Service First
&
Human Resource
Outsourcing Project
Fran Brooks
Department of Management Services
State of Florida
Create a smaller, more effective,
more efficient government that
fully harnesses the power of
technology
SERVICE FIRST
SERVICE FIRST


Transfer of Career Service positions to Selected
Exempt Service
 Affected approximately 16,000 managerial,
supervisory, and confidential positions
Personnel Rules
 Repealed 44 chapters of the State’s Personnel
Rules and replaced them with 10 chapters
effective January 2002 (all previous rules
statutorily repealed January 1, 2002)
SERVICE FIRST

Broadbanding
 Designed and implemented a broadband
classification and compensation system

Education Vouchers
 Administered the Educational Voucher Program
through June 30, 2002
Savings Sharing Program
 Developed program guidelines and forms

SERVICE FIRST


Training

Professional Development Program

Quarterly Management Development Forums
Performance Evaluation System


Uniform system: Workgroup reviewing industry and
agencies’ best practices
Workforce Transition and Assistance
 Workforce Transition database
 Managing Change guidelines
HR
OUTSOURCING
SERVICES
PROJECT
OUTSOURCING VS. PRIVATIZATION
Outsourcing
Retain ownership of the functions
(focus on policy of “what” we do;
not process of “how” we do it)
Privatization
Relinquish ownership of the functions
(getting out of the business)
WHERE ARE WE HEADED?
 E-solution to provide best in class suite of services for
HR, payroll, and benefits
 We are seeking to outsource transactions, and insource
transformations
 We have good people trapped in bad systems
 Conversion from a paper-based, multiple touch process to
a self-service, employee enabled electronic solution
 We expect to employ a highly innovative, entrepreneurial,
and efficient management program that challenges the
status-quo and existing culture in formulating and
implementing high-quality, timely, and cost-effective
human resource and personnel services
WHY NOW?

The five stand-alone systems (non-integrated) are
almost 20 years old
 Budgeting, cash management, accounting/ payroll,
personnel, and purchasing systems

Cooperative Personnel Employment Subsystem –
COPES is the existing personnel system

Maintenance on existing system drives operating costs,
outdated software, limitations on ability to meet our
needs, unreliable, subject to breakdown, etc.

We are in a new millennium – time to change our 50
year old way of doing business
WHY NOW?

Technology investment avoidance is becoming a major
reason to outsource.
 Investment in state of the art should only be made in
core business processes.
 Supporting processes (such as personnel and payroll)
can use (rent or lease) technology from companies that
have core businesses in these support areas.
 Industry has services available to meet our needs – we
are not seeking to purchase new software or replace
existing software

Estimated $65 - $90 Million to replace COPES
WHY NOW?

1990’s – State commissioned a project to modernize or replace the
non-integrated subsystems known as FFMIS (Florida Financial
Management Information System)
 Decision was made to replace rather than update

1997-1999 – Pilot project to replace COPES and the payroll
portion of FLAIR (Florida’s Accounting Information Resource)
 Pilot project progressed through scoping and planning phase,
but discontinued due to rising cost estimates and emerging
technology
WHY NOW?



Mid-1999, State Legislature authorized two new initiatives and
KPMG was hired to conduct a business case study on the
Modernization of State Government Financial Management
Business Practices
 Study assessed five options and recommended an Enterprise
Resource Planning solution at an estimated expense of $281
Million to integrate the five legacy systems. Other alternatives,
including outsourcing, are currently also being considered.
Vendors have made the investment in the technology – we don’t
need to – we are seeking to contract for services
Industry has formed successful partnerships with vendors,
changed the role of their HR functions, and delivered better
service to their customers, employees and managers.
BUSINESS PLAN – “AS IS” COSTS*
(*As reported and verified by each agency)
















