HR and Payroll systems are required by all types of employing organisation to support the administration of employees, the payment of employees, the management of employee data and the provision of management information. This need is met in the UK by database and software providers such as SAP, Oracle, Ceridian, NorthgateArinso, Unit4, MidlandHR and many others, offering web and server-based, in-house, partially managed or outsourced solutions.
Over time organisations outgrow the systems they use (or which are used on their behalf) and the transition to a new system becomes essential. Transitions are also compelled by statutory change, software end-of-life, business reorganisation, company buy-outs, technological advance and changes in management focus or direction.
As a result a continuous demand exists in all market sectors for the decommissioning of current HR and Payroll systems and the implementation of new ones.
This document seeks to identify best practice for such implementations, and in doing so I cover the following areas:
- The implementation project life cycle
- The project team
- Project initiation and planning
- Core HR and Payroll system implementation activities
- Best practice project management
- Key features of successful implementations; and
- Similar types of implementation
Initially I focus on in-house implementations, where a project manager and project team work in the host organisation to implement the new system, and the system supplier provides system expertise in the form of consultancy. I will discuss the implementation as if it is one of a combined HR and Payroll system. These considerations will also apply to the implementation of HR and Payroll modules within an ERP solution.
The Implementation Project Life Cycle
In PRINCE2 and PMBOK the definition of a project life cycle is very similar:
- Initiate the project
- Undertake a detailed fact finding and planning exercise
- Execute the stages or phases of the project
- Formally close each stage or phase (signing off against predefined success criteria and taking forward lessons learned)
- Project closure
Both methodologies give a detailed breakdown of how each of these life cycle elements must be executed and controlled to minimise the risks of schedule slippage, cost overspend and unsatisfactory deliverables. The project management activities that bracket the delivery phases of the project – objectives definition, scoping, requirements gathering, planning, learning lessons, performance measurement and project administration – are all about ensuring that organisations get right the fundamental, deliverable-based core of the project.
Given the range of deliverables required from HR and Payroll implementations, it is crucial that a structured approach along the above lines is adopted.
The Project Team
A project board or committee should include executive-level representation, senior HR and Payroll management, an IT manager or director, and a nominated project sponsor. It may also include a senior supplier representative, an employee representative and representatives from affected departments such as Audit, Finance, Training and Recruitment. The latter group may not need to attend all Project Board meetings (or all parts of each meeting).
The project team should include:
- The project manager
- A senior HR officer or manager, empowered to make system set-up and HR process decisions on behalf of the organisation (avoiding ‘decision making by committee’)
- A senior Payroll officer or manager, empowered to make system set-up and Payroll process decisions on behalf of the organisation
- Experts in the process areas affected by the implementation
- Hands-on team members to undertake non-strategic work
- A representative from IT; and
- A supplier- or third party-provided consultant with prior knowledge of the system and its implementation.
Depending on the size of the project, the team may also at some point include:
- Business process re-engineering expertise
- Experts in documenting the use of the system
- Additional external consultancy
- Dedicated resource for project communications
- Dedicated Business Intelligence resource; and
- Super-users participating in pilot and parallel running.
Key recommendations in regard to the project team are:
- That the core team members are dedicated full time to the project
- That supplementary resources are assigned to the project on the basis of agreed time allocations
- That the team includes representation from all areas within which the system will be implemented
- That, prior to or at the commencement of the project, the project team are trained in how to work together as a team on this kind of project
- That at least some of the project team members are able to continue working with the system after project completion, perhaps in a system support capacity, thus benefitting the organisation with the expertise gained during the project
- That a project area or project HQ is provided for the duration of the project, where the project team will be based.
Initiation And Planning
As a minimum, project initiation must include the creation and signing-off at an executive level of a Project Initiation Document, a Project Charter or a Project Brief, on the lines defined within PRINCE2 and PMBOK. The project initiation should also include detailed stakeholder analysis and the allocation of resource for the initiation and planning stages of the project.
As a minimum the project planning stage should generate strategies for controlling the cost, the timing, the quality of outputs and the risks of the project, and provide detailed plans for project execution, communications and control.
Phasing, both in functional terms (e.g. initial roll-out of core HR plus Payroll, then Training or Recruitment, then Employee Self Service) and in terms of business area or geographical location, is generally recommended for HR and Payroll implementation projects. It is also advisable within large implementations to undertake initial pilot runs, over and above the parallel running, even within a functional or business area.
