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October 2006 Editorial

Transformational Public Sector HR: Becoming Strategic

An Interview with Jim Farrell,

State Personnel Director for the State of Michigan

Shannon Flumerfelt, PhD.

Editor of the E-Journal of Organizational Learning and Leadership

The following interview took place with Jim Farrell, State Personnel Director for Michigan. Mr. Farrell describes a human resources optimization project that reflects the changing nature of organizational life. This project was framed by budget reduction criteria on a tight timeline, requiring a 20% reduction in the employee workforce. By focusing the project at the start, communicating openly and frequently, supporting employees, employing employee expertise, and using collaborative approaches to problem identification and solution, the goal to reduce expenses, improve efficiency and deliver better HR services was realized. Approaching this difficult project in a transformational manner resulted in achieving and exceeding project goals. Mr. Farrell describes how he accomplished a seemingly impossible task with great success.

In addition to serving as the Personnel Director for the State of Michigan, you served as the Project Director for the Michigan Human Resources Optimization Project (HROP). Can you explain what HROP is and why it was a desirable project for the public sector?

In this case, HROP is the development of a statewide HR shared services center. The backdrop to the project is that the state had faced a tremendous amount of budgetary and revenue shortfalls in the last several years. With that situation, a discussion as to where budgetary cuts were going to be made took place. It was clear that those services provided to constituents, such as child protective services, for example, are programs that are not desirable for reduction. The programs that came to the forefront in these budget reductions discussions, therefore, were those related to administrative functions, such as human resources (HR).

Hence, with the HR function facing budget reductions, an HROP process was used to solve multiple problems. As the State Personnel Director, I had to focus on how to provide more effective and reliable HR services for state employees while meeting the cost savings goals. The legislature was pushing for this as well. They considered several options, including providing complete centralization of HR operations. The Governor was considering similar options as well. It was jointly decided, therefore, that the direction to move in would be to capitalize on some of the HR information service operations already in place and search for budget reductions there.

Operations such as employee and manager self-service operations became the focus of these discussions and an interest developed in seeking ways to expand those services while cutting costs. By taking a look at what routine transactions were being provided in the18 departments within state government, consideration was given to processes and transactions that might be handled better in a centralized, share services environment.

This meant that the state’s HR community would need to be involved in this change proposal. An initiative of this magnitude meant that there would be uncertainty and resistance with our organization, so a commitment was made to involve the entire community. There was no way to avoid change; it was a given that the budget was tight. The Legislature and Governor’s Office made it clear that something needed to be done, and the HR community also knew that there were some changes that could be made to improve operations as well. Our two options then included examining the shared services center model or a total consolidation of the HR function with centralized reporting. Either option meant a change from the current model, whereby 18 departments held their own HR functions. From initial meetings, it became clear that becoming more efficient and saving money for the state through the shared service centers was the best option.

The idea of developing ownership within the departments was important as evidenced by your description of the “HR community." What were the critical collaborations that added to the project’s success?

As a part of the whole project, the processes that would be centralized and standardized had to be identified. HR members from the 18 departments were involved in developing common understandings of the shared services processes under examination and how to improve them. For each process, it was determined if it should be centralized, and, if so, what changes needed to be made to do so. Subject matter experts from each of the departmental HR operations participated in mapping the processes, determining the processes’ suitability for centralization, developing how the processes would work in the shared services center model and validating them. This meant that processes originally thought to be appropriate for centralization might not have ended up in the shared services center. And, likewise, processes originally not considered for centralization might have become a part of the standardization. Collaborating with employees facilitated this part of the project.

Collaboration was important, then, in getting to a quality solution?

Exactly, because change is difficult, even when it is desirable. But in this case, the change was not as desirable and the pressure to change was imminent. It was up to HR to come up with a solution. Otherwise, one would have been forced upon us. With that, there is no question that the change mandate was a good driver in fostering collaboration. But beyond that, it was important for the departments to understand what was being done in the project and what its purpose and goals are. It was critical that there was organizational alignment behind the project. In addition, the project had to work. This initiative was not just change for change’s sake; this proposal had to lead to new processes and an improvement in results. The only way to implement this correctly was to involve the people who are familiar with those processes and who will have to implement the changes in their own environments. Trying to force change is not an effective approach. It leads to sabotage. Bringing people into the decision making routine, demonstrating a sincere interest in their ideas, and developing credibility by working collaboratively was critical. We all wanted to save the state money, improve the services and meet the employees’ needs who were using the services. Based on those common interests, the collaboration worked.

