current systems being "OK" at the moment and is producing a positive outcome for your company is only less than 14%. The likelihood that it is hurting your company is at 86%.
That is more than enough to seriously consider changing your current systems.
Overall effect: net negative
Most companies are already in this situation - whether they accept it or not.
The sooner you realize this, the better it is for your company.
Status quo, or doing nothing, is still a decision. Cross this with a bad outcome, you get the worst situation in the decision matrix.
Now, depending on what research you are looking at, your company could potentially be losing 10% of your gross payroll due to time theft - intentional or not. This can come in the form of errors in manual computations, buddy punching, etc.
In addition to this, if you fall into the 16.28% of companies who's main problem is that of data accuracy (or to be more specific, inaccuracy), then that can potentially compound the issues. Imagine getting an inaccurate pay during one of your payouts. I'd argue you'd be pissed as hell. Multiply that by the number of employees in the company and you get a very stressed HR.
What if that doesn't happen to the entier company, but just you.
You still have bills to pay. You can complain but the changes will most likely happen at the next cutoff, i.e. 15 days from now. What if you only have enough to pay for the bills this period? What if you are going on a vacation and using that to fund your trip?
Overall effect: net negative
Payroll management is an area in HR where companies can make quick-wins in terms of cutting costs and improving productivity. This is an administrative side of HR where you shouldn't spend unnecessary money on - especially if that added cost is used to fix a problem. Use this simple HR decision matrix to assess where you are in right now and move towards the right scenario in the matrix.
I'd love to hear your thoughts on this. Let us know in the comments section below.