Best Practices Findings and Recommendations HRPayroll Process Redesign

Best Practices, Findings, and Recommendations HR/Payroll Process Redesign Project January 2002 HR/Payroll Project—Findings and Recommendations January 2002 1

Table of Contents Begins on… Introduction Page 3 Best Practices Page 4 Findings Payroll HR and Benefits Page 26 Recommendations Payroll HR and Benefits Common Benefits of Process Change HR/Payroll Project—Findings and Recommendations January 2002 Page 38 Page 43 Page 54 Page 57 Page 65 2

Introduction The following document details best practices, findings, recommendations, and benefits for the Lucas County HR/Payroll Process Redesign project. The best practices represent methods and processes used by leading publicand private-sector organizations across the United States. The findings and recommendations are the result of 22 process redesign sessions, 2 Visioning sessions, and numerous interviews with members of the HR/Payroll Project Team and other Lucas County employees. The HR/Payroll Project Team: Judy Baker Dan Bridge Phyllis Cole Becky Crabtree Mary Creager Sheila Daum Diane Ducey Allison Duncan Megan Hupp Betty Hutchinson Bridgette Kabat Laurie Kuhnke Gwen Moore-Browne Lenora Pettaway HR/Payroll Project—Findings and Recommendations January 2002 Diane Roach Kelly Roberts Delsha Traylor Jim Volschow Ardith Willmann Cheryl Winter Bill Le. Boeuf (Acuent) Adam Golden (Acuent) 3

Best Practices HR/Payroll Project—Findings and Recommendations January 2002 Page

Integrated HR and Payroll system q q Shares information throughout system Allows data entry at the source Allows users random access to applicable information Reduces data storage requirements HR/Payroll Project—Findings and Recommendations January 2002 5

Mandatory Direct Deposit q q q Best-in-class organizations have participation rates over 90% Strive for 100% participation Reduces transaction costs Checks never lost, misplaced, or outstanding Eliminates need for reconciliation Reduces or eliminates escheat payments HR/Payroll Project—Findings and Recommendations January 2002 6

Self-service applications q Allows employees to access and enter their own data directly into the system q Allows managers to access and enter information directly into the system q Gives managers real-time access to employees’ data q Reduces the chance of errors in the system q Reduces the number of informational phone calls and e-mails to Lucas County HR, Payroll, and Benefits departments q Reduces data entry by Lucas County HR, Payroll, and Benefits staff members HR/Payroll Project—Findings and Recommendations January 2002 7

Centralized processes and functions q Best-in-class organizations centralize all non-core processes that require information sharing q Reduces costs q Reduces errors q Reduces throughput time HR/Payroll Project—Findings and Recommendations January 2002 8

Standardized and streamlined processes q Best-in-class organizations use “clean, ” streamlined processes throughout their businesses q Reduces chances of errors in the system q Allows employees more time to engage in more value-added work HR/Payroll Project—Findings and Recommendations January 2002 9

Web-enabled applications q Allows employees, managers, and job applicants to access the system from any PC q Enables telecommuting HR/Payroll Project—Findings and Recommendations January 2002 10

Universal system access q Allows employees without Web access to access self-service and other system information q Use Interactive Voice Response (IVR) for touch-tone telephone access to system q Use stand-alone information kiosks q Place kiosks in strategic locations throughout Lucas County, focusing on areas and departments with limited PC access HR/Payroll Project—Findings and Recommendations January 2002 11

Integrated applicant tracking and resume management software q Provides HR departments great flexibility q Provides HR departments real-time data q Allows Lucas County HR to leverage full functionality and capability of its ERP system q Reduces Lucas County’s time-to-hire HR/Payroll Project—Findings and Recommendations January 2002 12

Paperless environment q Eliminates cost of paper stock, distribution, processing, and filing q Paperless processes facilitate faster and more efficient data flow HR/Payroll Project—Findings and Recommendations January 2002 13

Technology-based applications for time collection, including: q q q Web-based (Internet and Intranet) systems PC-based (network) systems Badge (swipe card) system Biometric (fingerprint or hand-print reader) systems Telephone-based systems HR/Payroll Project—Findings and Recommendations January 2002 14