Total Personnel Cost (1287.5 FTE’s) $ 55,565,821
Material & Supply Cost
$
666,103
Facilities & Maintenance
$ 4,426,031
Equipment
$
263,680
Telephones
$
630,125
Postage
$
451,961
Security
$
47,530
Archiving/Data Storage
$
44,871
Printing
$
538,103
Training
$
382,265
Travel
$
475,341
Recruitment & Selection
$ 907,097
Computer System Expense
$ 7,159,995
Consulting & Contractual Services $
154,138
Counseling
$
989,672
Other
$
647,653
TOTAL $ 73,350,385
HR Outsourcing Initiative
Estimated Potential Program Savings
(Dollars In Millions)
FY2002
"As-Is" HR Program
Current "As-Is" Program Costs (1287.5 FTE)
Current FTE Salaries & Benefits
Current Expenses
Total "As-Is" Program Costs
COPES Replacement / Upgrade
Total "As-Is" and COPES Costs
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009*
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Annual $
Cumulative $
55.6
17.8
73.4
80.0
153.4
153.4
$
$
$
$
74.8
$ 228.2
$
76.2
$ 304.4
$
77.7
$ 382.1
$
79.2
$ 461.3
$
80.7
$ 542.0
$
82.3
$ 624.2
$
27.4
$ 651.6
$
14.0
$
41.8
$
$
$
$
$
$
Transition Workforce by Phase (922 FTE)
Vacancies (200 FTE)
Benefits (Group 1 - 112 FTE)
General HR (Group 2 - 440.5 FTE)
Recruitment & Selection (Group 3 - 169.5 FTE)
Subtotal Transition Workforce Costs
$
$
$
34.6
$
44.3 $
(9.3)
(1.9)
$
$
33.1 $
Residual FTE & Expenses (316 FTE)
$
20.7
$
21.2
Subtotal State Workforce (1238 FTE)
Credit for Abolished HR Positions (49.5 FTE)
Functional Expenses: Recruitment/Selection + Expenses
Systems Expense: COPES and TimeDirect
$
$
$
$
53.8
(2.1)
1.9
5.5
$
$
$
$
27.6 $
(2.1) $
1.0
5.5
21.7 $
(2.1) $
22.2 $
(2.1) $
22.7 $
(2.1) $
23.2 $
(2.1) $
23.7 $
(2.1) $
Final Adjusted Transition Workforce + Other (1287.5 FTE)
$
59.1
$
32.0
$
19.6
$
20.1
$
20.6
$
21.1
$
21.6
$
5.9
$
200.0
$
73.1
$
73.8
$
61.4
$
61.9
$
62.4
$
62.9
$
63.4
$
19.7
$
478.6
Potential Cost Savings Relative
to "As-Is" HR Program
Annual $
Cumulative $
0.3
0.3
$
$
1.0
1.3
$
$
14.8
16.2
$
$
15.8
31.9
$
$
16.8
48.7
$
$
17.8
66.5
$
$
18.9
85.4
$
$
7.7
93.1
$
93.1
Potential Cost Savings Relative to
"As-Is" and COPES Replacement
Annual $
Cumulative $
80.3
80.3
$
$
1.0
81.3
$
$
14.8
96.2
$
15.8
$ 111.9
$
7.7
$ 173.1
$
173.1
$
173.1
7
24.7
HR Outsourcing Program Business Plan
HR Services Potential Provider Contract
Total HR Services Provider and State Workforce
Note
Note
Note
Note
1:
2:
3:
4:
57.0
17.8
74.8
58.4
17.8
76.2
41.8
59.9
17.8
77.7
41.8
61.4
17.8
79.2
41.8
62.9
17.8
80.7
41.8
64.5
17.8
82.3
41.8
21.5
5.9
27.4
Total
13.8
(20.8)
(7.4)
6.4
$
21.7
$
22.2
$
22.7
$
16.8
$ 128.7
$
23.2
$
23.7
$
17.8 $
18.9
$ 146.5 $ 165.4
Potential Savings
Program Years
Average Annual Savings
$
7.9
$
$
$
$
$
441.1
130.5
571.6
80.0
651.6
$
278.6
$
$
$
$
$
$
78.9
(9.3)
(1.9)
(20.8)
(7.4)
39.5
$
163.3
7.9 $
(2.1) $
$
$
$
202.8
(16.8)
2.9
11.0
Current As-Is and Residual Estimates do not include HR Support Personnel - Payroll Accounting and Agency Specific Training (178 FTE).
Estimated Residual/Savings for Attorney Fees are not included due to variable causal factors.
FY2009 includes the pro-rated values for four months of operations to complete the contract period of performance (84 Months).
All Salaries and Benefits costs include 2.5% annual escalation.
Table -1 Estimated Potential Program Savings
WHAT ARE THE BENEFITS?

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Allow agencies to focus on core business and mission
Better service for our employees and managers
Reduce expenses - $73.4 million “As Is” costs
Cost avoidance – estimated $65 - $90 million to replace COPES
Redirect savings to accomplish other priorities -- $173 million
Access to “state of art” technology – improve services for employees
and supervisors
Leverage technology with HR administration best practices (case
management, cost accounting, analysis, data collection)
Improve applicant services: one application - multiple vacancies
Improve ability to communicate and provide information – links to
other sites, programs, resources
Partnership with industry for enterprise solution – we shouldn’t
automate an inefficient process
WHAT ARE THE BENEFITS?


