Following an accounting scandal that fundamentally changed the culture at software giant CA, HR is emerging stronger than ever thanks to the dogged determination of its leader and the value-added services delivered by its HRO providers.
Andy Goodman, the senior vice president of HR at computer software giant CA, might be a disciple of Yankee great Yogi Berra, who once declared, “This is like déjà vu all over again.” That’s because Goodman has lived his own déjà vu moments over and over again during the past six years at the Islandia-based company, which has undergone a profound transformation marred by scandal, wholesale leadership change, and now optimism for future global growth. And through it all, Goodman has been at the center of the tumult, selling and reselling his vision of the perfect HR organization at CA.
It’s not that Goodman likes to repeat himself, but under the extraordinary changes CA has experienced since 2002, he’s been forced to be steadfast in his pitch about HR transformation. You see, shortly after he arrived at the company, its CEO, most of CA’s senior leaders, and executive board were forced out in one of the most thorough corporate house cleanings in recent years. In fact, Goodman since 2002 has been the one constant in an otherwise swirling dervish of corporate chaos, serving as CA’s pillar even as the beams were coming down around him. And along the way, he’s turned to HRO to help shore up his efforts, turning to NorthgateArinso and a number of best-of-breed subcontractors to deliver a host of services.
“The vision of what I came in with five-and-a-half years ago and what we’ve tried to realize through the years have been very consistent and very staged in terms of what we’ve had to do and the challenges we’ve had to take on,” Goodman recently reflected from CA’s resort-like corporate complex on New York’s Long Island. “The difficulty was doing it through the turbulence of this organization—exiting the entire executive team, rebuilding the entire executive team, getting the talent and stability here, and getting through the deferred prosecution agreement. There were three CEOs and five CFOs and a whole bunch of executive turbulence and organizational turbulence to get through, but we stayed pretty consistent to get to where we are right now, and that was a truly transformational journey.”
That’s right: prosecution. If you thought you had it tough pushing HR transformation to C-level sponsors, try being Goodman, who came to CA during one of the worst possible times. Following an accounting scandal that resulted in the company paying $200 million in restitution and the prosecution of a number of senior executives including then-CEO Sanjay Kumar (he was sentenced to jail for 12 years in addition to being ordered to pay restitution of $800 million), CA was so hobbled that it was forced to clear out its executive teams and even went as far as change its name from Computer Associates. And amidst all the chaos, Goodman was able to mostly adhere to his schedule to transform CA’s HR from a patchwork of disparate, home-grown processes around the world to a standardized, model of efficiency. At the same time, the company has trimmed its workforce from 15,000 in 2004 to just shy of 14,000 spread out throughout North America, Asia, EMEA, and Latin America.
At the heart of CA’s HR services today is a comprehensive HRO contract headed up by NorthgateArinso, the global HRO giant borne out of last year’s marriage between U.K. software specialist and Belgium HRO specialist ARINSO, which also had a sizable U.S. presence even before the merger. Signed in December of 2006, the five-year, $60 million deal with a two-year extension option covers HR administration in 30 countries and recruitment process outsourcing, tuition reimbursement, and benefits administration in North America. The outsource arrangement has helped the software maker to fundamentally elevate HR services and process way beyond what Goodman—the first HR professional to run the company’s HR organization— started out with.
In the decade or so since HRO adoption took off, stories of successful implementation have become commonplace, almost blasé to the casual observers. CA’s transformation, however, is anything but typical. The combination of jail time, corporate drama, and unrelenting determination on the part of CA’s chief HR officer ratchets up this story’s intrigue.
For someone like Goodman—a veteran HR leader whose career path included stops at prominent names such as GE, Ernst & Young, Bankers Trust, and the recently defunct Merrill Lynch—all of CA’s upheaval didn’t phase him. As a survivor of 9/11 who literally had to run for his life during that infamous day in Lower Manhattan, he’s learned to become graceful under fire.
The challenge Goodman faced when he arrived at CA was multifaceted. Because HR was previously the responsibility of non-HR professionals, there was no formal HR function within the rapidly growing business. Founder Charles Wang, who retired from the company just around the time Goodman joined CA, had spent most of his energy on company growth but less on a formal HR organization.
“The issue with CA’s growth to that point was it was rapid and high acquisition, so HR was predominantly here to sew together acquisitions and get them on payroll. But there weren’t a lot of other expectations of HR beyond that,” Goodman recalled.
So his goal was clear: change CA’s HR into a truly professional organization, standardize processes in all of the countries in which it operated, and improve services along the way.
No simple task, by most HR professionals’ standards. But add in the fact that the executive sponsors kept being replaced, and it’s easy to see why Goodman could have run for cover elsewhere. But he didn’t, despite being “thrown buses at,” and it’s one of the fundamental lessons CA offers up to other HR leaders.
“We had to influence and get the sponsorships of various executives over and over again. We had to consistently kind of go back to the starting line,” he pointed out. “The one thing that we absolutely stayed with and got every new leader to buy into is that what we’re putting in place and what we’re trying to implement was going to be global and enterprise, it was going to be standardized in nature, and it was going to be scalable to be able to move the enterprise and culture to where we needed it to be able to execute.”
What that meant was to emphasize the same core values around the world, operate the same performance management model everywhere, and use a consistent compensation planning process throughout the organization. And it didn’t require CA to outsource to achieve this process optimization; rather, it required Goodman to stay with his message and repeated pitch to a revolving cadre of executive leaders. He acknowledged that it wasn’t an easy task early on, especially as the company faced prosecution following the conspiracy to artificially inflate revenues.
