Editor’s Note: Keith Rodgers is the Founder of Webster Buchanan Research, a market research and consulting company specializing in global payroll since 2003. Following an initial career in the U.K., Rodgers has lived and worked in Singapore, Australia, and the United States’ San Francisco Bay Area, where he’s now based. Rodgers has assisted some of the world’s largest companies with their global payroll projects, and consults on a wide range of global payroll topics including strategic planning and design, vendor selection, and performance management.
What are the chronic challenges for companies involved in global payroll initiatives?
I’ve been involved in global payroll since 2003. When we started out, everyone accepted that it was an immature industry. The problem is, we’re in 2020 and parts of the vendor market still haven’t made it through adolescence.
One example is that global payroll outsourcing vendors still tend to rely on manual activities to fulfill critical parts of their service offerings. There’s nothing inherently wrong with manual work. Payroll teams functioned successfully for decades with people doing work that is now largely automated. However, you need strong checks and controls to eliminate errors. Our consulting team is sometimes hired to help multinationals tackle implementation and service delivery problems with their vendors. When we run our remediation programs, we typically find manual activities at the center of many of them.
The good news is that global payroll vendors continue to extend the level of automation, more recently through robotics and artificial intelligence (AI,) potentially generating significant improvements. But this is not just about eliminating human error in calculations or filings. It’s also about the quality of the vendor project manager leading your implementation, stretched resources, and sometimes even about the whole culture of customer service at the vendor.
Surely this isn’t all the vendor’s responsibility?
Absolutely not. Their customers usually share responsibility when things go wrong!
One enduring challenge is multinationals underestimating the complexity of global payroll projects. Global payroll teams sometimes get hung up on individual country legislation, but this isn’t necessarily the problem. Sometimes the biggest hurdle is the organizational complexity of the multinational itself. This includes bringing autonomous country payroll functions on board or trying to drive through change when the global payroll team only has dotted-line responsibilities and country managers are dragging their feet. Sometimes it’s about underestimating how international projects will impact what we call “payroll plus” activities carried out by country teams, such as HR administration or time management.
Even though the global payroll team may understand these complexities, other functions upstream and downstream of payroll may not. That’s when you might see them resisting change or launching their own global change initiatives without considering the impact on payroll.
What emerging trends in global payroll are grabbing your attention?
One of the most significant trends is the growing acceptance that there are many different ways to design, implement, and manage your global payroll landscape. Thankfully, we’re long past the stage where multinationals start out with the assumption that one vendor can do everything for them. Yes, sometimes one vendor can, but in many cases this isn’t feasible or desirable. The larger the footprint, the stronger the case for asking whether you can achieve a better result by mixing and matching a small number of strategic partners and keeping some of your countries as single-vendor exceptions.
Technology developments are helping with this. For example, the middleware that global vendors rely on for key tasks, such as aggregating data inputs and outputs or managing workflows, is evolving relatively quickly. In some cases, it makes it easier for multinationals to take a piecemeal approach or retain some of their high-performing incumbent providers. The impact of middleware developments, in fact, features in a research report published this month by Webster Buchanan.
What strategic advice would you give to a company moving into global payroll?
One of the most important things to remember is that global payroll is not just about vendors. Your vendor strategy is a subset of your overall strategy. That means you need to start out by understanding your objectives and establishing the principles that underpin your global payroll initiative—not just from payroll’s perspective, but for all stakeholders and the senior executive team. At a most basic level, for example, ask yourself if you’re looking to cut costs or deliver world-class service. Those two goals may be incompatible, and your answer will influence your decisions.
Then, you need to look at what shape of global payroll setup works best for your organization in the long term, taking account of a wide range of factors. These include the following:
- Your company’s appetite for risk
- Competing initiatives in other global functions
- How best to leverage your existing payroll setup
- Your governance model
The business case for change is part of this evaluation. If you start by addressing these issues, you’re more likely to find vendors that fit with your global payroll strategy, rather than adapting your strategy to a vendor’s delivery model.
What are some of the factors a company should consider to determine if a prospective vendor is a good fit?
My earliest career was in journalism, where I developed a healthy skepticism about promises made by vendors. During this time, I learned how to dig beneath the surface to see what’s really going on. So, firstly, don’t take everything you’re told at face value. Working with some of our largest multinational clients, I’ve seen written responses to requests for proposals (RFPs) with statements that are simply inaccurate or misleading. That’s not common, but expect that sometimes troublesome issues will be glossed over and a rosy picture painted instead. Question the things that are important to you and get them validated. The experiences of other customers can be really valuable here.
Secondly, recognize that global payroll has unique challenges that won’t necessarily be addressed by standard procurement approaches. It’s all about the nuance. For example, a standard procurement RFP question might be to ask a vendor about its attrition rate—how many customers it’s lost—as an indicator of customer satisfaction levels.
What happens when a multinational rolls out half a dozen countries with a global vendor, but doesn’t like the quality of service it receives and switches to a different supplier for future countries? It’s still a customer of the first vendor, but it’s hardly satisfied. So, your procurement questions need to address these kinds of unique scenarios.
You mentioned robotics and AI. What are their roles in global payroll?
Again, be careful swallowing the hype. Yes, the potential is enormous, but it's still early days, especially in payroll. The applications for the technology are still emerging. So, don't be distracted by talk of robotics and sophisticated analytics from a vendor and ignore the fact that it still hasn’t worked out how to handle retroactive calculations or offer multi-factor authentication to help keep your data safe.
That caveat aside, there are exciting developments under way in key areas such as reducing data input errors, cutting the length of the payroll processing cycle, and helping multinationals make strategic decisions about their workforce. In the build to gross, for example, there’s big potential in using exception routines to spot errors in client data. A conventional software routine could do this, but would simply flag errors and warnings. A robot would go one step further in learning from errors it experienced in the past (such as data formatting errors), and initiating an action to fix them (asking the employee to correct them). Vendors that are leading the field here rightly point out that this can cut significant time off the payroll cycle.
Likewise, AI will play a growing role in analytics, from operational payroll issues to wider corporate issues. This includes recurrent errors from a particular data source or spikes in overtime.
What have been your experiences in successfully navigating cultural and other differences on a worldwide stage?
It’s not always been successful. I’ve been fortunate enough to work on four continents—in London, the San Francisco Bay Area (where I now live), Singapore, and Sydney. I cringe now when I look back at my attitude when I first moved abroad almost two decades ago. I often made the mistake that many other expats make, which is to assume that because something is different from what you’re used to, it’s quaintly odd. It may not be odd. It may just be different, and may actually be a better way of doing something. The more I traveled, the more I realized that if you start with an open mind, you learn much more.
Be sure to read the article “Comparing Benefits of Using a Single Global Payroll Vendor” in this issue by another Webster Buchanan global payroll professional.
Frank J. Mendelson is Acquisitions Editor for the Global Payroll Management Institute (GPMI) and the American Payroll Association (APA).
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Frank J. Mendelson is Acquisitions Editor for the Global Payroll Management Institute (GPMI).