Journey to Excellence - Path to HR/Payroll Process and System Optimization

Journey to Excellence - Path to HR/Payroll Process

and System Optimization

Tom LaVeck, Manager, Time Governance and Reporting, National Grid USA

Kris Khanna, Director, Deloitte Consulting LLP

Yu Chen, Specialist Leader, Deloitte Consulting LLP

Session ID# 5362

This presentation should not be interpreted as a representation about or endorsement of any third party products, including SAP software.

COMPANY BACKGROUND

National Grid USA Overview

• National Grid USA (NYSE: NGG) is a wholly owned subsidiary of National Grid plc, an international electricity and gas company and one of the largest investor-owned energy companies in the world • 17000+ Employees, 31 Unions

Natural Gas Distribution

• 3.5 million customers

• Largest distributor of natural gas in the northeast US

Electricity Transmission

• 8,600 miles

• 3 states: Upstate New York, Massachusetts, Rhode Island

Electricity Distribution

• 3.4 million customers • 29,000 square miles • 3 states: in New York,

3 KEY LEARNING POINTS

1

2

3

Come to learn National Grid’s journey from a sub-optimal initial SAP® HR/Payroll implementation to a point where its HR/Payroll system and process are stable and efficient enough to allow shifting its focus to more strategic HR/Payroll initiatives

Gain insight into leading practices in implementing some of SAP HR/Payroll functionalities and integration design and how they can be utilized to improve efficiency of HR/Payroll processes

Walk away with important lessons-learned from how National Grid organized its stabilization and

Project Background

Journey to Excellence

• Health Assessment

• Remediation

• Stabilization

• Enhancement

• Strategic

Leading Practice

Lessons-Learned

Closing

• Initial SAP HCM implementation went live in November 2012 as part of

overall SAP ERP implementation in US for 18,000+ employees with the

following modules:

PROJECT BACKGROUND

Payroll ESS and MSS Process and Forms

JOURNEY TO EXCELLENCE

Phase 2

Phase 1

Phase 3

Phase 4

Identify improvement opportunities

Assess current state from Process/Technology/People

ASSESSMENT APPROACH

Process

People Technology

Leverage industry leading practices

Validate, categorize, and prioritize improvement opportunities

Develop improvement roadmap with

short/medium/long term plans

1

₂

3

4

ACTION PLAN (SELECTED SAMPLE TASKS)

Tasks Timeline People Process Technology

Establish firm cadence and governance to initiate transition of business Short-term ✓

Finalize and implement payroll run books and FAQs for Time/Payroll Processing for both weekly, monthly, and off-cycle payroll cycles

Short-term _✓

Develop communication plan and ownership for delivering timely

communication to ensure process integration between stakeholders such as Time Entry staff and Payroll

Short-term ✓

Defect Resolution: Resolve all time and payroll related system defects.

Solve all critical defects. Short-term

✓

Transition of business acceptance testing from HRIS to Payroll Operations Medium-term _{✓ ✓}

Rollout and reinforce business process procedures (BPPs) to support payroll execution

Medium-term _✓

Work schedules/substitutions creation/change/assignment process and design review

Medium-term _{✓ ✓}

Develop cross-training program according to the skills requirements to

operate the payroll organization of the fully-operational payroll staff Long-term ✓

Establish internal/external Service Level Agreements (SLAs) and performance measures which are common and critical governance components

Long-term ✓

Time Management flexibility and scalability review around incorporation

CHALLENGES

• Time to process weekly payroll for 10K employees took 30-40 hours

immediately following the go-live

• Major system errors creating payroll processing complications including:

• Inadequate organization design to support transaction data center

processing and inefficient payroll process and run books

Master data/payroll data

conversion errors

Incorrect system

configuration

Inaccurate or non-available

business process

documentation

Poorly designed

processes/SLA around

application maintenance and

APPROACH AND STEPS TAKEN

• Reviewed payroll runbooks and identify

areas of improvement to improve

process consistency, efficiency and control

• Reviewed payroll time and job program/variants and identify

performance issues

• Leveraged splitter program to shorten

system run time for time and payroll

processing steps with long run-time

• Created defect triage to prioritize defect

fixes moved to Production

• Reviewed and addressed critical payroll system gaps to improve

payroll accuracy

• Reviewed Payroll

Organization/Staffing and made

recommendations

• Provided on the job training to new payroll staff in addition to Business Process Procedures