But several critical developments unfolded in his favor. When John Swainson arrived in 2004 as CEO, he brought stability and a deference to Goodman’s vision. Sure, he had to lay it out for Swainson what HR transformation meant and labored for executive sponsorship to keep the vision from being sidetracked, but Goodman said these are the hallmarks of a good HR leader.
“The issue and the advice I would give is to be thoughtful and thought-out on your vision—what you truly want to accomplish and not just a knee-jerk reaction to, ‘I just got a call from finance to cut costs and I have to jump and do something,’” he said.
Another development that helped Goodman during the transition was that as a result of the scandal, it forced CA to take a step back from its high-flying days under Wang, who prodigiously grew the company through aggressive measures such as acquisitions. When news of the accounting scandal hit the street, CA’s share price plummeted, constricting a key source of capitalization for additional buyouts. During that quiet period, Goodman was afforded the opportunity to build an infrastructure and implement initiatives such as career banding and compensation planning. Goodman said taking a breather from being on the fast track allowed HR to prepare for the changes ahead, including its HRO implementation.
As CA built out its HR function—in a deliberative, structured fashion for the first time ever—it was doing what many pioneering outsourcing practitioners failed to do early on in the industry’s development: transform before transferring. As a seasoned HR veteran who tinkered with outsourcing at previous organizations, Goodman understood the limitations of HRO, and expecting a provider to clean house for you was simply delusional. Even the promise of cost savings alone was simply not a good reason to outsource, he pointed out. HRO is much more than the sum of its pieces; it needed to be viewed and implemented holistically, Goodman contended.
“The one thing I felt very strongly about was that the way to not to engage in an outsourcing strategy was on a cost basis. That had to be a part of the equation, but if the business case was purely cost cutting, it was going to be a losing proposition because the feeling was that it was going to be short lived, particularly because most of the cost basis of a lot of outsourcing was predominantly based on just labor arbitrage, those margins get cut and removed pretty quickly,” he said. “The other [consideration] which I had previously experienced is if you take something broken and you try to put it outside, it’s just going to be broken outside.
“The rush to move to something external was not the game. The idea was to understand what your internal operating model was, to understand what your objectives were, and the whole game was about value.”
Sreekanth K, vice president of global HR operations at CA, added that outsourcing wasn’t simply to build new capabilities; rather, the company wanted to improve on its processes. “We were running our own call center, and we were running our own service center, so when we outsourced, we had very good benchmarking data that we can compare it to,” he said. “My experience is when I attended many of the HRO conventions, many people said ‘I outsourced for an application or I outsourced a process because I lacked that process. I can’t create it so I outsourced it.’ But we had a lot of processes.”
So as CA sought out HRO’s value, it was clear to Goodman and K what it needed: SAP technology that enables their goal of moving HR up in its ability to add value to the business; self-service that empowers employees and managers while fostering a culture of accountability; a provider who could deliver on a global scale; and a master vendor who can effectively partner with other best-of-breed vendors to deliver a number of services.
To help vet available vendors, CA turned to advisory firm Pillsbury Winthrop Shaw Pittman. Through it, the company determined two viable strategies: put together a consortium of providers, with a lead vendor managing the deal; or manage the providers itself. Goodman said because of the complexity and risks involved, it wanted to spread that risk with a partner.
NorthgateArinso emerged as the ideal provider for several reasons, Goodman explained. For one, it offered up a global footprint prior to the acquisition by Northgate. Its capabilities became even more robust following the merger and the subsequent acquisition by private equity firm KKR. Secondly, process improvements were based more on its technological platform rather than straight labor arbitrage. Finally, NorthgateArinso offered greater flexibility to grow with CA’s own ambitions.
As part of the deal, NorthgateArinso manages subcontractors such as CDI, which delivers recruitment process outsourcing (RPO) services to CA. Other subcontractors handle tuition reimbursement, leave administration, and some aspects of benefits administration.
With the deal past its one-year go-live anniversary, Goodman said he is pleased with its progress. While he’s not one for hyperbole—rating the implementation a 7 or 8 on a scale of 10 and adding: “I’ve never seen an implementation that was a 10, ever”— he does characterize it as successful.
“We are able to implement very rapidly, we’re able to globalize very rapidly, and we’re able to drive adoption very rapidly. I do think we are still working out some of the kinks and making sure that the SLAs in quality assurance aspects are in place,” he pointed out.
Indeed, ensuring that CA manages its HRO contract with a seasoned governance team has been critical to keeping its rollout on schedule with the least amount of disruption (see sidebar for Goodman’s practical advise on governance). And now that implementation is squarely behind his team, he said he is focused on taking HR to the next level—the reason why many organizations take on HRO in the first place. With a new set of tools at his disposal, rigorous processes and policies in place, a robust technology backbone supporting the whole initiative, and renewed enthusiasm to grow the business, Goodman believes the company is well-supported to go after its goal.
“The easier we make it for us to enable our managers and employees to have what they need when they need it, the easier it is for us to be able to move forward and be where the business needs us to be. That’s the innovation we are looking for,” Goodman added.
So with buyers such as CA now embracing the strategic value of outsourcing more than its cost advantage, it’s clear where the market is today. For Goodman and K, HRO is the new enabling tool in HR’s efforts to contribute to growth and its long journey to a seat at the table.