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 Distribution 3.4 million customers 29,000 square miles 3 states: in New York, Massachusetts, Rhode Island Electricity Transmission 8,600 miles 3 states: Upstate New York, Massachusetts, Rhode Island
3 KEY LEARNING POINTS 3 1 2 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 enhancement projects across different process areas
WHAT WE WILL COVER Project Background Journey to Excellence Health Assessment Remediation Stabilization Enhancement Strategic Leading Practice Lessons-Learned Closing
PROJECT BACKGROUND 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: Core HR Module (PA/OM) Benefits (Employer sponsored programs only) Time Management Payroll ESS and MSS Process and Forms Integration with 3 rd party talent management systems (Taleo, People s HUB, etc.)
Assessment JOURNEY TO EXCELLENCE 11/2012 4/2013 10/2013 10/2014 11/2015 Go-Live Engage Deloitte to conduct health review Strategic Enhancement Stabilization Phase 4 Remediation Phase 3 Phase 2 Phase 1
HR/PAYROLL HEALTH ASSESSMENT
ASSESSMENT APPROACH Assess current state from Process/Technology/People Leverage industry leading practices 1 2 Develop improvement roadmap with short/medium/long term plans Process Identify improvement opportunities 5 Technology People 3 Validate, categorize, and prioritize improvement opportunities 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 of multiple bargaining unit changes Long-term
PHASE 1: PAYROLL OPERATION REMEDIATION
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: Master data/payroll data conversion errors Inaccurate or non-available business process documentation Incorrect system configuration Poorly designed processes/sla around application maintenance and vendor integration Inadequate organization design to support transaction data center processing and inefficient payroll process and run books
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 and system improvement
ACCOMPLISHMENTS Better trained payroll operation staff Time to process weekly payroll was reduced to 12-15 hours on average Standardized Business Process Procedures (BPPs) More consistent payroll process time for each week Better structured payroll organization with the right support Created a new governance model including SLA metrics which reinforce rigorous timelines Well established system changes release gate control process for defect fixes moving to production system Increased payroll accuracy after resolving major system configuration issues
PHASE 2: HR/PAYROLL STABLIZATION
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 autopopulate 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 provide more transparency to employees
STABLIZATION PROJECT EXAMPLE: PAYROLL AND TREASURY INTEGRATION REDESIGN
PAYROLL AND TREASURY INTEGRATION Business Objectives 1 Reduce the business risk of potential late payroll payment to employees by reducing weekly postpayroll payment processing time from 10-12 hours to 4-5 hours 2 Streamline regular payroll payment process by removing the unnecessary dependency on Treasury and Accounts Payable 3 Streamline payroll payment void/reversal process by removing the unnecessary dependency on other process areas (e.g., Accounts Payable) 4 Reduce the potential compliance risk caused by manual payroll payment reissue process
PAYROLL AND TREASURY INTEGRATION Unique Challenges There are many company codes under National Grid, but their payroll payments are all paid through one company s cash account Payroll needs to be able to use standard SAP Off-Cycle workbench to reverse/reissue voided/returned payments SAP In-House-Cash (IHC) need to be used to manage cash centrally through the service company, including payroll payments Payroll needs to be able to use standard SAP Off-Cycle process models to automate post payroll processing steps 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 Many Finance sub-processes (Treasury, GL, Inter-Company, and Cash Reconciliation) may be impacted by any integration approach changes
PAYROLL AND TREASURY INTEGRATION A final design walk through was conducted with Payroll process owner and impacted Finance process/subprocess owners to obtain final design approval Key functional area business stakeholders were invited to confirm the integration requirements A team of functional area technical experts, guided by the lead consulting partner, were put together to come out the proposed integration design 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 1 Design Approach System, process and testing impacts were fully documented and fed into subsequent project implementation plan and change management plan Prototyping were done in sandbox to validate potential impact to each functional area
PAYROLL AND TREASURY INTEGRATION As-Is Payroll Payment process Payroll Payroll Calculation Pre-DME 10-12 Hours Finance (Treasury) Payroll Data via EDI IHC process Payment Run (F111) Payment Medium (ACH and Check Files) Cash Recon Bank Clearing & Cash Accounts Postings Manual Cash Reconciliation Electronic Bank Statement External Systems House CITI Bank Check Print ADP Vendor
PAYROLL AND TREASURY INTEGRATION 2-4 Hours Check Print House Bank
PAYROLL AND TREASURY INTEGRATION 1 2 3 Accomplishments Reduced the payment processing time from 10-12 hours to 2-4 hours, significantly reducing the risk of late payroll payments to employees Reduced the cost and dependency on Cash/Treasury nightly support for payroll payment generation Implemented standard SAP Payroll Payment process and its integration with Treasury to generate payroll payments out of Payroll module Implemented the payment reversal and payment replacement feature through standard SAP Off-Cycle Work Bench and enabled the further off-cycle process automation 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 4 5 6
PHASE 3: ENHANCEMENT
IMPROVEMENT OPPORTUNITIES Tax Reporting and Remittance 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 Garnishment Processing Lack of transparency regarding garnishment contributed to employee service center inquiries Poorly designed garnishment processes attributed to challenges integrating with vendors Payroll Processing Step Automation 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 kickedoff manually Payroll processing errors were being manually consolidated for filing purpose Step Progression Only some, but not all applicable unions were automated for the step progression process Process and Forms Low adoption rate for about half of the forms in use Some of the forms had functionality limitation due to existing technology Usability Time Entry process, Time Approval and Travel Expense self-service applications could be more user-friendly Employer Benefits Enrollment The employer benefits enrollment process was manual Inaccurate enrollment data
APPROACH AND STEPS TAKEN (SELECTED) Tax Reporting and Remittance Process 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 Process and Forms Fiori Upgraded to EHP7 and leveraged SAP s latest form technology to replace ADOBE forms Conducted workshop to realign business requirements on Fiori applications 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 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 & Expense and shopping cart approvals
GOING STRATEGIC
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 Workforce Workforce Analytics Analytics And Planning Workforce Pla ng Talent Management Mobility and Employee Engagement Workforce Process Enablement (Core HR/Payroll process)
LEADING PRACTICE
PROGRAM MANAGEMENT A program management office, was established to help initiate and manage stabilization and enhancement projects across multiple process areas. 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
TEAMING APPROACH Client Team Advisory Partner/ System Integrator Application Management Support Partner Roles and Responsibilities 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 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 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 Defect resolution during testing phases and post production support
CHANGE MANAGEMENT APPROACH Change Management was important to our success. We applied Deloitte s Change management approach throughout our journey.
LESSONS-LEARNED Engage business early during business improvement projects to uncover any potential requirement understanding gaps early on 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 Align business projects with strategic business goals and set up metrics to measure the business improvement results 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
CLOSING CONTACT INFORMATION: Tom LaVeck, National Grid, thomas.laveck@nationalgrid.com Kris Khanna, Deloitte Consulting LLP, kkhanna@deloitte.com Yu Chen, Deloitte Consulting LLP, yuchen3@deloitte.com Here with you. Here for you.
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