“So Jeff…the real question is…how soon do you want to start saving money?” the salesman asked across my kitchen table. I looked up at him, then back down at the quote for the new household de-ionized soft water system, and then back at him. I hadn’t yet developed my professorial; is-that-really-all-you-got-glance-over-my-glasses-look yet but this was one of the moments that led to its development.
“So…Stan, after my $200 installation cost and $75 a month thereafter my net savings will still be…lemme see here….back page….the one with all the footnotes and fine print…”
“Ninety-two-fifty-six” Stan said as he pointed to the number on the quote.
“Because of the pipes” my voice bearing a nascent prodding tone.
“Yes! The pipes. They are corroding in the walls as we speak. And all the detergents and soaps you won’t have to buy, the finish on your cars you won’t have to replace…it all adds up over time!” Stan’s accountant-look was highly developed.
Fast forward 10 years and $11,107.20 in unrealized savings (I also didn’t buy Microsoft at $30 a share) I heard these words “really…I don’t know why they want to put off saving money”. Stan?!? No, these words were spewing from my mouth in talking to a colleague about a client hesitating putting in a modern WFM system.
“But look what they are spending, no!…WASTING now on their manual process” Bryan said “all that money down the drain each month!”
“You ever sell soft water systems, Bryan?” I asked.
“What?” Bryan said
“Never mind”, I said.
The fact is, it’s hard not to sound like a door-to-door salesman sometimes when talking about the ROI for workforce management and time & attendance systems like Kronos Workforce Central and ADP eTime (and related products) – even though we aren’t even in the business of selling them. I would argue that this is probably because it is one of the few IT automation projects that really does have reasonable and measurable returns on investment if not stone-cold payback in less than a year in many cases. I believe this aversion to large capitalization of PR/TK/WFM projects is due to two interrelated perceptions.
The first is that payroll, and thus payroll processing, is one of those inescapable ‘gotta do it no matter what’ things in business. Like death and taxes the rate will never drop to zero so why spend good money after bad trying.
The second perception is that if payroll is basically getting done now, how bad could it be? Or from an ROI perspective, we couldn’t possibly be wasting THAT much money so there surely couldn’t be THAT much money to save. This idea is fostered in looking at partial-picture benchmarks like burden rate and direct paycheck processing costs or comparing one company’s Timekeeping/PR contract with another.
Now this is a blog, not to mention one with ‘101’ in the title, so you must forgive the short treatment I am about to give this subject. I believe, however, we need to get back to some fundamentals in how we go about the business of paying people and measuring the true cost of doing it. So here we go:
#1: Get it RIGHT first. Error rates much past 3% and you are inviting EXPENSIVE trouble from the Department of Labor and Unions. (Note: If you are getting away with more than 3% it is like borrowing from the Mob..don’t do it)
#2: Emps and Sups tracking time. If it weren’t for the outrageous penalties for the above this would easily be the #1 area of return in most Time Keeping and WFM automation projects. Paying producers to manage the time accounting of yet other producers is a huge waste of direct productivity.
#3: Payroll people processing payroll. Having half an army of people to pay your army of people is a waste of money.
That’s it. Check this plumbing first and see how an improved TimeKeeping/WFM solution could improve these numbers. These are really what WFM/TimeKeeping systems are all about. Oh sure, you can make a lot of suds by tossing words like ‘Human Capital Management’ and ‘Metro Workforce Model’ into the mix but that will only add a fresh lemon scent to all the big dollars going down the drain. Hmmm... Maybe Stan had a point?!?
“Most people don’t plan to fail, they fail to plan”. This quote is attributed to John L Beckly who also founded the Economics Press, the purveyors of “Bits and Pieces”. You know, those little motivational booklets that have inspiring quotes and stories from all sorts of famous people. One of the famously quoted famous people was Werner Von Braun who said “One test is worth one thousand expert opinions”. Yet unpublished, until now, is my engineer-father’s line “If I thought it would actually work I wouldn’t need to test it”. (He used this often when his customers grimaced about the cost of testing something he was building for them… it generally didn’t make them feel better but his stuff always worked the first time in the field.)