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“Real time” answers to status, approvals, benefit eligibility; 24/7
access and action
Automation of routine transactions – uniform business rules, routing
shortens time needed for approval
Redeployment of personnel to higher talent uses
Redefinition of the HR Function itself
Assist in making the transformation to an E-Culture, enable
employees to learn on their own and access their own information –
self-reliance and ability to make better decisions
Managers will have time for “high touch”, coaching, mentoring, and
performance evaluation, efficiency, and productivity
WHAT IS NOT BEING CONSIDERED
FOR OUTSOURCING?
Policy and Management Responsibilities

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Selection of candidates and specialized recruitment
Labor Relations
Grievances
Disciplinary Actions
Collective Bargaining Agreements
Appraisal of employee performance
Efficiency, Productivity and Incentive Sharing Programs
Career Pathing and Performance
Mentoring Program
WHAT IS NOT BEING CONSIDERED
FOR OUTSOURCING?
Policy and Management Responsibilities




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Policy and Procedure Development and Maintenance
Agency Unique, Program Specific, and/or Specialized Training
Federal Computerized Criminal Information Background
Checks and Investigations
Processing fingerprints
Human Resource Management – change management,
employee relations and communications
Management of employee separations and reductions in force
WHAT IS BEING CONSIDERED
FOR OUTSOURCING?
Transactional Processes and Functions



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Applicant Management – Assist supervisors with recruitment,
screening, and selection processing
Payroll Preparation
*Payroll Production/Payroll Accounting (*not currently in scope,
but included in Invitation to Negotiate to obtain pricing for
service)
Collection and accurate reporting of Time/Attendance/Leave
Administration of Workers’ Compensation Program
Administration of Benefits Enrollment, Flexible Spending
Accounts, and eligibility for participation
Retirement Benefits Enrollment
WHAT IS BEING CONSIDERED
FOR OUTSOURCING?
Transactional Processes and Functions

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Employee Information, Files, and Records maintenance
Administration of Employee Assistance Program (EAP)
New Employee Orientation Training and Hire Packets
Mandatory statewide training (New Employee Orientation,
Professional Development Program, Sexual Harassment, Diversity,
American with Disabilities Act, etc.)
Generation of standardized reports and capability to query
information
Collection of data to assist in administration of EEO/Affirmative
Action Plans
Maintenance of organizational charts
WHO IS AFFECTED?

COPES Customers

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29 Agencies
67 County Health Departments
State Courts
Justice Administration Commission
Bureau of State Payrolls Customers

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
State University System
Legislature
Auditor General
INDUSTRY TRENDS

The amount of emphasis placed on various HR
activities is shifting from a reactive and administrative
focus to leadership and proactive business-related
activities.

Outsourcing transactional functions and processes will
streamline the administration and delivery of HR
functions making more time for value-added activities
(strategic direction, policy and compliance, program
management, governance).
COMPANIES THAT HAVE IMPLEMENTED
E-HR & SHARED SERVICES
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Bank of America
Dow Chemical
Time Warner
Eastman Chemical
IBM
AT&T
Westinghouse
Federal Express
Hewlett Packard
American Electric Power
JC Penney
Allstate
Proctor and Gamble
KPMG
Microsoft

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



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BP/Amoco
Dell
Motorola
Armstrong World Industries
Marriott International
Sears
McGraw-Hill
AMP Incorporated
Commonwealth Edison
Mayo Clinic
Whirlpool Corporation
John Hancock
Sun Microsystems
General Electric
OUTSOURCING IN THE
COMMERCIAL SECTOR
 Gartner Group
28% of Outsourced Operations are in the
Transaction Processing Arena
 Transaction Processing Arena is the “Fastest
Growing” Segment of Outsourcing


People Solutions, Inc.

80 percent of the cost of running an HR
department is transactional
WHAT DO WE NEED TO GET THERE?
 Request for Information (December, 2000)– 14 vendors responded
 Unique Needs and Requirement of Agencies
 Inventory of FTE’s and Functions
 Assembled team of stakeholders to assemble and review information –
workload and transactions
 Determined “As Is” Costs for Business Plan
 Invitation to Negotiate (Released on March 22, 2001)
 Intent to Award (Announced on September 5, 2001)
 Business Plan (Completed on September 25, 2001)
 Contract signed August 19, 2002

Agency involvement – workgroups for policy, transition, residual
organizations, evaluation, implementation, etc.