Thorough exit interview program q Track reasons for terminations q Analyze trends in terminations q Use information from analysis to reduce turnover and improve morale HR/Payroll Project—Findings and Recommendations January 2002 15

Employee reimbursement q q Electronic submission Turnaround time— 1 to 3 days Payment by Direct Deposit Automated routing and approval using workflow HR/Payroll Project—Findings and Recommendations January 2002 16

Simplified time reporting q Frees time for exempt employees HR/Payroll Project—Findings and Recommendations January 2002 17

Electronic pay advices (receipts) q q q Eliminates paper stub Eliminates cost of on-site distribution Pay information available to employees faster Improved technology eases concern over security If employees still want paper, they can print themselves HR/Payroll Project—Findings and Recommendations January 2002 18

“Positive Pay” disbursement transactions q q Payroll sends transaction file to bank—bank only pays checks in file Check number, account number, and name on check must match Eliminates reconciliation problems Most effective fraud prevention available HR/Payroll Project—Findings and Recommendations January 2002 19

Performance Management q Best-in-class organizations have detailed, up-to-date job descriptions for all employees q Use job descriptions as basis for performance management program, including 360 degree performance appraisals and/or Balanced Scorecard q Each employee should have clear, measurable goals q Each employee receives an annual review HR/Payroll Project—Findings and Recommendations January 2002 20

Open Enrollment program q Open Enrollment is conducted via self-service, either online or Interactive Voice Response (IVR) q Communications about Open Enrollment are sent to employees’ home addresses q Employees receive multiple, consistent communications to ensure they understand their options q Open Enrollment selections are collected electronically and uploaded into the system HR/Payroll Project—Findings and Recommendations January 2002 21

Streamlined voluntary deductions q Limit Payroll’s involvement in deductions to high value-added transactions only q For example, eliminate U. S. Savings Bond program HR/Payroll Project—Findings and Recommendations January 2002 22

Comprehensive compensation summaries q Gives employees detailed information about their wages, deductions, and other financial situations q Reduces the number of inquiries from employees about their compensation q Eliminates hours spent researching employee inquiries each year after W-2 s are mailed q Gives employees peace of mind HR/Payroll Project—Findings and Recommendations January 2002 23

Fewer payroll codes q Best-in-class organizations limit and standardize time codes q Reduces the chance for errors HR/Payroll Project—Findings and Recommendations January 2002 24

E-mail W-2 forms q q Eliminates cost of on-site distribution W-2 information available to employees faster Improved technology eases concern over security Employees print W-2 s themselves HR/Payroll Project—Findings and Recommendations January 2002 25

Payroll Findings HR/Payroll Project—Findings and Recommendations January 2002 Page

Payroll processes are inefficient q Numerous redundant processes exist throughout Lucas County’s departments § Payroll processes are not standardized across the 40+ decentralized Payroll offices § Departments develop their own methods to gather, review, verify, and forward payroll information to Lucas County Payroll q Payroll is centrally processed q Many Lucas County processes require multiple, unnecessary approvals § Example: In the mileage reimbursement process, approvers include the department head, departmental Payroll, Lucas County Payroll, and the Lucas County Office of Management and Budget (OMB) q Lucas County processes are manually intensive and paper-based œ Continued on next page HR/Payroll Project—Findings and Recommendations January 2002 27

Payroll processes are inefficient (continued) q Throughput time for employee reimbursement is very slow § Mileage, tuition, and Wellness reimbursement take an average of 28 to 42 days from submission to employee reimbursement HR/Payroll Project—Findings and Recommendations January 2002 28

Participation in Direct Deposit is low q Only 58% of Lucas County’s payroll payments are made via Direct Deposit q Participation rates among departments (with over 40 employees) range from 87% in Metroparks to 31% in the Engineer’s office q There is no County-wide campaign to increase Direct Deposit participation q Over 96% of all Federal Government payroll payments are made by Direct Deposit q The state of Ohio mandates Direct Deposit for its employees § Lucas County is currently promoting legislation that would allow the County to make Direct Deposit mandatory HR/Payroll Project—Findings and Recommendations January 2002 29

Payroll forms are numerous and redundant q County departments use multiple, similar forms § In a sample of 5 departments, all 5 had different forms for reporting absence, requesting vacation, requesting overtime, and recording attendance q There are standard forms for Payroll processes, but departments often edit them or create their own q Forms are paper-based and many require data entry by staff members q Non-standard forms create higher probability for data entry errors q Standardized forms provide a solid foundation to transition to selfservice and online forms HR/Payroll Project—Findings and Recommendations January 2002 30

