Global Payroll with Martin Stockton — Webcast Q&A Transcript

Edward Brooks: Hi this is Edward. First of all, thanks very much for doing this Martin. I can’t remember how we got talking but you’re probably one of the first people I met, almost two years ago, who really saw how RPA could work with payroll, HR facilities and functions.

Do you want to give background on yourself and how you got into this space, before we push ahead?

Martin Stockton: Yeah, sure, I have been involved in the HR payroll technology world for more years than I can care to remember. About two and a half years ago I got a contract to work with a robotics company to develop their HCM solution.

I defined the factory process areas, worked through the development of their specifications, how it would work, the sales training material, etc.

And then switched my mind into thinking ‘I’m not going to say like a robot, but thinking in terms of what robotics actually does.’ Then my next piece of work after that was to work for a very large multinational company, which is proving to be the basis of what I am going to talk about this afternoon.

Edward Brooks: Excellent, I think one of the things we were talking over the last 18 months was turning your experience into training content. HR is such a big beast in itself, you have to start breaking it down and obviously payroll, Accounts and Finance function or Accounts and HR function as a standalone, there’s enough to talk about just on that alone.

What’s your view generally on how to break HR payroll into pieces and actually start digesting it?

Martin Stockton: Well I built it around recruitment, onboarding, off-boarding, training and payroll, but the first four were purely HCM processes, where I always felt it was quite difficult to really do a cost justification and real business case around how to approach that, which I think is being born out by a lot of what’s going on in the market.

Whereas with payroll on a global context — Global Payroll is primarily my top function area, it becomes much more tangible rather than intangible as a result. A business case becomes much, much easier to manage and then the problem is fitting a technology option into delivering the concept, “Robotics of Global Payroll”.

What I did, in this case that I want to talk about, wasn’t to look for a robotics solution but to look for a global payroll solution that had high robotics content inside it. That’s how I would recommend addressing anything similar to this, in the short term.

Edward Brooks: Interesting, because my experience of global payroll, is that there isn’t really such a thing as global payroll. It is a series that is related together with local payrolls. I don’t know if that has moved on in the last few years but that was my experience.

Martin Stockton: It’s how you manage it and how you emphasize compliance to the people who are responsible for the quality of the content that goes in there. One of the things I’m going to talk about was a situation that my client had.

In fact one of my other clients had the same problem where they had their third party payroll providers actually making payments without authorization on their behalf, which breaks every compliance rule in the book, and that’s where immediately a robotics approach kills that solution stone dead.

If you have a recruitment process and people don’t necessarily follow the process, but people still get paid and that’s why for me, I think robotics and Global Payroll is something that is a hard and fast, tangible, results-driven process within the business.

You’re always dependent on somebody else doing the work for you in many, many ways.

Edward Brooks: I was going to ask you about your clients, did they have a problem that you were trying to solve or did you have to identify the problem in the first place?

Martin Stockton: The problem was that you would have too many people working on a payroll process that in theory, was serving all the offices around the world. In this particular case I’m talking about, the desks were next to each other but people were not talking to one another.

There’d be people putting in information into the HR solution, going to the printer, printing it off, then passing it on to the payroll person who sat next door, who would then make an error in the data input.

You’ve got breaches in compliance because of the data, you’ve got breaches in the process and you’ve got duplication of effort. When we looked at 68 countries worldwide, it was pretty easy to determine how many man-hours were spent on payroll, where it was all falling over and where the mistakes were coming through. That was how we identified the key problem area.

Edward Brooks: So you had a problem? It was quantified as well because you were able to put a dollar amount against it.

Martin Stockton: Yeah, there was too much money being spent on payroll and too many man-hours and too many heads were actually touching payroll. Although you would say there are X amount of full-time people touching payroll, that was not the issue, it was how many people across the world were spending 10% of their time on payroll. They didn’t need to get involved in it because of the processes.

We looked at it in terms of finding a new solution that would work robotically to be able to drive a lot of that compliance, save the data input and manage a lot of those process controls without having the manual intervention in the process.

Edward Brooks: Were there compliance costs or fines, or was there risk attached to that?

Martin Stockton: The company will rarely tell you where they have problems. Sometimes they don’t want to air their dirty linen but my particular client, I said to them “Well what happens if you don’t pay people enough on your payroll?”

The head of payroll said “Well the employees shout and they tell us” and I said “Well what happens if you pay them too much?” and she said “Well nobody ever tells us, so we have no way of checking whether we over paid people”.

