Powering HR into the 21st Century
An interview with Karen Francks, Manager, HR Services & Disbursements, Pepco Holdings, Inc.
* View all content in the HR Series
Karen Franks heads Pepco Holding’s HR Services & Disbursements teams. In this interview, she talks openly about the evolution she has personally witnessed, and led, over the past 13 years. Starting with decentralized functions across a number of different businesses brought together through mergers, the company that was to become Pepco Holdings then implemented semi-centralization in an administrative center in the late 1990s, then embraced "benefits admin" outsourcing five years later with the remaining HR services pushed out across HR and to the businesses. However, a consultant’s report, a few years ago, highlighted the fact that many of Pepco’s more highly paid HR professional/consulting staff were spending more than a third of their time fielding calls and processing transactions! Time to power HR service delivery into the 21st century!
What’s interesting about this story is how accurately it reflects the changing IT and provider landscape that are making it increasingly easy for HR to leverage itself into a more strategic position. Karen has been involved with this journey from the start and offers a candid insight into the trials and tribulations of building a world-class HR service delivery model.
BH: Karen, can you tell us a bit about Pepco, and describe some of the key drivers that led you to think about HR shared services as a strategy?
KF: Sure. Pepco Holdings is a holding company for three utilities in the mid-Atlantic region. We are headquartered in Washington DC and we serve Delaware, South New Jersey, Maryland, and the District of Columbia. Around 2008, when the financial markets began to crash, it was also a time for us to step back and look at our strategy as a company. We owned a couple of non-regulated entities, Conectiv Energy, and Pepco Energy Services, and we were struggling to get recognition on Wall Street for the complexities in our business, so we used this time to recast ourselves. At the same time, we had been entering an increasingly tough regulatory environment. As a utility, we make our money from rate cases. When there’s a tough regulatory environment, it’s much harder to get rate relief.
So we decided, in late 2009, to sell off our non-regulated assets, our Conectiv Energy assets, and to begin winding down the retail side of our Pepco Energy Services business, and we became, fundamentally, a utility. But as we did so, we still had all the overhead from the non-regulated businesses and there were a lot of things that we needed to do differently in our new utility world. So, in May of 2010 we engaged with Accenture to recast our strategy and structure, and we shifted to an enterprise operating model that included Power Delivery (our core utility business) at the center of the whole. We also have a small corporate core, which houses legal, HR strategy, regulatory compliance, internal audit, government affairs, corporate communications, and the CFO organisation.
As part of this new operating model, we created a brand new Support Services organisation that has facilities, security, HR services and disbursement – which is my area – as well as IT and supply chain, reports to a brand new executive leadership team member. Of our 4,000 employees, 580 report to this new Support Services organisation. Our entire mission, our purpose, so to speak, is to enable Power Delivery. So what has happened is that the HR Services organisation decoupled from the HR function. In the past, HR was always under one VP in the corporate center. Now, the "centers of expertise" and the HR business partners are still in the corporate core, but I’ve taken the transactional side of HR – the transactions, recruiting and the HR systems – and moved that into Support Services, effective January this year. I also have leadership responsibilities for accounts payable and payroll, because there is a somewhat symbiotic relationship there and they are both heavily transactional.
BH: What’s the background of HR Shared Services at Pepco?
KF: Well, it goes back quite a while. Thirteen years ago we went through the first of a series of mergers. It was the beginning of the whole, never-ending cycle of utility mergers, so we were Delmarva Power and Atlantic City Electric, back in 1998, and we merged to create a company called Conectiv. As a result of that merger we created an HR Service Center, in 1998. If you think back to that time, the technology was not anywhere near what it is today. So, we home-built a knowledge center, we home-built a case management system – it was all pretty basic. We were a benefits administration center and a general HR Service Center – the classic contact center. Within a few years we started embarking on yet another merger, this one with Pepco, in DC, so the merger in 2002 became a merger between Conectiv and Pepco, to create Pepco Holdings.
This new merger scenario coincided with the beginning of the outsourcing boom in the HR world and it was decided that we were going to outsource our benefits admin. As a result, we entered into an outsourcing relationship with Aon, and disbanded the Service Center. In hindsight, what was overlooked was that benefits did not constitute everything HR. The remaining HR work was pushed back to a number of people, mostly the HR business partners, which dragged them into the administrivia of HR.
We continued like this until 2007, when we did a strategy session with an external consultant called North Highland, which came up with some interesting results: On average, our high-cost, professional resources in the HR business partner world were spending an inordinate amount of time – upwards of 30% – on HR transactions and HR routine enquiries. It took a while for us to react to that data, but we finally did last summer. Now that the technology is mature, and we can demonstrate the actual value-add of shared services, especially in HR, the business case is supportive of moving back to an HR service center.
BH: So the pendulum has swung from one end to the other?
KF: Yes. But the scope has changed in that we are not a benefits admin center any more. We are now an HR Service Center, and benefits are still outsourced. We’ve also outsourced some additional processes – pension, 401K, disability management, the classic things – so the difference in our scope now versus then is that we are managing a lot more third party providers, and the enabling technologies are so much more mature.
The other thing is that the HR Service Center is one piece of a larger HR transformation. We are transforming the way HR is done in this company and our operating model is shifting, with the role of the HR business partners, the role of the centers of expertise, and the role of HR services all evolving. It’s a fundamental transformation.
BH: Can you describe the key environmental pain points that you are addressing with the current strategy?