Access to the HR/Payroll system is limited q Lucas County systems do not have employee or manager self-service capabilities q Access to the current system is limited to interdepartmental staff members q The current system is mainframe-based and requires network access and a desktop computer q There is no Web access and very limited remote system access to the system q Employees want the functionality and control that employees/managers have with self-service capabilities § Gartner Group and Forrester research shows that self-service organizations have higher employee satisfaction, lower error rates, more efficient and streamlined HR organizations, and more time to focus on strategic issues HR/Payroll Project—Findings and Recommendations January 2002 31

Lucas County Payroll maintains many voluntary deductions q Maintaining multiple deductions creates manual transactions and the need to develop and maintain additional system interfaces q Lucas County offers many voluntary deductions including United Way, Community Shares, U. S. Savings Bonds, Ohio Prepaid Tuition, and 3 political action committees (PACs) q Some Lucas County voluntary deductions have low participation rates § § Less than 2% of employees participate in Ohio Prepaid Tuition Approximately 4. 5% of employees contribute to Community Shares Approximately 4. 5% of employees purchase Savings Bonds Approximately 5. 5% of employees contribute to the PACs— 1 of the PACs has only 1 contributor, another has only 3 contributors q Conversion to the People. Soft system will require new interfaces to be developed for each voluntary program HR/Payroll Project—Findings and Recommendations January 2002 32

Continuous Improvement efforts q Lucas County’s Payroll department is progressive and desires to implement best practice processes and technology q There are no formal programs to track and analyze key performance indicators and metrics q Change Management is not currently integrated into County initiatives q Current County job descriptions do not require skills in Change Management, Process Redesign, Performance Measurement, and Organizational Development § A limited number of Lucas County employees possess a combination of these skills œ Continued on next page HR/Payroll Project—Findings and Recommendations January 2002 33

Continuous Improvement efforts (continued) q Long-term transformation goals and objectives have not been established or communicated throughout the County § The ERP SIP is a first step toward establishing an improvement function HR/Payroll Project—Findings and Recommendations January 2002 34

Payroll—Outstanding checks list q It currently takes an average of 16 work hours per month to produce and manually process this list q The bank used for payroll disbursements should generate an outstanding checks file § During payroll reconciliation, Lucas County Finance uses information supplied by the bank to identify the outstanding checks HR/Payroll Project—Findings and Recommendations January 2002 35

Check disbursements safeguards q Lucas County takes preventive measures by incorporating fraud prevention measures into its processes and check stock q Positive Pay is a fraud prevention service offered by banks that fund payroll disbursements—Lucas County does not currently leverage Positive Pay § The Employer provides a disbursement file that lists each payee, the check number and net pay amount § The bank will not honor any check that does not match the information provided by the employee q Experts considered positive pay the most effective fraud prevention measure available for check disbursements § Check fraud accounts for losses of more than $10, 000 a year in the U. S. q Lucas County issues over 1, 600 paper paychecks every two weeks HR/Payroll Project—Findings and Recommendations January 2002 36

Time & Attendance processes are inefficient q The County uses multiple systems to track employees’ time—manual (paper-based) logs, time clocks, notes from supervisors’ calendars q Time reporting is manual and labor intensive q There are multiple, redundant reviews and approvals in the time reporting process § Payroll performs a completeness review of time submission § In a sample of five departments, all five had multiple reviews and approvals of employees’ time § Approvers include the line manager, department head, and departmental HR/Payroll Project—Findings and Recommendations January 2002 37

HR and Benefits Findings HR/Payroll Project—Findings and Recommendations January 2002 38

HR processes are inefficient q Numerous redundant processes exist throughout Lucas County’s departments § HR processes are not standardized across the HR departments of the various hiring authorities and boards § Each department develops its own methods and processes, including recruiting, hiring, discipline, performance reviews, and promotion q Many Lucas County processes require multiple, unnecessary approvals § Example: In the tuition reimbursement process, approvers may include the department head, HR, the OMB, Accounts Payable, the County Administrator, and Disbursements q Lucas County processes are manually intensive and paper-based HR/Payroll Project—Findings and Recommendations January 2002 39

