Integrating HR systems: Out with the old, in with the new

Coates Hire

When Coates Hire appointed Colin Shaw as general manager human resources in February 2001, he was the first HR professional the company had ever employed. At that stage, it had 800 staff and generated an annual turnover of $210 million. Coates Hire is Australia’s largest equipment hire company, supplying plant and equipment hire to a wide variety of markets.

“We didn’t have an HR system back then. We just had seven different MicrOpay systems that couldn’t talk to each other in seven different business units. If I wanted any reports, I had to go to seven different sources and collate them myself,”Shaw recollects.

He can laugh about it now, as he’s about to go live with a new centralised Oracle E-Business system that includes self-service HR, payroll and time and labour modules. “It’s not a bells and whistles HR package, but it aligns well with all of our other technology and is by far the best fit for our business.”

Shaw has been a member of the project steering committee and has been seconded to the project team for 12 months to oversee the HRMS, payroll and change management aspects of the project.

Tony Yortis, Coates Hire’s chief information and innovation officer, was hired in September 2003 to spearhead the project management role. The company needed an integrated system that would serve as a platform for growth. Currently employing 1,800 people in 190 locations, it has a vision of being a $1 billion company by 2010. Growth will be achieved through an ongoing aggressive acquisition strategy and increased sales.

Yortis set out to define what he calls the ‘as is’ and ‘to be’ process models, evaluating the current processes in the business and trying to define where the company wanted to be. “Predicting the future is a challenging thing, especially when the growth you are expecting is not all organic. We have to be flexible to incorporate new future businesses,” he explains.

Coates Hire undertook an exhaustive four-and-a-half month evaluation process, beginning with a request for interest from more than twenty vendors, receiving tenders from nine, then culling down to a shortlist of three before choosing Oracle’s system. Coates Hire was attracted to the scalability of the Oracle system and the fact that it isn’t bound to Oracle for future support. “There are a lot of well respected consulting firms I can also go to, whereas with many other ERP [enterprise resource planning] vendors, I am locked in to using their services,” says Yortis.

Yortis and Shaw built their whole business case around the efficiencies they expect to achieve once they complete implementation. Being an equipment hire company, there’s a strong understanding of return on assets and utilisation rates. They considered outsourcing payroll entirely, or replacing MicrOpay with a better system, but because the ultimate goal was to have a company-wide ERP outcome, it was agreed the company should stick with a company-wide system. Centralisation of the payroll function has seen a reduction in headcount from eight to four.

Earlier this year, Coates hired a professional change management team of eight people (on fixed 12-month contracts). “Change management has been the biggest challenge across the organisation. You should never underestimate the impact of change on individuals from the MD down,” asserts Shaw.

The change management team goes out and works with the business, gets buy-in from the staff, manages the stakeholders, communicates in both directions and gets everyone involved. The team has undertaken change readiness surveys, created communication schedules and job/organisation alignment strategies and run the training. Change managers also assess skill levels of staff when running the parallel systems, as well as identifying staff that can assist with support once the go live date passes.

It was deemed unnecessary to convert any payroll history from the legacy MicrOpay systems on to the new Oracle system. “We have retained an inquiry access on the old system, which costs us nothing to maintain,” says Shaw. It’s all part of the “bite-sized chunks” philosophy they have taken towards the new system implementation.

Yortis advises against trying to cram in too much in a short time. “The system you choose must support your business model, should require minimal customisation, should have an ability to bolt on new modules in the future and should take no more than 12 months to implement. Don’t select systems purely on technical features or on cost. You should achieve ROI in two to three years,” he says.

Shaw concurs, underlining the importance of not underestimating union issues. Half the company’s employees are governed by Awards and one-third are “seriously unionised”, according to Shaw. “You should communicate well and early with the unions. The more you communicate with them and iron out problems as you go, the fewer problems you will have when you push the go live button,” he says. He also warns other HR directors that they’ll have to get into microscopic detail before implementing a new system, “because it’s the detail that will come back and bite them if they don’t have a full understanding of it”. Shaw and his team are currently going through all awards and allowances to check their accuracy before the new payroll system goes live on 15 November.

Department of Innovation, Industry and Regional Development, Victoria

The Victorian Department of Innovation, Industry and Regional Development’s (DIIRD’s) stated strategic outcome is to create a “dynamic, innovative and sustainable Victorian economy in which business is encouraged to grow and prosper”. It’s one of the Victorian government’s nine departments, and employs 800 permanent staff and contractors. One of the HR department’s objectives is to maximise the use of HR systems and any technology that enhances HR service delivery.

In line with this objective, an employee self service (ESS) system was implemented five months ago, effectively transferring the input and maintenance of personal, employment and payroll details out of HR services and on to each employee or contractor. This has released HR staff from routine transaction processing to complete higher value tasks, moving them from a service focus to a more strategic focus.

“We are always looking at ways to improve business processes and service delivery, so replacing manual transactions with electronic transactions fits in with that goal,” says Margaret Raczynski, DIIRD’s manager HR systems. The Department retained its legacy payroll system (The Solution Series) and interfaced a new web-based Lotus Notes ESS system.

In order to build a business case, Raczynski reviewed every transaction that the payroll services staff undertook in terms of processing times, accuracy and amount of stationary used. Using an external consulting company, it estimated the volume of transactions in a year and estimated savings achievable using an automated system. The biggest saving was achieved by deploying one-and-a-half full-time HR employees from operational to strategic activities, but other positives resulted: prompt processing; improved data accuracy, reduced handling (through several divisions); fewer inquiries to HR; reduced stationery and simplified induction training.

Raczynski wrote the specification then external software developers created a web-based Lotus Notes ESS application specifically for DIIRD. The outsourced development phase took eight months.

Overall, it took about 18 months to go from business case to implementation. “This was probably a bit too long,” concedes Peter Smith, director of human resources for DIIRD, “but when you have limited resources, project deadlines can be pushed out further than you want.”

Creating a customised, web-based program best fulfilled the division’s existing business objectives. The Victorian Government’s existing IT platform is Lotus Notes. An ESS team comprising HR and knowledge management people implemented and project managed the changes.

Raczynski believes the key to its successful implementation was running a pilot program in HR until all the synchronisation and interface problems were ironed out. It was first implemented in a small division, where it worked very well with no support problems, then rolled out to the rest of the division over four weeks. “We tried to build a system that was intuitive and were fortunate in that PC skills existed throughout the department,” she says.

Smith agrees, adding that communication was another part of the recipe for successful uptake. Apart from employing the usual electronic and printed material and formal training, Raczynski and three others spent two weeks walking the floor. “It didn’t cost much in terms of time, but it guaranteed a trouble-free implementation,” she concludes.