• Built a rotational support staff to

ensure continuous issue resolution

Time to process weekly payroll was reduced to 12-15 hours on average

More consistent payroll process time for each week

Created a new governance model including SLA metrics which reinforce rigorous timelines

Increased payroll accuracy after resolving major system

configuration issues Well established system changes

release gate control process for defect fixes moving to production system Standardized Business Process

Procedures (BPPs)

Better trained payroll operation staff

Better structured payroll organization with the right support

CHALLENGES

• Core HCM design issues reduced the use of standard SAP HCM functionality and the efficiency of HR support staff • SAP was not configured to handle

employees working across multi-state

tax jurisdictions, as required by law

• Quotas configuration was incomplete

and inaccurate, leading to manual

interventions and adjustments of quotas

• Overpayments to employees were volatile in amount and value. Both overpayments and overpayment

recovery capabilities were unidentified and uninvestigated due to lack of data

• National Grid relied on insufficient tools

for payroll operations to timely resolve its

processing errors

• Payroll and Treasury integration design

was sub-optimal leading to 10-12 of payroll

payment processing time compared 3-5 hours average industry standard, increasing the risk of not meeting deadline of sending payroll ACH file to the bank

• SAP Off-Cycle Workbench could not be

used to reverse payroll results or issue pay

check replacement, instead manual A/P check process was used

• Payroll Year-End processing for 2014 was a big challenge to the payroll operation team due to the inexperience of the SAP system

APPROACH AND STEPS TAKEN

• _{Evaluated HR processes and enable core}

functionality to improve the effectiveness

of HR operations

• Reviewed work schedule design and assignment process and configured specialized error messages to reduce

payroll processing time and error

handling

• _{Configured and activated system}

functionality, reports, and tools to enable supervisors to reduce auto populate /

approve, strengthening the control environment of SAP

• _{Designed and Implemented multi-state}

time entry solution to meet compliance

requirements of tracking and taxing

where an employee is working

• _{Validated the accuracy of earnings/deductions}

that accumulate for tax processing, pension and other employee pay-related benefits

• Implemented electronic funds for Child Support and individual state garnishment rule

modifications necessary for compliance with

garnishment law

• Redesigned Payroll and Treasury integration to

enable the use of standard SAP Payroll Payment process and SAP Payroll Off-Cycle Workbench payment reversal and check replacement features

• _{Provided on the job training to the year-end}

processing leads from payroll operation team

and documented the procedures and sample check list and project plans for future year-end projects

ACCOMPLISHMENTS

• Improved overall HCM system design that

improved HR support activities, and enhanced HR data accuracy for business and regulatory reporting

• Reduced percentage of time entry auto-populate and auto-approve usage

• Accurate employees time off quotas

• Standardized the critical integration between

Payroll and Treasury

• Standardized the payroll payment reversal and pay check replacement process, reducing the

dependency on A/P to issue the replacement

check and manual net pay adjustment in the system

• Reduced payroll payment processing time

from 10-12 hours to 2-4 hours

• Reduced dependence on manual

workarounds during payroll processing

• Overpayments were reduced to acceptable

level

• Completed payroll year-end processing for

2014 on time with fewer resources, more

accuracy

• Automated for the union step progression process for the selected unions

• Implemented multi-state tax overwrite and solution to meet the multiple-state tax

reporting requirements

• Redesigned the garnishment configuration to

STABLIZATION PROJECT EXAMPLE

:

PAYROLL AND TREASURY INTEGRATION

Business Objectives

Reduce the business risk of potential late payroll payment to employees by reducing weekly post-payroll payment

processing time from 10-12 hours to 4-5 hours

1

2

3

4

• There are many company codes under National Grid, but their payroll payments are all paid through one company’s cash account