All of this wisdom had already been swirling around in my head for a while when Jeffry, a Kronos Workforce Central guru and colleague of mine chatted me up about test plans for a current Kronos Timekeeper project. He was being asked to create “additional and more thorough scripts and plans”. He said he was assuming the installation vendor was going to do all the fundamentals like overtime with holiday calculations, leave of absence accruals and other ‘bucketizing’ calculations. “What then”, he asked of me, “is out there in the form of test plans and scripts to take Kronos testing to the next level… and the next one”. Call it ‘extreme testing’ if you will.
Like a book of quotes, testing timekeeping and workforce management systems both rely on sorting through history’s little gems. Jeffry and I agreed there probably wasn’t a generic ‘extreme plan’ but that one needed to look through all odd ball scenarios that HR/PR had seen before at that particular company. Get the processing people to scan through old timecard data with you and they will very quickly come up with all the 50, 100 and 500 year storms that happened last week, last month and last year. This will often jog their brain for other scenarios the development team didn’t think of to test during unit testing. I don’t think this is all one can do but it is a great place to start—hence the quote, “Fool me once, shame on – shame on you. Fool me—you can’t get fooled again.” Hmmm perhaps a little rehearsal would have prevented that little prime-time error.
Rehearsal in the TimeKeeping/Payroll/WFM world is the ubiquitous ‘Parallel Test’. The idea being two-fold: 1) It will run enough variation (given sufficient duration) through the new system to find remaining errors and 2) Any errors encountered, no matter how fatal, won’t actually kill you because you have the existing system to fall back on. Some also claim the benefit of letting the staff ‘practice’ during the parallel but in my view that attitude tends to encourage sloppy and incomplete training. Think about it—all the really important, got to work the first time stuff across history is tested but not parallel tested. Moon Shots, Brain Surgery, SkyScrapers… these new endeavors are more critical than payroll but since there is no way to parallel test the new machine or method they must find other ways of ensuring success.
I have a project schedule I am trying to compress down for a client. It is hard not to look at the gobs of time on the current plan dedicated to ‘Parallel Testing’ and think it has the most potential to be compressed. In its place we are thinking about a creating a more intensive integration testing based on a wider sample of historical data earlier in the program. At this point, the customer’s PM and I think it will work… but don’t quote me on that just yet.
There is an old joke about a salesperson, an engineer, and a factory worker all showing up at a photocopier at the same time. Each argues that since their job is the most important that they should be allowed to go first. The salesperson argues "Nothing happens until someone sells something and no one gets paid if there are no sales". The factory worker responds with his own argument "But you would have nothing to sell if I didn't build it so no one gets paid unless I can get my work done". The engineer then jumps in "But you would have nothing to build unless I designed it so I should go first". At this point, a clerk from payroll walks up to the copier and says "Excuse me... I need to make copies so you all can get paid" and the three immediately step aside and clear a path to the copier.
Regardless of one's business model or employee type, it seems everyone maintains a healthy respect for the machinery and people that actually turn hours logged into paychecks (Okay, direct deposits). When employees earn shift and other premium pay it can take a lot of people or a lot of complex machinery (or both) to get everyone paid on time and correctly. Nowhere is this more evident as when a shop with FLSA, State, local and union pay rules goes from manual time keeping and payroll preparation to a completely automated system.
Although many people talk about their timekeeping and payroll systems as being ‘FLSA and multi-state compliant' what software vendors like Kronos or PeopleSoft really claim to do is help you "minimize the risks... and the administrative overhead associated with regulatory compliance".[i] It can be quite impressive to sit down with payroll staff whilst they go thru time cards and watch them apply all the rules that can possibly apply for a non-exempt, union employee during a pay week/pay period... with PTO... and Detail Pay... and Call-In... on a weekend. It is always equally impressive to me to see one of our configuration gurus develop a combination of shift periods, pay codes and rules in Kronos TimeKeeper that consistently duplicate all this human thinking. Quite often, the attempt at doing all this via a rule based electronic system exposes errors or at least inconsistencies in the existing manual process. More noteworthy, however, is the fact that cleaning up and automating your timekeeping processes more often than not can still leave you exposed to FLSA overtime pay rule violations. This is the classic ‘regular rate' vs ‘base rate' definition that every labor attorney loves to cash in on and most time keeping systems love to ignore as ‘not my problem'.
