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Process Redesign Case Study: Annual savings of over $2,500,000 achieved within four months


Fortune 500 Company, Memphis, TN

Project: Streamline payroll operations into one central department

Company has 914 branches in seven business units operating throughout the United States with a total of approximately 60,000 employees and more than 2,000,000 payroll checks per year.

Initially most business units performed three payroll functions: process demographic data, provide customer service, and process payroll data.  The payroll department entered the demographic data into the mainframe payroll system, provided customer service, entered the payroll data into the mainframe payroll system and distributed the payroll checks.  The total cost per check was about $2.80.  This included all costs of the process except those incurred at the branch level.  Based upon the process mapping and redesign efforts, we estimated that the cost per check could be lowered by 50% with a total investment of less than $250,000.  This investment included external consultants, software, and IT development.

Activity analysis, mapping, and redesign portions of the project were completed by December.  A group of knowledge workers from the various payroll departments accomplished this in three periods of three days each.  Each period was spaced about three to four weeks apart.  A presentation to management was given at the end of each period.  This identified the inefficiencies and bottlenecks in the current process and allowed us to estimate the potential gains from process improvements.

The implementation project was started in early January with the selection of the team.  About half the team was composed of supervisors from the business unit payroll departments.  The remainder of the team was composed of the external redesign consultant and supervisors from the payroll department.  Implementation plans were presented to senior management within two weeks of initiating the project.  Action plans were developed and within four weeks initial milestones were met.  Microsoft Project Manager was used to monitor the project, which included the following steps:

Confirm Business Model

Perform Technical Design

Develop Test & rollout Plans

Evaluate Personnel

Construct System

Train Staff

Pilot Redesigned Process

Refine & Transition

Four months after beginning the implementation phase of the project, most of the payroll functions in the business units had been eliminated with the people moved to other positions.  The staff in the payroll department was reduced by all the temporary help (eight) and three people were transferred elsewhere in the company.  The cost per payroll check had been significantly reduced to $1.58.  Error rates (DPMO) are down from the previous year and customer service levels are up.

The project is in its final phase of stabilization and improvement to lower the cost per check another 10-15%, lower error rates, and improve customer service.


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