Rather than put off its outsourcing engagement during its massive acquisition of maytag in 2006, whirlpool plowed ahead with its transformational efforts. Two years later, the company is reaping the rewards.
When we last checked in with global home appliance maker and distributor Whirlpool two years ago (see “Awash in HRO,” September 2006 issue), it had just flipped the switch on its HRO engagement with Convergys. Since then, the 12-year deal has now become lucky number 13. Pleased with the progress of the global rollout of its HR transformation strategy, Whirlpool tacked on another year to the contract.
A 13-year accord is long in the HRO business, but in the case of Whirlpool, which had substantially enlarged its market presence and operations across the globe with the acquisition of rival Maytag for $2.7 billion in 2006 shortly after its HRO deal was announced, the deal is just the right length. This is not grandma’s Whirlpool anymore, although the bored Maytag repairman remains a constant. The company is now the world’s leading manufacturer and marketer of major home appliances. Among its branded products are U.S. household names such as Whirlpool, Maytag, KitchenAid, Jenn-Air, and Amana.
Well-known European appliance brands include Brastemp, Bauknecht, and Consul. During the past decade, it has transformed itself from a regional manufacturing and trade-focused business into a global, consumer-driven enterprise. The problem was that HR hadn’t kept apace with this growing global footprint.
With a strategic objective of understanding and fulfilling customer needs, developing highly branded solutions, and continuously improving productivity and quality, its old-school HR department that focused on functions and not strategy no longer fit the company’s new global profile.
Enter Convergys, which signed on to provide multi-process HR support in compensation, benefit administration, payroll administration, employee data management, HR administration, employee and manager self-service, and global mobility functions in the U.S. and four European countries—Italy, Poland, France, and Germany. So far, the phased-in HRO project has been running as smoothly as a brand new Maytag dishwasher. The U.S., Italy, and France went live last year and early this year on the new HRO platform; Poland is set to go live by June; and Germany will be live by this November.
Although Whirlpool—with $18 billion in sales and ranked No. 127 on the Fortune 500—has operations in 32 countries and sells its appliances and other products in more than 140 markets, these four European nations, which are home to most of its manufacturing plants, represent roughly 70 percent of its employee population in the region. Altogether, the company boasts 73,000 employees and nearly 70 manufacturing and technology centers worldwide.
At this point, the company has no plans to migrate the HRO engagement to its other locations around the world, although the subject is still on the table. Still, with more than 50,000 employees affected by the outsourcing strategy, the deal ranks as one of the biggest ever in the HRO universe.
The outsourcing strategy was intended to help Whirlpool’s HR strategically support the company as it grew geographically, in addition to harmonizing and defining the role of the retained HR organization. The latter was made challenging, of course, by the merger with Maytag. While Whirlpool in the U.S. utilized an HR system provided by SAP, Maytag was on a different platform altogether, making services such as employee time and attendance a different experience in each location.
“We considered our various processes and recognized we had variations,” explained Nicki Sayward, director of global HR operations at Benton Harbor, MI-based Whirlpool. “We had disparate systems, be it payroll or master data systems, and wanted to improve our HR system platform. We decided which value-added processes we wanted to retain in the organization, and the noncore processes we would outsource. Most importantly, we wanted to support the organization’s growth strategy from a talent management standpoint.”
Convergys had strong capability in SAP, assisting the decision to engage the service provider. The provider also had a similar geographic presence to Whirlpool. With senior managers’ aggressive international expansion strategy in mind, HR decided to ink the outsourcing contract with Convergys on these factors primarily—not that the other tantalizing benefits of outsourcing such as cost savings, technology upgrades, and access to best practices didn’t also play a role.
“Outsourcing gives us the opportunity to leverage our resources (people and financial) to focus on key strategic initiatives such as talent management,” said Paula Whitesell, Whirlpool project director, Cost Leadership-PMO. “In addition, we were able to harmonize our HR policies and processes across all locations. Whirlpool has 13 manufacturing locations just in the U.S., and we needed to ensure we were being efficient with our HR processes.”