Manually or electronically-if you are merely sending hours and pay codes over to your payroll system you are relying on THEM to calculate the emps regular rate for FLSA mandated overtime pay (1.5x and 2x the FLSA definition of ‘regular rate'). Didn't know there was a difference between FLSA ‘regular rate' and what we typically call ‘base rate'? In simple cases without many pay rate differentials there isn't any effective difference but in the multi-shift, multi-rate, union and public service world it can take an army of people to figure out what rate should be used in overtime calculations. (The army, of course, as with all military personnel have no provision under law for overtime.)
If you are in the process of automating or updating your time keeping and payroll processes I urge you to find out how and where ‘regular rate' is being calculated for FLSA overtime purposes. Quite often I see people on the time keeping side simply throw the hours and the ‘time and a half' pay code over the fence and hope payroll gets it right. It may be, however, more advantageous if not downright necessary to do this rate calculation as part of the time keeping solution and/or the interface depending on payroll's capability. Yes-you very well may find that they have not been calculating overtime properly...for years. You, me, and Hilda both know that doesn't make it right.[ii] It may be painful to fix-requiring a lot more HR and legal involvement-- but I guarantee you will always have a clear path to the photocopier if you make it right!
[i] http://www.kronos.com/AssetInfo.aspx?id=1482
[ii]Hilda Solis is the current Labor Secretary
The third in a series of articles by guest author Chris Flanders
The second major area of testing is payroll. It is vital to retotalize your previous pay period.
Confirm that your configuration still works exactly the same way it has been. This will give you the confidence that, if nothing else changes, your employees in & out punches will get totalized in the same way and the employee will get paid the same way.
You can do this test by going through the following steps:
- Take a backup of your production database and upgrade it in a test environment to the new version.
- Remove signoff on all employees in the previous pay period.
- Force all employees to be retotalized by the BGP. (Run the SQL command "update totaleventts set totalizationstatus = 2".)
- Signoff on the previous pay period for all the employees.
- Run your payroll extract against the test system. (NOTE: To do this, you must have already upgraded and tested your interfaces. This process will help you confirm that your payroll extract interface is working correctly.)
- Compare your new test extract to the real production extract that you had before you took your production database backup.
This final step lets you see & confirm that all the time records that you extract from your existing system are identical to ones that have been totalized by and extracted from the upgraded test system. For any exceptions between the two (and there will probably be some), you just research and figure out why it was there. In most cases, it will just be some quirk of the extract timing, but what you want to find out is if anything in your rules configuration is now calculating differently. THAT is the key output of this test and successful completion of this test should give you (and your executive mgmt) a high level of confidence that when you upgrade, payroll won't suddenly change and you won't start paying out tons of OT!
There is a secondary benefit to this test as well. In order to complete it successfully, it means that you will also have been able to successfully:
-upgrade your database
-get an app server working
-get a BGP working and totalizing
-log into the application and do group edits
-run your extract interface
Yesterday we considered why keeping current is one of the reasons to upgrade. Another reason to consider upgrading to Kronos 6.1 is:
Technical Support
Most software vendors phase out support of older versions and only support the current release and one version back. Anyone still using Windows 3.1? Anyone even have access to it? You see my point.
Imagine you are the Payroll Manager for a company with offices across the United States. Imagine there are thousands of people relying on their paychecks.
And imagine there is a sudden system-wide issue with your workforce management solution.
And - because your company chose not to budget for upgrades and software maintenance fees - you have no access to your vendor. What do you do? Delaying a needed upgrade costs money, time, and frustration in the long run.
Of course, we are in the business of providing technical support to companies using workforce management software system such as Kronos. Nevertheless, whether you use us or another vendor for your support, a current and valid technical support contract is key to ensuring your system is up and running when you need it to be.
Coming in June of 2009, Improvizations is launching the Upgrade Studio, a process that your company can use to determine if and when you are ready to upgrade to Kronos 6.1. We will work with you to create a comprehensive upgrade plan so you have ALL the variables in place to plan for your next upgrade. Want to know more?
Back in the good ol' days of payroll you skipped out of the field on the 15th and last day of each moon cycle and someone handed you three shekels. So endeth the pay-period. Fast forward a few thousand years and you are now looking over the pdf of your paystub wondering what the heck paycode ‘22FL150 - 2/3rds 150% Funeral Leave Pay' is (not to mention, who died?).
