Making The Perfect Paycheck A Reality With Six Sigma

In your business, you strive to deliver the perfect product or service to your customers. Shouldn’t you also be delivering a perfect paycheck to your employees? It seems easy enough. Multiply the number of hours worked each week by the rate of pay and you have an accurate paycheck, right? Unfortunately, it’s not that simple. Factor in variables like overtime, leave, shift differentials, vacation, union agreements, and state, local, and federal regulations, and delivering the perfect paycheck just got a lot harder.

The good news is that the perfect paycheck — one that is accurate, ready on time, and produced for a predictable cost — is still an achievable goal. Many organizations are achieving greater payroll success by turning to a process that originated in the manufacturing industry. It’s called Six Sigma, and it provides a methodology for identifying and reducing errors and minimizing the variability that can make the perfect paycheck such an elusive benchmark.

Seeking the perfect paycheck
The concept of the perfect paycheck is taken from the manufacturing term “perfect order.” The perfect order achieves a number of metrics that make up how an order is manufactured and shipped, giving manufacturers a benchmark to measure production performance.

Finding defects
The first step is to reduce defects in the payroll process. Off-cycle checks, over-and underpayments, and payroll overriding the documented payroll approval process are all examples of defects that occur in payroll processing.

What is Six Sigma? 
Six Sigma is a business management strategy, originally developed by Motorola, that seeks to improve the quality of products and processes by identifying and removing the
causes of errors and minimizing variability. Each Six Sigma project follows a defined sequence of steps and has quantified financial targets such as cost reduction and profit increase.

How Six Sigma Can Make a Difference
It’s important to recognize that Six Sigma is not a cure-all. It requires that the participants understand their business processes and apply creativity to resolving problems. Six Sigma’s disciplined approach forces participants to look across boundaries to identify true root causes rather than rely on workarounds that may make one person’s job easier but fail to solve core problems.

To understand how Six Sigma can work in the payroll process, we’ll review a simple Six Sigma process, highlight some common examples of variability, and explore how they can be resolved. Six Sigma follows a five-phase project methodology: Define, Measure, Analyze, Improve, and Control (DMAIC).