KF: Number one is our data quality – integrity of data. As data infiltrates everything, if you have any bad core data in SAP it shows up everywhere, so that’s our current environmental pain point. Also we have a very paternalistic culture, with a lot of hand-holding, so the transition to self-service will require more of a behavioural change than a technological change. We are also addressing pain points in our number of handoffs, and the way we touch our internal customers. I think those are probably the three biggest pain points.
BH: What is your approach – are you moving to a multi-tier service delivery model?
KF: Our model is designed along the classic multi-tier model: the tier zero portal, which is self-service; tier one, at your service desk (your routine enquiries, basic problem resolution, transactions, fulfillment); tier two is more complex problem resolution and any kind of appeal or mitigation; and tier three is your policy setting and your strategy.
BH: What are some of the guiding principles behind the design of your HR services center?
KF: Well, number one: We will be easy to do business with. Today, that is not the case! My mantra is that we will be streamlined, standardised and simplified. Nothing comes into the service center from either the corporate core or the HR business partners without proper and robust policy documentation, and procedure documentation, and we will have governance and quality around continuous improvement.
BH: What about the technical requirements that you need to meet, and privacy, or security, and all those sensitive kinds of issues? How are you approaching that?
KF: This has been a challenge for us. First of all, we are an SAP company. We implemented SAP around 1999, we have a lot of bolt-ons to SAP, and we’re comfortable with that. However, we have a very strict security and infrastructure policy, and it is posing some challenges in the SaaS (Software as a Service) model, especially with the single sign-ons and the firewall access for the non-networked user. Our security people have taken a firm stand.
BH: So, what’s the solution?
KF: Right now we are scaling back on SSOs (Single Sign-On). The security folks are not comfortable with some aspects. However, they are open to it, and it’s been a very collaborative relationship between Enwisen and our security folks. We’re getting the right techies into the room to find answers. We’ve accepted that our go live date of August 15th may not be everything we want it to be, but we are on a path to get there.
BH: How did you go about selecting an outside partner?
KF: I searched on the Internet, and kept coming up with this word, "Enwisen," and I thought, ‘What is this, who is this?’ Then I stumbled across the SSON conference brochure, made a cold call to an account exec, and said, "I want to hear more about you." I went to the conference in Orlando in October 2010, saw the demos, and said, "This is what we need!" I came back and signed a contract. That’s how quick it was. (Karen was referring to the SSON/HRIQ HR Shared Services Summit. For more information on the upcoming May summit click here)
BH: So you’re preparing for deployment now, with August 15th as your go live date. How is that progressing?
KF: As usual, there are some challenges. As a company we’ve been dealing with some serious reliability issues as a result of both summer and winter storms. The resulting political and community response has required PHI to shift our focus to fixing as many of these issues as we can before summer storm season. Therefore, the business is entertaining nothing new if it doesn’t directly connect with restoration and reliability of power supply. So we’ve scaled back our full-blown, big bang launch, into a soft launch, which in essence includes nothing more than the portal, the case management, and the phone number going live.
What’s not going to go live on August 15th are all the process changes we’ve been working through, since our processes are not in good order. So we’ll continue to tweak the customer facing processes behind the scenes, but we won’t roll them out to our customers until after storm season. As a utility, you are always at the mercy of Mother Nature, so our business readiness is a factor, as we prepare for deployment.
One of our other business challenges is that we have a short window to go live in before we hit Open Enrollment season. That’s another thing in the HR world: you do nothing in the Fall, because the Fall is all about Open Enrollment, so we needed to get this Service Center in and test it, run it through its rigor before Open Enrollment in the middle of October.
This is all about changing behaviours – more than it is about using technology, so we have a work stream dedicated to change management and deployment.
BH: What benchmarks will you be focusing on in the service center, Karen, and what service level agreements do you have?
KF: We are not establishing service level agreements with our customers in the first six months. We are collecting data, however. We have an analytics and metrics work stream that’s looking at which data in particular to track. We are now determining the metrics that we want to be able to baseline on day one, so that we can turn these into service levels with our customers – HR, the business partners, and the business.
BH: What have you learned through this period, and what would you perhaps do differently?
KF: It’s really important to have the buy-in of all stakeholders to the new operating model. One of our challenges has been that there are leaders that are not necessarily in agreement with this new model. Aligning our HR stakeholders to this change has been more difficult than aligning our business stakeholders. I think also, scaling your scope appropriately, so that you’re not trying to do everything. We have scaled back twice on our scope, due to business readiness issues, and, quite frankly, our readiness also. We want to make sure that what we do on day one is successful.
I guess the key lesson would be: don’t underestimate the magnitude of the change when you’re putting up a service center, because it’s so different for HR. It’s not just the creation of the service center. The roles are going to change, in the centers of expertise and on the business partner side, and they are both partners in this journey.
BH: Thank you, Karen, for taking the time to talk with me today.
About Karen Francks
Karen Francks is the Manager responsible for the HR Services & Disbursements teams at Pepco Holdings, Inc. (PHI). PHI is a holding company for three utilities in the Washington, D.C. and mid-Atlantic regions. She joined PHI in 1981 and has held prior positions in Customer Service, Safety, and various Human Resource leadership positions.
Karen’s most recent position was created in the Fall of 2010 when PHI completed a major reorganization that resulted in the creation of a Support Services function. Within that new function Karen has responsibility for various HR services, Accounts Payable, and Payroll. The creation of this new organization officially began in January 2011 and is progressing nicely!
Karen graduated from Goldey-Beacom College with a Bachelor’s in Business Administration and from Widener University with a Master’s in Human Resources. In addition, she is also a certified Senior Professional in Human Resources (SPHR) and a Birkman Consultant.