This meant that there was no process in place that was able to correlate the payroll inputs to the payroll outputs, to determine whether the right payments were being made. They looked at it and said, “Wow, this is a huge, big, black hole. Let’s not bother about wasting time on how much it is costing us, we know it exists, let’s just fix it through robotics”.

Edward Brooks: Right, this was kind of a business case that you put your finger on and there’s the unknown beyond that

Martin Stockton: Yeah, it’s like the iceberg under the sea. You can see the peak, it sticks out and you know it’s a problem. If you go too near it, you crash and burn. There were people losing their jobs over the inefficiencies in that payroll.

The accuracy rate was found, not just the cost of running the payroll was high, and it was the unknown cost of the payroll errors that they weren’t able to quantify.

Edward Brooks: Yeah and I think that the conversation we’re having here about payroll, I like it as a topic because payroll is never the sexiest of topics sometimes, but in terms of people and the actual number of issues multiplied across multiple countries, multiple systems, they get very complicated. It’s a miracle if it works so well, so effectively.

Martin Stockton: It is, I’ll just take a little point on that. Net payroll in-country is not sexy but global payroll is a fascinating subject because very, very few people do it completely well. I remember talking to a company a few years ago and I said “How many payrolls do you have worldwide?”

And I checked it and they had a hundred more payrolls that they actually knew they had in operation worldwide. So it may not be sexy but it has a high visibility in the company. The biggest problem is, any breach in statutory rules and compliance, you’ve got another Enron coming up.

That’s why it has such a high profile these days.

Edward Brooks: Yeah, but I think what we’re talking about is more the answers and the kind of options you looked at to solve these issues. I think these are options that probably just were not there and were not accessible several years ago

Martin Stockton: Oh true, a lot of the payroll suppliers, they don’t know what to do with it because if they address it, and it makes their customers more efficient, it takes away the need to use their kind of services in the first place.

So when we quote, robotics is quite a high element in the selection process. I went round each of them and examined their approach. I have spent five months working on it and am deeply involved in it.

I could see where their approach was working, where it wasn’t and the first company we looked at and we discounted really didn’t know — they were talking about it but they had no strategy.

The second company, their approach to robotics and RPA was about making internal processes more effective but nothing that would have obviously benefited the customer. Whereas the supplier that we ultimately shortlisted and went to implement with, had a very, very solid attitude or philosophy around RPA that they would actually sit down with the customers and say “Hey, look this is what we do, how can we work together to make your operation more successful?”

Even now two and a half years down the line, that is a very, very unique approach in the HCM space and that company has risen quite effectively in the marketplace. It’s very, very important that providers mustn’t be afraid of robotics.

They should use it in conjunction with their clients to make their clients work more effectively, not be afraid that it would negate the need for them in the first place and that was worrying to the big guys.

Edward Brooks: Do you see that still, as an issue in the marketplace?

Martin Stockton: Oh yeah, definitely, it’s still an issue, I’ve been through several selection processes for HR and payroll technology and I’ve only ever seen one supplier actually address this openly. I’ve seen people lie about it, I’ve seen suppliers say “Oh no, we don’t believe in it, it’s all rubbish, we don’t need any form of robotics”

So different people approach it in different ways, it’s like they’re afraid if they get hold of it they’re going to burn their hands.

They shouldn’t worry about that, I think anything that makes their customers streamline their businesses and work more effectively makes them a better payroll provider, but it’s not always seen as easy as that.

Edward Brooks: Yeah, they will always appreciate to see they’re better partners, rather than supplier but you want someone to be actually thinking about you as the customer first and foremost rather than just a plug-in service that happens to happen.

Martin Stockton: Yeah I agree, it’s functional and it can be so important to the business.

Edward Brooks: Yeah, we’ve touched on this already in terms of why you picked up a solution, but is there anything that you want to go through in more detail?

Martin Stockton: The customer learned where the duplication in the payroll process was, that’s right. It wasn’t until they started pulling their own processes apart that they knew the number of man hours, as I said, that were being spent on payroll.

I asked the question “How many payroll people do you have worldwide?” and they said “About 20-something”. I said, “No, no you must have more than that, because if you had that many then you wouldn’t have a problem, you would have streamlined your business down”. What they didn’t count were the people that were touching payroll 10%, 20% of their working day or week.

So what we had to do was look at the whole payroll process, and it wasn’t a straightforward process, it never can be worldwide. We ended up regionalizing the process to make sure that the process was actually going to be not mandatory, but what worked best in each of those regions.