Way back when, it was instantly apparent if you were paid correctly or not. Now, you aren't so sure. Don't worry the people paying you can't be sure either. Feel better? I didn't think so. While I can't tell you the specific screw up on your paycheck or those within your company I would like to cover some fundamentals people forget while toiling away in some silo of the HR/Payroll plantation. Ignoring these fundamentals, in my opinion, has lead to overly complex time & pay tracking mechanisms that make payroll and/or their associated accounting errors (typically 1%-8%) very easy to create and very difficult to find.
Fundamental #1: It is COMPANY data- not Payroll Data, or HR Data or Time & Attendance data.
The second you start thinking attendance, timesheet, job cost or other information can be divorced from its other genomes in the helix you are going to end up with two-headed sheep! (Okay-farm analogy ends here). Do not let someone run wild in some aspect of the system (timecards, paycodes, GL Interface and the like) thinking they are isolated from all the others (not my job syndrome... don't you just love this pic!) 
Don't let HR escape the meeting you are having on state taxes for the new sales employees in Montana. "That's a finance issue" is the wrong answer. And make sure HR brings the latest pay policy manual to the meeting-we will need it for Fundamental #2.
Fundamental #2: Payroll policies don't generate paychecks-Data Entry People and Lines of Code do.
If your HR VP ever says "The payroll company is handling it-I gave them our payroll policy manual and they are taking care of everything" WHACK him or her on the head with the payroll policy manual. (then ask if you can split the dollar value of each error you find*). I once watched as my Kronos techie did the math for the HR VP. While I agree my techie shouldn't have used the phrasing "Any fifth grader can see THAT policy on THIS system will result in a 13% OVERPAYMENT", my techie's math was irrefutable.
The HR VP refuted it and said something like "I think (big name payroll company) is capable of handling our simple little company's payroll" and shuffled off with his policy manual. The lawsuits threatened when (big name payroll company) tried to get the overpayments back after more than 6 months of errors were impressive. At least those errors were consistent and replicatable. Want some variety? Take 2 or 3 or 10 payroll entry people, put them in different rooms and give them the same timecard/overtime/vacation pay situation and see how many different and creative ways it gets coded. Should be just one, right? It won't be for all but the simplest of entries. Do this regularly.
Fundamental #3: Different levels of granularity are needed by different departments at different time intervals with differing precision.
People just don't get this and they often come up with really bad schemes in order to implement really dumb pay policies that may not even be mathematically possible. In its simplest form, this means that while PayChexR-Us need only know the employee worked 8 hours to pay correctly, the system may need to split that into two different departments, or paycodes, or some other distribution mechanism to do some other calculation correctly. People maintaining these mechanisms often use the wrong tool for the job or, more commonly, don't understand the ramifications elsewhere in the system for changes that appear to get the result they wanted. More complex examples of this principle have to do with HOW percentages are calculated, WHAT rounding must be done, WHERE totals are needed, and WHEN periods are defined. This is closely tied to Fundamental #1 and either results from asinine pay policies or in asinine pay algorithms. You can't always control the former but you had better manage the latter.
Fundamental #4:
Making any changes to the HR/Payroll machinery without being able to model and test for effect across all stakeholders is Baaaaaaaaaad! (Hey-I didn't say no sheep allusions). Holding to this fundamental discipline is simply the last chance to check all silos before dollars go into bank accounts, tax authorities get paid, re-imbursement invoices get generated, etc. I'm not saying generate an entire mock payroll for every little change but people who really KNOW how the change will affect their area (check every area) need to be consulted and an overall model reviewed every time. Yes, every time. Walk everyone thru it from the CFO down to the shop floor supervisor with his hands on the time clock. (The shop floor guy, I have found, is more likely to identify real problems with the latest change).
That is it. Just four but I'm constantly amazed out how many people involved in the paying for and tracking of people attendance are not grounded in these fundamentals. Of course, straying from them is what keeps Kronos, ADP, labor attorneys and others in this business IN business. No sense in paying us a shekel more than necessary.
About the author: Jeff Millard has over 25 years of IT professional experience, he has a proven vision and leadership ability beyond mere technical expertise. He is well versed in a broad range of best-practice approaches, he has a unique ability to chart clear courses for growth oriented companies.