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Micah Fairchild Building the Business Case for Payroll Software – Part One

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 By Micah Fairchild

The Importance of Making the Case for Payroll Software

Payroll may be one of the earliest business software solutions (GE were the first in 1954) but however well-established its use, any organization asked to make a significant investment in a new payroll system will want to see a watertight business case before reaching for the checkbook. The overarching reason for this is that the business case justifies not only the financial outlay, but also the changes to current procedures/processes, as well as whatever disruptions to the business might occur in terms of time and user training. This justification lies in the clear presentation of bottom line business benefits like productivity, profitability, and reduced operating costs; and quite simply, as states, "captures and documents the reasoning for starting a new project."

Unfortunately, as a 2010 survey discovered, roughly 75% of HR/Payroll managers are uncomfortable writing business cases. To remedy this issue, we put together a guide of sorts to aid in building the business case for payroll software. This article (Part1 of 2) outlines the key steps in the business case process and offers two template structures for a payroll application project. Part 2 will cover the major benefits of payroll automation that can be included in the template and also the calculation of the return on investment, a vital part of any business case.

Payroll Software Business Case Step #1: Stakeholder analysis

Personnel Today suggests several key stages to a successful business case for payroll software; of which the first (and possibly the most important) is understanding the audience. Whose approval is needed? Who will manage the system? Whose working lives will be affected? While with any business change there are a wide range of interested groups (including C-level decision-makers, HR and finance department personnel, shareholders, customers or clients, and employees who are expecting to be paid), these groups will have different levels of both interest and influence regarding this proposed payroll technology. By mapping out these groups through stakeholder analysis, some early decisions can be made on how and when to engage with them, what information to communicate, and which benefits will be most appealing.

Payroll Software Business Case Step #2: Existing System Assessment

Whether the current payroll process is manual, outsourced, or just software in need of updating, a detailed understanding of the current system being used and its shortcomings is required. Being able to show what the current arrangements can deliver and what they are costing the organization is the first step in being able to provide an objective benchmark for the necessary capabilities of new payroll software.

Payroll Software Business Case Step #3: Proposing Alternatives

Depending on the exact nature of the business case, alternatives may be pitched at different levels. If the focus of the case is on the move from a manual to an automated payroll system, the business case will cite possible (but realistic) benefits that could be made from the change in approach. On the other hand, the case may be presenting a shortlist of specific options; a process which will require details of how each payroll application option will address the limitations of the current system. In either case, it should be noted that some benefits will be quantifiable in financial terms and others will be less tangible but no less impactful on the bottom line (e.g. employee engagement or corporate reputation).

Payroll Software Business Case Step #4: Provide a plan

The fourth step is to develop a convincing plan for change. As Personnel Today states, "This is where you should explain how the company will go about achieving the benefits you've outlined already." Although elements will certainly change once payroll software implementation has been approved, this plan should be as detailed as the current information will allow; including project milestones, timelines, and estimated times to value. In order to be a realistic forecast however, the development of the plan will undoubtedly require the participation of key stakeholders (e.g. Payroll staff, HR, IT, and potentially even a representative sample of affected employees). Ideally this preliminary project plan should contain some alternatives or 'what-if' scenarios, acknowledging and proposing strategies to counter any likely risks.

Payroll Software Business Case Step #5: Presentation of the case

Of course a compelling business case for a new payroll system must also be matched by a convincing delivery. Several presentations may be optimal as part of engaging with different stakeholder groups, testing out different facets of the business case, and gathering feedback to create a tighter case for change before presenting to any final decision-makers. As with the first step however, organizations should take note that the initial stakeholder analysis should inform each presentation; allowing it to be tailored to address the concerns of the particular audience (e.g. accuracy of salaries for employees, and strategic cost-cutting for the C-level, etc.).

Template Business Cases for Payroll Software

The following template structures are recommended by SNP Consulting in their article, Building a Compelling Business Case. However, the decision to use the simpler structure or the more comprehensive version should be determined by the impact of the proposal, the cost of the payroll software implementation, and the level of approval required.

1) Simple structure

  • Current situation (internal)
  • Proposed alternatives
  • Comparison table of current and proposed alternatives
  • IT considerations
  • Timetable
  • Recommendation

2) Comprehensive structure

  • Executive Summary
  • Introduction/Background
  • Current situation (internal vs. external)
  • Vision of the future
  • Evaluation of the options
  • Critical assumptions
  • Recommendation

Building the Business Case for Payroll Software – End of Part One

Payroll automation is widely seen as one of the basic technological building blocks of high performance. In fact, according to CedarCrestone's 2011-12 HR Systems Survey noted, "Organizations begin their journey towards administrative excellence with the deployment of a core record keeping system, typically deploying a state-of-the-art HRMS along with payroll and possibly benefits administration". Nevertheless, the size and scope of this type of enterprise application dictate that a solid business is still a necessity. Having highlighted the key steps in the creation of a compelling business case for payroll software, our 2nd and concluding part of this article will examine the core content of the payroll software business case, the key benefits that can be leveraged, and the calculation of the return-on-investment (ROI). End

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While with any business change there are a wide range of interested parties (including C-level decision-makers, HR and finance department personnel, shareholders, customers or clients, and employees who are expecting to be paid), these groups will have different levels of both interest and influence regarding this proposed payroll technology.



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