Enabling Technology

Trading Up

Risk is something they’re used to at the American Stock Exchange, but it usually occurs on the floor. When the AMEX’s hr chief decided to outsource, she found that the back-office gamble was well worth the rewards by partnering with checkpoint hr.

by Andy Teng

Today, the manic pace that used to pervade the floor at 86 Trinity Place in Manhattan has been replaced by a more subdued atmosphere as electronic automation has met much of the need for manual intervention. Similarly, within the back offices, HR Vice President Catherine (Katie) Casey is enjoying a more leisurely pace of corporate life after the AMEX underwent a significant transformation during the past two and a half years in which the exchange was spun off from the NASD and sold to its members. During the transition, Casey served as the task master in charge of creating a standalone payroll function to serve its nearly 500 employees—most of whom are paid by the hour—and some 200 retirees who also receive regular checks. Casey faced no small challenge because at the time she was handed the project in late 2002, her bosses allowed just little more than three months to complete the transformation, which required the AMEX to wean itself from the payroll services provided by the NASD.

“My biggest fear was that people were not going to be paid and that there weren’t going to be any paychecks,” recalled Casey, who looked to outsourcing as the solution. Despite the doubts of a number of naysayer—whose ranks at times included herself—Casey with the help of Edison, NJ-based CheckPoint HR managed to have checks cut on December 26, the day after Christmas. In the three years since, the exchange has relied on its payroll service providers to keep the employees happy, much to Casey’s surprise.

“When I look back on the fact that I undertook this in September with an absolute drop-dead date of December 26, I must have been out of my mind,” she reflected.

On any given day, tens of millions of equity shares are traded at the Amex. Add in bonds, exchange-traded funds (ETFs), and options, and you’ve got billions of dollars changing hands each year. The institution has grown markedly over its century-long history, partly because it relies on staffers to come up with innovative products and services. The exchange has always been a high-pressure environment in which to work, but when the NASD, decided in 2002 to spin off the AMEX, Casey and the rest of her department were about to feel a different kind of pressure.

Under NASD ownership, many HR functions were processed through the parent company’s HR department and charged back to the AMEX at what Casey said was a high rate. These costs included PeopleSoft and HR and benefits administration costs. Even before the divesture was announced, Casey said she thought her department could have realized savings by moving these functions out of the NASD.

When the decision to sell was handed down, Casey had no choice but to begin planning the transfer. The AMEX was faced with a number of critical questions: how to shift payroll functions from the NASD without disrupting the employees; until a buyer is found, what sort of HR system can effectively bridge the exchange’s interim needs; and with a small existing staff, how can Casey accomplish all of these goals by the December 26, 2002 deadline?

“It was more work and more risk because it wasn’t really starting with a clean slate. Because we were still owned for the next two years by the NASD, yet we had separated out this function and reintegrated it back to the AMEX. And we weren’t certain who the new owner of the AMEX was going to be,” she recalled.

The answer came from the company’s benefits consultant, which recommended CheckPoint HR as an outsourcing provider. The concept was new to Casey, who confessed that she had no prior experience with payroll. A former vice president of HR at Merrill Lynch, Casey was venturing into new territories with little time for mistakes and an unclear future migration path.

The outsourcing route seemed like an immediate, yet risky solution, especially considering the short time allowed to make the transition. But the rewards were clear. Offloading transactional functions such as payroll meant it could reduce headcount in the HR department, shift personnel to more strategic tasks such as recruitment, or both. Moreover, under the NASD, employees’ complaints about paycheck errors were plentiful—an ironic problem for a business that values financial accuracy above everything else. Another eventual benefit that Casey would later come to realize would be the expanded suite of value-added services that CheckPoint HR could bring to the table, items such as e-time cards and employee self service.

Still, outsourcing was a foreign concept that required lots of scrutiny and the blessing of upper management. To get corporate buy-in, Casey solicited the input of numerous colleagues and executives, some of whom weren’t especially keen to the concept. In the end, however, she sold the idea, but not without some clear warnings from the top.

“Our chairman and president said, ‘We think this is the right move, and you’re going to rechannel your existing headcount so we have more recruiting strength at a time when we were in a real competition for talent. We’re going to let you do it, but if you’re not going to pay people, that’s going to be a real problem. So you have to have a lot of confidence that you can get this done,’” she recalled. “I kept on thinking, ‘What if no one gets a paycheck on January 5? And I’m putting my trust in people whose pay I don’t control or whose review I don’t write.’ I’m putting my trust in a group of people in New Jersey somewhere. They’re not even a subway ride away, which gave me a little bit of pause.”


