Avoid Common Pitfalls Through Transition Management

SSON’s Barbara Hodge interviews Karen Slakey Hull, Associate Vice Chancellor of Human Resources & Organizational Excellence, UC Davis

Barbara Hodge: Karen, could I start off by asking you to give us some background to the shared services center that you are currently implementing at UC Davis? What were the drivers for moving to this model?

Karen Slakey Hull: Well, first off: We are actually still in the implementation phase, and plan to go live in mid-February of 2012, when we’ll be running a multi-functional shared service center covering finance, HR, payroll, and IT. We have the IT area broken into a couple of phases. We will consolidate our helpdesk service desk function and that will go live in late March, and then we will develop a program management office, to be implemented approximately 12 months after that.

To offer some background on why UC Davis decided to opt for Shared Services … in the State of California, the budget, like many states, is in a very grave condition. Beginning in 2007, California began experiencing budget shortfalls, which, in turn, have had a dramatic effect on the University of California, as a whole, and therefore on each of the University of California’s campus locations. At UC Davis, for example, our funding for administrative units across the campus has been reduced, on average, by about 30 to 35% over that four-year period; and we anticipate further reductions. Back in spring 2009, foreseeing that the State’s economy was not going to recover anytime soon, we began to look at what service model could be deployed that would provide for a sustainable administrative infrastructure with quality service and at lower cost – and a structure that could be sustained through good times and bad. One of the things that we observed in Higher Ed, which I think is typical in many organizations, is that in good times, we invest in administrative staff, and in bad times, we cut administrative staff. Looking over the past 15 or so years at the University of California, there have been at least as many good years as bad, from a budget point of view, and we just can’t continue the seesawing of staff, up and down. Also, regular across the board reductions were eroding our core services that are required to sustain the organization. So we began looking at different administrative models, and shared services rapidly emerged as the model which we believe will allow UC Davis to continue to prosper as a premier research institution. We’re really excited about its potential.

Why did you choose to go with a multi-functional shared services from the start? Would it not have been easier to start with one function?

KH: The reason we pursued a multi-functional approach is because, on the scale of things, we have a relatively small population as compared to a typical private sector implementation. The total population that we hope to ultimately serve is about 20,000 employees, so in order to more fully leverage the technology infrastructure and the management structure, we felt it was optimal to move toward a multi-functional shared service center, from the start.

What’s the program management office’s role?

KH: That will consolidate application development, and develop programming standards for our administrative divisions. I should also explain that we have approached this by first consolidating the functions within the administrative department divisions at UC Davis. So, basically, we want to work out the bugs before we integrate our academic community into the shared service center model. In other words, the February 15th launch will serve a population of about 6,500, but ultimately we hope to bring in the remaining parts of our campus.

Can you explain this rollout decision in more detail?

KH: Of course. Our structure is divided between academic departments and administrative departments. The administrative departments manage the infrastructure of the campus, including areas such as student services, development, information technology, facilities, HR, and finance. Those are some relatively large, complex operations. We are consolidating into a shared services center the business functions associated with payroll, finance, HR, and IT, for all of those administrative divisions. That will create the shared services center structure.

What are some of the change management challenges that you’ve been going through? Academics are known for being a little bit resilient to change. Has that been true at UC Davis?

KH: I guess I would approach the general issue of change management first, and then look at the academic community second.

Obviously, when you’re implementing a change of this magnitude, the first reaction is one of resistance – "why do we have to do this?" A lot of people didn’t think we’d actually do it, and so they sat on the fence and didn’t really pay much attention. We hired a consulting firm, ScottMadden, to do a business case for us. When we were doing the business case, what became clear was that this was a serious initiative, and that it was going to be executed. The Chancellor of our campus was also very vocal about the importance of this work, and it became obvious that she was a clear supporter.

I think one of the things we had working in our favor, relative to change management, was that workloads were increasing dramatically while at the same time the workforce was being reduced as a result of budget cuts. So it made it easier for our staff to recognize that we had to change our approach to work.