Lucas County exit interview process q Exit interviews are not part of the standard termination process q Lucas County has an average of 570 terminations per year for the last three years § Lucas County HR staff members estimate that only 15% of terminating employees receive exit interviews q There are no County standards to determine when to perform exit interviews § Some departments never or rarely conduct exit interviews; others perform them sporadically q There is no standard exit interview format q Exit interview responses are not tracked centrally to support trend analysis and corrective action HR/Payroll Project—Findings and Recommendations January 2002 40

Shadow systems exist throughout Lucas County q From a sample of 7 Lucas County departments, our review noted shadow systems used for HR/Payroll analysis and tracking in 6 departments q Shadow systems are often a signal that the departments do not trust the production system or do not understand how to utilize it q Shadow systems typically cause problems as data is manipulated and is not kept in sync with the source system q Shadow systems drive inefficiencies and errors into the organization HR/Payroll Project—Findings and Recommendations January 2002 41

Benefits enrollment q Recurring changes to benefits and Open Enrollment are paper-based q When making updates to personal information, employees often must also update benefits information q Lucas County Benefits includes Open Enrollment information in the quarterly newsletter preceding the Open Enrollment period § The information includes a calendar of events and Open Enrollment dates in the departments § Departments receive additional copies of the calendar to distribute and post q Lucas County Benefits conducts two weeks of in-person Open Enrollment sessions in County departments q Typically, only 25% to 35% of each department’s employees attend the sessions HR/Payroll Project—Findings and Recommendations January 2002 42

Payroll Recommendations HR/Payroll Project—Findings and Recommendations January 2002 Page

Finalize future state processes Lucas County has defined the core future state processes for Payroll processes and related HR and Benefits processes. To implement these changes, Lucas County must finalize the processes. These efforts are significant and are discussed further in this section. Specific details must be determined to: q Enable manager and employee self-service q Define security and access guidelines for the ERP system q Determine approvers and their backups q Develop approval criteria œ Continued on next page HR/Payroll Project—Findings and Recommendations January 2002 44

Finalize future state processes (continued) To implement the desired future state, Lucas County must define specific details to: q Determine the required proof/documentation for applicable transactions q Develop the workflow rules associated with self-service for each process q Determine the confirmation method for automated transactions q Determine what information the system will validate prior to submitting updates and what information will be validated prior to transaction posting q Integrate current hard copy files into the system HR/Payroll Project—Findings and Recommendations January 2002 45

Streamline Time & Attendance processes q Standardize processes as defined in future state design § Includes workflow and pre-populated, online timesheets q Establish time reporting performance measurements § Completeness, error rates, and cycle times § Analyze to determine the root cause and appropriate corrective action q Implement technology-based solutions for automated time collection § Swipe cards, human recognition (biometric) software, others q Enforce supervisory responsibility to review all time submissions for accuracy and completeness œ Continued on next page HR/Payroll Project—Findings and Recommendations January 2002 46

Streamline Time & Attendance processes (continued) q Eliminate non-value added reviews, approvals, and documentation storage q Implement exception-based time reporting for FLSA exempt and fixedschedule employees HR/Payroll Project—Findings and Recommendations January 2002 47

Increase Direct Deposit participation q Implement a program to increase the Direct Deposit participation rate among existing employees. Items for consideration: § Identify local banks and credit unions that offer free checking to Direct Deposit recipients § Call employees directly to request they switch to Direct Deposit § Educate employees on the benefits of Direct Deposit § Enlist departmental leaders to sign up employees § Offer incentives or prizes for groups with 100% participation q Track participation rates by department and target specific groups for increased participation q Strive for 100% participation County-wide q In conjunction with the ERP project, design and implement online pay receipts for Lucas County employees HR/Payroll Project—Findings and Recommendations January 2002 48

Implement “Positive Pay” fraud prevention in Payroll q Investigate current bank’s ability to support the Positive Pay program § Research alternatives if necessary q Develop file to transmit to bank and incorporate into payroll process HR/Payroll Project—Findings and Recommendations January 2002 49

