Total Quality Management in Human Resources

When a large firm’s human resources department was having trouble with delays in its payroll process, it implemented Total Quality Management (TQM) methods to make much-needed improvements. Luckily, the company had already completed successful TQM projects in areas of manufacturing, vendor payments and product availability – so the team was well-prepared to focus on the human resources payroll problem.

Total Quality Management’s Seven Steps of Problem Solving Improved the Payroll Process

First, the project leader commenced with necessary pre-steps, such as sending key human resources personnel to an introductory TQM training program. They then brainstormed the key human resources problems and considered the results of each issue:

Analyzing the list, the group determined that the real problems were the delays experienced by internal customers. Then, they brainstormed areas of delays and errors within HR:

The team determined that the payroll process was the problem, causing human resources personnel to experience a great deal of pressure to complete their jobs without error or delay. With a team consisting of four regional human resources managers, a finance department staff member, the payroll manager and key payroll personnel, they were ready to begin the TQM process.

Step One: Defining the Process

In TQM, problems must be measurable and are based on Problem = Desire – Actual Status. Measuring the human resources team’s feelings of “being under pressure” was a challenge. Together, the team decided that employee overtime would serve as a measurable standard.

The team recorded each employee’s daily overtime, as well as the activities they worked on during the overtime. The first month showed each person worked an average of 36 minutes overtime each day. While this number didn’t appear to be too much at first glance, the team soon realized that the average wasn’t the problem: the days of higher stress and overtime were the real issues.

To produce a more accurate picture, the team calculated a standard deviation of 18.8 minutes, and used the average plus three standard deviations to calculate an actual overtime on the worst days of 92 minutes per person. The team decided to set a phase one target to reduce this by 50%.

Step Two: Finding the Root Causes

The team mapped overtime hours and activities to determine the vital causes, and found that seven activities accounted for 81% of overtime:

Of these problem areas, recruitment and meetings were not yet suitable for change efforts; actionable items to be addressed first were data crunching, SAP changes and repeated changes in data formats requested from the head office. Together, these three areas totaled 29% of overtime, of which 60% originated in two regions, while another 35% came from just two people in the head office.

The team asked, “What were the two non-overtime producing regional offices doing that worked and prevented overtime?” The representatives from the regions described a one-time effort they made to develop data entry and storage formats that met the head office’s needs; it made sense to share these ideas with the two lagging regions to reduce their overtime, too.

The project team also discussed why the needed formats had not been developed and put in place already. They examined the following steps of the existing process:

1. Regions enter data changes for the SAP personnel master into Excel
2. Excel file sent to head office
3. Under intense pressure due to monthly payroll deadline and data entry errors, head office employees enter data into SAP

Step Three: Countermeasure Ideas

The team initiated a two-phase process change, using Just-in-Time principles:

• Phase One: Replace data batching with flow processing. Regions would send data to head office on a weekly basis; head office would enter data into SAP weekly, instead of just prior to monthly payroll.
• Phase Two: Non-value-added stages will be eliminated. Regions will enter data directly into SAP.

Steps Four and Five: Testing Ideas and Checking Results

After two months of testing, a 48% reduction in average time plus three standard deviations was achieved; the highest overtime was reduced from 92 to 50 minutes.

Step Six: Standardizing Operations

While overtime reduction was maintained, employees were still experiencing stress due to errors or incomplete entries during the payroll run while searching for correct information. The team chose to select the most frequent errors, their root causes and the countermeasures that would eliminate them.

Using the metric errors per query per payroll, the group found 65 in the first payroll run. An example:

• Error: Incorrect deduction of lunch coupons.
• Number of occurrences: 11 in two months, or 15% of total.
• Root cause analysis: One region produced all the errors; it gave lunch coupons at the beginning of the month, while other regions gave them at the end of the month, thus making the accounting foolproof.
• Countermeasure: Adopt standard process.
• Check the result: No errors post implementation. Within three months, errors and queries were reduced by 98%: from 65 per payroll run to one. Regular progress tracking was introduced.

Step Seven: Maintain Improvements

The TQM team compiled the results and presented them to management. Improvements they agreed to maintain included:

• Payroll manager will meet with staff after each payroll run to analyze and address all errors.
• Overtime control charts will be plotted each day.
• Unusual occurrences will be analyzed.

TQM Improves HR Processes

Learning about TQM as part of an HR certificate training course can lead to long-lasting improvements in human resources processes, including payroll. It can also lead to mindset changes throughout an organization. One director reported after the TQM payroll project that an employee found an error in his work and reported it, including a 5 Why and countermeasure analysis to correct it. It was proof that TQM had made a sustainable improvement in the human resources department.