We also developed a number of programs to help our staff through this transition. We now have a comprehensive training program, over 22 hours, for staff who may want to work in the shared services center, covering what it’s like, the skills and attributes required, success factors, etc. I think that helped our staff move from a place of, "I’m being done to" to a place of "I want to work here". They began seeing themselves as part of a new future. I think we’ve really helped move staff from that place of resistance to one of curiosity and excitement about the shared services center.

How did you support the changes that were happening through communications?

KH: We spent considerable time on our communications strategy. We now have four communications per month – two that go out to our entire campus, and two that just go to administrative staff – that provide regular updates on the initiative. We also have a comprehensive website, where people can submit questions at any time, and where we provide project updates. The other thing we have spent significant effort on getting right is a very strong governance committee. We have a multi-tiered governance structure, which has helped connect the work that we’re doing in the project management office with our stakeholder groups.

And what about the second part of the "change" – relating to the academic community?

KH: Yes, I was going to talk about that. So, like most organizations, universities, too, have one part of the organization that is a key driver for success. In our case, it’s our faculty, as we are a very large research institution. We have a very large physical infrastructure for that research program, so when we are implementing the shared services center, we cannot afford to have that research enterprise disrupted. Our faculty is rightfully concerned that this kind of change would disrupt their research programs. Like all of us, they tend to resist change; they like having their support person right down the hall. However, the person who was right down the hall is now supporting many other people, and their workload has increased dramatically, so the good old days are gone – and the faculty is still adjusting to that. We’ve also done some consolidation of the academic administrative structure, which will help facilitate the integration of the academic community into our shared services center, but that certainly presents a challenge to us. Our faculty really resists the idea of centralization, because the old days of centralization carry really bad memories for them; but shared services is not centralization.

Karen, you describe an all too common hurdle faced by SSCs across the private as well as public sectors. But from the public sector perspective, what do you think makes the implementation of a shared services model, and the consolidation and standardization that goes with it, more challenging than for the private sector?

KH: The public sector and higher education tend to be very stable organizations and we don’t have the fluctuations in staffing that is so common in private industry. What’s difficult for us, though, is that we are not focused on continuous process improvement, and so we don’t orient our employees toward continuous change. Those two factors, the stability of the staffing model and the lack of focus on continuous process improvement are the things that most significantly impact our ability to lead change in this sector.

So what kind of managers do you think that the public sector needs to be developing and hiring to bridge this gap?

KH: This is not answering your question directly, but one of the things that we have done in our project design – in fact it is one of our primary goals – was to build leaders in our organization … to build people who become more oriented to continuous process improvement and change. The business case that ScottMadden provided set very clear expectations regarding the staff reductions as a result of shared services. It gave us a "target" of sorts, and the project teams had to design a structure to meet that target. Over the course of this past year, what I have seen is that people who had what I might call a very traditional view of how we organize work and change … I’ve seen a dramatic shift in their perception. So in answer to your question, the more we can do to give our employees the chance to actually use their intelligence, their creativity and their resourcefulness to execute a project like this, the more we build the sorts of managers and leaders that we need going forward, within our organization.

The training program that you mentioned earlier – did you develop that internally, or is it one that you’ve bought in?

KH: No, we developed that ourselves, and we provided all the instruction, too, with the help of some outside instructors. We had over 300 enrollments in the program, and to date 100 completed the entire program. The training was set up in modules, so a person could go to a specific class, but not have to complete the entire program.

My last question concerns transition management. I know that you’ve applied this as part of your shared services implementation. Can you explain how this worked?

KH: Yes, transition management was a really important aspect of the change program, as we were first and foremost concerned about creating no disruption to our customers. We simply could not afford that.