So you can streamline the process, 80%, 20% of that process had to be specific to the region or the country because of the exceptions that were applicable in that region. In the end we had a good business case, we had a good ROI for the expenditure and fortunately they did the ROI right at the very end to justify the selection.

They should have done that, upfront in the business case, but I wasn’t involved in the business case unfortunately. I started late in the cycle, but the reality is… again it was the part of the process that they couldn’t see that was causing the problem and not being able to manage the cost.

When we actually pulled it apart, we were able to look at each of the process steps, which you need to do, to look at any RPF or HCM and identify where we could eliminate unnecessary process steps, which meant there were hours spent doing work that shouldn’t or didn’t need to be done.

Edward Brooks: We didn’t really touch this before, what was the trigger for them looking at this in the first place? What was the one set of things that when they started broke the camels back for them to do this?

There are organizations that know there are issues but it’s never quite a priority to actually deal with and take action. So what was the trigger?

Martin Stockton: They was breach in some countries, of the compliance rules, and the audits had found out that the ICPs, the local payroll providers had actually made payroll payments without authorization. So when it was brought in front of the Audit Committee, they went berserk.

They said “We’ve got to have one payroll product that should in theory have some element of Robotization in there, that will eliminate unnecessary hours, but also to make sure that nobody’s going to ever get to the end of the payroll cycle and say ‘this hasn’t been approved’.”

Using robotics to be able to manage the approvals in every stage of the process, managed to shorten by three or four days the amount of time available in the payroll cycle, as well as make sure that people that weren’t supposed to touch the payroll, didn’t have to intervene and make payments on the company’s behalf and therefore breaking all of the payroll cycle and breaching the compliance.

Edward Brooks: This was a situation right at the top level?

Martin Stockton: Yeah, because nobody wants another Enron and then when HCM and payroll touches robotics, quite often the instigation is ‘we don’t want another Enron’. I’ve heard that so many times, where people say “We’ve got to be able to manage the payments and make sure the payments are not being made unnecessarily by the wrong people with the wrong sums, at the wrong times.”

Edward Brooks: Right, so kind of easy to apply it to other parts of the business as well, so that it can get to that kind of level.

Martin Stockton: Yeah, definitely.

Edward Brooks: And in your journey, what were your key learnings?

Martin Stockton: The first point is really the key here. Instead of it to be a robotic solution for HCM, that would actually solve the problem, we looked for a payroll solution. We couldn’t find one and even now, with the work that I am doing with my other clients on HCM robotics, I can’t find the solution that’s actually going to work.

What we did was, we looked for a payroll solution that had a robotics element rather than looking for a robotics solution that had a payroll element, if you see where I’m coming from. We avoided the search of the Silver Bullet that doesn’t exist and managed to find the solution that had high elements of robotics in it.

Edward Brooks: That was the full package with robotics?

Martin Stockton: Yes, that’s right.

Edward Brooks: Just in general, a lot of pressure is put on RPA to solve all problems, but I think it’s good to be able to package it with other things as well to actually get full value rather than just a simulator that can solve all your problems.

Martin Stockton: I think you’re absolutely right, we could have spent the next five years looking for a solution that would have managed the robotics and probably never found one that would actually do everything we wanted, but we actually managed to find a payroll solution that was able to control the compliance issues the way a functional team worked.

Inside their product, they actually called it a robotics approach; it really was robotics in that sense.

The next thing we learnt, was delivering against the business case, sometimes can be really, really hard when you don’t know what your current costs actually are.

You say, “How much did it cost to do your payroll?” and people say “Well, we pay the payroll company X amount and they add X amount” but that’s only the tip of the iceberg. That doesn’t include what the hidden cost of the payroll is and the reality is that there’s so much going on in the payroll solution, of people touching things manually that could be handled robotically.

I broke that down and I found all sorts of things not happening. Same when I did the niche project with a major electronics giant, it was exactly the same. We used robotics to drive the compliance end, to make sure that as we went through this, we use the robots to work inside the box plus outside the box and we managed to eradicate 80% of the manual tasks in the payroll process by using the robotic approach of the supplier.

I keep coming back to this, but it’s very important that robots operate inside the box, humans operate outside the box and I think that’s really, really important.

The last point I would say is that there was a lot of talk of automation and robotisation. The reality is there’s a huge difference in HR terms between those two. You can automate the process, but that doesn’t mean stating that you’re robotizing it.