Eliminate low value-added voluntary deductions q Perform a cost-benefit analysis of all voluntary deductions q Eliminate voluntary deductions with limited participation q Reduces the number of interfaces for the new ERP system q Simplifies the payroll process HR/Payroll Project—Findings and Recommendations January 2002 50

Obtain an outstanding paycheck file from bank q Define and request a monthly file of outstanding checks from the bank q Eliminate the manual outstanding check identification process q Use bank file to perform reconciliation process HR/Payroll Project—Findings and Recommendations January 2002 51

Ensure payroll codes are utilized q Review all payroll codes to ensure they are required to meet regulatory requirements or are used for management/cost accounting reports q Eliminate codes that do not meet that criteria q Evaluate new code requests against criteria above § Do not honor unsupported requests for new codes q Minimizing codes simplifies time reporting, and payroll processing HR/Payroll Project—Findings and Recommendations January 2002 52

Perform a cost-benefit analysis to convert to a semimonthly pay cycle q The bi-weekly pay cycle generates an additional, unearned paycheck for exempt employees every 11 years q Evaluation of a semi-monthly pay cycle should include whether all employees could ultimately be converted to semi-monthly pay q Semi-monthly pay cycle eliminates end-of-month salary accruals q Reduces the number of annual payrolls from 26 to 24 § Also reduces the number of associated payroll tax filings NOTE: The Ohio Revised Code currently mandates biweekly pay for county governments HR/Payroll Project—Findings and Recommendations January 2002 53

HR and Benefits Recommendations HR/Payroll Project—Findings and Recommendations January 2002 Page

Establish a standard, County-wide exit interview program q Ensure 100% of terminating employees receive exit interviews q Exit interview content must address how the employee’s work experience compared to the organization and functional goals and values q Develop a standard, County-wide format for exit interviews q Establish an online database to record, store, and share results of exit interviews q Track results and perform trend analysis on a regular basis § Establish online access to exit interview results q Identify the root cause of issues and develop initiatives to address them HR/Payroll Project—Findings and Recommendations January 2002 55

Establish a County-wide communication plan for benefits enrollment q Send frequent, consistent communications to employees to make them aware of their options during Open Enrollment and upcoming changes throughout the year q Increases employees’ awareness of available benefits q Reduces/eliminates the number of post-enrollment period adjustments HR/Payroll Project—Findings and Recommendations January 2002 56

Common Payroll, HR, and Benefits Recommendations HR/Payroll Project—Findings and Recommendations January 2002 Page

Perform a survey to understand potential employee system access q Determine employees’ current and potential ability and openness to accessing the system for various types of transactions q A survey will help understand employee’s remote access preference § Includes potential use of workplace Internet/Intranet connections, centrally located kiosks, home Internet connections, and Interactive Voice Response (IVR) q Potential access locations can be identified, prioritized, and evaluated q Survey will provide the ability to properly plan for the right employee access methods HR/Payroll Project—Findings and Recommendations January 2002 58

Establish universal access to the ERP system q Determine current access capabilities and desired future access methods and locations q Determine optimum sites for employee access to the system q Establish access to the system using a combination of Internet, Intranet, computer terminals, stand-alone information kiosks, Interactive Voice Response (IVR), and wireless devices § Focus alternative access methods on areas and departments with limited PC access and responsibilities that cover multiple work sites q Define security and access guidelines for the ERP system to ensure that employee and manager access is limited to appropriate information q Enables manager/employee self-service and data entry at the source NOTE: Universal access will facilitate the use of additional Lucas systems HR/Payroll Project—Findings and Recommendations January 2002 59

Implement Self-Service functionality in the ERP system q Self-service is the most significant enabler of Lucas County’s desired future state processes § Of the 22 processes redesigned in this project, 18 leverage self-service workflow capabilities q Enables the County to enter data once at the source q People. Soft setup facilitates universal, appropriate access for employees and managers § This may include establishing a standard reporting hierarchy q Design and implement online forms q Streamlines the entry and collection of similar County information œ Continued on next page HR/Payroll Project—Findings and Recommendations January 2002 60

Implement Self-Service functionality in the ERP system (continued) q Enables automated end-to-end processes q Use digital certificates and/or digital signatures HR/Payroll Project—Findings and Recommendations January 2002 61