While other organizations go down the HRO path for cost savings primarily, Whirlpool brought up the subject last. “They were looking to transform their HR processes, rather than give us ‘their mess for less,’” explained Alex Berry, senior vice president of client services at Cincinnati-based Convergys Corporation. “Most companies want that quick-hit savings in the first month from HRO. Our model, on the other hand, is all about best practices, bringing in standards and processes that transform an HR department into something better and more efficient while providing much stronger return on investment and total cost of ownership. That’s our vision, and they bought into it.”
Two other factors drove the engagement: the desire to build HR capabilities such as project management and supplier management, as well as a goal of leveraging metrics and data within HR acitivites in order to make better decisions. “We’re passionate about running HR like a business,” Whitesell said. Passion seems to be a Whirlpool prerogative—the company’s mission is “Passionately Creating Loyal Customers for Life.”
Having a goal in mind and executing on it—no matter how passionate the intent—are two different animals. Because the Whirlpool-Maytag merger occurred at the same time that the discussions around HRO transformation took place, Whirlpool faced the decision of whether it should put the implementation on hold until the two companies were fully integrated. It also hadn’t been certain if the acquisition would clear steep antitrust objections and if Whirlpool would best other suitors such as China’s Haier Group vying to buy Maytag. Despite these questions, the decision was reached to keep the HRO rollout on schedule—merger or not.
Once the decision was made, the partners had to tackle another pressing problem—the hodgepodge of labor laws and regulations across Europe.
“The biggest challenge we and other HRO service providers have in global engagements—though we have learned from past experience and are getting better at it—is the complicated legal and regulatory compliance issues one encounters on a country-by-country basis there,” Berry said.
In Europe, most countries’ labor laws and regulations are overseen and monitored by “works councils,” which have great sway over workforce rules and conditions. In a way, the works councils are similar to labor unions in the U.S., negotiating with companies on behalf of workers on issues such as worktime hours, pay, benefits, and so on.
“We have to constantly stay abreast of what is going on with the different works councils, as they vary when it comes to regulations they prescribe,” explained Will Colon, Convergys senior director of client services, whose job it is to stay on top of the subject.
To abet this objective, both Berry and Colon visited many of Whirlpool’s sites overseas, touring factories to gain a sense of the workflow, which they felt would assist the change management process required by the HRO transformation.
“These are folks welding hinges on refrigerators, who work in large warehouses, and who don’t have the time to pop open a PDA and check on their benefits,” Berry noted. “When going through the implementation phase of the engagement, the works councils had a great deal of concern how these employees would be treated in terms of their access to information on pension, payroll, and other functions now outsourced.”
The partners had an innovative idea on how to provide this information. “One of the unique things we did was build these kiosks at each of the sites where employees can go and have a dedicated phone line to the service center,” Colon said (see Center within a Center sidebar).
At the kiosks, Whirlpool European employees get support for their queries and needs from Convergys’ service center based in Budapest, Hungary, while its U.S employees receive support from Convergys’ service center in St. John’s, Canada. The Budapest service center is a multicultural hotbed of employees fluent in many languages. When a Whirlpool worker in Germany, for instance, inquires about payroll or another HR concern, he or she is put in touch with a German-speaking representative. The same applies to employees in France, Poland, and Italy.
“HR is a very human-centric business where you’re talking about personal things like paychecks and benefits, and people want to talk to people who speak the same language, are from the same culture, and have the same feel,” Berry said.
Change management has been front and center throughout the implementation of the HRO engagement. We quickly realized that a phased-in approach rather than a so-called Big Bang HR transformation would be a key to our success. Not only would this help employees and the HR community digest the new strategy, but it also would help us build the appropriate plans to make the change sustainable. The U.S. was selected as the first country to be fully phased-in. “We decided to go with the U.S. first because that is where the majority of our workforce resided. We believed that by focusing on the U.S. first we could leverage the learning before we go to other parts of the world,” Whitesell said.