Overcoming those initial fears and convincing executive management the benefits of outsourcing is something that Casey shares with other HR executives who have also taken the same path. While the decision-making process to outsource was not unusual, the AMEX was clearly unique in its needs. Companies that decide to do so aren’t usually under the same compressed timeline that the NASD mandated. Furthermore, choosing a platform without knowing whether it needed to be integrated into another system added to the uncertainty. Additionally, the exchange operates under strict Securities and Exchange Commission (SEC) regulations, so compliance and security issues were especially important. An outsourcing provider must meet all of these and other mandates set by the AMEX.

For the service providers, it wasn’t an ideal outsourcing contract. To begin with, because of its uncertain future, the exchange initially could not commit to an agreement for more than a year at a time. The dilemma, as she explained, was that if the exchange were sold, it might have to sever its outsourcing arrangement. The vendor faced a potentially short-lived deal. Furthermore, the provider must have an adequate IT infrastructure and appropriate security and disaster recovery plan in place because of regulatory requirements. Lastly, because the benefits data didn’t come from the actual user, it needed to work with, in essence, two clients. Even Casey realized that she was looking for an iffy deal.

“Quite frankly, we just weren’t sure. We were an organization that’s up for sale. We didn’t know what was going to happen,” she said. “For these guys to take us on, it was a leap of faith.”

Over the next three months, Casey’s team and CheckPoint HR worked feverishly toward the transition. This involved an initial audit of CheckPoint HR’s data center by the Securities Information Automation Corporation (SIAC), the premier securities IT firm that runs the computer systems and communications networks for the AMEX and New York Stock Exchange. This was an important first step in assuring CheckPoint HR’s IT capability. The project then hinged on the NASD for the all-important employee data, which also require thorough filtering.

“We had to make sure the data on their side was sound so we could begin the mapping process. Once the data was in place, CheckPoint HR was able to use its proprietary automation tools and place the date into CheckPoint HR’s HRIS application,” recalled Steve Rosenthal, CheckPoint HR CEO.

Beyond the data, however, CheckPoint HR also had to provide the AMEX with its own benefits platform and tools for enrollment. “We had to build them an enrollment application that they were able to put in front of all their employees,” added Tim Padva, CheckPoint HR’s president. “The implementation process tends to be labor intensive from CheckPoint HR’s side. It wasn’t just executing payroll but building a box wide enough to accommodate all the data.”

Further complicating the task was the pay structure of the workforce. With union rules in place, steep increases needed to be considered, workers came in at different hours of the day and night, and a significant contingent of employees had no computer access.

Piece by piece, however, the outsourcing transformation fell into place, nudged by a lot of elbow grease and overtime. (Casey recalled missing Christmas Eve dinner that year.) However, when the deadline rolled around, payroll had been completely shifted to CheckPoint HR, and the employees were none the wiser. Although some initially reported minor errors in deductions, everyone was paid the first week in which CheckPoint HR took over.

Since then, the outsourcing accord has kept the exchange’s payroll function rolling. It not only has freed the organization from worrying about processing checks but also cut HR’s headcount and allowed existing staff to focus on more strategic functions. To the employees, the transformation was transparent, and the number of errors dropped sharply.

“I personally got an hour back everyday,” Casey said. “I was able to also eliminate one full-time head thanks to the efficiencies we gained on this, which won me some praise from our CFO and gave me some budget
dollars I can redistribute.”

Furthermore, the department was able to shift more of its attention to recruitment and other strategic functions, which provided more value to the AMEX. Recently, the organization switched to using electronic timesheets instead of conventional paper ones for its workers, further reducing HR’s workload.

All this occurred even as the AMEX was sold back to its members at the end of last year, which became the ideal turn of events because, as a standalone organization, it had no concerns about integrating HR with a parent company. By outsourcing in 2002, the AMEX actually gained a three-year headstart in establishing its payroll and benefits functions.


The crazed weeks leading up to the handoff required Casey—a high-energy woman who follows professional basketball—and her staff to spend many long days and some nights at the office to ensure a smooth transition. At times, Casey recalled, her usually dapper project leader was so harried that she began showing up in the office wearing the same
outfits as the day before.

The lesson here is even when functions are outsourced, clients can’t afford to take a hands-off approach. Expect lots of upfront work, and address problems as they surface. Most importantly, she added, make sure in-house staff is kept in close communications with the outsourcing partner so there are no surprises leading up to the commencement date. Additionally, make sure a clarity of mission is instilled in all stakeholders.

“It was a total team effort because I had no payroll people here. So [CheckPoint HR’s] people came out, and we had everyone’s cell phone numbers. My people went there,” Casey said, adding that Rosenthal went as far as participating in a conference call while on vacation.