I feel that this organization thought automation and robotization were the two same things until we showed them all the differences and they fully accepted how the differences manifested themselves.

Edward Brooks: How did you explain that? The two differences, did you do it separately?

Martin Stockton: Because automation is just repeating the stages in a process with a computer. It’s not actively intervening in the process to make the process work more effectively. It’s not putting the right audit trigger points or authorization points in it.

It’s just reflecting the keystrokes, as opposed to actually having to do it with robotics. That’s why we call it key scraping, I’m sure you are familiar with the terms.

Edward Brooks: Yes. We are going to move to the questions in a minute or two, but in terms of the impact on the people who were doing this as 10% or 20% of their job, what happened to that 10 or 20%, did it drop down to 5% or was everything eradicated?

Martin Stockton: A lot of the surplus payroll resources were removed from the business including the Head of Payroll in the UK because her work was consolidated and put into a service center in India.

She was managing the UK and then there were other people managing different European countries and they harmonized all those roles into one single function service center and used the robotics approach from the payroll product to be able to manage a lot of what they did.

It caused… I’m not going to use the word ‘havoc’, but it caused problems in the organization because everybody assumes that an implementation of robotics is actually going to remove jobs, and then people say, “All the key jobs you redeploy”. In reality, I’ve rarely seen that happen. More often it is not an issue; it was a case of removing the cost to the business by taking this out, while being mindful of cash flow as well as the simple tasks.

Edward Brooks: What about the need for the people that was reduced because of the automation and robotisation?

Martin Stockton: Yeah, the consolidation is one global pressing issue. The robotics elements of that was the piece that actually was used to reduce the head count once the process has been harmonized.

I think that was a very, very key thing. They could have consolidated the processes and put them into a service center in India but that wouldn’t have enabled a lot, the reality would have just put people out of work.

It wouldn’t have really changed the way — it would have just shifted resources into a service center. I suppose having lived around the world; robotics was the major difference there.

Edward Brooks: That’s fascinating, including the 10% to 5% that you could without robotics. You could have done that five years ago or ten years ago but actually making a real change to the processes and the compliance and the effectiveness and efficiency, that is something.

Martin Stockton: Yeah, it got out of the way of blaming people for doing things wrongly. They were just learning the process as some people have just historically followed the process and never mind looking at whether the process was wrong, they just followed the process.

The process was broken and the reality was it was the process and the people that were doing the work because robotics eradicates the errors because it built in the parameters. Like I said this company was not able to maintain or manage people that were over paid in the business and that was a tremendous mistake.

Edward Brooks: I am amazed by solutions that don’t just say automate or robotize everything, they actually say “Let’s centralize this, let’s realign our processes and we will apply technology on top of that”.

Martin Stockton: Yeah

Edward Brooks: Obviously the outcomes are very impressive and obviously I think from that whole unknown benefit you have, you don’t know whether you are overpaying or what risks you were carrying and so I think even beyond — the question was did your employers know and could they quantify the benefit in any way beyond the business case?

Martin Stockton: Yeah, I mean they’d come up with some sort of cost of running payroll per employee and they actually managed to reduce that cost by about 35% worldwide which for them was a significant achievement that made the board much, much happier.

It was cost effective, it was compliant, but it was also quantifiable. They could look at every penny spent in the whole payroll process and know where that money was spent. One other thing that I must say is that, the payroll supplier they chose, one of the reasons they chose them was that they were going to be a very large customer setting, not a small customer.

In some ways they can actually twist the robotics approach more to their way of thinking. If they go on and work with the other bigger guys then they would have been told, “Well this is where we automate and you have no choice to deviate from that process”.

We really like having a company that could work with them and allow them to manufacture processes on both sides… then everybody’s operation is more effective.

Edward Brooks: One of the questions I had was — someone just actually asked a similar one, is that once the organization had seen the work that could be done in this space with the payroll, what was next?

Were they excited to start looking at other areas?

Martin Stockton: They were talking about finance but finance transformation was a separate project. As it was, there was no robotics element in the finance process; it was purely in the payroll. It wasn’t even in HR, it was purely payroll.

Edward Brooks: It’s funny, I find, especially with bigger organizations they are pretty big silos in terms of what is done in one section. It’s a great story but it could have happened to a completely different company because it doesn’t feel as relevant to them. You’ve got payroll, finance, customer service; each of them is their own silo with their own interests.