Core Implementation Activities
HR and Payroll system implementations will typically include the following activities:
- System, hardware and comms delivery and configuration – preferably with multiple environments allowing for training, testing, trial system configuration and setup, and parallel and live running
- DBA setup, with immediately active backup protocols and the ability to restore or copy environments promptly when required
- Project team training
- System setup: parameters, tables, hierarchies, rates, calculation formulae and rules, menus, security etc
- Development and upload of bespoke software, interfaces and reports
- Data cleansing (assuming data will be migrated from the legacy system)
- Data migration tests
- Iterative testing of system setup, bespoke software, interfaces, reports and system functionality
- Production of user guides and other documentation
- Training for the users who will be involved in acceptance testing, pilot and parallel running
- User Acceptance Testing of end-to-end processes, inclusive of interface testing
- Data migration for parallel and pilot running
- Parallel and pilot running
- Remaining user and manager training
- Phased rollout (by functional and/or business area, with relevant data migrations if applicable)
- Phase closures and the carrying forward of lessons learned
- Project completion
All these activities must be actioned in accordance with the project plan and closely monitored for timeliness, cost, quality and risk. Preventative and corrective actions must be taken when necessary to ensure the project remains on time, on budget and ‘on spec’. Guidance for achieving this will be offered by the adopted project management methodology.
I recommend, where both HR and Payroll systems or modules are being implemented within an organisation, that they are implemented at the same time, in order to gain efficiencies in terms of project workload and cost. Where this is not possible, I recommend that the implementation of the HR system or module takes place first. The reason for this is that the system configuration and setup that is common to the two areas is more complex on the HR side (e.g. organisational hierarchy, employee records, absence recording) and it is easier to utilise a subset of a pre-existing configuration than to build a complex configuration on the back of a simpler one.
Best Practice Project Management
Where a proven methodology is already in place within an organisation then I recommend that this methodology is used for the HR and Payroll system implementation. It is important that the project manager and team use the same ‘language’ as their colleagues, and that the documents, reports and strategy for the project are recognisable and broadly understood.
Where an organisation is not using an in-house methodology I recommend either PMBOK or PRINCE2, with partial adoption of some of the efficiency strategies of Agile.
In addition to a project management methodology, the HR or Payroll implementation will require a protocol for configuration management. This ensures traceability from the initial project objectives through to the final outcomes of the project. Configuration management also ensures that version and change control are rigorously documented throughout the project.
As with the project management methodology, if there is a protocol for configuration management already in place this should be used; otherwise a proven example should be adopted from an external source.
The considerations detailed above clearly apply to best practice project management in general. Activities which the project manager of an HR and Payroll system implementation may wish to additionally emphasise are:
- Stakeholder management
- Project communications (including communicating with employees); and
- Supplier management.
For further guidance in regard to project management best practice, please see ‘A Perfect Plan’, also in this blog.
Other Features Of Successful HR And Payroll System Implementations
The following factors are recognised as contributing to successful HR and Payroll system implementations:
- Clearly defined objectives and success criteria
- The participation and publicised interest in the project of management at an executive level
- Buy-in at all stakeholders levels
- Allocation of responsibility for the implementation to all the departments within which the system is being implemented
- The purchase of sufficient expert consultancy, with an emphasis on skills transfer from consultants to employed staff during the implementation period
- The purchase of sufficient system training
- Sufficient payroll parallel running, for example two monthly payrolls paralleled over six weeks, with weekly and other payrolls being paralleled within this period
- Interfacing the new HR and Payroll system with other systems within the organisation wherever possible to minimise data entry. The new system should become the core repository of employee data. This requirement is potentially met within ERP implementations, offering HR and Payroll modules as part of a larger functional suite
- Developing in-house Business Intelligence expertise for use with the new system, which remains available to the HR and Payroll teams after the implementation project is completed
- Educating project stakeholders to expect a reduction in productivity immediately after system implementation, whilst the new processes bed-in and familiarity with the system is acquired
- Engaging with other organisations which use the new system, and with a system User Group if one exists.
It is clear from the above that best practice for Payroll and HR system implementations will also apply to the implementation of other, similar systems, such as T&A, Pension, Finance, Recruitment, Training, Document Management and ERP packages. There will of course be changes of emphasis and the business expertise required by the project team will differ with each system or module.
Many of the practices detailed here will also apply to the implementation of partially managed or fully outsourced solutions, with the main difference being that the supplier will have to undertake much of the project work rather than the customer who is receiving the service. With suppliers who regularly undertake outsourced implementations the project will be more of a repeatable ‘process’ and therefore should entail less risk. However, new risk is engendered for the supplier through the supplier’s lack of direct experience of the client organisation’s internal working and the resultant increased need for fact-finding. The outsourced customer also inherits the risk of not being in direct control of the implementation and of not retaining or gaining system and procedural expertise should the outsourcing fail.
In conclusion, best practice within HR and Payroll system implementations mandates a closely planned and managed project with considerable commitment from the involved organisation. A successful project will demonstrate many of the features detailed above and offer the ultimate rewards of greater productivity, greater access to system processes and data, and the improved engagement of staff and employees with the objectives of the organisation.
© Luke Andreski 2012. All rights reserved