Not all functions were outsourced at the same time, either; these, too, were essentially phased in. For example, payroll, benefits, and pensions were rolled out first in the U.S., followed by self-service a month later. As the partners migrated across the Atlantic, similar tactics were practiced.
“We wanted to involve users of the HR system as early as possible in the design phase for the system, rather than this simply be a lift-and-shift (from the U.S.),” said Manuela Adamoli, HR director for Whirlpool in Europe. “Change management in Europe was a key issue for us. We also wanted to stage the changes from a systems standpoint, believing that HRO is an enabler and not a solution to your HR problems.”
While Whirlpool was seeking standardization and harmonization in its outsourced HR functions, it also wanted to leave room for innovation. Through the relationship with Convergys, Whirlpool was able to launch and Employee Self Serve / Manager Self Serve site called People Tools. All employees (hourly and salary) can view and update information on line 24 / 7. The Oxford, MS manufacturing plant has stopped printing pay stubs since their employees (hourly and salary) can view their information on line. The idea was born in the division’s HR leadership team.“They embraced the technology they were given, came up with the idea, and volunteered to do it first,” Whitesell said. “The rest of our locations are now in a position to determine if this will be cost efficient for them, as well.”
Such out-of-the box thinking isn’t surprising at Whirlpool. Innovation is ingrained in the company’s culture. Delivering a continuous stream of innovation to consumers is central to its business strategy to ensure the company provides unmatched brand experiences, and this concept extends to HR. “To accomplish this, our people at every level are harnessing creative thinking,” Whitesell said.
Tying everything together in the HRO engagement is technology—the global SAP system provided by Convergys. Operating on a global HR platform enables Whirlpool to garner the critical information needed to keep the global workforce apprised and attuned from a talent management standpoint.
A United Stand
Several lessons have been learned so far in the engagement. Convergys, for instance, has a greater understanding of the need for metrics and measurements on both sides that take into account the management of employee emotions, Berry said.
“Critical to the success of the engagement is change management, taking the time to understand Whirlpool’s culture and business nuances before implementing the new HR system,” he added. “We also believe in a strong governance process, meeting with our counterparts at Whirlpool on a day-
to-day operational basis to track and solve the issues of that day.”
The partners say the engagement is still in phase-one status. Upcoming phases will help to further define best practices and provide other new lessons. With another 11.5 years left on the contract, there’s a lot of time left to really push the envelope.
|Center Within a Center|
| HR is a sensitive business, particularly when employees are used to walking down the hall to get answers about their pension, benefits, and payroll matters. When Whirlpool began the phase-in of its HRO transformation strategy almost two years ago in the U.S., Italy, Germany, France, and Poland, it took the subject seriously, developing an innovative solution to keep its employees apprised: a self-service kiosk.
Whirlpool’s rank and file, in addition to its managers, either now or will soon have easy access to answers about their most pressing HR concerns at the on-site kiosks.
“When they’re on a break, all they need do is walk over to the kiosk, which has a dedicated phone line and Internet access, to get what they need,” said Alex Berry, Convergys senior vice president of client services. “If they prefer to pick up the phone, they will have someone at the other end to answer their questions in their own language, even though that person is sitting in our service center in Budapest or in Canada.
Otherwise they can simply use the Internet access to look for whatever they need.”
In part, the kiosk was a response to concerns raised by European works councils charged with overseeing labor in various countries. The councils wanted to know how employees would obtain information on vital HR issues like pay and pensions. “Most workers, particularly blue collar ones, don’t have an hour to kill on their HR needs,” Berry says. “They need prompt answers that are crisp, accurate and succinct, which the kiosk provides.”
Manuela Adamoli, HR director for Whirlpool in Europe, said overseas employees can stop by the kiosks to fill out forms relating to their pay, pension contributions, and other HR-related elements.
“We see employees on their shifts take a break to visit the kiosk on a regular basis,” said Adamoli. “It’s been great from both a change management perspective—providing answers to questions workers have about the HRO engagement—and on an ongoing basis to handle their HR needs.”