So we developed a roster of every employee in our organization that performs HR, Finance, Payroll or IT work, and then we looked at the primary functions affiliated with that work; in other words, in Finance, we looked at processing accounts payable, receivables, travel & entertainment, and purchasing, as examples; and then, for every employee, we identified how much of their effort goes towards those types of activities, and what other work might be affiliated with their duties. This helped us understand the current employee job structures in the areas that we are consolidating. For example, how does removing work from departments affect employees in that department? In some instances, you’re going to need those employees to do other critical work, but in other instances, an employee’s total work leaves the department. So what we’re in the process of doing is meeting with every department, and evaluating their roster of employees affected by the move to shared services, individual by individual. That will tell us where we need to form partnerships, where we are likely to have work remaining in the department, and where we are likely to have staff reductions. So part of it is just understanding the big picture of the impact of the shared service center.

Simultaneously, we have a temporary employment pool at UC Davis, which provides very good temporary staffing in the area of Finance, HR, Payroll, and IT. We are currently expanding that temporary employment pool, so that as we move employees into the shared service center, but while the work still remains in the department, those positions will be filled with temporary staff for a period of 2 months or so.

Could you explain why you’ve chosen this route?

KH: Let me outline our timelines for a moment. We intend to bring staff into the shared services center on December 12th, and for the following two weeks, they’ll be in immersion training for the new systems, the new processes and procedures, etc. We’re implementing a number of new technology systems to coincide with the shared services center. So while the staff will have been taken out of their original departments – the work will remain in the departments.

After the training is complete, then we go to a pilot phase, where we pull in work from the departments on a limited basis, and we test our systems, procedures, and technology, with that work. We’ll do that for a couple of weeks. Then we’ll go to the phase where we’re bringing in a larger portion of the work, more diverse types of work, and, again, we’ll be testing our systems, procedures, and technology to make sure everything is working well, and that our staff are appropriately trained, making adjustments as we need to. And then we go live with the shared services center on February 15th, bringing in all of the work into the organization.

So you can see that there are periods when we will have taken staff out of the departments, but the work remains; and then the work slowly comes out of the departments and goes to the shared services center, until all of the work is in the shared services center. For that period of time, we are beefing up our temporary employment pool. On a separate track, we also have a lot of retirees who are already trained on our systems and know the work. We’ll be deploying both temporary employees and rehired retirees to support work during that transition period.

You are taking an extremely conservative view, I suppose, a very careful view, to launch, aren’t you?

KH: Yes, because if we don’t launch to the highest quality … it will be like swimming up Niagara Falls to get the academic community into that shared services center. We cannot afford any mistakes.

I’m very impressed with your approach to transition management, because you’re obviously taking on board higher costs.

KH: Yes, you’re right about the higher costs and we are very aware of that. But this is a very critical transition with a lot of fears and concerns. It needs to be done right with specific efforts designed to mitigate the impact to departments. Departments are losing people that you valued working with, people are getting laid off, people feel like, "well, gee, I might as well retire," when they don’t really want to. It’s just a really hard time. So what we’re trying to do, where it’s economically feasible, is soften that. For instance, in the ScottMadden plan, monies had been allocated for severance. Well, it turns out we’ve had a lot of natural attrition, and so the severance money that had been earmarked is now being allocated to funding the temporary employees inside departments. So in other words, they don’t get a double hit whereby we take their staff AND it costs them money to fill in with temporary workers. We are trying to be fair and at the same time foster a positive view of shared services, because that’s really important. We’re trying to mitigate the uphill battle for the shared services center, because they’re the ones who have to overcome whatever negative perceptions we create through our processes and the implementation.

I imagine that you’ve got much greater hurdles to overcome, internally, than corporate America might face.

KH: I think so. In a corporate environment, typically, the CEO says, "This is the way it’s going to be, and that’s that." In both public sector, and higher education, there is a much more collaborative approach and stakeholder buy-in is more critical. We cannot have projects fail because we haven’t had the foresight to pre-empt problems.

Barbara Hodge: Karen, best of luck with your implementation.

If you are part of the public sector, and want to drive improvements through your organization, be sure to stay ahead on shared services strategies: find out who is leading at Shared Services & Process Improvement for Higher Education, Healthcare and Government, in the US; or the Public Sector Transformation Forum in Australia – both running in November. Also, don't miss the UK's Procurement Transformation Summit – this is where a lot of attention will be focussed in the future.