Timeline to implement: August, 2002 – January, 2004
CRITICAL INFRASTRUCTURE OF
GOVERNMENT MAINTAINED

Retain selection of candidates and hiring decisions
 Retain “Government in Nature” responsibilities only –
routine transactions will be outsourced
 Management of workforce – free up resources to focus on
core mission of agency and unique needs
 Improved ability to measure and better manage business
functions such as payroll transaction costs, recruitment
costs, cost per employee for service delivery, and time
measurement for completion of personnel processes
 Access to new management tools that do not exist today
 Capability to fully integrate with other IT solutions
CONTRACTUAL OVERSIGHT
SAFEGUARDS –
ENSURE VENDOR PERFORMANCE






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Independent Third Party Contract Monitor – Quality Assurance
Surveillance Plan & Performance Measures
Involvement and input from agencies and Legislature
Penalties for poor performance and incentives for superior performance –
specific defaults and remedies to protect State and ensure continuity of
services
In the event provider is terminated for cause, State recovers liquidated
damages
Portability of information (SAP software) – provider responsible for all
costs of transfer, attorney’s fees, and staff and time if needed
Compliance required for all State and Federal laws and regulations
Contingency plan – fully operational within 24 hours
CONTRACTUAL OVERSIGHT
SAFEGUARDS –
ENSURE VENDOR PERFORMANCE

Gartner Group – “Five Major Failure Points of Strategic
Partnerships” – focus, fit, feasibility, function and financial



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Skilled Partnering Managers (Function)
Robust Process and Partner Support Infrastructure (Fit and
Feasibility)
Clear Goals and Measures (Focus and Financial)
Resource and Budget Authority (Focus and Financial)
Executive Sponsorship (Fit)
Solid Partner Planning and Results Assessment (Function and
Financial)
Capacity and Will to Innovate as Business and Partner Requirements
Evolve (Fit and Financial)
CONTRACTUAL OVERSIGHT
SAFEGUARDS –
ENSURE VENDOR PERFORMANCE



HR service is core business of provider
Extensive research conducted on past performance and
financial data
Convergys’ Clients of Similar Size and Scope of Services
 GE – 320,000 employees/retirees
 Lucent Technologies – 170,000 employees/retirees
 Marriott – 150,000 employees
 AT&T – 190,000 employees/retirees
 Pfizer – 78,000 employees
CHANGE MANAGEMENT AND
TRANSITION
Employees – commitment for priority consideration of
qualified applicants with provider and placement in
program areas (350+ employees for service center)
 Residual workforce – policy, management, discipline and
grievances
 Transition – gradual roll out by function, parallel testing
 Communication – project management, performance
measures, and change enablement
 Continuous training for employees and managers
 Leverage industry best practices to improve quality of
service – transform the state to an e-environment

WHAT WILL EACH
AGENCY LOOK LIKE




Personnel to handle discipline, grievances, labor
relations, and policy development
Contract administration -- Person to person interface
with provider on behalf of the agency
Residual organization – Focus on Management and
Policy
Retain “Government in Nature” responsibilities only –
routine transactions will be outsourced
HR OUTSOURCING PROJECT
Contract Signed – August 19, 2002
 Transition Teams – Begin Agency
Meetings on August 26, 2002
 Recruitment and Selection – May 1, 2003
 General HR and Payroll Preparation –
June 1, 2003
 Insurance and Benefits – January 1, 2004

EVOLUTION OF HR

Administrative Experts (Process Oriented)





Compliance
Benefits
HR Information Systems
Compensation
Employee Relations Experts (People Oriented)




Labor Relations
Environment, Health, Security, and Safety
Diversity and EEO
Employee Relations
EVOLUTION OF HR

Strategic Partners (Process Oriented)




Strategic Planning
Culture and Image
HR as a Business Partner
Change Agents (People Oriented)





Efficiency and Productivity Improvement
Training and Development (Gaps in skills needed and
experience)
Performance Measurement
Organizational Design
Workforce Utilization

For more information contact:
Fran Brooks, Project Manager
Department of Management Services
State of Florida
850/488-2187
MyFlorida.com website:
http://www.myflorida.com/dms/hrm/hrout/HR_O
utsourcing_Project.html