With the exchange now under the ownership of its members and on more stable footings, Casey said she can turn her attention to value-added services that CheckPoint HR has been champing at the bit to provide. Self service, a tool that HR professionals are slowly adopting, is the next frontier for her department to explore. Although she concedes that CheckPoint HR has for some time offered this service to her, Casey has been slow to embrace the concept—in part because of the recent sale and because of the large group of employees without computer access. Other value-added offerings such as recruiting tools are giving her department more capabilities as well.

Still, Casey said, with the exchange celebrating its one-year anniversary of its sale to members on December 30 and the dust finally settling, she plans to begin making more changes. “I don’t believe I’ve tapped into [the offerings] fully and it was never the plan to tap into it fully,” she said. “I wanted to try this on for size and see what would happen, but hopefully, as 2006 comes, we’ll be looking to take advantage of some of their other services.”

Down on the exchange floor, as the final minutes of the trading day wound down, Casey recounted the history of the AMEX. With the ranks of the traders thinning quickly moments after the close, she pointed out how the exchange has grown its offerings over the years for the myriad of risk takers in search of financial rewards. And not unlike them, Casey’s gamble on outsourcing payroll has resulted in its own returns.

“You don’t get a lot of rewards for having a great payroll team,” she reflected. “Whereas if you have strong recruiters who can fill jobs for management desperate for talent, it’s easy to get a lot more rewards; plus it’s easier to have a greater influence in the organization.”


With just over three months of time to transfer payroll functions to its outsourcing provider, HR professionals at the AMEX faced what seemed like an insurmountable deadline in 2002. At least that’s what HR VP Catherine Casey thought.

“If you were counseling people on how to basically shift payroll providers, you wouldn’t say to start after Labor Day and finish the day after Christmas,” Casey advised.

But for the exchange’s provider, CheckPoint HR in Edison, NJ, it was business as usual. Tim Padva, the president of the company, said while the AMEX might have considered it a compressed timeline, it is typical of the projects the company handles.

“This is our business. We go through it all the time,” he pointed out. “It happens to be a different type of scope because we were dealing with [former parent company] the NASD, which made it more complex.”

CheckPoint HR was able to transfer payroll processing to its operations, which included a data center and a mirror site in Clearwater, Florida, by the December 26, 2002 deadline. Since then, the company has processed AMEX’s payroll for the past three years. Along the way, the provider has expanded its offering to include recruiting tools and employee self service, which Casey said the exchange will begin to use in 2006.

Although the AMEX’s needs posed some unique challenges to the provider—an unusually high requirement for security and disaster recovery measures, coordinating data migration from the NASD, and the fact that the exchange was up for sales—project team members said they stuck to fundamentals to ensure a smooth transition. Thesesteps included:

  • Determine the scope of the project as soon as possible and execute quickly. Steve Rosenthal, CheckPoint HR’s CEO, said the client and provider must closely adhere to an agreed upon timeframe. “A lot of time is devoted to the implementation plan and process. When the scope changes, there are 10 more things that need to happen, and you must have the capability and flexibility to quickly change course and redirect the effort,” he said. “If you lock the data down as soon as possible, you insulate yourself from a changing situation, which is the No. 1 reason conversions don’t go off too smoothly or within a designated timeframe.” Casey added that to meet deadlines, both the client and provider must designate a leader on each side to drive progress.
  • Maintain data integrity. Casey said it’s critical that clients supply their outsourcing partners with the cleanest data possible. In her situation, CheckPoint HR had to source the data from the NASD since it had been the one providing payroll functions to the AMEX. This added a layer and required extra efforts to clean up the information sent to CheckPoint HR. “If you are moving away from a parent company, and you are insourcing a solution, or reintegrating a function, the integrity of the data has to be really high. CheckPoint HR could only spit back to us what they got from our parent company, as opposed to what they got from us. So it was a very difficult conversion.”
  • Learn to walk before you begin to run. Although its provider offered a cornucopia of value-added services, the AMEX was slow to accept them. As Casey explained, many of the exchange’s workers had no access to computers; furthermore, they could only absorb so much change at once, so it may be more effective to approach things slowly.
  • Communicate, communicate, communicate. Get home and cell phone numbers, private extensions, e-mail addresses—whatever it takes to keep in touch. Rosenthal recalls dialing in for a conference call while on vacation at the Epcot Center in Florida. “If there were ever any confusion, someone was picking up the phone or shooting off an e-mail, so there wasn’t this struggle of understanding how are we going to make them understand what we want,” Casey added. In the end, she added, the basic lessons taught in business school applied to the transition. While she said the project deadline still seems impossible even in retrospect, she credits the work of staff members at the AMEX and CheckPoint HR for executing in time. “The fact that we were able to do it in that short of time really illustrates what great team work there was and what a good fit the solution was.”
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