Martin Stockton: That’s true.

Edward Brooks: Where would you push them next in terms of HR processes?

Martin Stockton: I wasn’t involved in that, they were implementing a Workday solution; it had nothing to do with what I was doing. I think they had a hell of a job trying to get Workday implemented anyways.

I mean you can robotize it once you’ve implemented it, I think, but it will take a robotics approach to the core HR processes. It was just five steps too far at that stage in the process.

Edward Brooks: If you’re doing an ERP implementation, it’s not the thing to look at robotics.

Martin Stockton: You are absolutely right. You would approach in a different way, with HCM you’ve got to make sure you’ve got your processes right and implemented and then look at how you can refine them using robotics.

You can’t start your process in robotics and then work backwards. With the Workday implementation, robotics was not in scope.

Edward Brooks: It’s funny, I always wondered further the likes of SAP or Oracle — they’re actually finding that organizations are not upgrading or moving to new ERP systems because people are putting tactical solutions on top of it using like RPA.

I’d love to know the answer a little. Give us the answer in the shorter term but I’d love to know the answer if RPA is having that kind of effect.

Martin Stockton: Yeah, but just bear in mind if you’re going to robotize your SAP or whatever implementation, you don’t need to reinstall or re-implement SAP, everything you want is already in the system.

Edward Brooks: Exactly.

Martin Stockton: You’re not just shaking the tree, you are shaking the tree and finding the apples that fall on the ones you don’t need, but you’re not planting a new tree. I think a lot of companies think that “Oh we’re going to do a robotics transformation process which means we are going to have to implement a new system”.

No it doesn’t. If you’ve got your SAP process, the only thing it does is it tends to negate best business practice, because now you’ve got a different way of doing it that bypasses best business practice contained within the product.

I think a lot of organizations are still not thinking that way yet.

Edward Brooks: Just before we finish off, there’s a question around retaining local country knowledge and local country skills, how did you address that?

Martin Stockton: That is a difficult one to address. Well if you work in a traditional service center environment you’ve got tier 0, which is your employee self service, tier 1 is your first level support, tier 2 are your specialists.

If you think of it as a triangle, the most manual processes are in level 0 and 1. The two organizations I work with took out a lot of the tier 0 and tier 1 and automated that level of the process through robotics and kept the specialists at tier 2 and above.

That worked more effectively. If you bear in mind that by using a robotics approach in HCM and payroll, you actually get rid of 80% of the simple repetitive tasks, then all you get rid of is administrators, you’re not getting rid of process specialists or country specialists in payroll.

They would still consolidate into a more effective tier 2 in the traditional service center approach.

Edward Brooks: Very interesting, so this is actual workers moving, not the knowledge?

Martin Stockton: Yeah, yeah definitely you can put a lot of the knowledge work into expert systems and AI and whatever you want to call it. In the old days, when you contact service centers for details of a policy, it might take 24 hours.

Using chat bots and whatever, you can get that information instantly now, if it’s managed properly. You know even tier 2 is not immune from being hit by robotics, because somebody somewhere has to make decisions that bypass the core processes, again it’s always the 80/20 rule.

Edward Brooks: Interesting, you touched on chat bots, I was wondering if your clients look at those as options as well?

Martin Stockton: It was just pie in the sky to them, “Hey let’s get everything else fixed before we get into chat bots” but I’m not seeing a huge element of companies doing that for HR yet, which is a shame because HR is probably the largest part of an organization that has interaction with its customer base.

In finance you don’t have any interaction with the employee base, if you are HR you do. I’m a big fan of chat bots for HR, I really, really am. I’m looking forward to seeing more of them but the technology that manages that, that interrelates with service centers is still very, very weak.

Edward Brooks: Interesting, that’s a whole different conversation. You really should probably think of those as well, going forward. Now Martin first of all, I really, really appreciate you taking the time to prepare for this.

To me there’s two sides of the HRM payroll story, one is HR in particular; doing what they can internally, so they can optimize their processes to leverage technology, but it’s also to start helping organizations and people change their journey… this needs to happen over the next five or ten years.

I find the HR space super exciting to be in.

Martin Stockton: Absolutely.

Edward Brooks: Thanks; I’m going to ramble more on that in the future because I think I want to come back to it because of all the technology stuff. There’s lots of business change that needs to be done. Again Martin, thank you very, very much.

Martin Stockton: You are welcome.

Edward Brooks: Thank you again.

Martin Stockton: Cheers! Bye.