Establish a Continuous Improvement function q Ensure continued County support at the senior management level q Organize a cross-functional Continuous Improvement Team § Ensure team members have skills in process reengineering, project management, change management, organizational development, and performance measurement q Define, track, and analyze HR, Payroll, and Benefits metrics at both a department and County-wide level on a regular basis § Use measurements to prioritize change initiatives q Develop and integrate a long-term Change Management program q Evaluate People. Soft’s EPM module to support continuous improvement efforts HR/Payroll Project—Findings and Recommendations January 2002 62

Eliminate shadow systems in County departments q The People. Soft system will perform many of the shadow system functions q Interview key department employees to identify the use of Excel spreadsheets, Access databases, and other logs and databases that act as shadow systems q Investigate the use of such systems and why they exist § Perform analysis to address the reasons for shadow systems q Develop plans to address causes of shadow systems § Includes system access and training, management reports, data integrity, etc. q Eliminates redundant entry and maintenance of information § Drives employees to fully leverage the ERP system capabilities HR/Payroll Project—Findings and Recommendations January 2002 63

Educate employee relations/unions about the ERP system’s capabilities A cross-functional group of Payroll, HR, and DP/IS experts should establish a periodic meeting to educate labor relations representatives and strive to: q Standardize processes and benefits across different labor groups to allow further streamlining of processes q Develop a better understanding of the system’s capabilities § Allows Lucas County to avoid situations where the costs and efforts to fulfill negotiated employee benefits may outweigh the benefits realized by the County q Identify and communicate upcoming changes as soon as possible to plan for the least disruptive implementation of those changes HR/Payroll Project—Findings and Recommendations January 2002 64

Benefits of Process Change HR/Payroll Project—Findings and Recommendations January 2002 Page

Lower cost, higher quality transaction processes ü Investment in system leveraged by the entire County as appropriate ü Elimination of redundant data and work ü Numerous paper forms replaced by simpler online forms and self-service o Eliminates data entry by Lucas County staff members ü File storage requirements significantly reduced or eliminated ü Higher quality due to less confusing data and source data entry ü Improved access to decision-making information for Lucas County leaders ü Ability to reallocate or reduce (by attrition) resources—“do more with less” HR/Payroll Project—Findings and Recommendations January 2002 66

Faster transaction processing ü Data updated in real time ü Reduced approvals and reviews streamline and accelerate data flow ü Reduced occurrence of timing errors and associated problems ü More timely payroll information HR/Payroll Project—Findings and Recommendations January 2002 67

Improved employee satisfaction and customer service ü Easier accessibility for all employees via remote access ü Employees have greater control over their personal information ü Fewer phone calls to HR, Payroll, and Benefits for information requests ü Better analytical tools and information for individuals day to day jobs ü Reduced stress among staff members ü Better information regarding organizational issues HR/Payroll Project—Findings and Recommendations January 2002 68

Platform for better system security ü Process defined security leads to more accessible data that is secure ü Better audit trail and more complete documentation ü Ability to identify abuse in the system ü Improved internal controls HR/Payroll Project—Findings and Recommendations January 2002 69

Reengineering Progress ü More standardized processes—County-wide and interdepartmental o Establishes a foundation for continuous improvement at Lucas County ü Simpler processes ü Easier to access and create reports ü Performance measurements identify improvement opportunities with the highest ROI ü More time for HR, Payroll, and Benefits to perform more strategic, valueadded activities ü Continuous improvement culture developing HR/Payroll Project—Findings and Recommendations January 2002 70

County-wide benefits ü Improved image of public employment ü Improved coordination with County Finance departments ü Fosters interdepartmental environment ü Better and more frequent communication with labor unions o Drives mutually beneficial negotiations HR/Payroll Project—Findings and Recommendations January 2002 71

Process-specific benefits ü Quicker acquisition of talent (New Hire, Applicant-to-Pay, and Contractor processes) ü Better qualified candidates (Applicant to Pay) ü Better hiring decisions (Applicant to Pay) ü Eliminates separate check runs (Pay Cycle Processing and Time & Attendance processes) ü Significantly reduced reconciliation time (Payroll Reconciliation) ü Reduced chance of fraud (Payroll Reconciliation process, Positive Pay processes) ü Elimination of physical paychecks (Direct Deposit) HR/Payroll Project—Findings and Recommendations January 2002 72