In part 2 we contemplated the customers of the payroll function, while in part 3 we focussed on the value that payroll provides to each of the different customers. Thus, we know the who and the what. Now we take a closer look at the infrastructure required to serve our customers. Or rather, the how.
Osterwalder’s Business Model Canvas describes ‘the how’ by asking 3 simple questions: What are our key resources? What are the key activities to convert those key resources into our product offering? Who is going to help you do it?
Key Activities
How do we differentiate key activities from other activities? We know that not all activities will add value to our customers, but that does not mean that these activities are not important. Key activities are the activities that we need to be able to perform well in order to generate the value proposition that we aim to deliver to each customer segment. Consider the specific activities that are necessary to convert key resources into our value proposition and then delivering that value proposition to our customer segments.
After taking the time to understand who the customers of the payroll department are, how to maintain relationships with them, and what exactly it is that we strive to give to each customer segment, the tasks and processes that we need to perform must be understood well enough for us to determine which activities we will need help with. Especially those activities that we will be totally reliant on key partners for. This will help identify potential partners that will not only support our vision, but possibly elevate it.
While we are contemplating what we should be doing to serve our customers, we have an opportunity to also think about how we should do things to ensure that we keep costs low. Payroll vendors can excellently articulate how partnering with them will help you to achieve this. Selecting the right vendor with the appropriate mix of products and services can expand the value proposition that your payroll provides.
Key Resources
The assets that are indispensable to payroll operations in the pursuit of value creation could be physical, intellectual, financial, technological, and of course human. The goal under this section of the canvas is to think about what specific key resources or assets are necessary to deliver the payroll value proposition?
This piece of the puzzle links key activities with the next, key partners. When we understand what needs to be done to create value for each customer segment, it becomes easier to identify the ingredients required to produce the perfect payroll. For example, specialist skills that your organisation might require from the payroll department might include tax expertise to serve expats.
Key Partners
Key partners help us to leverage our business model since we will not own all of the key resources or be able to perform all key activities required. It is therefore important to identify all of the players involved in the key activities as well as providers of key resources that we have identified earlier. This will, at the very least, enable us to map key partners against associated risks so that we can ensure we have proper contingency plans in place.
From a payroll perspective, this is generally where we see the bidirectional nature of the relationships that we have with our internal customer segments. For example, HR provides the payroll department with information about new joiners, changes, and leavers, but also depends on payroll for reporting, analytics on pay data, and more. Similarly, Finance provides cost and accounting information to payroll, but payroll generally cannot effect payments on their own as the pay process is owned by the Finance department. Other key partners could include outsourced payroll bureaus or simply software companies that provide your organisation with the tools required to calculate source to gross and gross to net. Think about what key resources does the payroll department receive from these partners and what key activities are performed by these partners?
In part 5 we will take a closer look at the financial aspects of the payroll department and consider whether a company’s payroll function could operate as a profit centre.
References
1. Osterwalder, Alexander; Pigneur, Yves; Clark, Tim (2010). Business Model Generation: A Handbook For Visionaries, Game Changers, and Challengers. Strategyzer series. Hoboken, NJ: John Wiley & Sons. ISBN 9780470876411. OCLC 648031756. With contributions from 470 practitioners from 45 countries.