• SAP In-House-Cash (IHC) need to be used

to manage cash centrally through the service company, including payroll payments

• Each payroll ACH/check entry need to be

posted into Cash Accounts individually to

enable auto cash clearing once bank statements are loaded electronically into SAP

• Payroll needs to be able to use

standard SAP Off-Cycle workbench to reverse/reissue voided/returned

payments

• Payroll needs to be able to use standard SAP Off-Cycle process models to automate post payroll

processing steps

• Many Finance sub-processes

(Treasury, GL, Inter-Company, and Cash Reconciliation) may be

impacted by any integration

approach changes

Unique Challenges

Key functional area business

stakeholders were invited to confirm the integration requirements

Design Approach

1

A team of functional area

technical experts, guided by the lead consulting partner, were put together to come out the

proposed integration design

Prototyping were done in sandbox to validate

potential impact to each functional area

System, process and testing impacts were fully documented and fed into subsequent project implementation plan and change management plan Design review meetings

were conducted with both business and technical experts from impacted Finance functional areas such as treasury, Inter-Company (I/C) group, Accounts Payable and Cash Reconciliation A final design walk through was conducted with Payroll process owner and impacted Finance process/sub-process owners to obtain final design approval

PAYROLL AND TREASURY INTEGRATION

As-Is Payroll Payment process

Ex te rn al Sy st e m s P ay ro ll Fi n an ce ( Tr e as u ry ) C as h R e co n

Payroll Calculation Pre-DME

CITI Bank ADP

IHC process Payroll Data

via EDI

Payment Medium (ACH and Check Files) Payment Run (F111) Manual Cash Reconciliation Electronic Bank Statement Bank Clearing &

Cash Accounts Postings 10-12 Hours Check Print Vendor House Bank

PAYROLL AND TREASURY INTEGRATION

2 - 4 Hours

Implemented standard SAP Payroll Payment process and its integration with Treasury to generate payroll payments out of Payroll module

Reduced the cost and

dependency on Cash/Treasury nightly support for payroll payment generation

Met existing IHC treasury business requirements and cash reconciliation business requirements by implementing a few low to medium complexity enhancements

Provided detail line by line item posting details with unique identifier for Payroll Cash Recon accounts to allow EBS auto clearing at the line item level Reduced the payment processing

time from 10-12 hours to 2-4 hours, significantly reducing the risk of late payroll payments to employees

Implemented the payment reversal and payment replacement feature

through standard SAP Off-Cycle Work Bench and enabled the further off-cycle process automation

PAYROLL AND TREASURY INTEGRATION

Accomplishments

1

2

3

4

5

6

• Tax deposits and reporting process were manual

• Standard SAP tax reporting tools were under utilized

• Paid 3rd party vendor about $1M annually to support manual tax filing

• Lack of transparency regarding garnishment contributed to employee service center inquiries • Poorly designed

garnishment processes attributed to challenges integrating with vendors

Tax Reporting and

Remittance Garnishment Processing

• Only some, but not all applicable unions were automated for the step progression process

• Low adoption rate for about half of the forms in use • Some of the forms had

functionality limitation due to existing technology

Step Progression Process and Forms

• Time Entry process, Time Approval and Travel Expense self-service applications could be more user-friendly

Usability

• Payroll Day 1 Time processing steps were being kicked-off manually

• The programs of some Time processing steps were not optimized in terms of the processing performance, leading to unnecessary delays during the process

• Payroll processing steps on payroll days were being kicked-off manually

• Payroll processing errors were being manually consolidated for filing purpose

Payroll Processing Step Automation

• The employer benefits enrollment process was manual • Inaccurate enrollment data Employer Benefits Enrollment

IMPROVEMENT OPPORTUNITIES

APPROACH AND STEPS TAKEN (SELECTED)

Tax Reporting and Remittance Process

Process and Forms

Fiori

Engaged stakeholders from all process areas early to confirm the integration requirements Redesigned payroll tax reporting and remittance process to make it more efficient Reviewed existing configurations and adjusted them based on the new process Retrained Payroll Operation team and Employment Tax team on standard SAP tax reporter

functionalities

Upgraded to EHP7 and leveraged SAP’s latest form technology to replace ADOBE forms