It sounds like you are describing a transformational learning process by improving some of the transactional components of the organization. Could you comment on that?

We do call this an HR transformation project because it truly did transform the way in which we do business. So, it is more than just taking transactions and utilizing some call center technology and information technology that help us track and monitor our customers. We were able to accomplish a lot through this initiative. First, our customers are better served. There are more consistent answers to questions. There is more efficiency in completing transactions. There is a four-fold increase in the use of employee and manager self-service operations. Our HR offices now fundamentally work differently. For our general population, where they go for answers and how they receive their HR services is fundamentally different. Previously, our departmental HR offices performed every function. Now our employees have the power and ability to conduct many of their own transactions and to get information about their own personnel issues online.

What can you say about the culture into which this HROP was implemented? What was the cultural setting like and what kind of work was done to prepare the organization for this change? What leadership work was done before, during and after the project?

This point is important and one that is often overlooked. Call centers are not technologically difficult to implement, although there are issues to deal with in terms of integrating technology into an environment. One of the cultural issues of utmost concern was how to handle the statewide reduction of HR positions. There were 76 positions to be reduced as a result of the first year of implementation, and then 62 more positions over the next four years, totaling 138 positions in HR. This meant 20-25% of the HR workforce. So, one of the things that I focused on was to make clear that employee participation in this project was valuable and that displaced employees would be supported. I put a project team in place working in the field. We talked frequently and regularly so that I could understand what was occurring with the project at all times.

In terms of organizational development and change management, one of the first things that happened was to get out into the departmental HR offices and have direct sessions with people impacted by this change. These meetings were done in person. We talked with these high-impact employees about what the project was and why it was being done. Most importantly, we let those employees know that there was a commitment to not laying anyone off as a result of the project. The employees were given the first opportunity to apply to work in the shared service center, if they desired to. If not, then an effort was made to place these employees in another desirable position in state government. Career planning services were also made available. This was an upfront, direct and honest effort to tell employees what was ahead. Fortunately, there were no layoffs. In addition, there were the emotional issues surrounding relocating employees to tend to. The relationship separation that was going to occur as a result of relocation was of concern. So we worked with each department to put a plan together to celebrate each person’s contributions, properly support them in this transition and thank them for their work. Also, the HR employees “left behind” also needed some support as they considered how their job duties were redefined, given the new shared services center. These HR employees needed to know how to redirect state employees and managers to the shared service center in a positive, helpful way.

The state employee workforce had to be educated as well. Many of them were used to some form of self-service, but we also provided training sessions to help them learn about the new modules that were in place. The employees needed to learn about the types of transactions available at the service center through brochures, brown bag lunches and training sessions. Each department developed their own communication plan to disseminate this information.

There were a few other elements that helped with the project. First, I had been an HR department director myself. I was familiar with the field and had a solid network in place. I understood the work from the departmental perspective. That added some credibility.

How was this project organized and what were the timelines for implementation?

There was a project team, with coordinators for communications and marketing. There was a small core team and then there were liaisons from each of the 18 HR departments. The work was shared, but there were some aspects of the project that required personalized departmental development and implementation. Departmental ownership of the project was facilitated in this way.

In addition, there were technical components of the project and a building was constructed to house the center. A call center manager was hired up front, as were key supervisors. These people were involved in the center’s design, construction, hiring and training plans. Ownership of the project by the call center’s employees was critical.

The entire HROP took 13 months, with a few unanticipated delays, so in total it took about 10 months to complete. This was a fast timeline.

Is there any outsourcing in place as a result of the project?

No, this was important to our Governor’s office.

Can you explain what tools and strategies were used in the planning and implementation process that were helpful?

