HR or Payroll: In Global HCM Transformation, What's the Best Order of Implementation?
Additional content contributed by Mary Christie, Business Transformation Practice, and by ADP Lyric and GlobalView implementation leaders.
Undertaking an HR and payroll digital transformation is no small task, with many decisions and considerations going into the design and rollout. The endeavor's complexity only increases exponentially with a global transformation compared to a single-country scenario. A common question that clients ask ADP's Business Transformation Practice (BTP) in global strategy discussions is, what should we implement first? The new HR system or the new payroll system, or should we have a concurrent implementation?
Often, the BTP team encounters client scenarios where a global HR transformation is the catalyst for considering a global payroll transformation. Overall, the order of implementation is an interesting question: On the one hand, considering the flow of data from HR to payroll, companies may choose to have the HR system implemented and stable to have the basic (correct and complete) employee data needed for payroll. However, global companies often encounter more accurate data in their local payroll systems depending on the presence of a regional or global HR system of record (SOR) and the quality of data integrations across their landscape. This article discusses the order of implementation considerations when it comes to global HR and payroll digital transformations.
Order of implementation
The highest priority is that the transformation begins with a robust global solution design step that includes both HR and payroll stakeholders. The requirements for HR and payroll (and other needed modules within the client's scope) are considered from the beginning. The intent of this global program preparation stage is to:
- Delve into the global requirements for human capital management (HCM), payroll, reporting, integrations and upstream/downstream systems (local requirements are then typically discussed at the initiation of country-specific kick-offs),
- Understand the employee population needs (e.g., salaried, hourly, executive),
- Conduct stakeholder analysis,
- Identify the enterprise structure needs,
- Gather requirements in terms of future growth and M&As,
- Account for any legacy systems involved,
- Understand compliance considerations,
- Plan the initial country rollout and strategy.
Once the global design is complete, implementation teams can be flexible within the rollout schedule to accommodate client needs. Generally speaking, while there are certainly exception scenarios, most companies are encouraged to stand up their new HR SOR first (and have it stable for several months), followed by the new payroll system in a country or group of countries. This approach allows the payroll processes to incorporate and test with the live and stable HR data and avoid re-work on the back end. The time lapse between HR go-live and payroll go-live should be minimized to reduce "bridge" processes such as temporary integrations or duplicate entry.
In the instance that the business requirements of the client dictate a different order, there are options to consider:
1. The new payroll system is implemented first, followed by the new HR system
In this scenario, the new payroll system and processes are mapped and tested with the existing HR system. Due to the re-work involved, this would generally add additional time and cost to the project. For example, temporary interfaces typically need to be developed and tested to integrate the new payroll system with the existing HR system. Then, when the new HR system deployment begins, new integrations will be developed and tested. The work effort involved in implementing and supporting the temporary interfaces could be a determining factor in this approach. The timing for stabilization of the HR and payroll system deployments would also be a determining factor.
2. The two new systems are implemented concurrently
When HR and payroll are implemented concurrently, the HR system should be deployed in production before payroll. HR systems generally provide the ongoing employee data changes required to process payroll. This scenario typically involves extending the testing period and increasing overall project risk as both systems are moving targets. This scenario also involves additional effort (e.g., interim and alternate steps) and complexity, for example for parallel testing, scenario-based testing using dummy data checking data quality, additional data activities at cutover, etc. If the HR system is designed with the payroll system in mind and vice versa, then the "scope creep" risks can be mitigated.
The size of the countries under consideration also makes a difference. Implementation for smaller headcount countries is often less complex and more manageable (in the instance that the new payroll system must go live first). Larger head count countries, on the other hand, tend to be more complicated projects.
When evaluating the order of implementation by geography (e.g., regions and individual countries), various "burning platform" or other disruption events (for example, a divestiture, failing provider, etc.) that require a particular country or population to be sequenced first may influence these decisions. Change management is also a critical consideration: It is important to demonstrate strong internal support with success in the first few country implementations in order to create momentum as the global project continues to be implemented.
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