When Hercules faced the retirement of its existing SAP system, it turned to an external solution.
Address: 1313 N. Market Street,
Wilmington, DE 19894
Web Address: www.herc.com
Number of Employees: 4,600
Description of Primary Products or Services:
Chemical specialties for making a variety of products for home, office, and industrial markets.
Date of Outsourcing Commencement: August 2007
Please describe the circumstances that led to your company turning to outsourcing of your payroll, benefits, and HR services.
Hercules was facing the need to upgrade its outdated SAP 3.1i system. In particular, SAP support for the 3.1i HR module was being discontinued. Making the jump to mySAP 2004 was technically and functionally challenging. Not only were we weighing the pros and cons of this significant upgrade, but we were also interested in “getting out of the business” of future HR module patches and upgrades. Of equal significance was the company’s strategic shift in changing how to provide support functions to the businesses. The goal was two-fold: focus HR on more strategic contributions and less on the routine transaction-related activities, and transform the support functions to be more scaleable and variable.
What were your initial concerns and worries about engaging services?
The expansive scope of the HRO implementation was cause for concern. The implementation involved three significant HR areas: payroll, time and attendance, and health and welfare administration. Prior to the HRO implementation, time clocks were nonexistent at most U.S. locations. Introducing the use of the time clocks represented a significant cultural shift for the company. Of similar cultural and behavioral challenge was the advent of the self-service requirements/components introduced as a result of the HRO initiatives.
How did you decide on this set of external services?
Defining the set of external services was driven by two primary factors: Eliminate the need to upgrade our SAP HR system, and outsource those HR-related activities that were transactional and administrative, thereby allowing the HR organization to focus on providing more strategic services to the business.
How did you decide which provider was best suited for your needs?
Using an RFP process, a Hercules team was charged with selecting the partner whose solution best met our immediate HRO needs, but also presented the potential opportunity of expanding the relationship globally. Cost was a factor but not the primary one. Given Hercules’ size, it was important to partner with a provider who valued our business and who understood the importance of the HRO initiative to the long-term direction and strategy of Hercules. Lastly, the “personalities” of our two companies had to fit together.
In retrospect, would you have changed the tactical or strategic approach you took?
From a strategic perspective, the decision to outsource the three areas of HR remains sound. Tactically, if we had to do it over, we would have introduced the outsourcing in phases, thereby reducing the simultaneous layers of complexity and allowing the employees to better ease into the cultural and behavioral changes required. Additionally, we would have improved the implementation by being more realistic about the time required.
What advice do you have for others?
Key lessons learned include the following: Strong dedicated project management skills are critical to successfully implementing a project of this level of complexity. No matter how comfortable you feel with your partner’s abilities, do not deviate from adhering to a disciplined approach to defining business requirements, the blueprint creation, and a formal review and approval/sign-off. If implementing time and attendance and payroll for multiple plant locations (particularly if various labor contracts exist), pay close attention to the complexity of translating payroll practices into a useable “rule set” and the associated testing involved. In designing your outsource solution, focus on the manual versus automated points of interface and the hand-offs not only between you and your partner but also within your partner’s organization, systems, and processes. Don’t underestimate the change management and training needed if your employee population is not accustomed to a web-based, self-service approach.
Anne Schumann is vice president, information technology and HR, at Hercules, Inc. She joined the company in 2000 as vice president of its shared services center. Previously, she spent 11 years with ARCO Chemical Company in various management positions in finance, HR, and global business operations.