First, developing a solid project plan and having the right people involved is essential. This was a fairly high level project given the elements of technology, organizational change and restructuring, training and retraining, and development of common metrics for the service center. It was important that as the project director, I had a working knowledge of HR. Consideration had been given to selecting an IT person as the project director, but, while IT is an important tool in the project, the project was about the work of HR and how to change HR. In analyzing the processes to convert to standardization, using gap analysis and “as is-to be” tools were helpful. We did use standard process improvement techniques. Common metrics were developed for the center by the key management center staff. Things such as wait times, one-time service for employees and limiting turn around times were examples of common metrics for the center. In addition, an understanding of excellent customer service was developed. Overall, the most helpful strategies were to lay out a clear vision of what needed to be accomplished, involve current employees as subject matter experts, bring in key experts as needed, use a solid network of experienced HR people for advice and assistance, rely on other government offices for assistance, and pay close attention to the project’s development and implementation. However, we did not spend a lot of time documenting what we were doing, which I think would have been distracting to the project’s development and implementation.

The assistance and support of the Governor was essential. In addition, various department heads from the Cabinet served as executive sponsors, which was useful. The project governance model worked well. As the project manager, I supervised the entire operation. An outside IT consultant worked with me. The project was divided into three areas: IT, Process Improvement and Organizational Change groups, led by state employees. The project team dealt with daily planning and execution issues. This model, combined with the support of the executive sponsors worked well. Because of regular and frequent communication and updates on the project, it was understood where problems were occurring and if the budget reduction plans were on track. People knew what they were doing and were committed to the project.

In addition to the people and the support, having to get this done quickly was a plus. There was no going back and this timeline created a common understanding of what needed to be done and when.

What are the results of this project? Where was value added?

We were able to achieve all the goals we set out to accomplish. The project itself was done under budget and ahead of schedule. The original goal was to save $24 million dollars over five years. This goal will be exceeded as we are at a $28.8 million projected savings. The job reductions occurred more rapidly than originally planned, which worked well through attrition. The satisfaction rating with the service center is at 97%, which exceeded our goal of 95%. Employees who use the center receive an email survey. We have had a 60% response rate on satisfaction. The accuracy of the transactions are at 97%, which was our goal. We met all of our criteria for turnaround time. The average time to answer calls is 30 seconds, which was our objective. In addition to that, as the project was underway, we found processes that needed improvement in terms of efficiency or accuracy, and we were able to standardize processes. This, in turn, increased efficiency through consistency. There is a four-fold increase in the use of the self-service center. This means that our employees are taking charge of their own personnel information and have the ability to conduct some transactions on their own. One of the goals was to free up our HR people in the field to do the more strategic activities of organizational development, workforce planning, recruitment, employee relations activities, training and development, for instance. This type of work adds value to the organization by removing their concentration from the more routine, transactional tasks to transformational work. We are definitely doing more with less. We have better overall customer satisfaction. Consistency has improved tremendously. Employees like the system. The best results for me are when the HR directors report that this was a difficult project to undertake, but that it is done well and is working.

What is the future of public sector HR? Will it be included in the strategic processes of the organization?

Yes, I think that HR will be more strategic in the future. We are not the only public entity that is engaging in this type of work. HR associations have promoted the notion of HR becoming a strategic business partner. It is being done to some degree everywhere. It is common knowledge that organizations do not exist for HR, but rather organizations exist to do other things. In the public or private sectors, HR is not the core business. HR needs to add value in order to survive. The routine transactional duties, while important, are not what leaders in organizations are looking for. They need help with recruiting and retaining people, workforce planning, succession planning and leadership training, for instance. The public sector HR community is focused on becoming strategic by doing such things. The project described here does allow HR to focus on being strategic.

Thank You!

Comments to: flumerfe@leadingtoday.org

About the author:

Shannon Flumerfelt, PhD, is an Assistant Professor at Oakland University. Previously, she worked in public school administration and teaching, which included leadership development initiatives, restructuring schools with the Coalition of Essential Schools’ principles and other various change issues related to traditionally-based settings. Her scholarly interests include organizational leadership change and development and technology.