Benchmarking
01 July 2019
This article was featured in the July/August 2019 issue of the magazine.
Don Macarthur, CIPP consultant, encourages your participation
According to the Rolling Stones, “summer’s here and the time is right for fighting in the street, boy”. But not for payroll professionals of course: summer for them is the time to complete the CIPP benchmarking survey.
Hopefully by the time this issue of Professional in Payroll, Pensions and Reward comes out many readers will have completed the survey already or will have started to collate the answers from different teams in the organisation. But for those who haven’t yet started there’s still time – just! Access the survey at cipp.org.uk/benchmarking today, before it’s too late.
...benchmarking is the process of comparing your results to peers in your industry
What’s the point?
The origins of the word ‘benchmarking’ are in mediaeval masonry or surveying or marksmanship, depending which dictionary or encyclopaedia you read. In each of these arenas the purpose of a benchmark was to help you to produce precisely the same result time after time. The mason wanted to carve every stone block identically, the surveyor wanted to keep placing his levelling rod in exactly the same place, and likewise the marksman wanted to hit the target every time.
It is quite an easy step from there to understand the modern application of the word to businesses that want to be sure that they’re performing as well as, or better than, the competition. To quote one definition, “benchmarking is the process of comparing your results to peers in your industry”. Having some benchmarks for your peers, or your industry, enables you to get a picture of how well you’re matching up, and what sort of targets you can set yourself to do even better. I saw this some years ago when working with North Sea oil companies that were always keen to compare returns on investment or other types of cost-benefit ratio.
What’s the problem for payroll?
There can be no doubt that benchmarking could be a very useful tool for payroll managers, but in practice this is much tougher to achieve than in other industries and professions. The oil companies I worked with may have differed a bit in size, but in other respects they were ‘peers’: their operations were pretty similar, and their benchmarking results were therefore pretty comparable. But payroll teams do not all run similar operations: they are not all ‘peers’. They serve every type of business or industry, their employee numbers can range in size from single figures to almost half a million, they outsource different tasks or none, etc etc.
So, the CIPP’s first challenge is to work out ways of segmenting the payroll industry into groups with similar characteristics, because only then can we start helping the members of those groups – ‘peers’ – to compare or benchmark their financial and operational performance. That’s frustrating, because it means having a year or two more when the survey results won’t be as useful as they could be. But the potential rewards for the payroll community from getting this right are enormous, and I would urge readers to support the 2019 survey as strongly as possible to help us reap those rewards sooner rather than later.
What sort of rewards might we expect?
The current set of questions homes in on several areas where comparisons could prove really illuminating. And from a quick review of some of these it is obvious that the potential areas for delving deeper are limited only by our imagination.
What about payslip accuracy for example? Is there any correlation between error numbers and particular types of payroll?
Leaver overpayments are attracting very close attention these days, which is hardly surprising given the amounts of money which need to be recovered and the costs involved in pursuing these. The volumes can of course be distorted by attrition rates or other features: if staff turnover is high for example, the ratio of overpayments to total staff levels is likely to be correspondingly higher. But these factors can be adjusted for, and we can then start seeing if the numbers or values of overpayments, or the amounts which can’t be recovered, vary with the type of employer.
We have not incidentally asked about overpayments to continuing employees this year. Is that right, or would readers appreciate information about these as well?
Every organisation can be liable to occasional data breaches, but are some types of payroll more susceptible to such failures? It will also be interesting to see whether particular breaches are more or less likely with electronic transmission than with paper.
The survey currently focusses on personal data generally and then on payslips sent to the wrong person, and on data wrongly received from elsewhere.
In the paper era payroll teams sometimes earned money from using payslips for advertising or in producing copy payslips or P60 certificates. Are people thinking of imaginative ways of replacing that lost income as paper gives way to online transmission?
But the biggest opportunities must be in comparing costs. Staff are of course the largest cost area for any business these days. The numbers clearly vary a lot, and understanding the factors behind the differences could be very useful. How for example are staff numbers affected by particular types of outsourcing? Or by industry sector? Do the particular features of public sector employers lead to different staffing needs from those in the private sector or the charitable sector?
Moving on to other costs, we can assume for example that London-based teams will be paying more for office accommodation than those further away from the big cities, but is the picture as simple as that?
And so on, and so on.
What’s changed for 2019?
We have made some significant changes to the question bank for the 2019 survey, learning from feedback from previous participants as well as trying to focus more clearly on our twin benchmarking objectives of identification and comparison. So, of the revised questions for 2019:
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some are about identification – distinguishing groups of payroll teams with similar characteristics, based on things like geography or industry or size or other features
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some are about comparison – telling us about volumes or values of events: overpayments or errors or costs for example, and
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some are about both.
Once we have collected the answers to these questions, we can use analysis tools to filter results to produce conclusions and help us further improve the survey for 2020. We shall at the same time seek feedback and ideas from those who participated in the survey, and here we have a big advantage over many business groups. Payroll professionals, as we all know, are always busy with their core tasks. Yet at the same time they are unfailingly ready to devote time and energy to help take the profession forward. The time available for informal consultation on the design of the 2019 questions was sadly all too brief, but the answers I received were amazingly thorough and thought provoking, and I want to express my thanks to those who found time to help us in this way.
So, please complete our benchmarking survey this year, whether you have done so in previous years or not. And please encourage payroll colleagues to do so as well. The more data we receive the more useful will be the results, and the faster we can move forward to produce better and more useful data still.