Conducted workshops to engage not just some stakeholders, but all stakeholders for the forms to

revalidate the requirements and fully understand existing functionality gaps and reasons of low adoption

Conducted workshop to realign business requirements on Fiori applications

Developed and deployed applications to streamline time entry, time approval, shopping cart approval and travel expense approvals

ACCOMPLISHMENTS

• Reduce payroll processing time further

to 8 hours from 10-12 hours

• Reduced the business risk of potential

late or inaccurate payroll tax payment to federal and state government agencies

• _{More consistent and standard process}

for payroll tax reporting and remittance

• Reduced the 3rd party vendor cost in tax

filing annually by about $1M

• _{More automated payroll processing}

steps, further reducing the possibility of

manual errors and shortening the processing time

• _{Expanded step progression automation}

to all applicable unions

• Automated the employer benefits

enrollment process

• _{Redesigned forms will help increase their}

adoption rate

• Improved the usability of time sheet entry

screens and manager time approval steps

• _{Increased the transparency regarding}

garnishment deductions, reducing

employee inquiries around garnishment

• _{Increased time approvals percentages prior}

to payroll processing

• Improved accuracy of time entry for self

service employees

• _{Reduction in turn around time for travel &}

JOURNEY CONTINUES

•

With core HR/Payroll processes stabilized

and optimized, we built a good

foundation for the future. Now we can

focus more on strategic initiatives on our

long term plan/roadmap

•

Cloud

•

SAP SuccessFactors Talent

•

SAP SuccessFactors Employee Central

•

Mobility

•

Time Entry

•

Other HR/Payroll/Talent

applications

Mobility and Employee Engagement Workforce Process Enablement (Core HR/Payroll process) Talent Management And Planning Workforce Analytics

PROGRAM MANAGEMENT

1

2

3

4

5

Identify improvement opportunities at process team level

Align opportunities with business objectives for each process area; build business case and prioritize/sequence projects at process team level

Group/sequence projects at program level

Build consolidated business case and project timeline at program level

Secure funding approvals and staffing teams

A program management office, was established to help initiate and manage

stabilization and enhancement projects across multiple process areas.

TEAMING APPROACH

Team Roles and Responsibilities

Client

• Identify and confirm business requirement

• Identify and/or confirm integration test and user acceptance test scenarios

• Provide business approval on project deliverables such as design documents, test scenarios and test results

• Conduct production health check during production cutover

• Project management and coordinate among different consulting vendors

Advisory Partner/ System Integrator

• Lead project management and lead process and system design • Assist review assembly test results and regression test scenarios

• Identify and/or recommend integration test and user acceptance test scenarios • Recommend production health check during production cutover

• Lead integration testing and user acceptance testing phases • Advise client on user acceptance testing execution

Application Management Support

Partner

• Participate process and system design

• Responsible for making system changes and conduct unit test, assembly test, regression test and performance test

• Provide input on integration test and user acceptance test scenarios • Execute conversion and cutover activities

Change Management was important to our success. We applied Deloitte’s

Change management approach throughout our journey.

LESSONS-LEARNED

Align business projects with strategic business goals and set up metrics to measure the business improvement

results

Engage stakeholders from all process areas early to confirm the integration requirements, do not design in silos and

ignore the potential impact to other process areas and end up costly

redesign/reimplementation

Do not stop business process improvement journey right after

initial system implementation

Do not underestimate the power of change management, a lot of user errors are caused by lack of proper communication of the

changes, the training on the new process instead of system

issues

Set up a company wide PMO office to manage business improvement projects from different process areas

to better use the shared system and people resources across the business Engage business early during business

improvement projects to uncover any potential requirement understanding

CLOSING

CONTACT INFORMATION:

Tom LaVeck, National Grid, [email protected] Kris Khanna, Deloitte Consulting LLP, [email protected] Yu Chen, Deloitte Consulting LLP, [email protected]

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